SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 20-F/A-3 - -------- ----------------------------------------------------------------------- [ X ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 - -------- ----------------------------------------------------------------------- OR - -------- ----------------------------------------------------------------------- [ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, for the fiscal year ended: - -------- ----------------------------------------------------------------------- OR - -------- ----------------------------------------------------------------------- [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, for the transition period from _____ to _____. - -------- ----------------------------------------------------------------------- COMMISSION FILE NO: 000-32571 INTERNATIONAL TECHNOLOGY ENTERPRISES LTD. (Exact name of registrant as specific in its charter) BELIZE (Jurisdiction of incorporation or organization) 1ST FLOOR EAST WING 65 FRONT STREET PUNTA GORDA, BELIZE (Address of principal executive offices, including Postal Code.) Registrant's area code and telephone number: (501) (7)22342 Securities to be registered pursuant to Section 12(b) of the Act: Title of each class: NONE Name of each exchange on which registered: NONE Securities to be registered pursuant to Section 12g3-2(a) of the Act: Title of each class: COMMON STOCK Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. Title of each class: NONE Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the registration statement - 5,149,193 COMMON SHARES. 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. [X] YES [ ] NO Indicate by check mark which financial statement item the registrant has elected to follow: [ ] ITEM 17 [ ] ITEM 18 (APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS) Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. [ ] YES [ ] NOINDEX Page - ------------- ----------------------------------------------------------- ----- PART I - ------------- ----------------------------------------------------------- ----- Item 1. Identity of Directors, Senior Management and Advisers ..... 3 Item 2. Offer Statistics and Expected Timetable ................... 3 Item 3. Key Information ........................................... 3 Item 4. Information on the Company ................................ 29 Item 5. Operating and Financial Review ............................ 33 Item 6. Directors, Senior Management and Employees ................ 35 Item 7. Major Shareholders and Related Party Transactions ......... 38 Item 8. Financial Information ..................................... 42 Item 9. The Listing ............................................... 42 Item 10. Additional Information .................................... 43 Item 11. Quantitative and Qualitative Disclosures about Market Risk. 54 Item 12. Description of Securities Other than Equity Securities .... 55 - ------------- ----------------------------------------------------------- ----- PART II - ------------- ----------------------------------------------------------- ----- Item 13. Defaults, Dividend Arrearages and Delinquencies ........... 55 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds ..................................... 55 Item 15. [Reserved] ................................................ 55 Item 16. [Reserved] ................................................ 55 - ------------- ----------------------------------------------------------- ----- PART III - ------------- ----------------------------------------------------------- ----- Item 17. Financial Statements ...................................... 55 Item 18. Financial Statements ...................................... 55 Item 19. Exhibits .................................................. 56 - ------------- ----------------------------------------------------------- ----- 2 INTRODUCTION As used herein, except as the context otherwise requires, the term "Company" refers to International Technology Enterprises Ltd., a corporation organized under the laws of Belize. The Company publishes its financial statements expressed in United States dollars. In this document, references to "US dollars" or "US$" are to the currency of the United States of America. The Company's fiscal year ends on December 31 of each year. References in this document to a particular year are to the fiscal year unless otherwise indicated. In the future, the Company will produce annual reports containing audited consolidated financial statements and an opinion thereon by the Company's independent public accountants. The financial statements contained in this registration statement have been audited in accordance with United States Generally Accepted Accounting Principles ("US GAAP"). The Company has no revenue and losses for the most recent year. ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS - -------------------------------- ----------------------------------------------- Jack L. Mahan, Jr. Secretary of Board/Chief Executive Officer/ 1296 E. Gibson Road, #149 President/Chief Financial Officer Woodland, CA 95776 U.S.A. - -------------------------------- ----------------------------------------------- Ian D. Ross Chairman of the Board/Vice President 24 Station Street Spalding, Lincolnshire PE11 1EB United Kingdom - -------------------------------- ----------------------------------------------- Quan Van Nguyen Director 18/15 Ngo Quyen City Rach Gia, County Kiengiang Viet Nam - -------------------------------- ----------------------------------------------- ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE Not applicable. ITEM 3. KEY INFORMATION A. Selected Financial Data Selected Consolidated Financial Data The selected historical data presented below has been derived from the financial statements of the Company, which financial statements have been examined by Braverman & Company, P.C., 190 High Chaparral, Prescott, Arizona 86303. Its telephone number is (520) 771-1122 for the year ending 31 December 2000. 3 The financial statements are presented in U.S. dollars and have been prepared in accordance with generally accepted accounting principles in the United States ("US GAAP"). The following table summarized certain financial information and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Company has not declared a dividend during the years ended December 31, 2000,. There were no fluctuations in revenues and net income (loss) between the periods stated in the table below since the Company was in operative. Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operations. For the reasons set forth herein the information shown below may not be indicative of the Company's future results of operation. Statement of Loss and Accumulate Deficit Date: Financial Information per US GAAP 31 December 2000 (Audited) - ------------------------------------------- ---------- Total revenue Nil Interest expense $ Nil Net income (loss) $(15,600) Total assets $ 3,400 Net working capital (deficit) $ 3,400 Shareholders' equity $ 3,400 - ------------------------------------------- ---------- B. Capitalization and Indebtedness Statement of Capitalization and Indebtedness As of 31 December 2000 Debt: Secured: Banks......................................... 0 Unsecured: Banks......................................... 0 Supplier credits.............................. 0 Financial leases.............................. 0 --------- Total debt................................... 0 --------- Less short-term debt and current portion of long-term debt................................ 0 --------- Long-term debt................................. 0 --------- Stockholders' equity: Capital stock.................................. 1,440 Paid In Capital................................ 2,060 Contributed Capital............................ 15,500 --------- Total stockholders' equity(4)................ 18,960 --------- Total capitalization (total debt and stockholders' equity).......................... US$18,960(1) ========= ______________ (1) As of December 31, 2000, our debt and equity was denominated in U.S. dollars. 4 The following table sets forth a history of the share capital for the Company, since inception. - -------------------------------------------------------------------------------- DATE EVENT SHARES - -------------------------------------------------------------------------------- 28 September 2000 Shares issued to founding shareholders 4,634,100 30 September 2000 Shares issued to EFHC 515,093 Balance at 31 December 2000 5,149,193 Balance at 19 March 2001 5,149,193 - -------------------------------------------------------------------------------- C. Reason for the other and Use of Proceeds Not Applicable. D. Risk Factors RISK FACTORS THAT MIGHT CREATE LOSS TO SHAREHOLDERS Certain Factors May Affect Future Results And Loses by Shareholders. From time to time, information provided by the Company, statements made by its officers or information included in its filings with the Securities and Exchange Commission contains statements that are not purely historical, but are forward looking statements, made under the Safe Harbor provisions of the Private Securities Litigation Act of 1995, which involve risks and uncertainties. In particular, forward looking statements include projections, plans, and objectives for The Company's business, financial condition, operating results, future operations, future economic performance or statements relating to the sufficiency of capital to meet working capital, planned capital expenditures, and expectations as to customer orders. The Company's actual future results may differ materially from those stated in any forward-looking statements. Factors that may cause such differences, such as the risk factor that the Company's business could be adversely affected by acquisitions, include, but are not limited to, the factors discussed below. These factors, and others, are discussed from time to time in the Company's filings with the Securities and Exchange Commission, including the Company's future Annual Reports on Form 20-F that may be filed. It should be noted that the Safe Harbor provisions do not apply to statements that are untrue. Note also that the statutory safe harbor is not available to non-reporting issuers; disclosure should not imply that the safe harbor applies to the Company's statements made when the Company was not a reporting issuer. Liabilities from such statements remain a source of potential shareholder loss. 5 RISK FACTORS RELATED TO THE "GOING CONCERN" FINANCIAL CONDITION OF THE COMPANY: Shareholders Might Be At Risk Because The Company's Auditors Have Issued A Going Concern Opinion And Because The Company's Officers And Directors Will Not Loan Any More Money To The Company, The Company May Not Be Able To Achieve Its Objectives And May Have To Suspend Or Cease Operations. The Company's auditor has issued a going concern opinion. This means that there is doubt that the Company can continue as an ongoing business for the next twelve months. Because our officers and directors are unwilling to loan or advance any additional capital to the Company, management believes that if the Company is not initially successful in its operations, it may have to suspend or cease operations within four months. Further, it will be more difficult for the Company to obtain debt financing at favorable rates while such an opinion exists because of creditors unwillingness to loan funds to a corporation that is in danger of going out of business. Shareholders Are At Risk of Loss Because The Company Lacks An Operating History And Has Losses, Which It Expects To Continue Into The Future. If the losses continue the Company will have to suspend operations or cease operations. Since the Company was incorporated, it has not started its proposed business operations or realized any revenues. It has no operating history upon which an evaluation of its future success or failure can be made. The Company's net loss since inception is $(15,600). Its ability to achieve and maintain profitability and positive cash flow is dependent upon: --Its ability to locate customers who require the Company's services. --Its ability to obtain computer products and fulfill the customer's needs. --Its ability to generate a profit from its operations. Based upon current plans, the Company expects to incur operating losses in future periods. This will happen because there are fixed and variable expenses associated with the Company's operations. Until revenues exceed the fixed and variable expenses, the Company will operate at a loss. Failure to generate a profit will cause the Company to go out of business. Shareholders Might Loose Their Investment Because The Company Does Not Have Enough Cash To Raise Capital. The Company believes that it does not have the cash it needs for at least the next twelve months based upon its internally prepared budget. Further, the Company's cash requirements are not easily predictable and there is a possibility that its budget estimates will prove to be inaccurate. If the Company is unable to generate a positive cash flow, it will be required to curtail operations substantially and seek additional capital. There is no assurance that the Company will be able to obtain additional capital if required, or if capital is available, to obtain it on terms favorable to the Company. The Company may suffer from a lack of liquidity in the future, which could impair its short-term marketing and sales efforts and adversely affect its results of operations. 6 If The Company Is Unable To Operate Profitably Or Obtain Loans, It May Have To Attempt To Raise Capital Through The Sale Of Its Securities. Because the Company is in a start-up phase and has not generated any revenues, it is unlikely that it will be able to raise capital through the sale of its common stock. If the Company is unable to generate a profit from its operations and cannot borrow money, its only available source of capital will be through the sale of its common stock. Because the Company is in a start-up stage, has not generated any revenues, and there is no market for the Company's common stock, it is unlikely that the Company will be successful in raising money through the sale of its common stock. If the Company is unable to raise additional needed capital, it will have to suspend or cease operations. Investors May Suffer Loss As A Result Of Management Having No Funding Plan Or From The Risks Associated With A Funding Plan If A Plan Is Ever Developed. Management has not developed a funding plan to raise equity at this time. If a plan is ever developed for shares that may be traded publicly under applicable rules, the Company will incur costs associated with Company disclosure obligations in this registration statement. Also, given the lack of a market and the Company's intent to sell securities to raise funds, there is a risk that the Company will not be able to price the shares in the fundraising transactions at their true market value. Also, issuance of new shares, which could be provided for in the fundraising plan, will dilute investor positions increasing the number of shares freely traded. Shareholders could suffer loss from such potential dilution. For debt financing portions of the funding plan, debt financing may subordinate the claims of common stockholders in liquidation or impose material restrictions on Company operations. Investor Loss Might Result from The Company Needing Additional Financing, Which Could Be Difficult To Obtain. The Company expects that the Company's existing cash and investment balances will not be sufficient to meet the Company's cash requirements to fund operations and expected capital expenditures for at least twelve months. In the event the Company may need to raise additional funds, it cannot be certain that it will be able to obtain additional financing on favorable terms, if at all. Further, if the Company issues additional equity securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of common stock. Future financings may place restrictions on how the Company operates its business. If the Company cannot raise funds on acceptable terms, if and when needed, it may not be able to develop or enhance the Company's products and services, take advantage of future opportunities, grow the Company's business or respond to competitive pressures or unanticipated requirements, which could seriously harm the Company's business. Shareholders May Suffer Loss From The Company Substantially Increasing The Company's Indebtedness. The Company may incur substantial indebtedness in the future. The level of the Company's indebtedness, among other things, could: make it difficult for the Company to make payments on the Notes; - make it difficult for the Company to obtain any necessary future financing for working capital, capital expenditures, debt service requirements or other purposes; - require the dedication of a substantial portion of any cash flow from operations to service for indebtedness, thereby reducing the amount of cash flow available for other purposes, including capital expenditures; - limit the Company's flexibility in planning for, or reacting to changes in, the Company's business and the industries in which it competes; - place the Company at a possible competitive disadvantage with respect to less leveraged competitors and competitors that have better access to capital resources; and - make the Company more vulnerable in the event of a further downturn in the Company's business. 7 There can be no assurance that the Company will be able to meet its future debt service obligations, including the Company's obligations under any notes. Shareholder Loss Could Result From The Company's Operating Results Likely To Fluctuate Significantly. The Company's quarterly and annual operating results will be affected by a wide variety of factors that could materially adversely affect revenues and profitability, including: - competitive pressures on selling prices; the timing of customer orders and the deferral or cancellation of orders previously received; - write-offs of excess and obsolete inventory; - changes in product mix; - the Company's ability to introduce new products and technologies on a timely basis; - the introduction of products and technologies by the Company's competitors; market acceptance of the Company's and the Company's competitors' products; - fulfilling backlog on a timely basis; - reliance on sole source suppliers; - potential retrofit costs; - the level of orders received which can be shipped in a quarter; and - the timing of investments. As a result of the foregoing and other factors, the Company has and may continue to experience material fluctuations in future operating results on a quarterly or annual basis which could materially and adversely affect the Company's business, financial condition, operating results and stock price. RISK FACTORS RELATED TO THE LACK OF LIQUIDITY OF THE SHARES: Investors May Suffer Loss Caused By Limit Of Free Trading Shares In The Market. The Company shares will become freely tradable to the public in the United States if they are ever listed on the NASD Bulletin Board. This listing may never occur. Initially, 515,093 shares, a small number of shares could be traded. The shares were issued at US$.001 par value. No shares of the Company have traded in the United States at this time, therefore no market value has been established. If a market should form for these shares, buyers could experience difficulty-finding sellers with whom to trade. Sellers could experience difficulty liquidating their shares. Issuance Of Additional Shares By The Company Could Make Individual Shareholder's Holdings Worth Less. The Company is authorized to issue 100,000,000 common shares. 5,149,193 or 5% of the common shares are currently issued and outstanding and 94,850,807 or 95.1% of the common shares are unissued. The Board of Directors has the power to issue such shares. Although the Company presently has no commitments or contracts to issue any additional shares to other persons, the Company may in the future attempt to issue shares to acquire products, equipment or properties, or for other corporate purposes. Any additional issuance by the Company, from its authorized but unissued shares, would have the effect of diluting the interest of existing shareholders. Shareholders May Not Be Able To Sell Shares Because Of Thin Market; Ninety Percent (90%) Of The Company's Issued Shares Are Insider Shares. They are subject to Rule 144. This means that these shares can't be sold for one year. At the end of the one-year holding period, these shares would be subject to the Insider Trading Rules, which would limit the rate of sale of insider shares into the Market. However, any sale of insider shares will adversely affect the Company's share price. 8 Should The Company Issue Shares In The Future The Additional Shares Would Dilute Present Shareholder Equity In The Company. The sale of such shares would adversely affect the Company's share price. While such insider sales would be subject to American Securities Laws, the result of such sales risks the loss in any investment made by shareholders in the Company's stock. Shareholders May Encounter Loss From No Trading Market for The Company's Common Stock. The Company's common stock is not traded on any exchange or electronic medium. Accordingly, persons who acquire the Company's shares of common stock may not be able to resell them. Because The SEC Imposes Additional Sales Practice Requirements On Brokers Who Deal In The Company's Shares, Which Are Penny Stocks, Some Brokers May Be Unwilling To Trade Them. This means that a shareholder may have difficulty in reselling his shares and may cause the price of the shares to decline. The Company's shares qualify as penny stocks and are covered by Section 15(g) of the Securities Exchange Act of 1934, which imposes additional sales practice requirements on broker/dealers who sell the Company's securities in the aftermarket. For after-market sales of the Company's securities, the broker/dealer must make a special suitability determination and receive from a potential buyer, a written agreement prior to making a sale to him. Because of the imposition of the foregoing additional sales practices, it is possible that brokers will not want to make a market in the Company's shares. This could prevent a shareholder from reselling his shares and may cause the price of the shares to decline. Cumulative Voting, Preemptive Rights and Control. There are no preemptive rights in connection with the Company's common stock. Shareholders may be further diluted in their percentage ownership of the Company in the event the Company issues additional shares in the future. Cumulative voting in the election of Directors is not provided for. Accordingly, the holders of a majority of the shares of common stock, present in person or by proxy, will be able to elect all of the Company's Board of Directors. Shareholders Might Lose Return On Their Investment Due To No Dividends Anticipated By The Company. At the present time the Company does not anticipate paying dividends, cash or otherwise, on it's Common Stock in the foreseeable future. If they would be paid on a pro rata basis based on the number of shares held future dividends will depend on earnings, if any, of the Company, its financial requirements and other factors. Since Insider Shareholders Have Agreed To Limit Transferability Of Stock In A "Stock Pooling" Agreement, Shareholders May Not Be Able To Trade Their Stock. The "insider" shareholders have agreed, through a stock pooling agreement, to limit the transferability of their Company shares. They have agreed not to trade the insider 4,634,100 shares owned by International Technology Industries Corp. for 5 years, however this agreement can be set aside by mutual agreement of the insider shareholders participating in the agreement. This agreement impacts about 90% percent of the outstanding shares of the Company and therefore, may limit the number of buyers for stock. This agreement does not affect the transferability of free trading registered shares held by non-participants of the Stock Pooling Agreement. The Stock Pooling agreement may be set-aside at any time by a unanimous vote of the participants. These policies may negatively impact some shareholders. 9 RISK FACTORS RELATED TO OFFICERS AND DIRECTORS OF THE COMPANY Reliance Upon Directors And Officers Who Will Be Devoting Limited Time To The Operations Of The Company Might Put Shareholders At Risk Of Losing Their Investment. The Company is wholly dependent, at the present, upon the personal efforts and abilities of its Officers and Directors, who exercise control over the day-to-day affairs of the Company. Because all of the officers and directors have other business interest, each will only be devoting approximately 10% of his time to the operation of the Company. Investors May Suffer Loss From Inexperienced Management. The present management has no experience operating a business like the one that is disclosed in this filing. The present management has education and experience, as disclosed, in other businesses. The Company plans to add management personnel with appropriate education and experience as funds become available. Management Could Engage In Unknown Business Causing Loss To Investors. The Company has no obligation to engage in the business described in the registration statement. Present management has disclosed the intent of the Company to engage in the disclosed business. Management could, at some future time, engage in presently unknown business opportunities other than those the Company has presently disclosed in this registration document. Investors May Suffer Loss Because Officers Of The Company Are Officers And Directors Of Related Companies. The Company's president, Mr. Jack Mahan, is also the Secretary of the Company's Board of Directors. Mr. Mahan is also President and Member of the Board of Directors of the principal shareholder of the Company, International Technology Industries Corp. (ITIC). Mr. Mahan is also an officer and member of the Board of Directors of Equity Finance Holding Corporation (EFHC). Although Mr. Mahan is not a shareholder of ITIC and not a shareholder of EFHC, his presence on all three Boards of Directors has a potential to create a conflict of interest between ITEL, ITIC and EFHC Boards of Directors. The Company does maintain a policy on Conflict of Interest. This policy requires a fiduciary duty on the part of each and every director and officer of the Company. Should such a conflict develop, the appointed client board member would withdraw from the discussion and vote on the issue before the ITEL Board. In any potential conflict issue, it is the responsibility of the individual director to state that they see a conflict and withdraw from the discussion and voting on that topic. Further, the Board of Directors will also determine if a conflict of interest exists pursuant to the policy of the Company. Directors are empowered to enact policies, which may be contrary to shareholder interests. Article B. of the Company's Memorandum and Articles of Association empowers the Company's Board of Directors to vote in ways that could negatively impact investors' holdings. A director is entitled to vote on any proposal notwithstanding that he may have interest therein, provided before the proposal is put to a vote he shall disclose the nature of his interest. 10 Directors May Take Actions That Might Enrich Themselves, Thus Placing Shareholders At Risk Of Loss. There is no prohibition that prevents directors, in the absence of an independent quorum, to vote compensation to themselves. Directors may borrow money. There is no prohibition preventing the Company from loaning money to directors. There is no retirement or non-retirement age limitation with respect to directors. There is no requirement that directors own shares of the Company's common stock. The Board may declare dividends that may not benefit shareholders. Shareholders Might Not Be Entitled To Share In The Profits Of The Company. Shareholders are entitled to share in any surplus in the event of liquidation, after all debts are paid and all securities having rights superior to common shares are paid. There are no redemptions provisions for the Company's securities. There are no sinking fund provisions for the Company's securities. The Company's shares of common stock are not subject to further capital calls by the Company. There are no provisions discriminating against any existing or prospective holder or such securities as a result of such shareholder owning a substantial number of shares. Therefore, shareholders might lose their right to participate in the return on their investment. Shareholders Might Not Participate In Tne Annual Meeting Of Shareholders. ITEL, as a foreign private issuer is not subject to the proxy rules under the Exchange Act, Section 14, thus shareholders might not be able to tender proxy votes. Belize law doesn't require that an international business corporation hold an annual general meeting of its shareholders. If an annual meeting of shareholders and special meetings of shareholders may be called, the chairman, the board of directors, or stockholders of 1/5th of the outstanding shares could call it at any time. Only shareholders of record are entitled to attend the shareholders meetings. Without an Annual General Meeting, minority shareholders effectively have no voice in the decisions of the Company's Board of Directors. Nor would they be able to influence the direction of the Company. Under Belize Law, there would be no basis in Law for them to seek legal redress in the Courts of Belize. RISK FACTORS RELATED TO THE BUSINESS OPERATIONS OF THE COMPANY: The Company And Its Officers And Directors Will Be Liable For False Advertising Or Misrepresented Claims And Said Liability May Create Loss For Investors. The Company and its officers and directors may be held liable for false advertising or misrepresented claims about its products. In the event the Company or its officers and directors are found liable for such, they may be subject to civil monetary penalties as well as criminal sanctions in the form of fines and prison sentences. If the foregoing occurs, the Company may have to cease or suspend operations. One issue of liability is disclosure in the Company's original registration document filing that the Company intended to promote products as the most technologically advanced in the industry without assurance that the products are in fact the most technologically advanced. A second issue is the liability associated with management disclosing experience with contract manufacturing of integrated circuit board in the original registration document. A third issue the liability associated with disclosure of a letter of intent to purchase Tech 2000 Corp. Tech 2000 Corp. has experience with the circuit board manufacturing process. Tech 2000 Corp. provided the information for the previous disclosure regarding the circuit board 11 manufacturing process. At that time there was a conversation relative to potential purchase by the Company of Tech 2000 Corp., which later resulted in a letter of intent to purchase Tech 2000 Corp. That letter of intent to purchase was terminated 10 May 2001. A fourth issue is liability associated with the premature release of the ITEL "test web-site." The Company Registration Statement Amendment 2. disclosed relevant information regarding the ITEL "test website" (formerly: http://www.itelf.net) which was available to the public between 19 April 2001 and 25 May 2001, the date it was taken offline. This test-website appeared in anticipation of the execution of the letter of intent from the Company to purchase Tech 2000 Corp. This purchase did not take place and the agreement was not executed. Tech 2000 Corp. established the test-website without authorization from the Company. The test-website consisted of nine pages titled "ITEL" that linked to pages of the Tech 2000 Corp. website which is now available to the public at http://www.tech2000corp.com/. A fifth issue of liability is associated with a premature press release by Equity Finance Holding Corporation stating that the Company was in the business of contract manufacturing of integrated circuit boards. Equity Finance Holding Corporation on 2 May 2001 issued a press release that stated the Company" is currently engaged in the manufacturing of integrated circuit boards that is expanding to global markets." That statement postdated the issuance of the letter of intent to purchase Tech 2000 Corp. and predated the termination of that letter of intent. The press release assumed that the transaction would be completed. When the letter of intent was terminated and the purchase did not occur, this press release incorrectly stated the subsequent facts. The registration statement is currently clear that the Company has never engaged in the manufacturing of integrated circuit boards and does not intend to do so. No material changes in the Company's net sales or revenues have been or are expected as a result of the incorrect information in the press release. The press release was issued by Equity Finance Holding Corporation. The Company issued the press release without authorization. Since press releases are not the precipitating cause of loss, there is little probably, if any, of liability to either Equity Finance Holding Corporation or the Company. No member of the public has raised the question and no claim has been initiated. Nevertheless, the liability still poses potential loss for shareholders. The Brokering Or Selling Of Computer Parts Is Extremely Competitive And If The Company Is Unable To Compete Effectively, It Will Have To Cease Operations. The Company intends to broker computer hardware and software for a fee. The brokering and selling of computer equipment is extremely competitive. There is no assurance that the Company will be able to compete effectively in such a market. If the Company is unable to compete in such an arena, it will have to cease operations. The Company's Business May Be Adversely Impacted By Acquisitions That May Affect The Company's Ability To Manage And Maintain The Company's Business. Since the Company's inception, it has intended to acquire a number of businesses. In the future, the Comapany may undertake acquisitions of businesses that complement the Company's existing operations. Such future acquisitions could involve a number of risks, including: - the possibility that one or more such acquisitions may not close due to closing conditions in the acquisition agreements, the inability to obtain regulatory approval, or the inability to meet conditions imposed for government or court approvals for the transaction; - the diversion of the attention of management and other key personnel; - the inability to 12 effectively integrate an acquired business into the Company's culture, product and service delivery methodology and other standards, controls, procedures and policies; - the inability to retain the management, key personnel and other employees of an acquired business; - the inability to retain the customers of an acquired business; the possibility that the Company's reputation will be affected by customer satisfaction problems of an acquired business; - potential known or unknown liabilities associated with an acquired business, including but not limited to regulatory, environmental and tax liabilities; - the amortization of acquired identifiable intangibles, which may adversely affect the Company's reported results of operations; and - litigation which has or which may arise in the future in connection with such acquisitions. For example, the Company may be required to spend significant management time operating this non-core business unit and managing a potential divestiture. Further, there can be no guarantee that the line of business will break-even or operate at a profit in the near future, if at all. Any losses from the line of business will have a negative impact on the Company's operating results. The Company's Business May Be Adversely Impacted By Divestitures Of Lines Of Business That May Affect The Company's Ability To Manage And Maintain The Company's Business. Since the Company's inception, it has planned to divest ourselves of certain non-profit creating lines of the Company's business. In the future, the Company may undertake such divestitures. Such future divestitures could involve a number of risks, including: - the diversion of the attention of management and other key personnel; - disruptions and other effects caused by the divestiture of a line of business on the Company's culture, product and service delivery methodology and other standards, controls, procedures and policies; - customer satisfaction problems caused by the loss of a divested line of business; and - the decreased diversification of the Company's product lines caused by the divestiture of a line of business may make the Company's operating results subject to increased market fluctuations. In addition, any divested line of business could significantly outperform relative to the Company's expectations. If The Company is Unable To Protect Customer's Intellectual Property, It May Lose A Valuable Product Line Or May Incur Costly Litigation To Protect The Company's Rights. At times, the Company may be notified that it may be in violation of patents held by others. An assertion of patent infringement against the Company, if successful, could have a material adverse effect on the Company's ability to sell the Company's products, or could require a lengthy and expensive defense that could adversely affect the Company's operating results. Shareholder Loss Might Result From No Market Studies. The Company has relied on the assumptions, considerations and judgment of its directors, management and officers in the formation of its business plan. No formal independent market studies concerning the demand for its proposed services and products have been conducted or proposed. The Company has not engaged any independently qualified financial consultants and advisors in the carrying out of an analysis of the effects and consequences this sale of Common Stock may have on the present and future operations of the Company, the ability of the Company to obtain funds or financing or the variations in share price due to additional shares being available for sale. 13 RISK FACTORS RELATED TO BEING A BELIZE CORPORATION: Because The Company, Without Shareholder Approval, Can Issue Shares With Rights Superior To Those Of Common Shareholders, The Rights Of Common Shareholders Can Essentially Be Eliminated. Because the Company, without shareholder approval, can issue additional shares with rights superior to those of common shareholders, a common shareholders right can essentially be eliminated through dilution to an insignificant percentage of ownership of the outstanding securities. The board determines the rights and preferences of shares at the time of issuance. This dilution that may occur by the Company issuing newly issued shares with multiple votes per share. However, newly issued shares are not planned to have multiple votes. Because The Company's Articles Of Association Provide That These Securities Of An Investor Will Be Subject To A Lien For Any Money Owed By An Investor To The Company, The Company May Have Difficulty In Persuading Broker/ Dealers To Make Markets In The Company's Securities. The Company's articles of association provide that the Company will have a lien on an investor's securities for all money owed to the Company by the investor. As such, the shares may be subject to attachment and sale at anytime an unpaid debt is owed to the Company. Because an orderly market requires the transfer of unencumbered, unrestricted shares and because the foregoing provisions impedes both orderliness, market makers may be reluctant to make a market in the Company's securities. This could result in an investor's inability to sell or transfer his securities. Loss May Result From The Company's Articles Of Association Which Provide That The Board Of Directors May Decline To Register Any Transfer Of The Securities; The Company May Have Difficulty In Persuading Broker/Dealers To Make Markets In The Company's Securities. The Company's Articles of Association provide that the Company's board of directors may decline to register any transfer of the Company's securities. Because an orderly market requires the unconditional transfer of securities and because the foregoing provisions impedes the unconditional transfer of securities, market makers may be reluctant to make a market in the Company's securities. This could result in an investor's inability to sell or transfer his securities. Indemnification Of Officers And Directors For Securities Liabilities Could Create Loss of Return on Investment for Shareholders. The laws of Belize provide that the Company could indemnify any Director, Officer, agent and/or employee as to those liabilities and on those terms and conditions as provided for by law. Further, the Company may purchase and maintain insurance on behalf of any such persons whether or not the corporation would have the power to indemnify such person against the liability insured against. The foregoing could result in substantial expenditures by the Company and prevent any recovery from such Officers, Directors, agents and employees for losses incurred by the Company as a result of their actions. Further, the Company has been advised that in the opinion of the Securities and Exchange Commission, indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable. 14 Shareholder Loss Might Result Because A U.S. Citizen Who Purchases Shares Of Common Stock May Have Difficulty In Enforcing His Rights Against The Company. The Company is incorporated under the laws of Belize. Further, all of the Company's assets are located in Belize. As such, a U.S. citizen may have difficulty in enforcing his rights against the Company. In the event that a shareholder sues the Company in the United States and obtains a judgment in federal or a state court, the shareholder may find that it is impracticable or impossible to enforce his judgment in Belize, unless he travels to Belize to do so. Further, Belize laws do not grant much, if any, protection to consumers in general. Accordingly, it is quite possible that any judgment obtained against the Company outside of the United States will be unenforceable in Belize. The International Business Company Legislation Enacted In 1990 By Belize, Central America, The Company's Domicile, May Impact Investor's Holdings. Since Belize IBC law is designed to protect the Company, it may not protect the shareholders. The key features of the Belize act are as follows: no income tax, stamp duty, estate taxes, capital gains or withholding tax: having only one shareholder/subscriber permitted; share may be held by corporations or trusts; a single director allowed which may be a corporation or trust; on-disclosure of beneficial owners; bearer shares permitted - shares maybe issued without par value; IBC'S can be used for financial management, investment holding, ship or property ownership, share ownership of other companies, leasing of assets, copyrighting and/or licensing as well as general commercial trading no exchange control; private label company availability; low fees for setup and renewal; no statutory accounting or auditing records need to be filed in Belize; no minimum capital requirements. Minimal restrictions: cannot carry on business with residents of Belize; cannot own real estate in Belize; cannot operate as a bank or an insurance company unless an offshore banking license is granted; cannot provide Registered Office Or Serve As Registered Agent; An IBC must maintain a Registered Agent and a Registered Office in Belize. Also, governing law does not require that shareholders elect all directors. Shareholder Rights May Be At Risk As A Result Of The Company Organizing In Belize, Central America. In Belize, there is no established body of corporate law on which shareholders can rely for clarifying and protecting their rights. These rights differ materially from typical rights of investors in U.S. companies. For example, (1) Shareholders do no have the right to approve mergers and sales of substantially all of the Company assets by a vote of the majority of common shares outstanding, and (2) Appraisal rights do not exist by law. (In Belize, there is not an established body of law upon which shareholders can rely for clarifying and protecting their rights.) The Company lacks offices in the United States. Most of Company directors and officers reside outside the United States. Therefore, it may be difficult to serve process upon them in the United States or to collect upon a judgment obtained in the United States against them. There is doubt as to the enforceability of liabilities predicated on U.S. federal securities laws determined in original actions in Belize and judgments of U.S. courts obtained in actions based upon the civil liability provisions of U.S. federal securities laws are not enforceable in Belize. Moreover, no treaty exists between the United States and Belize for the reciprocal enforcement of foreign court judgments. Consequently, the Company's American shareholders may be effectively prevented from pursuing remedies under U.S. federal securities laws against the Company, its officers and directors. 15 Company Operations May Suffer Loss Relative To Currency Fluctuations And Foreign Exchange Controls Yield A Loss For Shareholders. As part of the Company's ordinary business operations, the Company will be required to make purchases from suppliers. The Company may be required to accomplish such purchases through the use of foreign currencies other than the United States dollar. As a result, fluctuations in exchange rates of the United States dollar against foreign currencies could adversely affect the Company's results of operations. The Company may attempt to limit its exposure to the risk of currency fluctuations by purchasing forward exchange contracts that could expose the Company to substantial risk of loss. In such a transaction, the Company would purchase a predetermined amount of foreign currency to ensure that the Company in the future will own a known amount of such currency to pay for goods at a predetermined cost. The Company believes that the use of such transactions will successfully allow the Company to better determine costs involved in its operations, and thus better manage currency fluctuations. There can be no assurance that the Company will in the future successfully manage its exposure to currency fluctuations or that such fluctuations will not have a material adverse effect on the Company. Investors May Suffer Loss From Political Policies And Foreign Operations Of The Company. The Company anticipates dealing with international companies in the future. The Company's operations may be affected by economic, political, governmental, infrastructure and labor conditions in countries where the Company operates and/or has contractual relationships with other international companies. Investors Rights To Litigation Are Limited. Investors cannot bring actions under the civil liability provisions of the U. S. federal securities laws against the Company; it's officers, directors and experts. Investors cannot affect service in the United States against the Company; it's officers, directors and experts. Investors cannot enforce judgments obtained in a U. S. court against the Company, it's officers, and directors and experts based upon the civil liability provisions of the U. S. Federal securities laws. Investors cannot enforce, in the Belize Courts, judgments of U. S. Courts made under the civil liability provisions of the U. S. federal securities laws against the Company, it's officers, directors and experts. Investors cannot bring an original action under the civil liability provisions of the U. S. federal securities laws in the Belize Courts. Shareholders Might Suffer Loss Because Belize Is Not Considered An Independent Country. Mexico and Guatemala now recognize Belize as an independent country. However, that recognition is the result of economic pressure by the United States and the British Government's willingness to send their troops to protect Belize's Border with Guatemala. There can be no assurance that neither Mexican nor Guatemalan recognition of Belize would continue, without the protection of the United States and Great Britain. If an invasion occurred, Belize's history of political stability would end. Business would be impossible to conduct in Belize. The Company, And Its Shareholders, Has Suffered Loss Because Belize Is Subject To Annual Hurricanes. In 2001, a Force IV Hurricane destroyed most of the buildings in the Toledo District of Belize, including the Company's office in Punta Gorda Belize. As with any natural disaster, Hurricanes cause economic loss and some of this loss must be borne by the Company. 16 The Belize Economy Is Highly Dependent Upon Tourist Travel, The Loss Of Which Could Create Loss For Company Investors. The primary attraction for foreign tourists is the Belize Reef, which is the second largest reef in the World. The Belize Reef is dying. Without the Belize Reef to attract Tourists, the Belize Economy may go into a serious recession. Such circumstances could create loss for the Company and its shareholders. Shareholders And The Company Could Encounter Loss Due To The Poverty In Belize. Like most Central America countries, Belize faces high unemployment problems and limited employment prospects for a rapidly growing workforce. Belize has the highest rate of people who are HIV positive in Central America. The AIDS Public Health problem can't be met with the resources currently available to Belize. Theft and disease from potential employees of the Company might create loss for the Company and investors. Shareholders And The Company Could Encounter Loss Due To The High Crime In Belize. Belize City and Dangriga have crime rates equal to New York City, Los Angeles or Chicago. Historically, most crime was petty theft. However, the spread of crack cocaine into these urban areas has lead to a significant increase in violent crime. The potential for violent crime discourages tourists and increases the risks in doing any type of business. Shareholder Loss Might Result From Incomplete Knowledge Of Company Insiders. The Company insiders' are entities whose purpose, activities and ownership are unknown to management. Without knowing the beneficial ownership of the Company, shareholders might not have necessary information to avoid loss of investment. RISK FACTORS RELATED TO TAXATION: An Investor May Not Be Able To Make A Beneficial Tax Election As A Result Of The Company's Unwillingness To Provide Necessary Information. There is a chance that the Company could become a passive foreign investment company. If that occurs an investor may be able to make favorable tax election, provided he is notified of the favorable tax status. The Company, however, has decided that it may or may not provide the information necessary for investors to make favorable tax elections. As a result, an investor may lose such favorable tax election. If The Company Is Judged A Foreign Passive Investment Company, Investors May Suffer A Loss From Tax Consequences To The Investor. As a foreign corporation with U.S. Holders, the Company could potentially be treated as a passive foreign investment company ("PFIC"), as defined in Section 1297 of the Code, depending upon the percentage of the Company's income which is passive, or the percentage of the Company's assets which is held for the purpose of producing passive income. 17 Certain United States income tax legislation contains rules governing PFIC that can have significant tax effects on U.S. shareholders of foreign corporations. These rules do not apply to non-US. shareholders. Section 1297 of the Code defines a PFIC as a corporation that is not formed in the United States and, for any taxable year, either (i) 75% or more of its gross income is "passive income," which includes interest, dividends and certain rents and royalties or (ii) the average percentage, by fair market value (or, if the company is a controlled foreign corporation or makes an election, by adjusted tax basis) of its assets that produce or are held for the production of "passive income" is 50% or more. A U.S. shareholder who holds stock in a foreign corporation during any year in which such corporation qualifies as a PFIC is subject to U.S. federal income taxation under one of two alternative tax regimes at the election of each such U.S. shareholder (the deferred tax charge regime and the Qualified Election Fund "QEF" regime). The following is a discussion of these two alternative tax regimes as applied to U.S. shareholders of the Company. Both regimes, however, may apply if the shareholder makes the QEF election after the first year in which it owned stock in the PFIC. A U.S. shareholder who elects in a timely manner (an "Electing U.S. Shareholder") to treat the Company as a QEF, as defined in the Code, will be subject, under Section 1293 of the Code, to current federal income tax for any taxable year in which the Company qualifies as a PFIC on his or her pro-rata share of the Company's: (i) "net capital gain" (the excess of net long-term capital gain over net short-term capital loss), which will be taxed as long-term capital gain to the Electing U.S. Shareholder and (ii) "ordinary earnings" (the excess of earnings and profits over net capital gain), which will be taxed as ordinary income to the Electing U.S. Shareholder, in each case, for the shareholder's taxable year in which (or with which) the Company's taxable year ends, regardless of whether such amounts are actually distributed. The effective QEF election also allows the Electing U.S. Shareholder to (i) generally treat any gain realized on the disposition of his or her Common Shares (or deemed to be realized on the pledge of his or her Common Shares) as capital gain; (ii) treat his or her share of the Company's net capital gain, if any, as long-term capital gain instead of ordinary income, and (iii) either avoid interest charges resulting from PFIC status altogether, or make an annual election, subject to certain limitations, to defer payment of current taxes on his or her share of the Company's annual realized net capital gain and ordinary earnings subject, however, to an interest charge. If the Electing U.S. Shareholder is not a corporation, such an interest charge would be treated as "personal interest" that can be deducted only when it is paid or accrued and is only 10% deductible in taxable years beginning in 1990 and not deductible at all in taxable years beginning after 1990. The procedure with which a U.S. shareholder must comply in making an effective QEF election will depend on whether the year of the election is the first year in the U.S. shareholder's holding period in which the Company is a PFIC. If the U.S. shareholder makes a QEF election in such first year, i.e. a timely QEF election, then the U.S. shareholder may make the QEF election by simply filing the appropriate documents at the time the U.S. shareholder files its tax return 18 for such first year. If, however, the Company qualified as a PFIC in a prior year, then in addition to filing documents, the U.S. shareholder must elect to recognize (i) (under the rules of (S)1291 (discussed below), any gain that he would otherwise recognize if the U.S. shareholder sold his or her stock on the application date or (ii) if the Company is a controlled foreign corporation, the U.S. shareholder will be deemed to have made a timely QEF election. When a timely QEF election is made, if the Company no longer qualifies as a PFIC in a subsequent year, normal Code rules will apply. It is unclear whether a new QEF election is necessary if the Company thereafter re-qualifies as a PFIC. U.S. shareholders should seriously consider making a new QEF election under those circumstances. If a U.S. shareholder does not make a timely QEF election during a year in which it holds (or is deemed to have held) the Common Shares in question and the Company is a PFIC (a "Non-electing U.S. Shareholder"), then special taxation rules under Section 1291 of the Code will apply to (i) gains realized on the disposition (or deemed to be realized by reason of a pledge) of his or her Common Shares and (ii) certain "excess distributions," as specially defined, by the Company. A Non-electing U.S. Shareholder generally would be required to pro-rate all gains realized on the disposition of his or her Common Shares and all excess distributions over the entire holding period for the Common Shares. All gains or excess distributions allocated to prior years of the U.S. shareholder (other than years prior to the first taxable year of the Company during such U.S. shareholder's holding period and beginning after January 1, 1987 for which it was a PFIC) would be taxed at the highest tax rate for each such prior year applicable to ordinary income. The Non-electing U.S. Shareholder also would be liable for interest on the foregoing tax liability for each such prior year calculated as if such liability had been due with respect to each such prior year. A Non-electing Shareholder that is not a corporation must treat this interest charge as "personal interest" which, as discussed above, is partially or wholly non-deductible. The balance of the gain or the excess distribution will be treated as ordinary income in the year of the disposition or distribution, and no interest charge will be incurred with respect to such balance. If the Company is a PFIC for any taxable year during which a Non-electing U.S. Shareholder holds Common Shares, then the Company will continue to be treated as a PFIC with respect to such Common Shares, even if it is no longer definitionaly a PFIC. A Non-electing U.S. Shareholder may terminate this deemed PFIC status by electing to recognize a gain (which will be taxed under the rules discussed above for Non-Electing U.S. Shareholders) as if such common shares had been sold on the last day of the last taxable year for which it was a PFIC. Under Section 1291(f) of the Code, the Department of the Treasury has issued proposed regulations that would treat as taxable certain transfers of PFIC stock by Non-electing U.S. Shareholders that are generally not otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death. Certain special, generally adverse, rules will apply with respect to the Common Shares while the Company is a PFIC whether or not it is treated as a QEF. For example under Section 1298(b)(6) of the Code, a U.S. shareholder who uses PFIC stock as security for a loan (including a margin loan) will, except as may be provided in the regulations, be treated as having made a taxable disposition of such stock. 19 The foregoing discussion is based on existing provisions of the Code, existing and proposed regulations thereunder, and current administrative rulings and court decisions, all of which are subject to change. Any such change could affect the validity of this discussion. In addition, the implementation of certain aspects of the PFIC rules require the issuance of regulations which in many instances have not been promulgated and which may have retroactive effect. There can be no assurance that any of the proposals will be enacted or promulgated, and if so, the form they will take or the effect that they may have on this discussion. Accordingly, and due to the complexity of the PFIC rules, U.S. persons who are shareholders of the Company are strongly urged to consult their own tax advisors concerning the impact of these rules on their investment in the Company. Controlled Foreign Corporation. If more than 50% of the voting power of all classes of stock or the total value of the stock of the Company is owned, directly or indirectly, by citizens or residents of the United States, United States domestic partnerships and corporations or estates or trusts other than foreign estates or trusts, each of whom own 10% or more of the total combined voting power of all classes of stock of the Company or the total value of the stock of the Company ("United States shareholder"), the Company could be treated as a "controlled foreign corporation" under Subpart F of the Code. This classification would result in many complex consequences including the required inclusion into income by such United States shareholders of their pro rata shares of "Subpart F income" (as specially defined by the Code) of the Company and the Company's earnings invested in U.S. property and previously excluded Subpart F withdrawn from certain types of investments (as specifically defined by the Code). In addition, under Section 1248 of the Code, gain from the sale or exchange of Common Shares of the Company by a U.S. person who is or was a United States shareholder (as defined in the Code, a holder of Common Shares of the Company who is or was a United States shareholder at any time during the five year period ending with the sale or exchange) is treated as ordinary dividend income to the extent of earnings and profits of the Company attributable to the stock sold or exchanged. Because of the complexity of Subpart F, and because it is not clear that Subpart F would apply to the holders of Common Shares of the Company, a more detailed review of these rules is outside the scope of this discussion. The Shareholder May Suffer Loss By Reclassification Of The Company's Foreign Personal Holding Company Status. A foreign corporation will be classified as a foreign personal holding company (an "FPHC") if (i) at any time during the Company's taxable year, five or fewer individuals, who are United States citizens or residents, directly or indirectly own more than 50% of the corporation's stock (by either voting power or value) (the "FPHC shareholder test") and (ii) the corporation receives at least 60% of its gross income (regardless of source), as adjusted, from certain passive sources (the "FPHC income test"). After its initial year of qualification as an FPHC, a corporation may remain an FPHC even if only 50% of its gross income is FPHC income (i.e., passive income such as interest, dividends, etc.). 20 The Company believes that it does not satisfy, and expects that it will continue to fail to satisfy, the FPHC income test. The Company believes that the FPHC shareholder test also was not met prior to the Offering and will not be met immediately after the Offering. However, due to a number of factors (including the FPHC stock attribution rules, possible change in residence by current indirect shareholders, and possible acquisition of Common Stock by purchase, gift, or bequest by individuals related to or partners of current indirect shareholders) there can be no assurance that the Company will not become an FPHC in the future. If the Company were classified as an FPHC, U.S. Holders (including certain indirect holders) would be required to include in income their pro rata share of the Company's undistributed FPHC income if they were holders on the last day of the Company's taxable year (or if earlier, the last day on which the Company satisfies the shareholder test). Such income would be taxable to such persons as a dividend, even if no cash dividend were actually paid. In such a case, a U.S. Holder would be entitled to increase its tax basis in the Common Stock by the amount of such deemed FPHC dividend. U.S. Holders who dispose of their Common Stock prior to the date discussed above would not be subject to these rules. Moreover, if the Company became an FPHC, United States persons who acquire Common Stock from decedents would not receive a "stepped-up" basis in such Common Stock. Instead, such a holder would have a tax basis equal to the lower of fair market value or the decedent's basis. The Company will notify U.S. Holders in the event that it concludes that it is classified as FPHC for any taxable year. The shareholder may suffer loss resulting from the Company becoming liable for Personal Holding Company Tax. A corporation will be classified as a personal holding company (a "PHC") if (i) at any time during the last half of the Company's taxable year, five or fewer individuals own more than 50% of the corporation's stock (by value) directly or indirectly (the "PHC Shareholder test") and (ii) the corporation receives at least 60% of its gross income, as adjusted, from certain passive sources (the "PHC Income test"). However, if a corporation is an FPHC (see above) it cannot be a PHC. The Company believes that it does not satisfy, and will continue to fail to satisfy, the PHC shareholder test. The Company believes that the PHC income test will not be met for the current taxable year and that it consequently will not be classified as a PHC. However, there can be no assurance that the Company will not become a PHC in the future. A corporation classified as a PHC is subject to a 39.6% tax on its undistributed personal holding company income. Foreign corporations (such as the Company) determine their liability for PHC tax by considering only (i) gross income derived from United States sources and (ii) gross income which is effectively connected with a United States trade or business (collectively, "U.S. Taxable Income"). RISK FACTORS RELATING TO MEETING UNITED STATES SECURITIES AND EXCHANGE COMMISSION DEFINITIONS: Risk Of The Company Being Unable To Raise Funds In The United States May Result In Shareholder Loss. The Company is at significant risk of being considered a blank check company under the Securities Act, Rule 419. This would potentially restrict the Company's ability to raise capital through offerings registered in the United States. It would not restrict funds being raised outside the United States or through private placement. The Company's 20-F filing is a registration statement not an offering memorandum. The Company does not intend to seek to raise money within the United States. 21 Shareholders may suffer loss from the Company being classified by the SEC as an unregistered investment company because of lack of operations. If the Company continues to have no operations, and engages in only fund raising activities, the U.S. Securities and Exchange Commission could classify the Company as an unregistered investment company in violation of the Investment Company Act of 1940. The Company will seek to make acquisitions and in that context may seek to raise funds. However, at present, the Company is not seeking to raise funds for the sake of raising funds. The Company believes that it does not meet the definition of an unregistered investment company. However, such a classification could become possible. Loss Relative To The Stock Trading Requirements Of SEC Rule 144 May impact shareholders. Ninety percent (90%) of the Company's issued shares are insider shares. They are subject to Rule 144. This means that these shares cannot be sold for one year. At the end of the one-year holding period, these shares would be subject to the Insider Trading Rules that would limit the rate of sale of insider shares into the United States Market. However, any sale of insider shares will adversely affect the Company's share price. Should the Company issue shares in the future the additional shares would dilute present shareholder equity in the Company. The sale of such shares would adversely affect the Company's share price. While such insider sales would be subject to American Securities Laws, the result of such sales risks the loss in any investment made by shareholders in the Company's stock. RISK FACTORS RELATED TO THE COMPANY'S DEPENDENCE UPON THIRD PARTIES: If Equity Finance Holding Corporation Fails, The Company May Fail And Shareholders May Lose Their Investment. Because the Company is depending on EFHC to assist with raising funding, the Company may not be able to raise funds to meet disclosed obligations and operations, if EFHC fails. The Company has no financial obligation to Equity Finance Holding Corporation. Total payment from Tech 2000 Corp. to Equity Finance Holding Corporation, for management consulting services, was an amount of US$145,000 with payments spread over 8 months. There is no financial obligation after the Company trades the NASD OTCBB. EFHC has established a relationship with the Company that should result in future business in the form of referrals. While EFHC is still not profitable, EFHC has survived several years being unprofitable and has every reason to believe that it will continue to survive. However, there is a risk that EFHC will fail. In that event, there is a significant risk to the Company that EFHC will not be able to assist the Company find funding. The Company's 20-F Filing Completion Depends Upon The Help Of Equity Finance Holding Corp. The EFHC auditors have expressed concerns about the financial viability of EFHC in a "Going Concern" note to EFHC's last audit. Since EFHC is completing the Company SEC registration statement, Form 20-F, that process cannot be depended upon being completed if EFHC fails. The Shareholder May Suffer Loss Related To Management's Ability To Change The Nature Of Business Operations. The Company has no obligation to engage in the business described in the registration statement. Present management has disclosed the intent of the Company to engage in the disclosed business. Management could, at some future time, engage in presently unknown business opportunities other than those the Company has presently disclosed in this registration document. 22 RISK FACTORS RELATED TO POLITICAL AND ECONOMIC STABILITY IN GLOBAL OPERATIONS: The Company Shareholders May Suffer Loss Related To International Operations And Particular Operations In The PRC And Hong Kong As A Result Of Political And Economic Developments. Since the Company targets Asia and particularly the Peoples Republic of China as a business location, the shareholders may suffer loss doing business in China. Pursuant to the Sino-British Joint Declaration, the government of the PRC began to exercise sovereignty over Hong Kong, effective July 1, 1997, through the Hong Kong Special Administrative Region, which was established pursuant to Article 31 of the PRC constitution. The PRC has agreed that (i) Hong Kong's current social and economic system will remain unchanged for 50 years after July 1, 1997, with the Special Administrative Region to be administered by local inhabitants under the PRC's "Basic Law," and (ii) the laws currently enforced in Hong Kong will remain largely unchanged and foreign investment will be protected by the law. There can be no assurance that the Basic Law as adopted in its present form will not be changed or interpreted in a materially adverse manner for the Company in the future or that any such changes or interpretations would not be given retroactive effect. As of December 2000, we were required by the government of the Hong Kong Special Administrative Region to comply with its laws and regulations in connection with the Mandatory Provident Fund ("MPF") to be set up for each of our employees. We believe that all of our operations in Hong Kong are in compliance with the relevant laws and regulations of the Hong Kong Special Administrative Region, however, amendment of its existing laws and regulations may impose additional requirements and compliance with such laws and regulations may require us to incur significant capital expenditures or liabilities, which could create substantial financial burden and hence make it impractical, inefficient or impossible for us to conduct business in or from Hong Kong. The Company Shareholder may suffer loss from the PRC Exchange Controls and Other Limitations affecting Security Holders. There are no exchange control restrictions on the payment of dividends on the Common Stock in Hong Kong. The shares of Common Stock of the Company are issued in the currency of the United States. Should the Company decide to take on purchases and sales for or with our customers in the currency of the PRC, the Renminbi, we would subject ourselves to dealing with a currency that is not freely convertible into foreign currency. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign currency and through restrictions on foreign trade. Prior to January 1, 1994, the PRC had a dual exchange rate system, which consisted of the rate fixed time-to-time by the PRC State Administration of Exchange Control (the "SAEC") and the rates prevailing in the various swap centers around the country (the "Swap Rates"). In most cases, foreign enterprises satisfied their need for foreign currency through such means as exporting products for foreign currency, selling "import substitute" products in the PRC for payment in foreign currency, or accessing a swap center. Among the more widely used Swap Rates was the rate at the swap center in Shanghai. Effective January 1, 1994, a new unitary, managed floating-rate system was introduced in the PRC to replace the previous dual-track foreign exchange system, which was abolished pursuant to the Notice of the People's Bank of China Concerning Further Reform of the Foreign Currency Control System (the "PBOC Notice"). The conversion of Renminbi into U.S. dollars 23 must now be based on the rate set by the People's Bank of China, which is set based on the previous day's PRC interbank foreign exchange market rate and with reference to current exchange rates on the world financial markets. In furtherance of these currency reforms, the China Foreign Exchange Trading Center (the "CFETC") was formally established in Shanghai and began operating in April 1994. The establishment of the CFETC was originally intended to coincide with the phasing out of the swap centers. However, the swap centers have been retained as an interim measure and it is envisaged that the local swap centers will be phased out gradually. Currently, foreign investment enterprises ("FIEs") in the PRC (including Sino-foreign equity and co-operative joint ventures) are required to apply to the local bureau of the SAEC for "foreign exchange registration certificates foreign investment enterprises." Upon the presentation of appropriate documentation, FIEs may enter into foreign exchange transactions at swap centers, or in the future, in the event the unitary exchange rate system is implemented as anticipated, through the unified market when all swap centers are consolidated under the CFETC. On January 29, 1996, the State Council promulgated the Regulations of the People's Republic of China Regarding Foreign Exchange Control (the "Regulations") that came into effect on April 1, 1996. Pursuant to the Regulations, conversion of Renminbi into foreign exchange for current account items is permissible. Conversion of Renminbi into foreign exchange for capital items, such as direct investment, loans or security is still under the sole jurisdiction and requires approval of the SAEC. As a result of the adoption of the unitary exchange rate system on January 1, 1994, the official bank exchange rate for Renminbi to U.S. dollars experienced an immediate devaluation of approximately 50% to US$1.00 .2 = Rmb 8.7000. Any future volatility or devaluation of the Renminbi could have a material adverse effect on the Company's business, results of operations and financial condition. As the Company has not entered into any Renminbi-denominated purchases or sales for or with customers, they currently do not have to obtain any required approvals for the conversion and remittance abroad of foreign currency necessary for the operations of any of the Company's business in the PRC. However, if the Company does transact business in Renminbi in the future and obtain the required approvals, such approvals do not guarantee the availability of foreign currency, and no assurance can be given that the Company will be able to convert sufficient amounts of foreign currency in the PRC's foreign exchange markets in the future at acceptable rates, or at all, for the repayment of debt, payments of interest, purchases of equipment or payment of dividends, if any, and payments for services and other contracts. All of the Company's sales and purchases for and with customers will be denominated in U.S. Dollars. If the Company were to transact business in Renminbi or other currencies, it would subject itself to a variety of risks associated with changes among the relative currency values. The Company does not currently hedge its foreign exchange positions. Since 1983, the Hong Kong government has maintained a policy of linking the U.S. Dollar and the Hong Kong Dollar at an exchange rate of approximately HK$7.75 to US$1.00. There can be no assurance that such link will be continued, although the Company is not aware of any intention of the Hong Kong government to abandon such link. The PRC government sets the exchange rate between the Renminbi and all other currencies. 24 Over the last five years, the Renminbi has experienced significant devaluation against most major currencies. If the value of the Renminbi (if the Company were to transact business for or with customers in Renminbi) or the Hong Kong Dollar decreases relative to the U.S. Dollar, such fluctuations may have a positive effect on the results of Renminbi relative to the U.S. Dollar would increase the expenses and therefore would have a material adverse effect on business, financial condition and results of operations. Political And Economic Instability In The PRC May Result In Loss To The Company Shareholders. Since 1979, the PRC adopted an open-door policy and the country is gradually shifting itself towards a more market-oriented economy. Such reforms have resulted in significant economic growth and social progress. Many of the reforms are unprecedented or experimental and will be refined and improved upon. The reforms over the past 20 years have significantly opened up the country's investment and business environment compared with the past, but as the economy is now at a transitional stage, a number of reforms are subject to further refinements and readjustments. The Company is operating on the assumption that, in the long term, such refinements and readjustments should in most cases improve the overall investment and business environment that would be advantageous. However, there is no guarantee that such reforms will benefit the Company immediately, and it is difficult to determine whether such reforms may have direct or indirect negative impacts on the business and operations in the future. The Legal And Regulatory Framework Of The PRC Could Create Losses For The Company Shareholders. The National People's Congress, or its Standing Committee, is responsible for the passing of new laws of the PRC and any amendments thereto. The PRC legal system is based on written statutes. Court judgments are therefore not legally binding - although judges in subsequent cases will often make reference to them in forming their judgment. The interpretation of the PRC laws may be subject to policy changes reflecting the domestic, political and social developments at the time. Since 1979, to facilitate foreign investments and to meet the needs of investors, the PRC government has been developing and modifying its economic systems by promulgating a series of economic related laws and regulations. As the legal system of the PRC keeps evolving, the promulgation of new legislation, the changes to existing laws and regulations and the precedence of national laws over local regulations may have negative impacts on foreign investors. Although throughout the past 19 years, the legal system of the PRC in general has been evolving in favor of foreign investors, there is no guarantee that the changes and modifications of laws and regulations in future will be advantageous to foreign investors as in the past. Therefore uncertainty exists as to changes to and/or development of any PRC laws and regulations and of the legal system itself. There is no assurance that any change in and interpretation of the PRC laws and regulations in future will not have any adverse effect on our business and prospects. RISK FACTORS RELATED TO OPERATING IN AN INTERNATIONAL ELECTRONICS AND SEMICOUDUCTOR INDUSTRY ENVIRONMENT: Shareholders Might Encounter Loss Resulting From The Company's Business Is Impacted By The Slowdown In Economies Worldwide. The Company's business is dependent on current and anticipated market demand for electronics, which has been negatively impacted by the slowdown in the economies of the United States, 25 Asia, and elsewhere that began in the second half of 2000. The uncertainty regarding the growth rate of the worldwide economies has caused companies to reduce capital investment. These cutbacks have been particularly severe in the electronics and semiconductor industry that the Company serves. We cannot predict if or when the growth rate of worldwide economies will rebound or whether the growth rate of the Company's business will rebound when the worldwide economies begin to grow. While the Company's diverse businesses may allow the Company to perform better than some companies in periods of economic decline, the effects of the economic decline are being felt across all electronics business. The Company's Business Is Dependent On The Current And Anticipated Market For Electronics And Shareholder Loss Could Result From A Bad Estimate Of The Market. The volatility of this market creates a situation whereby the company cannot be reliable in market estimates. The Company's business and results of operations depend in significant part upon capital expenditures of manufacturers of semiconductors and other electronics, which in turn depend upon the current and anticipated market demand for those products. The current and anticipated market demand for electronics has been impacted by the economic slowdown that began in the latter portions of 2000 and by the terrorist attacks of September 11, 2001. Historically, the electronics and semiconductor industry has been highly cyclical with recurring periods of over supply, which often has had a severe negative effect on demand. The Company believes that the markets for newer generations of electronic products such as those the Company brokers and markets will also be subject to similar fluctuations. The Company is dependent on the timing of customer orders and the deferral or cancellation of previous customer orders. The Company cannot assure that any future increase in sales or bookings for a calendar quarter will be sustained in subsequent quarters. In addition, any factor adversely affecting the electronics industry or particular segments within the electronics industry may adversely affect the Company's business, financial condition and operating results. The Company Has Taken And Expects To Continue To Take Measures To Address The Recent Slowdown In The Market For The Company's Future Products That Could Have Long-Term Effects On The Company's Business. The Company has taken and expects to continue to take measures to address the recent slowdown in the market for its future products. In particular, the Company has frozen hiring, delayed salary increases, deferred pay to officers, discontinued planned offerings of some products, and delayed the Company's planned expenditures and expense budgets. These measures will reduce the Company's expenses in the face of decreased revenues due to potential decreased or cancelled future customer orders. However, each of these measures and any additional measures taken in the future to contain expenditures could have long-term effects on the Company's business by reducing the Company's pool of technical talent, decreasing or slowing improvements in product offerings, and making it more difficult for the Company to respond to customers. 26 If The Company Fails To Acquire New Product Lines To Adapt To The Company's Customers' Needs And If The Company's Customers Fail To Accept The Company's New Products, It Will Adversely Affect The Company's Revenues. The Company believes that the Company's marketing position depends primarily on the technical competence and creative ability of the Company's suppliers. The supplier's development of new technologies, commercialization of those technologies into products, and market acceptance and customer demand for those products is critical to the Company's success. Successful product development and introduction depends upon a number of factors, including: - new product selection; development of competitive products by competitors; - timely and efficient completion of product design; and -supplier's timely and efficient implementation of manufacturing and assembly processes and product performance at customer locations. Intense Competition In The Company's Industry May Affect The Company's Revenues And Shareholder May Suffer Loss. Since the company only markets and brokers products produced by others, and does not manufacture its own products, it faces substantial competition, throughout the world, in each of the Company's operating segments. Some of these competitors also have substantial financial and other resources to pursue engineering, manufacturing, marketing and distribution of their products. The Company also faces competition from international suppliers at several of the Company's customers. Some of the Company's competitors have introduced or announced new products with certain performance characteristics that may be considered equal or superior to those the Company plans to offer. The Company expects competitors to continue to improve the performance of their current products and to introduce new products or new technologies that provide improved cost of ownership and performance characteristics. New product introductions by competitors could cause a decline in sales or loss of market acceptance of the Company's products. Moreover, increased competitive pressure could lead to intensified price based competition, which could materially adversely affect the Company's business, financial condition and results of operations. The Company Is Subject To Risks Of Operating Internationally; Therefore Shareholders Are Accepting A Global Business Risk. The Company expects to derive a significant portion of the Company's total revenue from customers outside the United States. The Company's international sales are subject to significant risks and difficulties, including: - unexpected changes in legal and regulatory requirements and in policy changes affecting the Company's markets; - changes in tariffs and exchange rates; - political and economic instability and acts of terrorism; - difficulties in accounts receivable collection; - difficulties in staffing and managing international operations; and - potentially adverse tax consequences, such as the World Trade Organization's dispute against the U.S. Foreign Sales Credit. Reliance On The Suppliers And Manufacturers In The PRC And Other Countries In Asia Could Result In Shareholder Loss. The Company is heavily reliant on suppliers and manufacturers in the PRC and other Asian Countries to fulfill specific requests and orders placed by customers. While the Company's directors, management and officers do not limit sourcing activities in the PRC, it is anticipated that the Company will carry out a substantial portion of such sourcing activities in the PRC. Therefore, this aspect of ITEL's business is subject to changes in economic, political and social conditions in the PRC. There can be no assurance that such changes will not adversely affect the execution of the contemplated business plan by the directors and officers and management. 27 ADDITIONAL RISK FACTORS: Shareholder Loss May Result From Poor Management of Potential Growth. The Company's ability to manage future potential growth, if any, will require a continual process of implementation and improvement in our operational, financial and management information systems and control; employment and effective training of its new employees, including management, marketing and technical personnel; and also proper motivation and management of our new employees so as to allow our overall operations to flow effectively and to integrate them into our corporate culture. Although the directors and officers have previously contributed to the growth of other companies, there can be no assurance that the management will be able to achieve similar or identical results and performances successfully. If the Company fails to manage future potential growth effectively or loses the services of one or more of its key personnel, it would incur a material adverse effect on the results of operations and the ability to execute the Company's business strategy. Shareholders Cannot Be Assured Of The Company's Ability to Attract and Retain Qualified Personnel. The Company's ability to attract and retain qualified personnel is critical to the implementation of its business plan. No assurances can be given that the Company will be able to retain or attract such qualified personnel or agents to implement its business plan successfully. If for any reason, the Company were unable to attract and retain the qualified personnel necessary, ability to implement the business plan would be adversely affected. Heavy Dependence on Service and Purchase Contracts for Current Revenues Could Create Loss For Shareholders. During our start-up stage, the Company is heavily dependent upon future service orders with suppliers and future sales orders with customers. A large percentage of future revenue will be derived from the commission received of the invoice value of goods purchased on behalf of customers. Further, there may be service contracts whereby the customer is obligated to pay a stipulated fee that is to be deducted if the commission payable is higher than the retainer fee at the end of each quarter. In light of the intense competition, there can be no assurances that there will be no default on either party to or early termination of any future service agreements in order to sustain and achieve future revenues. Also, the Company may seek future customers for the sale, purchase, export and delivery of merchandise from the PRC. A portion of revenue may be derived from exporting such shipments of goods at reasonable and competitive costs. With the slowing down of the economy in the foreseeable future, there can be no assurances that the Company will able to obtain a continuous flow of contracts to allow an accumulation of revenue. 28 ITEM 4. INFORMATION ON THE COMPANY A. History and Development The International Technology Enterprises Ltd. (the "Company") was incorporated under the laws of Belize on September 27, 2000. The Company was incorporated for the original purpose of manufacturing and distributing electronic products. "The Company was not founded to do business in the United States. The Company does not, nor does it intend to, do business in the United States." The original strategy was to purchase that capability. A letter of intent was sent to Tech 2000 Corp., a contract manufacturer of integrated circuit boards, 5 March 2001 and terminated 10 May 2001 (by telephone call). The letter was rescinded and the transaction did not occur. There were no material costs associated with this letter of intent to purchase. There is no other documentation related to this matter exchanged between the parties. The letter of intent was terminated because the Company strategy was to maintain its status as a brokerage company manufacturing nothing and holding no inventory. Since, the letter of intent was not discussed beyond the original presentation to Tech 2000 Corp., no potential claims should arise from the termination of the letter of intent to purchase. No covenants were exchanged and no acquisition agreement was drafted nor executed. Mr. Phong Huy Dinh, President and shareholder of Tech 2000 Corp., is the brother-in-law of Quan Van Nguyen, one of the officers and directors of the Company. As a result the Company has decided to limit its operation to acting as a broker of computer hardware and software. B. Business Overview The Company is in a start-up stage. It has not generated any revenues and there is no assurance that it will become operational. The disclosure contained in this registration statement reflects the Company's plan of operation. Unless the Company can raise capital through the sale of securities or loans, it will not be able to implement its business plan and in all likelihood will have to cease operations. The Company believes that it will need $2,000,000 in order to commence operations. The Company intends to conduct the business of an international sales broker of integrated circuit boards. The Company will establish contracts with third party purchasers of integrated circuit boards and manufacturer sellers of integrated circuit boards for a commission. The commission will be predicated upon a percentage of the total purchase price of the circuit boards. Brokers sell manufacturers' products without creating ongoing sales overhead for the manufacturer. The manufacturer doesn't pay for the local sales office and pays the broker from the proceeds of the broker's sales. The broker expands the manufacturer's market without increasing the manufacturers overhead. Circuit boards are computer hardware with related software. The object of a brokerage is to minimize pricing by access to multiple offshore suppliers who offer products at varying prices; thereby providing the lowest available price. Achieving the lowest price is more probable because of the Company's global sales strategy and its willingness to seek sources of supply in Asia, Eastern Europe, Latin America and elsewhere. The Business is not seasonal. Management of the Company believes that the Company can make money. There appears to be a sufficient spread in production costs in the world to allow a manufacturer's broker to profit. 29 The Company is domiciled in Belize. Belize International Business Corporation law, amended to year 2000, provides the legal framework for the Company. The key features of the Belize act are as follows: no income tax, stamp duty, estate taxes, capital gains or withholding tax: having only one shareholder/subscriber permitted; share may be held by corporations or trusts; a single director allowed which may be a corporation or trust; non-disclosure of beneficial owners; bearer shares permitted - shares may be issued without par value; IBC'S can be used for financial management, investment holding, ship or property ownership, share ownership of other companies, leasing of assets, copyrighting and/or licensing as well as general commercial trading no exchange control; private label company availability; low fees for setup and renewal; no statutory accounting or auditing records need to be filed in Belize; no minimum capital requirements. Minimal restrictions: cannot carry on business with residents of Belize; cannot own real estate in Belize; cannot operate as a bank or an insurance company unless an offshore banking license is granted; cannot provide Registered Office Or Serve As Registered Agent; An IBC must maintain a Registered Agent and a Registered Office in Belize. Also, governing law does not require that shareholders elect all directors. In Belize, there is no established body of corporate law on which shareholders can rely for clarifying and protecting their rights. These rights differ materially from typical rights of investors in U.S. companies. For example, (1) Shareholders do no have the right to approve mergers and sales of substantially all of the company assets by a vote of the majority of common shares outstanding, and (2) Appraisal rights do not exist by law. (In Belize, there is not an established body of law upon which shareholders can rely for clarifying and protecting their rights.) ITEL lacks offices in the United States. Most of Company directors and officers reside outside the United States. Therefore, it may be difficult to serve process upon them in the United States or to collect upon a judgment obtained in the United States against them. There is doubt as to the enforceability of liabilities predicated on U.S. federal securities laws determined in original actions in Belize and judgments of U.S. courts obtained in actions based upon the civil liability provisions of U.S. federal securities laws are not enforceable in Belize. Moreover, no treaty exists between the United States and Belize for the reciprocal enforcement of foreign court judgments. Consequently, ITEL's American shareholders may be effectively prevented from pursuing remedies under U.S. federal securities laws against the company, its officers and directors. Warranties The Company will not warrant any of its services or the products which it brokers. Market and Marketing Global Markets: Industry Trends Over the past 10 years, the Printed Circuit Board (PCB) market and its dynamics have changed significantly. The Company can expect the rate of change in the industry to accelerate as regional strongholds diminish, and global sourcing accelerates. The business environment is becoming increasingly competitive at all levels of the value chain, not least the PCB industry. Major emphasis is being placed on cost elimination through technology and materials R&D. This increases the entry cost of capital and investment and changes the landscape and profile of PCB companies that can compete in this new environment. 30 Over the last decade, the printed circuit board (PCB) industry in general has gone through tremendous change in structure and capability brought about by significant changes in technology and industry drivers. Consumer needs have changed with increased computer literacy and a more mobile lifestyle. Electronic products have grown smaller, lighter, faster and more powerful. The ubiquitous Internet, which was hardly heard of 5 years ago, has today pervaded every aspect of our lives - from how we communicate, to how we do business, and to the way we spend our leisure time. In 1999, global electronic equipment production was almost US$1.1 trillion driven by an insatiable appetite for communications equipment. The convergence of personal computers, communication devices, satellite entertainment and the Internet is spinning off many new products that offer the consumer both greater convenience and mobility. All this provides a platform for an exciting new millennium, as several industry sectors are raising their demand for more applications that translate into more business opportunities for PCB manufacturers. In the new order, OEMs are focusing on their core competencies, leaving the PCB business to specialist companies. To be successful in this exciting new environment, the Company has to be customer focused, knowledge driven and e-business enabled with a high access to supplier manufacturing flexibility. The world PCB market is forecasted to grow from US$37.5 billion in 1999 to US$49.9 billion in 2004, with a CAGR of 5.9%. By comparison, the CAGR in the Asia Pacific region alone (excluding Japan) is much higher at 9.2%, with a forecasted rise from US$9.3 billion in 1999 to US$14.5 billion in 2004. This makes it the most dynamic region in the global PCB market, followed by Japan (5.2%) and South America (5.0%). Additional information revising the above projections down to a more recent level were discussed in: Semiconductor Market Forecast Update, Cahners In-Stat Group, Report Number: SI01-14MF, Publication Date: November 2001, Number of Pages: 35, Report Price: $2,495 USD:"The current economic conditions and semiconductor industry overcapacity are expected to result in a 15% drop in semiconductor revenues from 2000 to 2001. The year 2001 has been a bad year for the semiconductor industry. As the economic slowdown spreads around the world we have lowered our forecast for 2001 to $138.3 billion, 32.3% below 2000. Although we expect quarter to quarter growth throughout 2002, the growth will be slow and total revenue for the year is expected to be 5.7% below 2001." They project continued growth to 2004. In the Electronic Engineering Times article, Valley entrepreneurs look homeward to China, Posted : 17 Aug 2001 they write: "We are blessed by China," said Bo Wu, CEO at EnReach Technology Inc. (Alviso, Calif.), whose business targets the emerging broadband market...Most analysts and Tsinghua graduates agree that Internet demand in China is huge, despite some existing infrastructure problems. AsiaTech's Liu acknowledged that the user experience in China so far hasn't been good, "due to the slow bandwidth available on the network, compounded by technology glitches." The PC penetration rate in China is also extremely low--some estimate it has reached only several percent of the total market. But that's not enough to put a drag on Internet uptake among the Chinese. "Think about [the] 80 million people in China who are already cell-phone users," said Liu. When even a fraction of them start using the phones to connect to the Internet, the traffic that Internet data centers in China must handle will soar, he said. The demand they speak of involves increases in the electronic industry market and provides opportunities for "brokerage" of ICBs and other electronics products. The registration statement has been amended accordingly. 31 Competition for the consumer electronics industry comes from all directions - - even from once-unlikely segments such as industry suppliers. For ITEL to survive in this environment and with its business plan, new strategies and partnerships will need to be developed, as well as creation of an effective game plan for future contingencies. Industry observers have watched as a steady stream of nontraditional competitors continues to flow into an already crowded consumer electronics marketplace. Signs of change are everywhere. Consider the choice of keynote speakers at the 2001 Consumer Electronics Show, "As if bracing for a competitive onslaught" is not enough, consumer electronics makers must face another challenge affordable supply. Shortages inevitably occur. Which manufacturing partners will suppliers favor; the traditional electronics manufacturer, the conglomerate with a broad array of products and services, or perhaps their very own product line? Where will loyalties lie? With significant pressure mounting on both ends of the value chain, what will keep the Company competitive as a consumer electronics company from being squeezed out of play? ITEL believes that the something that will provide the competitive advantage will be the "brokerage concept" of doing global electronics business. The Company intends to promote its services on a worldwide basis, initially targeting Asia, then Europe and Latin America. Initially, the Company intends to promote its services through electronic trade shows, in computer related magazines and through a web site it intends to create. Packaging and Transportation. Packaging of the products will be made by the seller. Transportation will be negotiated by the Company on behalf of buyer. Strategy The Company's marketing strategy is to promote its ability to locate computer hardware and software requested by a customer at the lowest available cost and within the time constraints established by the customer. Inventory The Company will not carry an inventory of products. All products will be purchased by a customer from the supplier and drop shipped directly to the Company's customers. Employees The Company currently employees no full-time employees and no part- time employees other than its officers and directors who devote approximately 10% of their time to the operation of The Company. The Company intends to employ these additional employees on as needed basis. However, the Company does work with one independent contractor to man the office in Belize and conduct operations on a fulltime permanent basis as a resident of Belize. There is no written contract with this individual. Additionally, the Company has agreed to services with a resident agent, on a fulltime permanent basis, to interface Company operations with the Belize Government. The resident office person is assisting with the relocation of the office after the Hurricane. Aside from seeking to rebuild or relocate the Punta Gorda office, there are no activities currently being conducted in Belize. It's anticipated that the office problem will be resolved in January 2002. Without an office, and with limited cash resources, it's difficult to conduct business. 32 Competition The Company competes with many other brokers and consulting firms who broker computer hardware and software to third parties all of which the Company believes have greater financial resources than The Company. C. Organizational Structure Not Applicable. D. Property, Plants and Equipment Currently the Company does not own any property. The Company's executive offices are located at 1st Floor East Wing, 65 Front Street, Punta Gorda, Belize. Its telephone number is (501)(7) 22342. The offices are sublet from International Technology Industries Corp on a month-to-month basis. The monthly rental is US$900.00. The Company uses approximately 100 square feet of space. The space consists of desks, telephone equipment, computer equipment and on-line e-mail services. It is at this location, when in the future stock market trading and subsequent operations commence, that (1) the brokerage contracts will be entered into between the Company and customer and (2) the Company will locate the computer equipment desired by the customer. Because the space is used on a month-to-month basis, the Company can be asked to vacate at anytime without advanced notice. If that should occur, the Company believes that it can find adequate alternative office space without interruption of operations. Until the arrival of Hurricane Iris, which devastated Belize in October of 2001, the 65 Front St. facilities disclosed were occupied on a regular basis--allowing for travel schedules. Hurricane Iris has necessitated temporary arrangements and repairs, which are now underway but yet to be completed, to the facility. The facility in Punta Gorda suffered significant damage. Mr. Mahan is living in California. He's coordinating the 20-F registration filing for the Company from the U.S. because it is cost and time efficient. There are no Company facilities in neither California, nor are there Company facilities in any other United States locations. International Technology Industries Corp. is engaged in the business of acquisitions and mergers. The space not used or occupied by the Company is used by International Technology Industries Corp. for its operations. ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS Management's Discussion and Analysis of Financial Condition and Results of Operations. The Company has inadequate cash to maintain operations during the next twelve months. In order to meet its cash requirements the Company will have to raise additional capital through the sale of securities or loans. As of the date hereof, the Company has not made sales of additional securities and there is no assurance that it will be able to raise additional capital through the sale of securities in the future. Further, the Company has not initiated any negotiations for loans to the Company and there is no assurance that the Company will be able to raise additional capital in the future through loans. In the event that the Company is unable to raise additional capital, it may have to suspend or cease operations. 33 The Company does not intend to conduct any research or development of its products during the next twelve months other than as described herein. The Company does not intend to purchase a plant or significant equipment. The Company will hire additional employees on an as needed basis, however, the Company does not expect any significant changes in the number of employees. The Company expects to earn revenues in the first quarter of 2002. There is no assurance, however, that the Company will earn said revenues as planned. Currently, the Company has US $3,400 in assets. The source of the assets in cash is the purchase of stock by Equity Finance Holding Corporation. Reconciliation to US GAAP The Company's financial statements have been prepared in compliance with US GAAP standards (GAAP) Inflationary and Other Economic Pressures The Company is not currently generating revenues from the sale of products. Future revenues in this segment are governed primarily by Asian market prices for the Company's services. No immediate effect in respect to inflation and changes on prices is realized. However inflationary pressures affect the Company's operation and development expenditure, which is primarily incurred in Belize dollars that is the same as the U.S. dollar. The directors' estimation of inflation is considered in regards to the general state of the world economy of the United States in particular. This exposure to inflationary pressure is dependent on the price of electronic products in an unregulated market. At this stage the Company is unable to quantify the mix of inflationary pressures that will affect the price of electronic products. Government Policies The Company has considered the issue of political risk in Belize regarding the acquisition and resale of electronic products and will continue to do so as a matter of normal business practice. Belize has no history of expropriation, accordingly, the Company is comfortable with the governmental situation, as it exists in Belize today. Activities conducted by residents and non-residents in Belize and the flow of investment into Belize and the return of capital out of Belize are subject to regulation. All of these controls and regulations are subject to change from time to time. These factors, in addition to the usual risks and the economic and political stability of Belize must be taken into account in relation to the Company's operations. These policies or factors do not affect investments by United States Nationals in Company's common stock. 34 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES A. DIRECTORS AND SENIOR MANAGEMENT The officers and directors of the Company are as follows: - -------------------- --------- ------------------------------------------------ Name Age Position - -------------------- --------- ------------------------------------------------ Jack L Mahan, Jr. 59 Director/Secretary/CEO/Chief Financial Officer - -------------------- --------- ------------------------------------------------ Quan Van Nguyen 49 Director - -------------------- --------- ------------------------------------------------ Ian Ross 57 Director/Chairman/Vice President - -------------------- --------- ------------------------------------------------ All directors hold office until the next annual meeting of shareholders and until their successors have been elected and qualified with the exception of Jack L. Mahan, Jr., who is appointed for a five year period as the representative of Equity Finance Holding Corporation pursuant to Article IV of The Company's bylaws. The five year term ends five years from the date the company begins to trade. The Company's officers are elected by the Board of Directors at the annual meeting after each annual meeting of The Company's shareholders and hold office until their death, or until they resign or have been removed from office. Jack L. Mahan, Jr. Dr. Jack L. Mahan, Jr., is a founder, Chief Executive Officer, Chief Financial Officer and a member of The Company's Board of Directors. Since March 1998, Dr. Mahan has served as Chairman, Secretary of the Board of Directors, and President for Equity Finance Holding Corporation, a foreign public corporation registered with the U.S. Securities And Exchange Commission trading in the U.S. on the Bulletin Board operated by the National Association of Securities Dealers (the "Bulletin Board") with the trading symbol EFHLF. Dr. Mahan has been employed by the State of California since 1989 as an economic development specialist and he has served on the Planning Commission for the City of Woodland, California since, 1997. Prior to that, Dr. Mahan owned several businesses including Daveck International, an international trading company. Dr. Mahan holds the degree of Doctor of Philosophy from the United States International University, San Diego, California, from the School of Leadership and Human Behavior. He received a MBA degree in International Business, Finance and Marketing, in 1978 and an MBA degree in Real Estate Management In 1979. Both of these degrees were received at National University in San Diego, California. He also received a Master's Degree (in 1966) and a Bachelor's Degree (in 1964) from San Diego State University, San Diego, California; both degrees were in Experimental Psychology. In 1967, he studied at the International Graduate School, University of Stockholm, Stockholm, Sweden. Quan Van Nguyen Mr. Van Nguyen, is a founder and a member of The Company's Board of Directors. Mr. Van Nguyen is a resident of Viet Nam and has experience in managing companies in Viet Nam. From June 1990 to April 1995, Mr. Van Nguyen owned and operated Rivers Transportation in Viet Nam. From May 1995 to present, Mr. Van Nguyen owned and operated a construction company located in Viet Nam. Since July, 1996, Mr. Van Nguyen owns and operates, a brick manufacturing facilities in Viet Nam which produce from one million to 3.5 million bricks per year and which employ 65 persons. 35 Ian D. Ross Dr. Ian Ross is a founder, a Vice President and the Company's Chairman of the Board of Directors. Since 1986, Dr. Ross has been Owner/Consultant for Ian D. Ross & Associates, and Professional Management Services. Dr. Ross provides consulting to the healthcare industry and business in general in sales and marketing. His company is international in scope. From 1968 to the present, he has operated as Dr. of Dentistry in a general dental practice. As, a dentist with a background in healthcare management and marketing, he has been a board member of a number of healthcare and other professional organizations. From 1984 to 1985 he was a Board Member and Director of Catholic Credit Union (Houston, Texas, U.S.A.); a Credit Union serving the local community. Duties included attending board meetings as well as conducting general business. He has served on the Board of Directors for the Confederation Of Dental Employers (C.O.D.E.) (UK),a professional organization of dental practice owners. From 1994 to 1996 he was Secretary and Editor; for which duties included those as Company Secretary and editor of the newsletter. He served on the Board of the Australian Society For Advancement Of Anesthesia & Sedation In Dentistry (1972 TO 1978). His duties included business manager of the journal "Dental Anesthesia and Sedation" and course director teaching sedation and practice management. Dr. Ross is a graduate of Sydney University Dental School, Australia (1968), and an Associate Fellow of the Australian Institute of Management (1975-77). He is also a graduate of Kingston University Business School, London, England (1996-97). As a graduate of the Dale Carnegie Sales Course, he has taught sales and marketing for healthcare professionals in the United States and in England. He has been a contributing editor (1984-85) for McGraw Hill's "Long Term Care" and other healthcare publications such as Dental Anesthesia and Sedation (1977). He has also taught the Marketing of Medical and Healthcare Services for Business Week Magazine (1985) and Productivity Training Corporation (1988 to 1994) as well as other healthcare companies. B. Compensation The following description sets forth the compensation paid by the Company from inception through December 31, 2000, for each officer and director of the Company. This information includes the dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any. The Company currently does not disclose to its shareholders or otherwise make public the information contained in this section. Compensation of Officers For the period ended December 31, 2000, there was no compensation paid by the Company to its officers. No salaries will be paid or accrued through December 31, 2000. The Company has recently developed a formal strategic policy regarding the compensation of its executives and officers. This policy is intended to ensure executives a total compensation package that is commensurate with their skill and experience. 36 The Company anticipates paying the following salaries in 2001, subject to the Company beginning profitable operations and generating sufficient revenues to pay the same: - ------------------------ ------------------- --------------- Office Amount - ------------------------ ------------------- --------------- Jack L. Mahan, Jr. President/CEO $ 50,000 Ian D. Ross Vice President $ -0- - ------------------------ ------------------- --------------- The Company has not adopted any stock option plans, retirement, pension, or profit sharing plans for the benefit of the Company's officers and directors other than as described herein. Stock Option Plans and Long-Term Incentive Plan Awards. The Company does not have any stock option plans or long-term incentive plans that provide compensation intended to serve as incentive for performance. Compensation of Directors. Directors do not receive any compensation for serving as members of the Board of Directors. The Board has not implemented a plan to award options to any Directors. There are no contractual arrangements with any member of the Board of Directors. C. Board Practices The term of offices for the current Board of Directors will expire at the next annual meeting of shareholders with the exception of one member of the Board of Directors who will be selected for a five-year period. The Company has not scheduled its next annual meeting. There are no director's service contracts with the Company. The Company has no subsidiary corporations. The Company does not have an audit committee or remuneration committee. D. Employees Other than its officers, the Company has no employees. E. Share Ownership The following table sets forth the common share ownership of each director and officer, individually and all officers and directors of the Company as a group. Each person has sole voting and investment power with respect to the shares of common stock shown, and all ownership is of record and beneficial. 37 - --------------------------- ------------------ ------------------------------ ------------------ Name and Address of Owner Number of Shares Position Percent of Class - --------------------------- ------------------ ------------------------------ ------------------ Jack L. Mahan, Jr. 0 Secretary of Board/Chief 0% 1296 E. Gibson Road, #149 Executive Officer/ President Woodland, CA 95776 - --------------------------- ------------------ ------------------------------ ------------------ Quan Van Nguyen 0 Director 0% 18/15 Ngo Quyen City Rach Gia, County Kiengiang Viet Nam - --------------------------- ------------------ ----------------------------- ------------------- Ian D. Ross 0 Chairman of the Board/ Vice 0% 24 Station Street President Spalding, Lincolnshire PE11 1EB United Kingdom - --------------------------- ------------------ ----------------------------- ------------------- There are no options to purchases shares of the Company's common stock by anyone. ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS There are no additional interests of management in transactions involving the Company except for those stated in Item 17 - Notes to the Financial Statements. A. Interests of Experts and Counsel Not applicable. Major Share Ownership The following table sets forth the common share ownership of each person or entity owning more than 5% of the Company's outstanding shares of common stock. - ----------------------------------- -------------------- --------------- ---------------------- Name and Address of Owner Number of Shares Percent of Class - ----------------------------------- -------------------- --------------- ---------------------- International Technology Industries 4,634,100 90% Corp. Belize IBC - ----------------------------------- -------------------- --------------- ---------------------- Totals 4,634,100 90% - ----------------------------------- -------------------- --------------- ---------------------- Relationship and Transactions with Equity Finance Holding Corporation andInternational Technology Industries Corp. 38 Relative to Item 4.C of Form 20-F, the relationships among the common shareholders owning 10% or more of the related foreign corporations is listed in the table below. Since each of the foreign corporations, except ITEL, involved in these transactions is not a reporting company in the United States, it is not possible to determine all shareholders because the information is not disclosed. The table below discloses the major shareholders of the Company (those with greater than 2% of the common stock). The "host country" is the United States. The Company stock is owned by 733 public shareholders.. Currently, there are 722 host country shareholders of the Company's common shares. Non-"Host-Country" (i.e., non-United States--the "host country") shareholders total 11 holders of record as of March 19, 2001. They hold 99% or 5,139,382 shares of the 5,149,193 total shares outstanding as of March 19, 2001. Thus, non-host country, non-U.S. resident shareholders, own 99% of the Company shares. There are 9,811 total (or 1% of total shares) "host-country" shares held by 722 United States Resident Shareholders. Shareholders of International Technology Enterprise Ltd. - --------------------------------------------- ----------------- -------------- Registrant Name Shares Percentage - --------------------------------------------- ----------------- -------------- International Technology Industries Corp. 4,634,100 89.99 % - --------------------------------------------- ----------------- -------------- Equity Finance International Corporation 158,842 3.08 % - --------------------------------------------- ----------------- -------------- Equity Finance Information Systems 118,034 2.29 % - --------------------------------------------- ----------------- -------------- Augen Opticien GMBH of Honk Kong Ltd. 113,353 2.20 % - --------------------------------------------- ----------------- -------------- International Money School 113,353 2.20 % - --------------------------------------------- ----------------- -------------- The following table discloses common shareholders owning common stock of International Technology Enterprises Ltd. Since each of the foreign corporations, except ITEL, involved in these transactions is not a reporting company in the United States, it is not possible to determine all shareholders because the information is not disclosed. 39 Common Shareholders/Individuals For International Technology Enterprises Ltd. - ------------------------- --------------------------- ---------------------------- -------------------------- Name of entity Shareholders of 10% Business Officers/Directors or more - ------------------------- --------------------------- ---------------------------- -------------------------- International International Technology International Brokerage J. Mahan,U.S. Technology Enterprises Industries Corp. (ITIC), Officer, BOD Quan Van Ltd (ITEL) 89.99% International Money Viet Nam, BOD Ian D. Ross School, 2.20% Augen Opticien Great Britain Officer, BOD GMBH of Honk Kong Ltd., (Relative of Nguyen: 2.20 % Equity Finance Phong Huy Dihn, U.S. Information Systems, 2.29% President of Tech 2000 Equity Finance International Corp.) Corporation 3.08% - ------------------------- --------------------------- ---------------------------- -------------------------- International Belize Shareholders* Unavailable information Unavailable information Technology Industries by Laws of Belize* by Laws of Belize* Corp. (ITIC) - ------------------------- --------------------------- ---------------------------- -------------------------- International Belize Shareholders* Unavailable information Unavailable information Money School by Laws of Belize* by Laws of Belize* (IMS) - ------------------------- --------------------------- ---------------------------- -------------------------- Augen Opticien GMBH of Belize Shareholders* Unavailable information* Unavailable information* Honk Kong Ltd. (AOG) by Laws of Belize* by Laws of Belize* - ------------------------- --------------------------- ---------------------------- -------------------------- Equity Finance Belize Shareholders* Unavailable information* Unavailable information* Information Systems by Laws of Belize* by Laws of Belize* (EFIS) - ------------------------- --------------------------- ---------------------------- -------------------------- Equity Finance Belize Shareholders* Unavailable information* Unavailable information* International by Laws of Belize* by Laws of Belize* Corporation (EFIC) - ------------------------- --------------------------- ---------------------------- -------------------------- *Domiciled in Belize, Central America. Information is unavailable by Laws of Belize to the Belize Government. - ------------------------- --------------------------- ---------------------------- -------------------------- The Company (ITEL) strategy is to expand to global markets. Debt and Equity Financing would be necessary for such expansion. The Company has contracted with Equity Finance Holding Corporation to assist with this process. Equity Finance Holding Corporation is a management consulting company which shares its shareholder base with companies wishing to expand by becoming a company reporting to the Securities and Exchange Commission (SEC) in the United States. When EFHC distributed the 515,093 ITEL shares to the 733 EFHC shareholders, International Technology Enterprises Ltd. was required to register with the SEC because the Company maintained more than 500 United States Resident shareholders. The Company's intent is to complete the registration and apply to trade on the NASD Bulletin Board. At that point a United States market may develop for the Company's stock, enabling the Company to access equity for the global expansion. 40 Equity Finance Holding Corporation (EFHC) has a management consulting services agreement (See Exhibits) with Tech 2000 Corp. which is located in Phoenix, Arizona, United States. These services included assisting with formation of the Company as a Belize entity and development of a funding stream for the Company as a new international brokerage corporation that might ultimately provide international brokerage services to Tech 2000 Corp. There are no obligations between the Company and Tech 2000 Corp. at this time. EFHC is assisting the Company with this registration and the application to NASD to list the Company with the NASD OTCBB for trading in the United States. EFHC intends to assist the Company list shares for trading in Europe as well. Once the Company shares are listed in Europe, EFHC believes it may be able to develop the contacts to develop European or Asian private placement funding for the Company. EFHC will supply management consulting services to the Company over the five-year period that this funding stream develops. EFHC purchased the 515,093 shares of Common Stock being registered hereunder with a view to subsequent distribution of the stock to its shareholders. There is no underwriting agreement between the Company and EFHC and EFHC is not entitled to any direct compensation in any form from the Company for this registration. EFHC is not required to register as an underwriter in the United States since shares are not placed in the United States. Trading of the Company stock in the United States will be accomplished through underwriters and market makers, registered as such in the United States. The Company has no financial obligation to Equity Finance Holding Corporation. Total payment from Tech 2000 Corp. to Equity Finance Holding Corporation, for management consulting services related to the formation of the Company, was an amount of US$145,000 with payments spread over 8 months. There is no financial obligation to the Company after the company trades the NASD OTCBB. EFHC's shareholders benefit by being paid a stock dividend of the Company. Disclosure in Equity Finance Holding Company's Form 20-F for the year ended 31 December 2000 indicated an amount of $2,575 due to the Company from Equity Finance Holding Company, at 5% annual interest, principle and interest due December 2005. Subsequent to the EFHC 20-F Annual Report filing, the amount discussed in this disclosure was rescinded based upon payments of cash for the Company's stock by EFHC. EFHC has established a relationship with the Company that should result in future business in the form of referrals. EFHC has survived several years being unprofitable and has every reason to believe that it will continue to survive. However, there is a risk that EFHC will fail. In that event, there is a significant risk to the Company that EFHC will not be able to assist the Company find funding. The EFHC agreement to pay a stock dividend to the EFHC shareholders and assist ITEL register this stock dividend with the SEC generated the transaction. The registration of the stock dividend and the subsequent listing of ITEL shares on the OTCBB would extinguish the debt created by ITEL paying the costs in full before the service was completed. 41 All stock transactions to date were offshore private placements issued at corporate formation valuing the Company shares at par of US$.001 per share. Subsequent to this registration statement and NASD OTCBB listing, valuation is expected to be US$.01 per share at initiation of trading. Equity Finance Holding Corporation recognizes that the company's shares lack a trading market. They realize that the company may not be able to continue to exist. Thus, the Company shares were valued at the lowest possible amount to reflect the fundamental reality of the company at this state of its development. The valuation was an arbitrary business decision based upon Equity Finance Holding Corporation's understanding of the status of the Company. Mr. Phong Huy Dinh is President of Tech 2000 Corp. which is located in Phoenix, Arizona, United States. Equity Finance Holding Corporation (EFHC) has a management consulting services agreement with Tech 2000 Corp. These services include assisting with formation of the Company and development of a funding stream for the Company as a new international brokerage corporation that might ultimately provide international brokerage services to Tech 2000 Corp. Mr. Phong Huy Dinh is a potential candidate for the presidency of the Company, once trading of stock is commenced. At this time, there are no negotiations for acquisition of Tech 2000 Corp. by the Company. ITEM 8. FINANCIAL INFORMATION A. Consolidated Statements and Other Information See Item 18. Legal Proceedings No material legal proceedings to which the Company is a party are pending nor are any known to be contemplated and the Company knows of no legal proceedings pending or threatened, or judgments entered against, any Director or Officer of the Company in his capacity as such. Dividends No dividend has been paid on the Common Shares since inception, and none is contemplated in the foreseeable future. B. SIGNIFICANT CHANGES Not Applicable ITEM 9. THE OFFER AND LISTING (Items 9 A, B, D, E and F are not applicable). Markets on which the Common Shares Trade No market exists for the Company's securities and there is no assurance that a regular trading market will develop, or if developed, that it will be sustainable. A shareholder in all likelihood, therefore, will be unable to resell the securities referred to herein should he or she desire to do so. Furthermore, it is unlikely that a lending institution will accept the Company's securities as pledged collateral for loans unless a regular trading market develops. 42 Mr. William Cate is the Managing Director of Beowulf Investments. Beowulf Investments is contracted (See Exhibits) with the Company to assist with funding, in the event the Company is publicly traded. Mr. Cate is currently also on the Board of Directors of Equity Finance Holding Corporation. On January 4, 1999, the NASD amended its rules regarding listing of securities for trading on the Bulletin Board which it operates. Effective January 4, 1999, securities of corporations will not be listed for trading on the Bulletin Board unless the corporation files reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Accordingly, the Company's common stock will not be listed for trading on the Bulletin Board until such time as this registration statement is declared effective by operation of law and the Company has satisfied all outstanding comments issued by the staff of the Securities and Exchange Commission. There is no trading market for these shares. However, the Company will seek to list these common shares for trading on the Over-the-Counter Bulletin Board (OTCBB) in the United States. The Company will qualify for listing on the Berlin Stock Exchange OTC Market; The Hamburg OTC Market or the Third Tier of the Frankfurt Stock Exchange subject to their being no outstanding comments with the staff of the SEC. There can be no assurance that such listings will occur. If the shares trade there can be no assurance that they will trade at any price. Equity Finance Holding Corporation has arbitrarily valued the shares at two Belize cents (B$0.02), which is one U.S. Cent (US $0.01). If the OTCBB and European listings occur, the Company believes that the primary trading market for its shares will be in Europe and Asia and not the United States. Equity Finance Holding Corporation bought ten percent of the issued shares of International Technology Enterprises Ltd. with the intent to issue the shares as a non-cash dividend to Equity Finance Holding Corporation's registered shareholders. The sale resulted in a ten percent reduction in the ownership of International Technology Enterprises Ltd. by its Belize owner(s). No dividends have been declared on the Company's stock. The Company does not foresee any dividends being declared soon. 515,093 common shares were sold to Equity Finance Holding Corporation. The Company was organized at the first meeting of the Board of Directors on 30 September 2000. At that time, the Company increased the issued common shares from 50,000 to 5,149,193 common shares. It increased the authorized shares from 50,000 common shares to 100,000,000 common shares. As of 19 March 2001, the Company had 733 holders of record of its common shares. Currently, there are 722 U.S. shareholders of the Company's common shares for a total of 9,811 shares, 0.19% of the total outstanding shares. Underwriter Equity Finance Holding Corporation purchased the Common Stock offered by the Company hereunder with a view to subsequent distribution of the stock. EFHC is therefore an "underwriter" as that term is defined in Section 2(11) of the Securities Act. There is no underwriting agreement between the Company and the Underwriter, and the Underwriter is not entitled to any direct compensation in any form from the Company for acting as underwriters in this offering. The Underwriter and any other person participating in the sale or distribution of the stock will be subject to applicable provisions of the Exchange Act and the rules and regulations there under, which provisions may limit the timing of purchases and sales of any of the stock by the Underwriter or any other such person. The foregoing may affect the marketability of the stock. Although a portion of the Common Stock offered hereunder will be sold to an "Underwriter," as such term is defined in Section 2(11) of the Securities Act of 1933, as amended ("Securities Act"), there is no Underwriter's over-allotment option nor is an Underwriter's over-allotment option to be exercised. The Underwriter is not a Seller of Company shares nor a Broker-Dealer as per Rule 3a4-1 an associated person of an issuer of securities shall not be deemed to be a broker solely by reason of his participation in the sale of the securities of such issuer if the associated person meets certain requirements met by the Company. The Company, or security holders, are not obligated for any expenses of the registration, underwriting discounts, or commissions, generally including registration fees, federal taxes, state taxes and fees, trustees' and transfer agents' fees, costs of printing and engraving, legal, accounting, and engineering fees and any listing fees. ITEM 10. ADDITIONAL INFORMATION A. Share Capital The Company sold 515,093 shares of its Common Stock to Equity Finance Holding Corporation ("EFHC") on 30 September 2000. EFHC is a Belize company, publicly trading in the United States. Its trading symbol on the Over-the-Counter-Bulletin-Board is EFHLF. EFHC common stock is traded on the Bulletin Board ("Bulletin Board") operated by the National Association of Securities Dealers, Inc. ("NASD"). The shares were without restriction, except for a stock pooling agreement, and were issued outside the United States by a Belize corporation to a Belize corporation and accordingly, the securities laws of the United States did not apply to the transaction. On 30 December 2000, EFHC distributed the foregoing 515,093 to its shareholders as a stock dividend. 43 Common Shares The authorized Common Shares of the Company consists of 100,000,000 B$0.001 per share par value Common Shares. All shares have equal voting rights and are not assessable. Voting rights are not cumulative and, therefore, the holders of more than 50% of the Common Shares could, if they chose to do so, elect all of the directors of the Company. As of 19 March 2001, 5,149,193 shares of Common Stock were issued and outstanding. All issued and outstanding shares were fully paid. Upon liquidation, dissolution or winding up of the Company, the assets of the Company, after the payment of liabilities, will be distributed pro rata to the holders of the Common Shares. The holders of the Common Shares do not have preemptive rights to subscribe for any securities of the Company and have no right to require the Company to redeem or purchase their shares. Dividends Holders of the Common Shares are entitled to share equally in dividends when, as and if declared by the Board of Directors of the Company, out of funds legally available therefore. No dividend has been paid on the Common Shares since inception, and none is contemplated in the foreseeable future. Transfer Agent Transfer Online, Inc. 227 South West Pine Street Suite 300 Portland OR, 97204 Phone: (503) 227-2950 Fax: (503) 227-6874 B. Memorandum and Articles of Association 1. The registor is Transfer Online, Inc. 227 South West Pine Street Suite 300 Portland OR, 97204 Phone: (503) 227-2950 Fax: (503) 227-6874 44 The Company's objects and purposes are to engage in any activity not prohibited by law as set forth in Item 4 of the Company's Memorandum of Association. 2. (a) A director is entitled to vote on any proposal notwithstanding that he may be interest therein, provided before the proposal is put to a vote he shall disclose the nature of his interest. (b) There is no prohibition which prevents directors, in the absence of an independent quorum, to vote compensation to themselves. (c) Directors may borrow money. There is no prohibition preventing the Company from loaning money to directors. (d) There is no retirement or non-retirement age limitation with respect to directors. (e) There is no requirement that directors own shares of the Company's common stock. 3. (a) The Company may declare dividends. (b) Each share is entitled to one vote. Directors do not stand for re-election at staggered intervals with the exception of the director from EFHC which is appointed for five years. No cumulative voting is provided for. (c) Shareholders are not entitled to share in the profits of the Company. (d) Shareholders are entitled to share in any surplus in the event of liquidation, after all debts are paid and all securities having rights superior to common shares are paid. (e) There are no redemptions provisions for the Company's securities. (f) There are no sinking fund provisions for the Company's securities. (g) The Company's shares of common stock are not subject to further capital calls by the Company. (h) There are no provisions discriminating against any existing or prospective holder or such securities as a result of such shareholder owing a substantial number of shares. 4. The Company has the right to issue securities with superior rights to those of the common shares. The superior securities may be issued by the board of directors without notice to the shareholders of the common shares. 45 5. The annual meeting of shareholders is held on December 1 of each year. Special meetings of shareholders may be called at any time by the chairman, the board of directors, or stockholders of 1/5th of the outstanding shares. Only shareholders of record are entitled to attend the shareholders meetings. 6. There are no limitations upon the right to own shares of the Company's common stock or the right of a shareholder to vote his shares. 7. There are not provisions in the Company's Memorandum of Association or bylaws that would have an effect of delaying, deferring or preventing a change in control of the Company. 8. There is no bylaw provision governing the ownership threshold above which shareholder ownership must be disclosed. 9. With respect to items 2 through 8 above, the law applicable to the Company is not different from that in the host country. 10. There are no conditions imposed by the Memorandum of Association governing changes in capital which are more stringent than is required by Belize law. Directors may refuse to transfer shares of common stock. If the board of directors takes such action, it shall, within two months, after the transfer is lodged with the transfer agent, send to the transferee notice of the refusal. Registration of transfers may be suspended at such time and for such periods as the directors may from time-to-time determine, but in no event shall such period exceed thirty days in any year. The Company may from time-to-time, by resolution of directors, increase or reduce the share capital. An action which increases the share capital could prevent a third party from acquiring sufficient shares to take control of theCompany. Provisions of our charter and by-laws and Belize law make a takeover of our company more difficult. Our basic corporate documents, our stockholder rights plan and Belize law contain provisions that could discourage, delay or prevent a change in the control of our company, even if a change of control would be beneficial to our stockholders. The Company's Board of Directors could use its power to issue preferred shares or other rights superior to those of ordinary shareholders. Such action could be taken to prevent an unfriendly takeover of the company. The issuance of additional shares in whatever form or for whatever reason might deny the public shareholders from realizing a premium over the market value of their shares. Under Belize Law, there is no legal recourse for such Board of Directors action available to minority shareholders. C. Material Contracts The Company has entered into two material contracts included herewith as Exhibits to this document. A BEOWULF FIRM COMMITMENT UNDERWRITING AGREEMENT, with Beowulf Investments whereby Beowulf Investments agrees to purchase 3,000,000 warrants of International Technology Enterprises Ltd. A Management Consulting Agreement with Equity Finance Holding Corporation to assist the Company become a U.S. reporting public company and qualify to trade on the NASD OTCBB. 46 D. Exchange Controls There are no exchange controls or other limitations which effect security holders other than shares of common stock issued by the Company to U.S. residents. Shares of common stock issued to U.S. residents are deemed restricted securities and must only be sold in compliance with Rule 144 of the Securities Act of 1933 (the "Act"). In general, under Reg. 144, an affiliate of the Company (officers, directors, and owners of more than ten percent (10%) of the outstanding shares of Common Stock are affiliates of the Company) may sell in ordinary market transactions through a broker or with a market maker, within any three (3) month period a number of shares which does not exceed the greater of one percent (1%) of the number of outstanding shares of Common Stock or the average of the weekly trading volume of the Common Stock during the four calendar weeks prior to such sale. Sales under Reg. 144 require the filing of Form 144 with the Securities and Exchange Commission. If the shares of Common Stock have been held for more than two (2) years by a person who is not an affiliate, there is no limitation on the manner of sale or the volume of shares that may be sold and no Form 144 is required. Sales under Reg. 144 may have a depressive effect on the market price of the Company's Common Stock. E. Taxation This discussion does not deal with all possible tax consequences relating to an investment in the Common Stock and does not purport to deal with the tax consequences applicable to all categories of investors, some of which (such as dealers in securities, insurance companies and tax-exempt entities) may be subject to special rules. Each prospective investor should consult its own tax advisor regarding the particular tax consequences to it of an investment in the Common Stock. The following discussion is based upon laws, regulations and relevant interpretations thereof in effect as of the date of this disclosure, all of which are subject to change, possibly retroactively. The following discussion summarizes all material US federal and Belize tax consequences of the ownership of Shares by a person ("US Portfolio Stockholder") that: (i) is a citizen or resident of the US, a US corporation or that otherwise will be subject to US federal income tax on a net income basis in respect of the Shares; (ii) is not deemed a resident of Belize; (iii) has not, within the preceding five years, beneficially owned 10% of the issued capital or voting stock in the Company; and, (iv) has not used the Shares in carrying on a trade or business, wholly or partly through a permanent establishment in Belize. The statements regarding U.S. and Belize tax laws set forth herein are based on those laws as in force on the date of this document that may affect the tax consequence described herein (some of which may have retroactive effect). This summary is not exhaustive of all possible tax consideration. Investors are advised to satisfy themselves as to the overall tax consequences, including specifically the consequences under US, state, local and other laws, of the acquisition, ownership and disposition of Shares by consulting their own tax advisers with respect to their individual circumstances. Taxation of Gains on Sale A U.S. Portfolio Stockholder is not subject to Belize income tax on the sale of its common shares in the Company. 47 Passive Foreign Investment Company Status A foreign corporation is classified as a passive foreign investment company (a "PFIC") in any taxable year in which, after taking into account the income and assets of certain subsidiaries pursuant to the applicable US Internal Revenue Code "look-through" rules, either (i) at least 75% of its gross income is passive income, or (ii) at least 50% of the average value of its assets is attributable to assets that produce passive income from cash holdings and profits from the sale of marketable securities, even if derived from an active business. If the Company were a PFIC during any year in which a US Portfolio Stockholder owned Shares, that US Portfolio Stockholder would be subject to additional taxes on any gain realized from the sale or any other disposition of the Shares, or any excess distribution received from the Company. A US Portfolio Stockholder will have an excess distribution to the extent that distributions on Shares during a taxable year exceeded 125% of the average amount received during the three preceding taxable years (or, if shorter, the US Portfolio Stockholders' holding period for the Shares). To compute the tax on gain or on an excess distribution, (i) the excess distribution or the gain is allocated ratably over the US Portfolio Stockholder's holding period for the Shares, (ii) the amount allocated to the current taxable year at the highest applicable marginal rate in effect for each year and an interest charge is imposed to recover the deemed benefit from the deferred payment of the tax attributable to each year. The amount allocated to past years is taxed at the highest applicable marginal rate in effect for each year and an interest charge is imposed to recover the deemed benefit from the deferred payment of the tax attributable to each year. If the Company is a PFIC, US persons that own an interest in another entity that owns shares in the Company may be treated as indirect holders of their proportionate share of that entity's Shares, and may be taxed on their proportional share of any gain or excess distribution from that entity attributable to the entity's in the Company. A US person that owns an interest in the entity that is an actual holder of Shares will be treated as an indirect holder if (i) the actual holder is itself a PFIC, (ii) the actual holder is a foreign corporation other than a PFIC in which the US person who owns an interest in the actual holder owns (directly or indirectly) at least 50% in value of the actual holder's shares, or (iii) the actual holder is a partnership, trust or estate in which the US Portfolio Stockholder is a partner or beneficiary. An indirect holder must take into income its portion of any excess distribution received by the actual holder or any gain recognized by the actual holder on the Shares. An indirect holder also must treat an appropriate portion of its gain on the sale or disproportion of its interest in the actual holder as gain on the sale of the Shares. If the Company were a PFIC, a US Portfolio Stockholder of Shares would generally be subject to similar rules with respect to distribution by, and dispositions of the shares of, any direct or indirect subsidiaries of the Company that were PFICs. 48 The Internal Revenue Code provides each US stockholder in an PFIC with an election whereby the additional US tax burden imposed on gain on sale of PFIC stock and receipt of excess distributions from a PFIC, as described above, can be avoided. This election generally requires that the PFIC stockholder include in its income, its pro-rata share of the PFIC's distributed and undistributed income, as computed under US tax accounting principles, on an current basis. In certain cases, a further election is available to an electing PFIC stockholder to defer the tax payable with respect to the stockholder's pro-rata share of the PFIC's undistributed income, although in this case interest applies on the deferred tax. Thus, even if the first or both of these elections are made, a US stockholder of a PFIC loses the tax benefit, which is available with respect to investment in a non-PFIC corporation, of deferring and converting to capital gain the investor's personal US tax liability with respect to the Company's undistributed income. These elections also generally require that the PFIC annually provide the electing PFIC shareholder, for inspecting by the Internal Revenue Service, an analysis of the PFIC's income computed under US tax accounting principals. The Company does not intend to furnish any US Portfolio Stockholder with the information that it would need in order to avoid the PFIC tax treatment described by electing to include its share of the Company's income on a current basis. Therefore, this election will not be available to the Company's US Portfolio Stockholders. There are other adverse US tax rules associated with holding Shares in a company that has been a PFIC during any part of a US Portfolio Stockholders holding period. These include a denial of a step-up in a tax basis on the death of a US individual stockholder, and burdensome reporting requirements. If the Company ceases to be a PFIC, a US Portfolio Stockholder may avoid the contained application of the tax treatment described above by electing to be treated as if it sold its Shares on the last day of the last taxable year in which the Company was a PFIC. Any gain is recognized and subjected to tax under the rules described above. Loss is not recognized. The US Portfolio Stockholder's basis in the Shares is increased by the amount of gain recognized on the deemed sale. This election is not available to a US Portfolio Stockholder that previously elected to include its share of the Company's income on a current basis. The US Congress recently has considered legislation that would alter the PFIC rules substantially. Prospective investors should consult their own tax advisors as to the potential application of the PFIC rules, as well as, the impact of any proposed legislation that could affect them. The Company has not generated sufficient income and assets during 1999 and 2000 to be deemed a PFIC. Taxation of Dividends The Company does not expect to pay cash dividends for the foreseeable future, but, rather, to retain earnings to finance expansion of the business. Should the Company begin paying dividends, however, the Company's dividends to its US Portfolio Stockholders would be exempt from Belize tax. The overall limitation on non-US taxes eligible for US credit is calculated separately with respect to specific classes, or "baskets" of income. For this purpose, dividends distributed by the Company will generally constitute "passive income" or, in the case of certain US Portfolio Stockholder, "financial service income." The US tax credits allowable with respect to each income basket cannot exceed the US federal income tax payable with respect to such income. The consequences of the separate limitation calculation will depend on the nature and sources of each US Portfolio Stockholder's income and the deductions allocable thereto. 49 Distributions on the Shares will constitute dividends for US Federal income tax purposes to the extent paid out of current or accumulated earnings and profits of the Company, as determined for US federal income tax purposes. If the Company pays a dividend, such dividend would likely be paid in U.S. dollars. The amount of dividend income for a US Portfolio Stockholder will be the US dollar value of the dividend payment on the date of receipt, even if the dividend is not converted into US dollars. Dividends paid by the Company will not be eligible for the "inter-corporate dividends received" deduction allowed to US corporations. Dividends on distributions are taxed as ordinary income in the United States. Other countries may apply different requirements. Estate and Gift Tax Belize does not impose any estate, inheritance or gift taxes. Therefore, no Belize estate tax, inheritance tax or gift tax will be imposed on the death or upon a lifetime gift by, a US Portfolio Stockholder. UNITED STATES FEDERAL INCOME TAX CONSEQUENCES The following is a discussion of United States Federal income tax consequences, under current law, generally applicable to a U.S. Holder (as defined below) of common stock of the Company who holds such shares as capital assets. This discussion does not address all potentially relevant Federal income tax matters and it does not address consequences peculiar to persons subject to special provisions of Federal income tax law, such as those described below as excluded from the definition of a U.S. Holder. In addition, this discussion does not cover any state, local or foreign tax consequences (See "Certain Canadian Federal Income Tax Considerations" above). The following discussion is based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, published Internal Revenue Service ("IRS") rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time. In addition, this discussion does not consider the potential effects, both adverse and beneficial, of any recently proposed legislation that, if enacted, could be applied, possibly on a retroactive basis, at any time. U.S. HOLDERS As used herein, a "U.S. Holder" includes a holder of common stock who is a citizen or resident of the United States, a corporation created or organized in or under the laws of the United States or of any political subdivision thereof, any entity which is taxable as a corporation for U.S. tax purposes and any other person or entity whose ownership of common stock of the Company is effectively connected with the conduct of a trade or business in the United States. A U.S. Holder does not include persons subject to special provisions of Federal income tax law, such as tax-exempt organizations, qualified retirement plans, financial 50 institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, nonresident alien individuals or foreign corporations whose ownership of common stock is not effectively connected with the conduct of a trade or business in the United States and shareholders who acquired their stock through the exercise of employee stock options or otherwise as compensation. DIVIDEND DISTRIBUTIONS ON SHARES OF THE COMPANY Except as otherwise discussed below under "Passive Foreign Investment Company Considerations," U.S. Holders receiving dividend distributions (including constructive dividends) with respect to common stock are required to include in gross income for United States Federal income tax purposes the gross amount of such distributions to the extent that the Company has current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions. Such Canadian tax withheld may be deducted or may be credited against actual tax payable, subject to certain limitations, against the U.S. Holder's United States Federal taxable income by those who itemize deductions. See "Foreign Tax Credit." To the extent that distributions exceed current or accumulated earnings and profits of the Company, they will be treated first as a return of capital up to the U.S. Holder's adjusted basis in the common stock and thereafter as a gain from the sale or exchange of the common stock. Preferential tax rates for net capital gains are applicable to a U.S. Holder that is an individual, estate or trust. In general, dividends paid on common stock will not be eligible for the dividends received deduction provided to corporations receiving dividends from certain United States corporations. A U.S. Holder which is a corporation may, under certain circumstances, be entitled to a 70% deduction of the United States source portion of dividends received from the Company (unless the Company is a "foreign personal holding company" as defined in Code Section 552, or a "passive foreign investment company" as defined below) if such U.S. Holder owns shares representing at least 10% of the voting power and value of the Company. The availability of this deduction is subject to several complex limitations that are beyond the scope of this discussion. FOREIGN TAX CREDIT A U.S. Holder who pays (or who has had withheld from distributions) Canadian income tax with respect to the ownership of common stock may be entitled, at the election of the U.S. Holder, to either a deduction or a tax credit for such foreign tax paid or withheld. This election is made on a year-by-year basis and generally applies to all foreign income taxes paid by (or withheld from) the U.S. Holder during that year. There are significant and complex limitations that apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder's United States income tax liability that the U.S. Holder's foreign source income bears to his or its worldwide taxable income. In the determination of the application of this limitation, the various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern income such as "passive income", "high withholding tax interest", "financial services income", "shipping income" and certain other classifications of income. The availability of the foreign tax credit and the application of the limitations on the foreign tax credit are fact specific and holders and prospective holders of common stock should consult their own tax advisors regarding their individual circumstances. 51 DISPOSITION OF COMMON SHARES Except as otherwise discussed below under "Passive Foreign Investment Company Considerations," gain or loss realized on a sale of common stock will generally be capital gain or loss, and will be long-term if the shareholder has a holding period of more than one year. However, gain realized upon a sale of common stock may under certain circumstances be treated as ordinary income, if the Company were determined to be a "collapsible corporation" within the meaning of Code Section 341 based on the facts in existence on the date of the sale. The amount of gain or loss recognized by a selling U.S. Holder will be measured by the difference between (i) the amount realized on the sale and (ii) his or its tax basis in the common stock. Individual U.S. Holders may carryover unused capital losses to offset capital gains realized in subsequent years. For U.S. Holders that are corporations (other than corporations subject to Subchapter S of the Code), any unused capital losses may only be carried back three and forward five years from the year in which such losses are realized. PASSIVE FOREIGN INVESTMENT COMPANY CONSIDERATIONS If the Company is a "passive foreign investment company" as defined in Code Section 1296 (a "PFIC"), U.S. Holders will be subject to U.S. federal income taxation under one of two alternative tax regimes at the election of each such U.S. Holder. Code Section 1296 defines a PFIC as a corporation that is not formed in the United States and either (i) 75% or more of its gross income for the taxable year is "passive income", which includes interest, dividends and certain rents and royalties or (ii) the average percentage, by fair market value (or, if the Company elects, adjusted tax basis), of its assets that produce or are held for the production of "passive income" is 50% or more. The Company currently qualifies as a PFIC because 75% or more of its gross income for the taxable year is "passive income," and may have been a PFIC in prior years. The rules applicable to a PFIC that is also a "controlled foreign corporation", as defined in Code Section 957, are more complex and are beyond the scope of this discussion. A U.S. Holder who elects in a timely manner to treat the Company as a "qualified electing fund"(an "Electing U.S. Holder") will be subject to current federal income tax under Code Section 1293 for any taxable year in which the Company is a PFIC (or is treated as such with respect to the Electing U.S. Holder) on his or its pro-rata share of the Company's (i) "net capital gain" (the excess of net long-term capital gain over net short-term capital loss), which will be taxed as long-term capital gain to the Electing U.S. Holder; and (ii) "ordinary earnings" (the excess of earnings and profits over net capital gain), which will be taxed as ordinary income to the Electing U.S. Holder, in each case, for the shareholder's taxable year in which (or with which) the Company's taxable year ends, regardless of whether such amounts are actually distributed. The qualified electing fund ("QEF") election generally also allows the Electing U.S. Holder to (i) treat any gain realized on the disposition of his or its common stock (or deemed to be realized on the pledge of his or its common stock) as capital gain; (ii) treat his share of the Company's net capital gain, if any, as long-term capital gain instead of ordinary income; and (iii) either avoid interest charges resulting from PFIC status altogether, or make an annual election, subject to certain limitations, to defer payment of current taxes on his share of the Company's annual realized net capital gain and ordinary earnings subject, however, to an interest charge on such deferred taxes. 52 The procedure a U.S. Holder must comply with in making an effective QEF election will depend upon whether the year of the election is the first year in the U.S. Holder's holding period. If the U.S. Holder makes a QEF election in such first year, then the U.S. Holder may make a QEF election by filing the appropriate documents at the time the U.S. Holder files its tax return for such first year. When a timely QEF election is made in the first year of the U.S. Holders' holding period for which the Company qualifies as a PFIC, if the Company no longer qualifies as a PFIC in the subsequent year, normal Code rules will apply. It is unclear whether a new QEF election would be necessary if the Company thereafter re-qualifies as a PFIC. If a U.S. Holder does not make a QEF election for the first year during which he or it holds (or is deemed to have held) the common stock in question and the Company is a PFIC (a "Non-electing U.S. Shareholder"), then special taxation rules under Code Section 1291 will apply to (i) gains realized on the disposition (or deemed to be realized by reason of a pledge) of his or its common stock and (ii) certain "excess distributions", as specifically defined by the Company. A non-electing U.S. shareholder generally will be required to pro-rate all gains realized on the disposition of his or its common stock and all excess distributions over the entire holding period of the common stock. All gains or excess distributions allocated to prior years of the U.S. Holder (provided that such years are not prior to the first day of the first taxable year of the Company during such U.S. shareholder's holding period and beginning after January 1, 1987 for which it was a PFIC) will be taxed at the highest tax rate applicable to ordinary income for each such prior year. A non-electing U.S. Holder also will be liable for interest on the foregoing tax liability for each such prior year calculated as if such liability had been due with respect to each such prior year. The balance of the gain or the excess distribution will be treated as ordinary income in the year of the disposition or distribution, and no interest charge will be incurred with respect to such balance. If the Company is a PFIC for any taxable year during which a non-electing U.S. Holder holds common stock, then the Company will continue to be treated as a PFIC with respect to such common stock, even if it is no longer definitionaly a PFIC. A non-electing U.S. Holder may terminate this deemed PFIC status while the Company is still a PFIC by filing a QEF election and electing to recognize a gain (which will be taxed under the rules discussed above for non-electing U.S. Holders) as if such common stock had been sold on the first day of the U.S. Holder's taxable year for which the U.S. Holder files the QEF election. If the Company is no longer a PFIC, a U.S. Holder may terminate the Company's deemed PFIC status by electing to recognize gain as if the common stock had been sold on the last day of the last taxable year for which the Company was a PFIC. Once a U.S. Holder has filed a QEF election, he or it will thereafter be required to submit certain information regarding the Company to the Internal Revenue Service each year. The Company intends to comply with such record keeping, reporting, and other requirements as necessary to enable its U.S. Holders to make a QEF election; provided, that if regulations are issued that contain exceedingly onerous reporting and record-keeping requirements, the Company may decide that compliance is impracticable and will so notify its U.S. Holders. 53 Certain special, generally adverse, rules will apply with respect to the common stock of the Company while the Company is a PFIC whether or not it is treated as a QEF. For example under Code Section 1297(b)(6) a U.S. Holder who uses PFIC stock as security for a loan (including a margin loan) will, except as may be provided in regulations, be treated as having made a taxable disposition of such stock. Moreover, under Code Section 1291(f) the Department of the Treasury has authority to issue regulations, and has issued proposed regulations, that would treat as taxable certain transfers that are generally not otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death, although it is not clear that such authority extends to transfers by Electing U.S. Holders. The foregoing discussion is based on existing provisions of the Code, existing and proposed regulations thereunder, and current administrative rulings and court decisions, all of which are subject to change. Any such changes could affect the validity of the discussion. In addition, the implementation of certain aspects of the PFIC rules requires the issuance of regulations which in many instances have not yet been promulgated and which may have retroactive effect. There can be no assurances that any of these proposals will be enacted or promulgated, and if so, the form they will take or the effect that they may have on this discussion. Accordingly, and due to the complexity of the PFIC rules, U.S. persons who are shareholders or prospective shareholders of the Company are strongly urged to consult their own tax advisors concerning the impact of these rules on their investment in the Company. DOCUMENTS ON DISPLAY Upon effectiveness of this registration statement, ITEL will become subject to the information requirements of the U.S. Securities Exchange Act of 1934, as amended, and, in accordance therewith, will be required to file reports, including annual reports on Form 20-F, and other information with the U.S. Securities and Exchange Commission. These materials, including this registration statement and the exhibits thereto, may be inspected and copied at the Commission's public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for further information on the public reference rooms. As a foreign private issuer, we are not required to make filings with the Commission by electronic means, although we may do so. Any filings we make electronically will be available to the public over the Internet at the Commission's web site at http://www.sec.gov. ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. The principal market risks (i.e., the risk of loss arising from adverse changes in market rates and prices) to which the Company is exposed are: - --------- --------------------------- * interest rates on debt; * foreign exchange rates - --------- --------------------------- The following risk management discussion and the estimated amounts generated from analytical techniques are forward-looking statements of market risk assuming certain market conditions occur. The Company's actual results in the future may differ materially form these projected results due to actual developments in the global financial markets. 54 Interest Rates Interest rates will fluctuate from time to time. The Company intends to monitory such interest rates in order to take advantage of the fluctuations. Foreign Exchange Rates The Company has not generated any revenues to date. In the future the Company intends to hedge transactions because of our exposure to foreign exchange fluctuations. Operating in international markets involves exposure to movements in currency exchange rates that typically affect economic growth, inflation, interest rates, governmental actions and other factors. Our revenue streams and operating expenses are denominated in US dollars only. Approximately 100% of the Company capital contributions and expenses were generated in U.S. dollars. From the Company perspective, the currency movement that would have the greatest impact upon operations is the US dollar. Strengthening the U.S. dollar will have the affect of increasing the Company's earnings. Inflation Inflation had no material impact on the Company operations during the years ended December 31, 2000. ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES Not Applicable PART II ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES None ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS Not Applicable ITEM 15. RESERVED ITEM 16. RESERVED PART III ITEM 17. FINANCIAL STATEMENTS. See Item 19. ITEM 18. FINANCIAL STATEMENTS. Not applicable. Consolidated financial statements are provided under Item 17. 55 ITEM 19. EXHIBITS. A. Financial Statements of Registrant. The following financial statements, together with the reports of the Company's independent accountants, are filed as part of this Registration Statement. INTERNATIONAL TECHNOLOGY ENTERPRISES LTD. (A Development Stage Company) FINANCIAL STATEMENTS DECEMBER 31, 2000 TABLE OF CONTENTS PAGE # INDEPENDENT AUDITOR'S REPORT................................................. 1 BALANCE SHEET................................................................ 2 STATEMENT OF OPERATIONS...................................................... 3 STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY................................. 4 STATEMENT OF CASH FLOWS...................................................... 5 NOTES TO FINANCIAL STATEMENTS.............................................. 6-9 INDEPENDENT AUDITORS' REPORT To The Board of Directors INTERNATIONAL TECHNOLOGY ENTERPRISES LTD. Punta Gorda, Belize, CA We have audited the accompanying Balance Sheets of INTERNATIONAL TECHNOLOGY ENTERPRISES LTD. (A Development Stage Company), as of December 31, 2000, and the related statements of operations, changes in stockholders' equity and cash flows for the period September 27, 2000, (inception), to December 31, 2000. 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 U.S. 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 INTERNATIONAL TECHNOLOGY ENTERPRISES LTD. (A Development Stage Company), as of December 31, 2000, and the results of its operations and cash flows for the period from September 27, 2000, (inception), to December 31, 2000, in conformity with U.S. generally accepted accounting principles. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note #5 to the financial statements, the Company has suffered a loss from operations and has no established source of revenue or cash flow. This raises substantial doubt about its ability to continue as a going concern. Management's plan in regard to these matters is described in Note #5. These financial statements do not include any adjustments that might result from the outcome of this uncertainty. Braverman & Company, P.C. Prescott, Arizona June 13, 2001 520-771-1122 F-1 INTERNATIONAL TECHNOLOGY ENTERPRISES LTD. (A Development Stage Company) BALANCE SHEET DECEMBER 31, 2000 ASSETS CURRENT ASSETS-Cash $ 3,400 ----------- $ 3,400 =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES $ 0 ----------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Common stock, par value $0.001; authorized 100,000,000 shares; issued 1,440,400 1,440 Paid-in capital 2,060 Contributed capital 15,500 Common stock subscribed 3,709 Subscriptions receivable (3,709) (Deficit) accumulated during the Development stage (15,600) ---------- TOTAL STOCKHOLDERS' EQUITY $ 3,400 ---------- $ 3,400 ========== The accompanying notes are an integral part of these financial statements - 2 - INTERNATIONAL TECHNOLOGY ENTERPRISES LTD. (A Development Stage Company) STATEMENT OF OPERATIONS September 27, 2000(inception), to December 31, 2000 and (Deficit) Accumulated Since Inception REVENUES $ 0 ----------- EXPENSES General and Administrative $ (15,600) ----------- TOTAL EXPENSES $ (15,600) ----------- NET (LOSS) $ (15,600) =========== Net (loss) per share-Basic $ (.01) =========== Weighted average Number of common shares outstanding 1,440,400 =========== The accompanying notes are an integral part of these financial statements - 3 - INTERNATIONAL TECHNOLOGY ENTERPRISES LTD. (A Development Stage Company) STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY September 27, 2000 (inception), to December 31, 2000 ACCUM- COMMON STOCK PAID-IN CONTRIBUTED STOCK SUBSCRIBTIONS ULATED SHARES AMOUNT CAPITAL CAPTIAL AMOUNT RECEIVABLE (DEFICIT) TOTAL ------------------------------------------------------------------------------------------ At inception - $ - $ - $ - $ - $ - $ - $ - September 28, 2000 Proceeds @ $.001 925,500 925 925 Proceeds @ $.005 515,093 515 2,060 2,575 Contributed capital 15,500 15,500 Common stock - subscriptions for 3,708,600 shares 3,708 (3,708) - Net (loss) for the period (15,600) (15,600) ---------------------------------------------------------------------------------------- Balances, - December 31, 2000 1,440,400 1,440 $2,060 $15,500 $3,708 $(3,708) $ (15,600) $ 3,400 ----------------- ------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements - 4 - INTERNATIONAL TECHNOLOGY ENTERPRISES LTD. (A Development Stage Company) STATEMENT OF CASH FLOWS September 27, 2000 (inception), to December 31, 2000 and (Deficit) Accumulated Since Inception Cash Flows from Operating Activities Net (loss) $ (15,600) Contributed capital 15,500 ----------- Net cash used in Operating activities $ (100) Cash Flows from Financing Activities Proceeds from sale of common stock 3,500 ----------- Net cash Increase $ 3,400 Cash, Beginning of period 0 ----------- Cash, End of Period $ 3,400 =========== Non-cash transactions: Common stock subscriptions $ 3,708 Subscriptions receivable $ (3,708) The accompanying notes are an integral part of these financial statements - 5 - INTERNATIONAL TECHNOLOGY ENTERPRISES LTD. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 2000 NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY International Technology Enterprises, Ltd. (the Company) was incorporated on September 27, 2000, in Belize, Central America, Certificate #16,272. It has no business or earned revenues and in accordance with SFAS #7, is considered a development stage company. The Company has selected December 31st as its year-end. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Estimates The preparation of financial statements in conformity with U.S. 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. Cash and equivalents The Company maintains a cash balance in a non-interest-bearing bank that currently does not exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with the maturity of three months or less are considered to be cash equivalents. There are no cash equivalents as of December 31, 2000.) Foreign Currency Conversion The Company maintains its books and records in United States dollars, using accounting principles generally accepted in the United States of America. Income Taxes The Company's primary tax reporting country is Belize. Under Belize laws, foreign earned income is taxable only on remittances to Belize. Income from operations in the United States is taxable by the United States and applicable state governments. Income taxes are provided for using the liability method of accounting in accordance with Statement of Financial Accounting Standards No. 109 (SFAS #109) "Accounting for Income Taxes". A deferred tax asset or liability will be recorded, net of a valuation allowance, for all material temporary differences between financial and tax reporting. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities. No amounts incurred to date are tax deductible until operations commence, accordingly there is no deferred tax at December 31, 2000. -6- INTERNATIONAL TECHNOLOGY ENTERPRISES LTD. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Reporting on Costs of Start-Up Activities Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of Start-Up Activities" requires organizational and start-up activities to be expensed as incurred. Loss Per Share Net loss per share is provided in accordance with Statement of Financial Accounting Standards No. 128 (SFAS #128) "Earnings Per Share". Basic loss per share is computed by dividing losses available to common stockholders by the weighted average number of common shares outstanding during the period. NOTE 3 - INCOME TAXES There is no income tax provision applicable for the period ended December 31, 2000. NOTE 4 - STOCKHOLDERS' EQUITY On September 28, 2000, the Company restated its Articles of Incorporation, which increased its capitalization from 50,000 common shares to 100,000,000 and changed its par value from US $1.00 to US $.001 NOTE 5 - GOING CONCERN The Company's financial statements are prepared using U.S. generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. To date the Company has suffered losses and has minimal working capital and equity. It has neither an established source of revenues or cash flows sufficient to cover its operating costs and to allow it to continue as a going concern. Management's plan is to have the majority stockholders/officers sustain all required cash flows of the Company in the near term. -7- INTERNATIONAL TECHNOLOGY ENTERPRISES LTD. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 NOTE 6 - RELATED PARTY TRANSACTIONS Contributed Capital The Company neither owns nor leases any real or personal property. Services and costs provided by management/shareholders have been included in the accompanying financial statements as contributed capital as follows: Incorporation costs $3,700 Management compensation 4,500 Rent and utilities 1,800 Agent fees 800 Office supplies 600 Telephone 600 Transfer agent fees 2,500 Audit fees 1,000 ----- Total $ 15,500 ======== The officers and directors of the Company are involved in other business activities and may in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interests. The Company has not formulated a policy for the resolution of such conflicts. Ownership and Control As of December 31, 2000 the Company was a subsidiary of International Technology Industries, Corp. (ITIC), a recently formed international business corporation, a Belize corporation. ITIC and EFHC have subscribed to a total of 3,708,600 shares of the Company's common stock at $.001 per share for a total of $3,708 as of December 31, 2000. Substantially all of the shares owned and subscribed to by ITIC are subject to a 5 year " Stock Pooling Agreement" whereby such shares, which comprise the majority of the outstanding and subscribed shares, are restricted on transferability, and may not be pledged or encumbered in order to provide stability to the capital structure of the Company. The Stock Pooling agreement is among shareholders owning greater than 3 percent of the Company (See Item 7 for list of companies with more than 3% ownership of the Company). The 4,634,100 shares of common stock held by these "Insider Shareholders" constitute 90% of the issued and outstanding securities of the Company. In order to provide stability to the capital structure of the Company, the Insider Shareholders have agreed to restrict the transfer of their shares of the Company common stock ("Shares"), and to subject the certificates representing ownership of their Shares ("Share Certificates") to a pooling arrangement as described in the Stock Pooling agreement. No Shareholder shall transfer, pledge or encumber any of the Shares held by that Shareholder or any ownership interest therein, during the 5-year term of this agreement. The agreement may be set aside by unanimous vote of the Insider Shareholders at any time. - 8 - INTERNATIONAL TECHNOLOGY ENTERPRISES LTD. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 NOTE 7 REGISTRATION OF SECURITIES The Company is in the process of voluntarily filing on Form 20F under the Securities Exchange Act of 1934, a registration statement with the Securities and Exchange Commission, which will, upon its effective date, require the Company to render annual, audited financial statements of the Company. -9- B. Exhibits. - -------- ------------------------------------------------ 1.1 Articles of Association.** 1.2 Bylaws.** 1.3 Share Certificate - Common Stock** 10.1 Management Consulting Agreement between Equity Finance Holding Corporation and International Technology Enterprise Ltd. dated 20 September 2000* 10.2 Agreement Between International Technology Enterprise Ltd. And Beowulf Investments dated 15 December 2000.* 23 Consent of BRAVERMAN & COMPANY, P.C.* - -------- ------------------------------------------------ * Filed within ** Previously filed in 20FR12G on 4/20/2001 All other schedules and exhibits are omitted, as the required information is not applicable or is not present in amount sufficient to require submission of the schedule or because the information required is included in the financial statements and notes hereto. 56 SIGNATURES Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant certifies that it meets all of the requirements for filing on Form 20-F and has duly caused to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized. Dated this 18th day of January, 2002. BY: INTERNATIONAL TECHNOLOGY ENTERPRISES LTD. BY: /s/Jack L. Mahan, Jr. Jack L. Mahan, Jr., President, Chief Executive Officer, Chief Financial Officer and Secretary of Board KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears below constitutes and appoints Jack L. Mahan, as true and lawful attorney-in- fact and agent, with full power of substitution, for his and in his name, place and stead, in any and all capacities, to sign any and all amendment (including post-effective amendments) to this registration statement, and to file the same, therewith, with the Securities and Exchange Commission, and to make any and all state securities law or blue-sky filings, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying the confirming all that said attorney-in-fact and agent, or any substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this Form 20-F Registration Statement has been signed by the following persons in the capacities and on the dates indicated: Signature Title Date /s/ Ian D. Ross Chairman of the Board 18 January 2002 Ian D. Ross and Vice President /s/ Jack L. Mahan, Jr. President, Chief Executive Officer, 18 January 2002 Jack L. Mahan, Jr. Chief Financial Officer and Secretary of the Board /s/ Quan Van Nguyen Member of the Board of Directors 18 January 2002 Quan Van Nguyen 57
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20-F/A Filing
International Technology Enterprises Inactive 20-F/A2002 FY Annual report (foreign) (amended)
Filed: 18 Jan 02, 12:00am