FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended December 31, 2000
Commission File Number 000-29425
I-TRANSACTION.NET, INC.
(Exact name of registrant as specified in its charter)
New Jersey
(State of jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
21 Four Seasons Place, Suite 520, Toronto Ontario M9B 6J9
(Address of principal executive offices) (Zip Code)
(416) 620-8330
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
-------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: Common Stock, $0.0001 Par
Value - 11,913,611 Shares as of October 31, 2000
The Exhibit Index is on Page 20
This document contains 21 pages.
I-TRANSACTION.NET, INC.
AND SUBSIDIARIES
INDEX
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PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet for December 31, 2000 ...............3
Consolidated Statement of Operations for the six
months ended December 31, 2000 and 1999........................4
Consolidated Statement of Cash Flows for the six
months ended December 31, 2000 and 1999........................5
Notes to Consolidated Financial Statements......................8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................18
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...............................20
SIGNATURES.....................................................21
I-TRANSACTION.NET INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
FOR THE SIX MONTH PERIOD ENDED
DECEMBER 31, 2000
I-TRANSACTION.NET INC.
(A DEVELOPMENT STAGE COMPANY)
(UNAUDITED)
CONTENTS
PAGE
----
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheet 2
Statements of Operations 3
Statements of Stockholders' Equity 4
Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6-12
I-TRANSACTION.NET INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
AS AT DECEMBER 31, 2000
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------
DECEMBER 31, June 30,
- ----------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash - $ 584
Accounts receivable, net 27,589 8,815
Sundry assets 7,716 -
- ----------------------------------------------------------------------------------------------------
Total current assets 35,305 9,399
Equipment, net 26,716 32,780
Goodwill 141,388 -
Due from affiliates - 13,825
Other assets 3,500 3,500
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TOTAL ASSETS $ 206,909 $ 59,504
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LIABILITIES
CURRENT LIABILITIES:
Notes payable $ 129,216 $ 95,069
Accounts payable and accrued liabilities 2,554,870 2,333,697
Customer deposits 10,135 31,200
Loans payable, related party 92,910 32,033
- ----------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 2,787,131 2,491,999
- ----------------------------------------------------------------------------------------------------
STOCKHOLDERS' DEFICIENCY
Common stock, $.001 par value, 200,000,000 shares
authorized; 11,928,353 shares issued and outstanding 11,929 11,914
Additional paid-in-capital 2,905,669 2,804,333
Cumulative translation adjustment (5,410) (5,410)
Deficit accumulated during development stage (5,492,410) (5,243,332)
- ----------------------------------------------------------------------------------------------------
Total stockholders' deficiency (2,580,222) (2,432,495)
- ----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 206,909 $ 59,504
- ----------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
I-TRANSACTION.NET INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED
DECEMBER 31, 2000 AND 1999
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------
FEBRUARY 28, 1997
DECEMBER 31, DECEMBER 31, JUNE 30, (DATE OF INCEPTION) TO
2000 1999 2000 DECEMBER 31, 2000
- ------------------------------------------------------------------------------------------------------------------------------
Sales $ 53,927 $ 1,707 $ 67,239 $ 137,887
Cost of sales 19,951 836 51,516 71,467
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Gross profit 34,336 871 15,723 50,059
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General, selling, and administration expense 158,414 43,717 190,184 375,433
Interest 125,000 1,817 250,000 375,000
Research and development -- -- 68,000 68,000
Consulting fees -- -- 493,615 493,615
- ------------------------------------------------------------------------------------------------------------------------------
283,414 45,534 1,001,799 1,312,048
- ------------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations before
extraordinary item (249,078) (44,663) (986,076) (1,261,989)
EXTRAORDINARY ITEM:
Legal judgment, net of $761,247 tax benefit -- -- (1,176,755) (1,176,755)
- ------------------------------------------------------------------------------------------------------------------------------
Loss before provision for income taxes (249,078) (44,663) (2,162,831) (2,438,744)
Provision for income taxes -- -- (761,247) (761,247)
- ------------------------------------------------------------------------------------------------------------------------------
NET LOSS $ (249,078) $ (44,663) $(2,924,078) $(3,199,991)
- ------------------------------------------------------------------------------------------------------------------------------
OTHER COMPREHENSIVE LOSS:
Foreign currency translation, net -- -- (5,410) (5,410)
COMPREHENSIVE LOSS $ (249,078) $ (44,663) $(2,929,488) $(3,205,401)
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PER SHARE INFORMATION FOR THE PERIOD ENDED DECEMBER 31, 2000:
Income per share from continuing operations $ 0.001
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Income per share from extraordinary items 0.001
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Basic net income per share 0.001
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Weighted average number of Shares 11,408,953
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
I-TRANSACTION.NET INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------
DEFICIT
ADDITIONAL ACCUMULATED
COMMON PAID-IN DURING DEVELOP-
ACTIVITY SHARES STOCK CAPITAL MENT STAGE TOTAL
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE, FEBRUARY 27, 1997 132,755,304 $1,342,086 - $ (2,292,419) $ (950,333)
Reverse splits (132,749,204) (1,342,080) 1,342,080 - -
Issuance of shares relating
to bankruptcy settlement 1,581 2 948,903 - 948,905
Shares issued for the
acquisition of Forum Energy 50,000 50 278,018,977 278,019,027
Loss due to write off of
Forum Energy - - - (278,017,599) (278,017,599)
Shares issued relating to
bankruptcy settlement with
creditors 145,930 146 18,682 - 18,828
Net loss from operations
at June 30, 1998 - - - (18,828) (18,828)
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1998, 203,611 204 280,328,642 (280,328,846) -
AS PREVIOUSLY REPORTED
Adjustment for the write-off of
Forum Energy - - (278,017,599) 278,017,599 -
- ----------------------------------------------------------------------------------------------------------------------------
RESTATED JUNE 30, 1998 203,611 204 2,311,043 (2,311,247) -
- ----------------------------------------------------------------------------------------------------------------------------
Issuance of shares relating
to bankruptcy settlement 5,000 5 995 - 1,000
Shares issued for cash, net 10,000,000 10,000 65,000 - 75,000
Shares issued for services 5,000 5 3,995 - 4,000
Loss from operations for the
year ended June 30, 1999 - - - (8,007) (8,007)
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BALANCE, JUNE 30, 1999 10,213,611 10,214 2,381,033 (2,319,254) 71,993
- ----------------------------------------------------------------------------------------------------------------------------
Issuance of 1,000,000 shares
for acquisition of ITNI 1,000,000 1,000 249,000 - 250,000
Issuance of 700,000 shares
for acquisition of Dynamic 700,000 700 174,300 - 175,000
Foreign currency translation - - - - (5,410)
Loss from operations for the
year ended June 30, 2000 - - - (2,924,078) (2,924,078)
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 2000 11,913,611 $ 11,914 $ 2,804,333 $ (5,243,332) $ (2,432,495)
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Issuance of 14,742 shares for
acquisition of Athon 14,742 15 101,337 - 101,352
Loss from operations for the
Six Month Period ended
December 31, 2000 - - - (249,078) (249,078)
- ----------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 2000 11,928,353 $ 11,929 $2,905,670 $(5,492,410) $(2,580,221)
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
I-TRANSACTION.NET INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIOD ENDED
DECEMBER 31, 2000 AND 1999
(UNAUDITED)
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SIX MONTH SIX MONTH YEAR ENDED FEBRUARY 28, 1997
PERIOD ENDED PERIOD ENDED JUNE 30, (DATE OF INCEPTION) TO
DECEMBER 31, 2000 DECEMBER 31, 1999 2000 DECEMBER 31, 2000
- --------------------------------------------------------------------------------------------------------------------------
NET LOSS $ (249,078) $ (44,663) $ (2,924,078) $ (3,173,156)
Adjustment to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation expense 6,064 4,632 53,208 59,272
Interest expense 125,000 - 250,000 375,000
Extraordinary item - legal judgement - - 1,938,002 1,938,002
Consulting fees - - 493,615 493,615
Changes in assets and liabilities:
Changes in non-cash working capital 8,581 52,359 84,977 112,032
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Net cash provided by (used in)
operating activities (109,433) 12,328 (104,276) (195,235)
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Investing activities:
Increase (decrease) in promissory note 34,147 100,000 95,069 29,216
Advances from (to) affiliates, net 13,825 (11,825) 15,201 29,026
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
investing activities 47,972 88,715 110,270 58,242
- --------------------------------------------------------------------------------------------------------------------------
Financing activities:
Issuance of stock - - - 80,000
Loan payable to related party 60,877 - - 62,403
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Net cash provided by financing
activities 60,877 - 5,994 142,403
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NET INCREASE IN CASH PRIOR TO EFFECT
OF EXCHANGE RATE ON CASH (584) - 5,994 5,410
EFFECT OF EXCHANGE RATE ON CASH - - (5,410) (5,410)
- --------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH (584) 101,043 584 -
CASH AT BEGINNING OF PERIOD 584 - - -
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CASH AT END OF PERIOD $ - $ 101,043 $ 584 $ -
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SUPPLEMENTAL DISCLOSURES:
The Company had no cash equivalents at December 31, 2000 and 1999.
NON-CASH INVESTING AND FINANCING TRANSACTIONS:
The Company acquired all the stock of i-Transaction.net, Inc. and Dynamic
Visions, Ltd. for stock as follows:
TOTAL VALUE OF
COMPANY ACQUIRED SHARES ISSUED ACQUISITION
---------------- ------------- -----------
i-Transaction.net. Inc. 1,000,000 $ 250,000
Dynamic Visions. Ltd. 700,000 $ 175,000
Athon Graphics and Marketing Inc. 14,742 $ 141,388
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
I-TRANSACTION.NET INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(UNAUDITED)
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1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
On October 26, 1999 Phoenix Summus Corp. changed its name to
i-Transaction.net Inc. ("the Company"). In January of 1999, the Company was
reincorporated in the State of New Jersey and re-established itself as a
development stage company. The Company's primary business activities relate
to developing, selling, and managing web-based database solutions software.
The Company through its subsidiaries will assist in the development,
marketing, and sales of its proposed acquisition of the e-commerce software
currently owned by ePass Canada.com, Inc. (See Note 11).
GOING CONCERN
The accompanying consolidated financial statements have been presented in
accordance with generally accepted accounting principles, which assume the
continuity of the company as a going concern. However, during the year
ended June 30, 2000 and the Six Month Period ended December 31, 2000, the
Company experienced, and continues to experience going concern and
liquidity problems. The Company has incurred a net loss of $(2,924,078) and
net loss of ($249,078) for the year ended June 30, 2000 and Six Month
Period ended December 31, 2000, respectively. The loss for the year ended
June 30, 2000 is primarily related to a judgment that was entered against
Phoenix Summas Corporation, which was the corporate name prior to the name
change that occurred October 1999 (see Note 7). The Company's consolidated
financial position also reflects a working capital deficiency of
$(2,751,826) and a stockholders' deficiency of $(2,580,222) as of December
31, 2000.
These conditions raise substantial doubt as to the ability of the Company
to continue as a going concern.
Management's plans with regard to these matters encompass the following
actions:
1. The Company has retained legal counsel to vigorously defend the
judgment entered against Phoenix Summas Corporation.
2. The Company plans to raise equity from private placements of its
common stock, and plans to sell additional shares of common stock in a
proposed public offering. From the proceeds of these anticipated
offerings the Company plans to pay outstanding liabilities, continue
to spend on research and development of its proprietary software,
and continue to explore acquiring potentially profitable technology
related companies.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries Dynamic Visions Ltd., i-Transaction.net Inc., a
Bahamian Corporation and E-Pass Digital Communications Inc.( formerly Athon
Graphics and Marketing Inc.) All inter-company balances and transactions have
been eliminated on consolidation.
I-TRANSACTION.NET INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(UNAUDITED)
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1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Cont'd.)
REVENUE RECOGNITION
Revenue from the sale of products is recognized at the time of shipment.
Revenue from consulting services is recognized when the services are
rendered in accordance with the terms of the related agreements. Revenue
from Orion Game System Shared Revenue Contracts is recognized when earned
on an accrual basis.
EQUIPMENT
Equipment is recorded at cost and are being depreciated on the
straight-line method over their estimated useful lives which approximates
five years.
FOREIGN CURRENCY TRANSLATION
The accounts of the Company's Canadian subsidiary are translated in
accordance with Statement of Financial Accounting Standard No. 52, which
requires that foreign currency assets and liabilities be translated using
the exchange rates in effect at the balance sheet date. Results of
operations are translated using the average rates prevailing throughout the
period. The effects of unrealized exchange rate fluctuations on translating
foreign currency assets and liabilities into U.S. dollars are accumulated
as the cumulative translation adjustment in shareholders' equity.
ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the reported period. Actual results could differ from these
estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial statements approximates
fair value because of their short-term maturities. The Company does not
hold or issue financial instruments for trading purposes nor does it hold
or issue interest rate or leveraged derivative financial instruments.
NET LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings Per Share." SFAS No. 128 supersedes and simplifies
the existing computational guidelines under Accounting Principles Board
("APB") Opinion No. 15, "Earnings Per Share".
The statement is effective for financial statements issued for periods
ending after December 15, 1997. Among other changes, SFAS No. 128
eliminates the presentation of primary earnings per share and replaces
it with basic earnings per share for which common stock equivalents are
not considered in the computation, it also revised the computation of
diluted earnings per share. The Company has adopted SFAS No. 128 and
there is no material impact to the Company's earnings per share,
financial condition, or results of operations. The Company's earnings
per hare have been restated for all periods presented to be consistent
with SFAS No. 128.
I-TRANSACTION.NET INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(UNAUDITED)
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1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Cont'd.)
NET LOSS PER SHARE - (cont'd.)
The basic loss per share is computed by dividing the net loss for the
period by the weighted average number of common shares outstanding for the
period. When present, common stock equivalents are excluded from the
computation if their effect would be anti-dilutive. Shares issued at
inception are considered to be outstanding for the entire period presented.
RECENT PRONOUNCEMENTS
SFAS No. 130, "Reporting Comprehensive Income", establishes guidelines for
all items that are to be recognized under accounting standards as
components of comprehensive income to be reported in the financial
statements. This statement is effective for all periods beginning after
December 15, 1997 and reclassification of financial statements for earlier
periods will be required for comparative purposes. To date, the Company has
not engaged in transactions which would result in any significant
difference between its reported net loss and comprehensive net loss as
defined in the statement.
In June 1998, the Financial Accounting Standard Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities". In June 1999, the FASB
issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the effective date of FASB Statement No. 133",
which deferred the required date of adoption of SFAS No. 133 for one year,
to fiscal years beginning after June 15, 2000. This Standard is not
applicable for the Company's year ended June 30, 2000.
2. EQUIPMENT
Equipment consists of the following:
- ----------------------------------------------------------------------------------------
Accumulated Net Book
Cost Depreciation Value
- ----------------------------------------------------------------------------------------
Equipment (Dynamic Acquisition) $ 21,637 $ 15,642 $ 5,995
Orion Game Systems 64,351 39,898 20,721
- ----------------------------------------------------------------------------------------
$ 85,988 $ 55,540 $ 26,716
- ----------------------------------------------------------------------------------------
3. NOTES PAYABLE
a. The operating loan is secured by a personal guarantee and a
postponement and assignment of claim from one of the shareholders
of the Company's parent.
b. This loan is currently in default. The lender has released the
personal guarantees of certain shareholders of the Company's
parent in exchange for a cash payment from the shareholders. The
shareholders have agreed not to seek repayment from the Company
of the cash payment.
I-TRANSACTION.NET INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(UNAUDITED)
- --------------------------------------------------------------------------------
4. LOANS PAYABLE, RELATED PARTY
The loans payable related party, consisting of advances for working
capital, are non-interest bearing and contain no fixed terms of repayment.
5. ACQUISITIONS
a. On September 29, 1999 the Company acquired 100% of the outstanding
common stock of i-Transaction.net Inc., a Bahamian Corporation, from a
related party, by issuing 1,000,000 shares of common stock which were
issued and subject to Rule 144 of Securities and Exchange Act of 1933.
The acquisition was accounted for under the purchase method of
accounting, and accordingly, the results of operations will be
included in the results of operations for the Company from the date of
acquisition.
In determining the value of the purchase of ITNI, it is appropriate to
use the quoted market price of the shares of the Company at the time
of acquisition if the shares reflected the fair value of the Company.
As the Company was a development stage Company at the time of
acquisition, the fair value of the Company was nominal and thus the
market value of the shares of the Company were discounted in
determining the purchase price. Accordingly, the shares were valued at
$.25 per share and the excess over the net assets acquired,
approximating $246,500, were charged to consulting fees, as the value
of the intangible assets, primarily consisting of a tradename, contact
base, and the business location could not be determined at this time.
b. On November 15, 1999 the Company acquired 100% of Dynamic Visions,
Ltd. ("Dynamic"), an Ontario, Canada corporation for 700,000 shares of
common stock of the Company which were issued subject to Rule 144 of
the Securities and Exchange Act of 1933. The acquisition was accounted
for under the purchase method of accounting, and accordingly, the
results of operations will be included in the results of operations
for the Company from the date of acquisition.
In determining the value of the purchase of Dynamic, it is
appropriate to use the quoted market price of the shares of the
Company at the time of acquisition if the shares reflected the fair
value of the Company. As the Company was a "shell Company" at the
time of acquisition, the fair value of the Company was nominal and
thus the market value of the shares of the Company were discounted
in determining the purchase price. Accordingly, the shares were
valued at $.25 per share and the excess over the net assets
acquired, approximating $247,115, were charged to consulting fees,
as the value of the intangible assets, primarily consisting of
propriety software and personnel, could not be determined at this
time.
I-TRANSACTION.NET INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(UNAUDITED)
- --------------------------------------------------------------------------------
5. ACQUISITIONS - (Cont'd.)
c. On September 18, 2000, the Company acquired 100% of E-Pass Digital
Design Inc.( formerly Athon Graphics and Marketing Inc. for $101,351
by issuing 14,742 shares and assuming net liabilities of $40,037. The
acquisition will be accounted for under the purchase method of
accounting, and accordingly the results of operations will be included
in the operating results of the Company from the date of acquisition.
The Company expects that the entire purchase price will be allocated
to goodwill.
6. INCOME TAXES
Deferred income taxes may arise from temporary differences resulting from
income and expense items reported for financial accounting and tax purposes
in different periods. Deferred taxes are classified as current or
non-current depending on the periods in which the temporary differences are
expected to reverse. The deferred tax asset related to the operating loss
carry forward has been fully reserved, due to the inability at this time to
predict whether the company will have future income to offset against these
loss carry forwards. On December 31, 2000, the Company had approximately
$3,700,000 of net loss carry forwards which are available through the year
2015.
7. LEGAL PROCEEDINGS
In March 2000 the company became aware of a judgment entered against a
Phoenix Summas Corp., which would appear to be a similar name to the former
name of the company Phoenix Summus Corp. that was filed in California in
1999. The judgment in the amount of $1,938,002 was the result of a default
being entered against the Company in the case of Sue B. Jones v. Harold
Blethen, ET AL. Case No. 5634126, Fresno County Superior Court
(California). The Company was not aware that any lawsuit had been initiated
against it and disavows any claim made by the Plaintiff in that case. The
Company has retained legal counsel to have the claim set aside.
I-TRANSACTION.NET INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(UNAUDITED)
- --------------------------------------------------------------------------------
7. SEGMENT INFORMATION
The Company currently operates its business in one segment that of
producing and servicing 3-D arcade games. This segment accounts for 100% of
the revenues for the year ended December 31, 2000.
8. RELATED PARTY TRANSACTIONS
a. The Company has an agreement to market and distribute products
developed or constructed by Dynamic Visions Development Corporation, a
private corporation. The shareholders (including several key
employees) of Dynamic Visions Development Corporation are also
shareholders of i-Transaction.net Inc., the parent company of Dynamic
Visions Ltd. Certain of the employees/shareholders of Dynamic Visions
Development Corporation have provided administrative and sales support
services to Dynamic Visions Ltd. without charge during the period. The
cost of these services have not been accrued in the accompanying
financial statements.
b. The Company is in the process of acquiring the E-Pass software from a
related party for $2,200,000 (See Note 11).
I-TRANSACTION.NET INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(UNAUDITED)
- --------------------------------------------------------------------------------
9. COMMITMENTS
On February 23, 2000 the Company acquired, subject to certain contingencies
in the acquisition agreement, 100% of the issued and outstanding common
shares of ePass Canada.com Inc. ("ePass") from a related party for
$2,200,000. The acquisition will be accounted for under the purchase method
of accounting and accordingly the results of operations will be included in
the results of the Company from the date of acquisition. ePass owns the
software product ePass which is an integrated data and knowledge product.
The purchase is not reflected in the accompanying financial statements
until such time as the contingency clause is satisfied. The closing of this
transaction and the satisfaction of the promissory note will occur upon 1.)
the valuation of ePass Canada.com, Inc., 2.) a valuation of the ePass
software, and/or 3.) completion of a successful financing that would allow
full payment for the purchase price of the shares of the corporation.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Dynamic Visions Sales
For the six month period ended December 31, 2000 Dynamic had sales of $53,927 as
compared to $1,707 in the same period in 1999. These sales consisted of revenues
from three gaming systems that have been placed in use at a Dave & Busters
location in Toronto, Ontario and from several development contracts that Dynamic
has been awarded, including contracts to develop simulation software that will
be used to train Canadian military personnel in the use of certain weapons
systems.
The Company intends to continue its efforts to sell Orion Game Systems to family
entertainment centers and arcade venues. The Company is enhancing the game play
and is developing new virtual reality input devices.
The Company also will seek development contracts from private entities and the
Canadian military. The Company already develops simulation software for the
Canadian military.
ePass Canada Sales
In March 2000, the Company entered into an agreement to purchase ePass Canada
and began enhancing the ePass software that company had developed. The Company
has not completed that transaction as it is contingent upon an independent
valuation of ePass Canada and the ePass software and/or financing to satisfy the
purchase price. ePass Canada derives its revenue from licensing its software and
sharing in revenue generated by ePass enabled sites. During the quarter ended
December 31, 2000 the Company sold no ePass licenses and derived no revenue from
the ePass software.
The Company will use sales staff in both Canada and the United States to seek
licensees for the software. Licensees will be customer service oriented
companies who will purchase a license for ePass software. The Company will also
customize the software to meet customer needs.
COSTS AND EXPENSES
Costs of Sales
For the six months ended December 31, 2000 the Company had revenues of $53,927
and the cost of sales was $19,951. All the Company's sales were derived from its
Dynamic Visions subsidiary. Likewise, all the costs of sales are attributable to
Dynamic Visions.
Selling, General and Administrative
The company had selling, general and administrative expenses of $158,414 for
the six months ended December 31, 2000 as compared to SG&A expenses of $43,717
in the year ago period.
Interest Expense
PART II
Item 1. Legal Proceedings
In March 2000 the company became aware of a judgment
entered against a Phoenix Summas Corp., which would appear to be a similar
name to the former name of the company, Phoenix Summus Corp. that was filed
in California in 1999. The judgment in the amount of $1,938,002 was the
result of a default being entered against the Company in the case of Sue B.
Jones v. Harold Blethen, ET AL. Case No. 5634126, Fresno County Superior
Court (California). The Company was not aware that any lawsuit had been
initiated against it and disavows any claim made by the Plaintiff in that
case. The Company has retained legal counsel to have the claim set aside.
Item 2. Change in Securities and Use of Proceeds
None.
Item 3. Default Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBIT INDEX
Exhibit
No. Description.
27 Financial Data Schedule
(b) The Company filed a Form 8-K on September 27, 2000 disclosing a change in
auditors. There was no dispute with the prior auditors.
The Company accrued interest in the amount of $125,000. This represents accrued
interest on the judgment against the Company in the amount of $1.93 million, and
other related costs.
Capital Expenditures and Depreciation
The Company had no capital expenditures during the quarter ended December 31,
2000.
Research and Development
The company had no research and development costs for the fiscal period. In the
prior fiscal year there were research and development costs of $68,000. There
were no funds expended for research and development in the year-ago quarter.
Liquidity and Capital Resources
The following table presents a summary of the Registrants cash flows for the
last two fiscal years:
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Six Months Ended Six Months Ended
December 31, 2000 December 31, 1999
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Net Cash Provided (required) $(109,433) $12,328
by operating activities
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Net Cash Provided (used) by $47,972 $88,715
investing activities
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Net cash provided (used) by $60,877 --
financing activities
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Net increase (decrease) in $(584) $101,043
cash
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The Company has relied on loans from shareholders to meet its cash needs and
plans to raise additional funds through placement of the Company's common stock.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
I-Transaction.net, Inc.
By: /s/ David Bruce
-------------------------
David Bruce, President
In accordance with the Exchange Act, this report has been signed below by the
folowing persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ David Bruce
-------------------------
David Bruce, President/Director
By: /s/ Thomas Weisner
-------------------------
Thomas Weisner, CEO
By: /s/ Stafford Greene
-------------------------
Stafford Greene, CFO