AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON August 1, 2003
Registration No. 333-90618
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Post Effective Amendment No. 1
to FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
INFOTEC BUSINESS SYSTEMS, INC.
(Name of small business issuer in its charter)
NEVADA 7380 98-0358149
State or other jurisdiction of (Primary
incorporation or organization) Standard Industrial (I.R.S. Employer
Classification Code Identification
Number)No)
444 Columbia Street E. New Westminster, British Columbia, V3L 3W9,CANADA
(604) 777-1707
(Address and telephone number of principal executive offices)
Nevada Agency & Trust Company
50 West Liberty Street, Suite 880
Reno, Nevada, 89501
(775) 322-0626
(Name, address and telephone number of agent for service)
___________________________
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this
Registration Statement.
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for
the same offering. |__|____________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |__|____________
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |__|____________
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. |__|____________
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states
that this registration statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until
the registration statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed
with the Securities and Exchange Commission. These securities may not
be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of these securities in any state in which such
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state.
SUBJECT TO COMPLETION
PROSPECTUS
INFOTEC BUSINESS SYSTEMS, INC.
(A Development Stage Company)
444 Columbia Street E.
New Westminster, British Columbia V3L 3W9, Canada
(604) - 777-1707
7,200,000 SHARES OF COMMON STOCK
----------------
This prospectus covers the 7,200,000 shares of common stock of Infotec
Business Systems, Inc. being offered by certain selling security
holders. We will not receive any proceeds from the sale of the shares
by the selling security holders.
Our common stock is currently traded on the over-the-counter
electronic Bulletin Board under the symbol "IFOB". On July 31, 2003,
the closing bid and ask prices for our common stock was $5.50 and
$5.90 per share.
The purchase of the securities offered through this prospectus
involves a high degree of risk. You should purchase shares only if
you can afford a complete loss of your investment. See section
entitled "Risk Factors" on pages 4 - 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURI
TIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRE
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ----------------
The Date of This Prospectus Is: __________, 2003.
The original date of this prospectus was November 5, 2002.
TABLE OF CONTENTS
PART I PROSPECTUS
Page No.
PROSPECTUS
SUMMARY...............................................................3
RISK
FACTORS...............................................................4
Need for Additional Financing................................4
Dilution from Additional Financing...........................4
Lack of Operating History....................................4
Doubt as to Our Ability to Continue as a Going Concern.......4
Marketable Product...........................................4
Part Time Management.........................................5
Competition...........................................................5
Customer Base................................................5
Program Errors and Defects...................................5
Rapid Technology Change......................................5
Management Control...........................................5
Penny Stock Rules............................................6
Inactive Market for Our Common Stock.........................6
2
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING
STATEMENTS............................................................7
USE OF PROCEEDS.......................................................7
SELLING SECURITY HOLDERS...........................................7
PLAN OF DISTRIBUTION..................................................8
LEGAL PROCEEDINGS....................................................10
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.........10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......10
DESCRIPTION OF SECURITIES............................................11
INTEREST OF NAMED EXPERTS AND COUNSEL................................12
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES.......................................12
ORGANIZATION WITHIN LAST FIVE YEARS..................................12
DESCRIPTION OF BUSINESS..............................................13
PLAN OF OPERATION....................................................17
DESCRIPTION OF PROPERTY..............................................21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................21
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.............22
EXECUTIVE COMPENSATION...............................................23
3
AVAILABLE INFORMATION................................................24
REPORTS TO SECURITY HOLDERS..........................................24
FINANCIAL STATEMENTS................................................F-1
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND
OFFICERS......................................... II-1
OTHER EXPENSES OF ISSUANCE AND
DISTRIBUTION..................................... II-1
RECENT SALES OF UNREGISTERED
SECURITIES.............................................. II-1
EXHIBITS.....................................................II-3
UNDERTAKINGS.................................................II-3
4
PROSPECTUS SUMMARY
Infotec Business Systems, Inc.
Infotec Business Systems, Inc. is a corporation formed under the
laws of the State of Nevada, whose principal executive offices are
located at 444 Columbia Street E., New Westminster, British Columbia,
V3L 3W9 Canada. Our telephone number is (604) 777-1707.
Our Business and Business Strategy
We are a development stage company and have not as yet engaged in
revenue producing activities. Our business plan is to develop and
market systems, and related products and services for remote access
via the Internet to business processes such as software applications,
data and a firm's business procedures and methods. We currently
market a virtual business system, as a platform for a business to
deploy its business applications over the Internet. We also market
products and services for Internet access and control, including a
service for e-mail communication security. A virtual business system
is essentially a network computer system or server, similar to those
found in most business offices, which provide the business with
software applications, security, network communications and a central
data store. Instead of a firm acquiring, establishing and maintaining
its own network computer system, its business process or systems are
maintained on our servers, which are established, secured, managed and
ready for use. The virtual business system is accessed securely by a
firm's properly authorized employees, advisors and customers via the
Internet, using an Internet browser from their computer workstation.
Our current objective is to accelerate our marketing efforts for
our virtual business system and the virtual office and for our e-mail
communication security product, to develop business relationships and
opportunities and to sell our products and services to customers. In
addition, we also plan to complete development of our productivity
applications and an event management system, as is more fully
described below. We plan to market our products and services
principally to businesses in the U.S. and Canada and to earn revenue
from monthly service fees, usage and transaction fees, and from
consulting.
We incurred a loss in the amount of $172,675 for the period from
incorporation to April 30, 2003. At July 31, 2003, our working
capital was approximately $235,000.
Securities Being Offered 7,200,000 shares of
common stock.
Securities Issued
And to be Issued 18,350,000 shares of common stock are
issued and outstanding as of the date
of this prospectus. All of the common
stock to be sold under this prospectus
will be sold by existing stockholders.
Use of Proceeds We will not receive any proceeds from the
sale of the common stock by the selling
stockholders.
1
References in this registration statement to the terms "Infotec",
"us", "we", "the company" and "our", refer to Infotec Business
Systems, Inc. or our wholly owned subsidiaries Infotec Business
Solutions, Inc. and Eventec Inc. and not to our selling stockholders.
All references to stock issuances and amounts, give effect to a 6:1
forward split of our capital stock in February 2003.
RISK FACTORS
An investment in us involves a high degree of risk. You should
carefully consider the risks described below and the other information
in this prospectus before investing. If any of the following risks
occur, our business, operating results and financial condition could
be seriously harmed. Our value could decline due to any of these
risks, and you could lose all or part of your investment.
We need additional financing and there is no assurance it can be
obtained, which will likely prevent us from ever becoming profitable.
We currently have insufficient capital to meet our business plan.
We cannot assure you that we will be able to raise capital or develop
sufficient revenues. In the absence of financing and obtaining
additional capital, it is doubtful that we will be able to continue
operations, which means that you will not be able to recover your
investment in our shares of common stock.
Any additional financing may significantly dilute your equity interest
in our stock.
We hope to raise additional financing in the future. Even if we
are able to obtain capital, any financing will likely involve a
dilution of the interest of our stockholders upon the issuance of addi
tional shares of common stock and other securities. Given our weak
economic state, the terms upon which capital may be available could
well involve substantial dilution to our stockholders, which may
reduce significantly the value of your investment in our shares.
Because we have no operating history, you may find it difficult to
evaluate our company.
We are presently in the process of developing a virtual office
system that will be required to complete our business plan. We have
not yet earned any revenues and we will not be able to earn any
revenues until development of our virtual office system is complete.
Accordingly, we have no operating history from which investors can
2
evaluate our future business prospects or management's performance.
As a result, you have no reliable means to determine whether you
should make an investment in our company.
Because we have not developed profitable operations and have limited
financial resources, our financial statements disclose that there is
substantial doubt as to our ability to continue as a going concern.
For the period from incorporation through April 30, 2003, we
incurred a loss of $172,675. As at July 31, 2003, we had
approximately $235,000 of working capital on hand. Our business plan
calls for significant expenses in connection with the marketing of our
products and services and our ongoing development program. In
addition, we anticipate that revenues, if any, from operations will
take time to develop. Because we have not achieved profitable
operations and may require additional capital, our financial
statements disclose there is substantial doubt as to our ability to
continue as a going concern. It is not possible at this time to
predict the outcome of these matters and whether we will ever become
financially viable and develop revenues sufficient to achieve any
level of profitability. As a result, investors who acquire our common
shares must recognize that they may lose their entire investment.
If we are unable to develop a marketable product, our ability to
generate revenue would be limited.
The virtual business system and virtual office and our Internet
access and control products and services are currently in their
introductory phase. In order to commence sales, we will have to dem
onstrate to potential customers that we have systems and services that
function properly and are capable of being marketed to the public and
further, demonstrate our value to their business. If we are unable to
demonstrate that our products and services are ready for market and
that they address a business need, we will not be able to successfully
market our products and services or earn any revenues.
We rely on our President who does not devote his full business time to
our business. If our President is not available, we may not be able
to implement our business plan and investors may lose their entire
investment.
We have only two directors and we rely principally on Mr. Robert
Danvers our President for his entrepreneurial skills and experience
and to implement our business plan. Presently, Mr. Danvers does not
devote full time and attention to our affairs, which could result in
delays in implementing our business plan. Moreover, we do not have an
employment agreement with any of our directors or officers including
Mr. Danvers. Accordingly, if Mr. Danvers does not continue to manage
our affairs, or devote sufficient amounts of his business time to
enable us to implement our business plan, our business would likely
fail and you may lose your entire investment.
We face intensive competition within the online application services
industry and do not have sufficient resources to compete effectively.
3
We face competition from a wide range of competitors in the
online application services industry. These companies include large,
well established and financially stronger companies, several of which
are able to write and develop their own software and middleware, which
we rely on for support of our virtual office. As we have indicated
previously, we have only limited resources to compete and may never
have sufficient funds to be able to develop our applications and
market our office offerings so that we may become a factor in this
industry. These competitive disadvantages represent another factor
which may cause investors in our stock to lose the value of their
investment.
If we are not able to develop a customer base, we will have limited
prospects for generating revenues.
If we are not able to achieve a customer base, then we will not
be able to achieve revenues. Establishing a base of customers will
require that we undertake marketing efforts that are successful in
bringing users to our virtual office system that will pay to use our
system. If we are not successful in developing a customer base as a
result of our marketing efforts, then our ability to generate revenue
would be severely limited.
If our systems contain programming errors or defects, it would
adversely affect our reputation and cause us to lose customers.
The development of our virtual business systems require that we
undertake system integration and computer programming. There is a
risk that the system integration and software programming that we
complete as part of the development process will contain errors and
defects including errors and defects in the system's security
subsystem that we will not be able to discover until the system is
supporting ongoing use. Our virtual business systems may develop
system errors or defects or security failures that cause harm to our
users' data. Problems experienced by users and loss of users' data
and business processes will adversely impact our reputation and
ability to earn revenues, to retain existing customers or to develop
new customers.
If we are not able to adapt to rapid technology change and develop new
products, we may not be able to attract or retain customers and we
will be unable to stay in business.
We will be required to update and refine the virtual business
system and our Internet access products and services in order to
address technological change. The market for systems such as ours is
characterized by rapid technological changes, frequent new product
introductions and changes in consumer requirements. We may be unable
to respond quickly or effectively to these developments, as we may not
have sufficient resources or money required to develop or acquire new
technologies or to introduce new services capable of addressing these
developments. If we are unable to update and refine our technology
and services in response to technological change, then we may not be
able to attract or retain customers and we will not be able to stay in
business.
Because Robert Danvers, our President controls approximately 59% of
our outstanding common stock, he will control and make corporate
decisions and investors will have limited ability to affect corporate
decisions.
Mr. Robert Danvers owns or controls approximately 59% of the
outstanding shares of our common stock. Accordingly, he will have
almost complete influence in determining the outcome of all corporate
transactions and business decisions. The interests of Mr. Danvers may
4
differ from the interests of the other stockholders, and since he has
the ability to control most decisions through his control of our
common stock, our investors will have limited ability to affect
decisions made by management.
Because we are subject to the "penny stock" rules, the tradeability of
our common stock will be limited, which may make it more difficult for
investors to sell their shares.
We are subject to "penny stock" regulations and unless the
trading price of our common stock is $5.00 per share or more, then
trading in our common stock would be subject to the requirements of
Rule 15g-9 under the Securities Exchange Act. Under this rule,
additional sales practice requirements are imposed on broker-dealers
who sell such securities to persons other than established customers
and accredited investors (generally those with assets in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 together
with a spouse). For transactions covered by these rules, the broker-
dealer must make a special suitability determination for the purchase
of such securities and have received the purchaser's written consent
to the transaction prior to the purchase. Additionally, for any
transaction involving a penny stock, unless exempt, the rules require
the delivery, prior to the transaction, of a disclosure schedule
prescribed by the Commission relating to the penny stock market. The
broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative and current quotations
for the securities. Finally, monthly statements must be sent dis
closing recent price information on the limited market in penny
stocks. Consequently, the "penny stock" rules may restrict the
ability of broker-dealers to sell our shares of common stock. The
market price of our shares would likely suffer as a result. A market
in our common stock may never develop due to these factors.
If an active and visible trading market for our common stock does not
develop investors may have difficulty selling our shares.
While our common stock is traded on the electronic OTC Bulletin
Board maintained by the Nasdaq Stock Market, there has not
historically been an active market for our shares. The continued
quotation of our common stock on the OTC Bulletin Board does not
assure that a meaningful, consistent and liquid trading market exists
or will be maintained. In the absence of an active trading market:
- investors may have difficulty buying and selling or obtaining
market quotations;
- market visibility for our common stock may be limited; and
- a lack of visibility for our common stock may have a
depressive effect on the market price for our shares.
Investors seeking liquidity in a security should not purchase our
common stock.
IT IS NOT POSSIBLE TO FORESEE ALL RISKS WHICH MAY AFFECT US. MOREOVER,
5
WE CANNOT PREDICT WHETHER WE WILL SUCCESSFULLY EFFECTUATE OUR CURRENT
BUSINESS PLAN. EACH PROSPECTIVE PURCHASER IS ENCOURAGED TO CAREFULLY
ANALYZE THE RISKS AND MERITS OF AN INVESTMENT IN THE SHARES AND SHOULD
TAKE INTO CONSIDERATION WHEN MAKING SUCH ANALYSIS, AMONG OTHERS, THE
RISK FACTORS DISCUSSED ABOVE.
6
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary", "Risk Factors",
"Plan of Operation", "Description of Business", and elsewhere in this
prospectus constitute forward-looking statements. In some cases, you
can identify forward-looking statements by terminology such as "may",
"will", "should", "expects", "plans", "anticipates", "believes",
"estimated", "predicts", "potential", or "continue" or the negative of
such terms or other comparable terminology. These statements are only
predictions and involve known and unknown risks, uncertainties, and
other factors that may cause our actual results, levels of activity,
performance, or achievements to be materially different from any
future results, levels of activity, performance, or achievements
expressed or implied by such forward-looking statements. These
factors include, among other things, those listed under "Risk Factors"
and elsewhere in this prospectus. Although we believe that the
expectations reflected in the forward-looking statements are
reasonable, factors previously noted could cause our actual results to
differ materially from those contained in any forward looking
statements.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common
stock offered through this prospectus by the selling stockholders.
SELLING SECURITY HOLDERS
The selling stockholders named in this prospectus are offering
all of the 7,200,000 shares of common stock offered through this
prospectus. The shares include the following:
1. 1,200,000 shares of our common stock that the selling
stockholders acquired from us in an offering that was exempt from
registration under Regulation S of the Securities Act of 1933 and
completed on May 14, 2002.
The following table provides information regarding the
beneficial ownership of our common stock held by each of the
selling stockholders, including:
1. the number of shares owned by each prior to this
offering;
2. the total number of shares that are to be offered for
each;
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3. the total number of shares that will be owned by each
upon completion of the offering;
4. the percentage owned by each; and
5. the identity of the beneficial holder of any entity
that owns the shares.
Total number Total shares
Shares shares to to be owned Percent
owned be offered upon owned upon
prior for selling completion completion
Selling to this security holders of of this
security holder offering account this offering offering
Albert Amar 12,000 12,000 NIL NIL
Robert Cherniack 540,000 540,000 NIL NIL
Stephen Bass 540,000 540,000 NIL NIL
Evelyn Cable 516,000 516,000 NIL NIL
Doreen Danvers 12,000 12,000 NIL NIL
Morris Ergas 12,000 12,000 NIL NIL
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TABLE IS CONTINUED FROM PAGE 7
Total number Total shares
Shares shares to to be owned Percent
owned be offered upon owned upon
prior for selling completion completion
Selling to this security holders of of this
security holder offering account this offering offering
Carol Hill 180,000 180,000 NIL NIL
Peter Hill 540,000 540,000 NIL NIL
Faouzi Kossentini 12,000 12,000 NIL NIL
Phillip Levy 12,000 12,000 NIL NIL
Debra MacArthur 570,000 570,000 NIL NIL
Maxwell Capital Inc. 510,000 510,000 NIL NIL
Beneficial owner: Bram Solloway
Susan Miller 540,000 540,000 NIL NIL
Sheila Milstein 12,000 12,000 NIL NIL
Alberto Moscona 540,000 540,000 NIL NIL
Carolynne Newcombe 12,000 12,000 NIL NIL
Lita Nuguid 540,000 540,000 NIL NIL
Richard Paisley 12,000 12,000 NIL NIL
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Neil Pollock 12,000 12,000 NIL NIL
Julius Roitman 540,000 540,000 NIL NIL
Alan Sacks 12,000 12,000 NIL NIL
Bram Solloway 570,000 570,000 NIL NIL
Maureen Solloway 24,000 24,000 NIL NIL
Robert Thompson 360,000 360,000 NIL NIL
Barrie Weiner 570,000 570,000 NIL NIL
Except as otherwise noted in this list, the named party
beneficially owns and has sole voting and investment power over all
shares or rights to these shares. The numbers in this table assume
that none of the selling stockholders sells shares of common stock not
being offered in this prospectus or purchases additional shares of
common stock, and assumes that all shares offered are sold.
Other than Bram Solloway and Doreen Danvers, none of the selling
stockholders or their beneficial owners (a) has had a material
relationship with us other than as a stockholder at any time within
the past three years; or (b) has ever been an officer or director of
ourselves or any of our predecessors or affiliates. Mr. Bram Solloway
is the beneficial owner of Maxwell Capital Corporation. Mr. Solloway
was our Secretary and Treasurer during the period November 1, 2001 to
May 20, 2002. Doreen Danvers is the mother of Robert Danvers. None
of the selling stockholders is a broker-dealer or an affiliate of a
broker-dealer to our knowledge.
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be distributed from time to
time by the selling security holders in one or more transactions that
may take place on the over-the-counter or other markets. These
include ordinary broker transactions, privately-negotiated
transactions or through sales to one or more broker-dealers for resale
of these shares as principals, at market prices existing at the time
of sale, at prices related to existing market prices, through Rule 144
transactions or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by
the selling security holders in connection with sales of securities.
The selling security holders may sell the securities in one or
more of the following methods:
10
" in the "pink sheets" or in the over-the-counter market or on
such exchanges on which our shares may be listed from time-to-time;
" in transactions other than on such exchanges or in the over-
the-counter market, or a combination of such transactions, including
sales through brokers, acting as principal or agent, sales in
privately negotiated transactions, or dispositions for value by any
selling security holder to its partners or members, subject to rules
relating to sales by affiliates; or
" through the issuance of securities by issuers other than us,
convertible into, exchangeable for, or payable in our shares.
Any such transactions may be effected at market prices prevailing
at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices.
Although not expected, if the selling stockholders enter into an
agreement after effectiveness, to sell their shares to a broker-dealer
as principal and the broker-dealer is acting as an underwriter, then
Infotec will file a post-effective amendment to the registration
statement, of which this prospectus is a part, identifying the broker-
dealer, providing the required information on the plan of distribution
and revising the disclosure in the prospectus. In addition we will
also file such agreement as an exhibit to the registration statement.
In making sales, brokers or dealers used by the selling security
holders may arrange for other brokers or dealers to participate. The
selling security holders and others through whom such securities are
sold may be "underwriters" within the meaning of the Securities Act
for the securities offered, and any profits realized or commission
received may be considered underwriting compensation.
At the time a particular offer of the securities is made by or on
behalf of a selling security holder, to the extent required, a
prospectus is to be delivered. The prospectus will include the number
of shares of common stock being offered and the terms of the offering,
including the name or names of any underwriters, dealers or agents,
the purchase price paid by any underwriter for the shares of common
stock purchased from the selling security holder, and any discounts,
commissions or concessions allowed or reallowed or paid to dealers,
and the proposed selling price to the public. In the event that
shares of selling security holders listed in this prospectus are
transferred to other persons and parties by way of gift, devise,
pledge or other testamentary transfer, we will file a prospectus
supplement to identify the new selling security holders.
We have told the selling security holders that the anti-
manipulative rules under the Securities Exchange Act of 1934,
including Regulation M, may apply to their sales in the market. With
certain exceptions, Regulation M precludes any selling security
holders, any affiliated purchasers and any broker-dealer or other
person who participates in the distribution from bidding for or
purchasing, or attempting to induce any person to bid for or purchase
11
any security which is the subject of the distribution until the entire
distribution is complete. Regulation M also prohibits any bids or
purchase made in order to stabilize the price of a security in
connection with an at the market offering such as this offering. We
have provided each of the selling security holders with a copy of
these rules. We have also told the selling security holders of the
need for delivery of copies of this prospectus in connection with any
sale of securities that are registered by this prospectus. All of the
foregoing may affect the marketability of our common stock.
We are bearing all costs relating to the registration of the
common stock and will pay these costs from cash in priority to our
operating expenses. The selling stockholders, however, will pay any
commissions or other fees payable to brokers or dealers in connection
with any sale of the common stock.
Penny Stock Rules
We are subject to "penny stock" regulations under Rule 15g-9
under the Securities Exchange Act. We will remain subject to this
rules unless the trading price of our common stock is not less than
$5.00 per share. The penny stock rules require a broker-dealer,
prior to transaction in a penny stock not otherwise exempt from the
rules, to deliver a standardized risk disclosure document that
provides information about penny stocks and the nature and level of
risks in the penny stock market. The broker-dealer must also provide
the customer with current bid and offer quotations for the penny
stock, the compensation of the broker-dealer and its salesperson in
the transaction, and, if the broker-dealer is the sole market maker,
the broker-dealer must disclose this fact and the broker-dealer's
presumed control over the market, and monthly account statements
showing the market value of each penny stock held in the customer's
account. In addition, broker-dealers who sell these securities to
persons other than established customers and "accredited investors"
must make a special written determination that the penny stock is a
suitable investment for the purchaser and receive the purchaser's
written agreement to the transaction.
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LEGAL PROCEEDINGS
We are not currently a party to any material litigation, nor to
the knowledge of management, is there any material litigation
threatened or contemplated against us.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the names, positions and the ages
of our directors and executive officers. Directors are elected at our
annual meeting of stockholders and serve for a one year term or until
removed from office in accordance with our bylaws or their successors
are elected and qualify. Officers are appointed by the board of
directors and their terms of office are, except to the extent governed
by employment contract, at the direction of the board of directors.
Directors do not currently receive any compensation for their services
in acting as directors.
Director
Name Age Position Since
Robert Danvers 50 Chief Executive Officer, 2001
President and Director
Stephen Jackson 49 Secretary, Treasurer and Director 2002
Robert Danvers, our founder, has served as our President, Chief
Executive Officer, Secretary and Treasurer from August 30, 2001 to
November 1, 2001 and thereafter to date as a director, President and
Chief Executive Officer. Since 1982, Mr. Danvers has provided
business consulting services to development businesses and public
reporting companies principally in the field of financial management
and business information systems. For the preceding five years, Mr.
Danvers has served as President and a director of Danby Financial
Management Corp. and Danby Technologies Corporation. These businesses
operate respectively in the fields of financial management and
information systems consulting.
Mr. Robert Danvers may be considered a promoter within the
meaning of the federal securities laws.
Stephen Jackson has served as a director since April 12, 2002 and
our Secretary and Treasurer since May 20, 2002. Mr. Jackson has been
13
active in general consulting to business; private, corporate and
publicly reporting businesses since 1980, He is a past director of
the British Columbia Taxi Association. He served during 2000 through
2002 as a director and President, Secretary and Treasurer of Phoenix
Star Ventures, Inc. (formerly wowtown.com, Inc.), a Delaware reporting
company trading on the OTC Bulletin Board, involved at that time in
establishing an Internet based local resource guide. During the
period 1995 through 1997, Mr. Jackson served as Vice President
Investor Relations for Athabaska Gold Resources Ltd., a Canadian
reporting company involved in mineral exploration, then trading on the
Toronto Stock Exchange and Breckenridge Resources Ltd., a Canadian
reporting company involved in mineral exploration, then trading on the
Vancouver Stock Exchange. During 1998 and 1999 Mr. Jackson consulted
for the Vancouver International Airport Authority.
Officers of the company do not devote their full time and
attention to our affairs. We estimate that Mr. Danvers devotes over
80% of his time to our business and Mr. Jackson less than 10%. There
are no family relationships between any of our directors, executive
officers and/or directors, nominees therefore or significant
employees.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding our
common stock beneficially owned as of the date of this prospectus, by:
(i) each stockholder known by us to be the beneficial owner
of five (5%) percent or more of our outstanding common stock;
(ii) each of the our executive officers and directors; and
(iii)all executive officers and directors as a group.
As at July 31, 2003, there were 18,350,000 shares of our common
stock issued and outstanding.
Name and Address of Amount and Nature of Percent
Beneficial Owner (1) Beneficial Owner (2) of Class
Robert Danvers (3),(4),(5) 10,788,000 58.8%
Chantal Trudeau 1,967,200 10.7%
Simon Danvers 1,967,200 10.7%
Nicholas Danvers 1,967,200 10.7%
Danby Technologies Corporation 422,400 2.3%
14
Stephen Jackson 2,000 0.0%
All Executive Officers
and Directors as a group
(2 persons) 10,790,000 58.8%
_____________________
(1) Unless otherwise indicated the address of each of the listed
beneficial owners identified is 444 Columbia Street E, New
Westminster, BC V3L 3W9.
(2) Under securities law, a person is considered a "beneficial owner"
of a security if that person has or shares power to vote or direct the
voting of such security or the power to dispose of such security. A
person is also considered to be a beneficial owner of any securities
of which the person has a right to acquire beneficial ownership within
60 days.
(3) Includes 1,967,200 common shares held in the name of Chantal
Trudeau. Robert Danvers is the spouse of Chantal Trudeau. Each
disclaims beneficial ownership of the shares beneficially owned by the
other.
(4) Includes 3,934,400 common shares held in the name of Danby
Investment Corp., a British Columbia corporation on behalf of Simon
Danvers as to 1,967,200 common shares and Nicholas Danvers as to
1,967,200 common shares. Simon Danvers and Nicholas Danvers are the
minor children of Robert Danvers and Chantal Trudeau. Simon Danvers
and Nicholas Danvers shares are held in trust by Danby Investment
Corp. for their benefit. Robert Danvers is the President and sole
shareholder of Danby Investment Corp.. As trustee, Robert Danvers has
full direction and control of the shares held beneficially for Simon
Danvers and Nicholas Danvers.
(5) Includes 422,400 common shares held in the name of Danby
Technologies Corporation, a British Columbia corporation. Robert
Danvers is the President and sole shareholder of Danby Technologies
Corporation.
Change of Control
There are currently no arrangements known to us, which will or in
the future could, result in a change of control.
DESCRIPTION OF SECURITIES
General
The following description of our capital stock is a summary of
the material terms and is subject to and qualified in its entirety by
15
our articles of incorporation, our bylaws and Nevada Law. Our
authorized capital stock consists of 450,000,000 shares consisting of
two classes of stock as follows:
Common Stock
Our articles of incorporation authorize the issuance of
300,000,000 shares of common stock, par value $0.001. Each holder of
common stock is entitled to one vote for each share held on all
matters properly submitted to the stockholders for their vote.
Cumulative voting for the election of directors is not permitted by
the articles of incorporation.
Holders of outstanding shares of common stock are entitled to
such dividends as may be declared from time to time by the board of
directors out of legally available funds and, in the event of
liquidation, dissolution or winding up of the our affairs. In the
event that any of the aforementioned situations occur holders are
entitled to receive, ratably, our net assets available to stockholders
after distribution is made to the preferred stockholders, if any, who
are given preferred rights upon liquidation. Holders of outstanding
shares of common stock have no preemptive, conversion or redemptive
rights. To the extent that additional shares of our common stock are
issued, the relative interests of then existing stockholders may be
diluted.
As of the date of this prospectus, there were 18,350,000 shares
of our common stock issued and outstanding, held by approximately 100
holders of record.
Preferred Stock
Our articles of incorporation authorize the issuance of
150,000,000 shares of preferred stock, par value $0.001. Our board of
directors is authorized to issue the preferred stock from time to time
in series and is further authorized to establish such series, to fix
and determine the variations in the relative rights and preferences as
between series, to fix voting rights, if any, for each series, and to
allow for the conversion of preferred stock into common stock. No
preferred stock has been issued by us.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is
Interstate Transfer Company, 6084 South 900 East, Suite 101, Salt Lake
City, Utah 84121, and its telephone number is (801) 281-9746.
INTERESTS OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this prospectus as having prepared
or certified any part of this prospectus or having given an opinion
upon the validity of the securities being registered or upon other
legal matters in connection with the registration or offering of the
common stock was employed on a contingency basis, or had, or is to
16
receive, in connection with the offering, a substantial interest,
direct or indirect, in the registrant or any of its parents or
subsidiaries. Nor was any such person connected with the registrant
or any of its parents or subsidiaries as a promoter, managing or
principal underwriter, voting trustee, director, officer, or employee.
The financial statements included in this prospectus and
registration statement have been audited by Morgan & Company,
Chartered Accountants, to the extent and for the period set forth in
their report appearing elsewhere herein and in the registration
statement, and are included in reliance upon such report given upon
the authority of said firm as experts in auditing and accounting.
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES
Our directors and officers are indemnified as provided by the
Nevada Revised Statutes and our articles of incorporation and bylaws.
We have been advised that in the opinion of the Securities and
Exchange Commission indemnification for liabilities arising under the
Securities Act is against public policy as expressed in the Securities
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities is asserted by one of our
directors, officers, or controlling persons in connection with the
securities being registered, we will, unless in the opinion of our
legal counsel the matter has been settled by controlling precedent,
submit the question of whether such indemnification is against public
policy to a court of appropriate jurisdiction. We will then be gov-
erned by the court's decision.
ORGANIZATION WITHIN LAST FIVE YEARS
We were incorporated under the laws of the State of Nevada on
August 30, 2001, and are in the developmental stage. Effective
October 3, 2001, we entered into an agreement to acquire the prior
development, designs and pilot implementation of a virtual office
system from Danby Technologies Corporation in consideration for a
purchase price of $60,000 and a royalty on our net revenues from the
system or products or services which use the system. Royalties are
determined at the rate of 2% of net revenues until the amount paid or
payable aggregates $250,000 and thereafter, at the rate of 1%.
In May 2002, we issued Danby Technologies Corporation 7,080,000
common shares and a staff member 120,000 common shares in settlement
of the principal amount of $60,000 due under the terms of the purchase
agreement of October 3, 2001. Mr. Danvers, our President, Chief
Executive Officer and a director, beneficially owns Danby Technologies
Corporation. The virtual office system was one of Danby Technologies
Corporation's development projects. Mr. Danvers has been our sole
promotor since inception.
In October 2001, we organized a wholly-owned British Columbia,
Canada corporation to enable us to conduct our development and to
service the Canadian market after commercialization of our systems and
in April 2003, a wholly-owned Nevada corporation to develop and market
an event management system.
17
In February 2003, we filed a Form of Certificate Change to amend
our Certificate of Incorporation, to increase our authorized and
issued capital stock through a 1 to 6 forward split to 450,000,000
shares of capital stock authorized for issuance, consisting of
300,000,000 shares of common stock (par value $0.001) and 150,000,000
shares of blank check preferred stock.
DESCRIPTION OF BUSINESS
Business of Issuer
Our business plan is to develop and market systems, and related
products and services for remote access via the Internet to business
processes such as software applications, data and a firm's business
procedures and methods. We use the general term "virtual business
systems" to describe the systems we develop and market. We plan to
market our products and services principally to businesses in the U.S.
and Canada and to earn revenue from monthly services fees, usage and
transaction fees, and from consulting.
A virtual business system is essentially a network computer
system or server, similar to those found in most business offices,
which provide the business with software applications, security, net
work communications and a central data store. We use the term
"business processes" to describe the functions, methods or practices
undertaken by a firm to support its business, such as customer rela
tionship management, accounting, human resources, conference and
communication or some other specialized process, applicable only to
the firm itself.
The distinguishing or differing features of what we describe as
virtual business systems are their management, fee structures and user
accessibility. Instead of a firm purchasing computer hardware and
software, establishing and maintaining its own network computer
system, its business process or systems are maintained on our servers,
which are established, managed and ready for use. A virtual business
system is accessible via the Internet, rentable and expandable when
needed. Virtual business system customers share a network computer
system with other virtual business system customers. The virtual
business system is accessed securely by a firm's properly authorized
employees, advisors and customers (we refer to these as "users") via
the Internet, using an Internet browser from their computer
workstation. Our virtual business systems will generally not require
specialized software to be installed on the computer our customers use
to access our systems. We also refer to the term "online" in our
business description to indicate a service or business process that is
accessible via the Internet, 24 hours a day.
The provision of software applications online, either as an
application hosting service, ASP or a developer of specialized
business process applications, is gaining acceptance and a following
among business, and represents, we believe, a strong competitive model
to a firm establishing and maintaining their own software and systems.
We do not plan however to compete with hosting service bureaus or
develop products that directly compete with the major developers and
18
providers of online services. We will focus our marketing and
development activities toward niche markets. Our approach is to
provide superior security features and to manage all of a firm's
business processes within our virtual office. This enables a firm to
capture and maintain information centrally as it is created, have
interoperability between its business processes and have relevant
information available to authorized persons, in real time. We are
developing the productivity applications for our virtual office as
outlined below, to enable us to offer additional business
functionality in support of this model. Our approach is also to
focus on niche applications or business processes, suited to our
systems. In furtherance of this approach, we are in current
discussions with industry participants to provide input into our
development and to use and sell an event management application that
will operate within our system.
Products and Services
We have developed an online virtual business system that we refer
to as our virtual office, to provide business users with a fully
managed network computer system accessible via the Internet. We are
marketing our virtual office business system with the following
capabilities or functionality:
" e-mail, calendar, address book, to-do lists and reminders;
" group calendar and schedule;
" web site;
" data storage and access, document sharing, cut and paste;
" local printing;
" backup and security;
" run user applications ; and
" maintenance and upgrades,
both as an office environment for business and also as a platform for
businesses to operate their specialized business processes in support
of their own product offerings. Our virtual business system includes
the ability to offer enhanced security through digital certificates
and smartcards and our ability to provide customized development and
related services for secure online access and transactional
processing.
We are also marketing products and services for security and
access control of web sites and for implementing secure e-mail
communication. We offer our Internet security services as part of our
virtual business systems and separately, under the commguardT brand.
We provide digital certificates for encryption of e-mail
communications and also for digital credentials or signatures that
distinctly identify the sender or user. Our digital certificates can
also be used to secure online access and control for web sites and
Internet accessible systems or applications. Through our license with
CTEC Security Solutions Inc., a related company, we are currently
marketing products and services within the United States, under the
commguardT brand. As a licensee, we provide a full system for
enabling customers and their clients to use e-mail encryption and
digital signatures that includes: all components; service and support;
and systems to manage a customer's roll-out and ongoing maintenance of
19
digital identifications. The commguardT secure e-mail service is
billed as a monthly service fee.
Recent Developments
Since completing the development of the virtual office platform
in the beginning of 2003, we have undertaken activities in furtherance
of our business plan and to develop markets for our products and
services.
We introduced the company and our business plan to potential
funders and have actively pursued funding options during this period.
In June 2003, we completed a private placement of 100,000 units at
$4.00 per unit.
We introduced to potential customers and joint venture partners,
our virtual office system and platform and our management and
customization services, as a backbone for operating and managing
business processes on line, both as a virtual office and to run a
firm's specialized business process. Our discussions have assisted us
in identifying potential opportunities for running and operating
online security and access control systems and specialized process
such as those for managing events online. In April 2003, we
incorporated Eventec Inc., as a wholly owned subsidiary, to facilitate
the development and marketing of an event management system in
conjunction with industry partners. We are currently in discussions
with two vendors to utilize our virtual business system as a base for
managing and offering their specialized services online. We have
however, no commitments from vendors to use our virtual business
system or our proposed virtual business system for managing events or
any other business processes online.
We undertook a review of our systems' access and security
controls and, to enhance our security model. We have undertaken a
program to incorporate digital identifications and smartcards in our
systems. Digital identifications and smartcards provide a high level
of assurance and security to protect from unauthorized access, and
from identity spoofing. In May 2003, we entered into a licensing
agreement with CTEC Security Solutions Inc., a related company, to
sell their commguardT branded access and security control products and
services in the United States. Through our license with CTEC, we have
a source of supply for our smartcards and smartcard readers at
competitive market rates. Since that time, and in conjunction with
CTEC, we have among other things:
- - developed and printed brochures targeted to the accounting,
legal, financial and investment management professions;
- - developed an operational Certification Authority for the
issuance of digital certificates, as an application that runs within
our business systems;
- - developed initial policies and practices documentation for
the operation of the Certificate Authority and the issuance of digital
certificates; and
- - introduced commguard e-mail communication security system to
potential customers within the legal and accounting communities.
20
We have also continued our development of the productivity
applications modules and a have undertaken a plan for the
incorporation of digital identifications and smartcards into our
virtual business systems.
Our current objective is to accelerate our marketing efforts for
our virtual business system and our e-mail communication security
product, to develop business relationships and opportunities and to
sell our products and services to customers. In addition, we also
plan to complete development of our productivity applications and an
event management system as is more fully described below.
Development Plans
Our business plan calls for ongoing expenditures for product
development and for the development of custom applications for our
virtual business systems. We also plan to undertake ongoing
development to support and enhance our product and service offerings.
The following outlines two products or applications, designed to run
in conjunction with the virtual office, which are the principal focus
of our current development plan.
(a) Productivity Applications
Planned as an integrated application which runs in
conjunction with the virtual office or virtual business system to
provide the following integrated business process functionality:
- - client and contact management;
- - document and resource management;
- - task and project management; and
- - time, expense tracking and billing.
We have completed various initial prototypes of the
productivity applications and are currently engaged in
completing a commercial implementation of the productivity
applications.
(b) Event Management Application
This application is planned to address the need for
online event management, which would include online customer
ordering, a web presence, ticket, data management and commu
nication functions. The application is planned to integrate
with our virtual business system or alternatively, be operated
as a stand alone online business system. We are currently in
the process of completing our development designs and plans for
the implementation of this event management application.
We have set forth estimates of the costs and time frame to
complete the elements of our development plan under the section titled
Management's Discussion and Analysis or Plan of Operation.
21
Systems
Our virtual business systems are composed of three components, or
layers, which we describe as the hardware and operating system layer,
the middleware layer and the business processes layer. We purchase or
subscribe for operating system and middleware software licenses.
Operating system and middleware software is priced per server with
additional fees for each user. We are able to acquire these licenses
readily without lead time, in the normal course of our business. We
develop and implement our online systems in what we term the business
processes layer. There are no additional licensing fees or charges
applicable to our own development. Our planned internal management
information system will also be implemented in this layer, to provide
real-time information on the status of client orders and system usage
and to provide automated billing and accounting. Our systems are
currently installed on Danby Technologies' servers as part of our
services engagement. As part of our current upgrade plan, we expect
to acquire some server hardware and software licenses and upgrade our
system security.
Intellectual Property
We currently market our products as the "Infotec Business
System" and "Infotec Virtual Office System" although we have not yet
applied for such a registered trademark and there is no assurances
that such mark would be available that we would be granted such mark.
We have obtained the right to use the Internet domain names
www.infotecbusinesssystem.com, infotecbusinessstrategies.com and
infoteconlineoffice.com. We do not have and cannot acquire any
property rights in an Internet address.
To protect our rights to intellectual property, we will rely on a
combination of trademark, copyright law, trade secret protection, and
confidentially agreements although we do not have confidentiality
agreements signed in every instance.
Our products and services incorporate some commercial computer
software and intellectual property owned by others, for which we are
required to pay licensing fees.
Competition
We will compete with numerous providers of online or Internet
accessible business applications and services companies, many of which
have far greater financial and other resources than we do. Many of
these companies have established histories and relationships in
providing online applications or systems that enable them to attract
talent, marketing support, the interest of decision makers and
financing. Moreover, proven track records are of paramount
consideration in selecting vendors.
We plan to compete, through the development of an integrated,
fully managed virtual office, as well as through a focus on
specialized business service opportunities. We also plan to market
22
our products and services through channel partners and resellers.
While our management team has significant business experience,
we, as a company, have no proven track record in the online services
industry. We can provide no assurance that we will be able to
successfully market our systems or compete within this industry.
Government Regulations
Due to the increasing popularity and use of the Internet, it is
possible that a number of laws and regulations may be adopted with
respect to the Internet generally, covering issues such as user
privacy, pricing, and characteristics and quality of products and
services. Similarly, the growth and development of the market for
Internet commerce may prompt calls for more stringent consumer
protection laws that may impose additional burdens on those companies
conducting business over the Internet. The adoption of any such laws
or regulations may decrease the growth of commerce over the Internet,
increase our cost of doing business or otherwise have a harmful effect
on our business.
Currently, governmental regulations have not materially
restricted the use or expansion of the Internet. However, the legal
and regulatory environment that pertains to the Internet is uncertain
and may change. New and existing laws may cover issues that include:
* Sales and other taxes;
* User privacy;
* Pricing controls;
* Characteristics and quality of products and services;
* Consumer protection;
* Cross-border commerce;
* Libel and defamation;
* Copyright, trademark and patent infringement; and
* Other claims based on the nature and content of Internet
materials.
These new laws may impact our ability to develop and market our
virtual business systems in accordance with our business plan.
23
We may have to qualify some of our products and services to do
business in other jurisdictions. If we commence revenue activities,
we anticipate that our sales and our customers will be in multiple
states and foreign countries. As our customers may be resident in
such states and foreign countries, such jurisdictions may claim that
we are required to qualify to do business as a foreign company in each
such state and foreign country. Failure to qualify as a foreign
company in a jurisdiction where required, could subject us to fines,
penalties or other prosecutions.
Research and Development Expenditures
We have spent $88,308 on expenses associated with the acquisition
of prior development costs and our development activities since
inception. We plan to expend in the next 12 month period
approximately $62,000 on expenses associated with the development of
our proposed products and services.
We expect to continue to develop our virtual business systems and
expect to devote a significant proportion of our revenues and capital
funds to developing enhancements to our systems and to maintaining our
competitive positioning.
Environmental Regulations
We are not aware of any environmental laws that will be
applicable to the operation of our business.
Employees
We currently have no full-time employees; we have one full time
contractor and we engage three part-time contractors. Mr. Robert
Danvers, our President and Chief Executive Officer is a full time
contractor. Danby Technologies provides two of our part-time contract
positions. CTEC provides our additional part-time contractor. As
prospects and circumstances warrant, we will engage additional full-
time and part-time employees, as well as consultants, to perform
required services.
PLAN OF OPERATION
Other than historical and factual statements, the matters and
items discussed in this prospectus on Form SB-2 are forward-looking
statements that involve risks and uncertainties. Actual results of
the company may differ materially from the results discussed in the
forward-looking statements. Certain factors that could contribute to
such differences are discussed with the forward-looking statements
throughout this report.
The following discussion should be read together with the
information contained in the financial statements and related notes
included elsewhere in this prospectus.
24
General
Our discussion and analysis of our financial condition and
results of operations are based upon our consolidated financial
statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation
of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate these estimates,
including those related to software development expenses, financing
operations and contingencies and litigation. We base these estimates
on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under
different assumptions or conditions.
Financial Reporting Release No. 60, which was recently released
by the SEC, requires all companies to include a discussion of critical
accounting policies or methods used in the preparation of financial
statements. Note 2 to our consolidated financial statements includes
a summary of the significant accounting policies and methods used in
the preparation of our financial statements. We believe that the
following critical accounting policies affect our more significant
judgments and estimates used in the preparation of our consolidated
financial statements.
Software development costs are expensed as incurred unless the
development project meets the criteria under United States generally
accepted accounting principles for capitalization. Capitalization of
software development costs begins upon the establishment of
technological feasibility and ceases when the product is available for
general release. The company has no capitalized software development
costs at April 30, 2003.
Operation Development and Plan
We are a development stage company. We have undertaken initial
marketing of our products and services, however, we have not as yet
engaged in revenue producing activities. Our business plan is to
develop and commercialize systems that provide remote access to
business processes via the Internet. We plan to market our products
and service to businesses in the U.S. and Canada and to earn revenue
from monthly service fees, usage and transaction fees and from
consulting. In furtherance of our business plan, we have undertaken
the following since our incorporation in August 2001 (For a more
detailed discussion of our recent activities, please refer to "Recent
Developments" in the section "Description of Business"):
We acquired the prior development, designs and pilot
implementation of the virtual office system in October 2001 from Danby
Technologies Corporation, a company owned by Robert Danvers. Danby
Technologies developed the original design and implementation
methodology for the virtual office and a pilot or test implementation
of the virtual office over the period of approximately two years from
the Fall of 1999 through to our acquisition in October, 2001.
25
In October 2001, we organized a wholly-owned British Columbia,
Canada corporation to enable us to conduct our development and to
service the Canadian market after commercialization of our virtual
office system and engaged Danby Technologies Corporation to provide
office space and an Internet accessible server-based system for us to
continue development and testing. The pilot of the virtual office is
installed on Danby Technologies' servers.
Since the October 2001 acquisition, we continued to progress our
development plan focusing on additional testing of the pilot
implementation in a live business environment with multiple users and
the development of updated designs for a commercial version of the
virtual office system. Since the commencement of the fiscal year
ended April 30, 2003, we upgraded our pilot system to incorporate new
software and our updated designs and have undertaken internal testing
with related parties. This work provided us with a stable
infrastructure for the virtual office and better segregation and
privacy of our customers' data and business operations. We also
continued development of our productivity applications using alternate
approaches for implementing our designs.
In April 2003, we organized a wholly-owned Nevada corporation to
develop and market our planned event management system.
In May 2003, we entered into an agreement with CTEC Security
Solutions Inc., a company of which Mr. Danvers is a director, officer
and minority shareholder, and its subsidiary CommGuard Inc., to
license their business applications and products and services related
to online access and Internet communication security, for sale within
the United States.
Our current plan of operations includes an expanded marketing
effort as well as our product development activities. Our objective
is to successfully market our existing products and services and to
complete development of additional products and services which will
meet and address a business need.
Marketing
During the early phase of our plan, we expect to continue to
develop awareness of our virtual business system as a platform for the
deployment of business applications over the Internet through direct
contact, trades conferences and online. We have currently identified
opportunities with security monitoring and access control firms and
firms who manage events. We will actively pursue these opportunities
as well as developing customer and channel relationships and new sales
opportunities. We are in the process of developing our web site and
additional marketing materials for the virtual business system. We
expect input from our discussions with potential customers and channel
partners to assist us in directing our marketing efforts.
We will also continue introduction of our e-mail communication
security services and the development of brand and product awareness.
We have identified the accounting, legal and the financial professions
as initial focuses of our marketing of this product. We intend to
develop business relationships and channel partnerships as well as
26
develop relationships with industry associations and professional
bodies. In conjunction with CTEC, we have plans to attend two
conferences where we will have the opportunity to show the commguardT
products and services to the legal community in Canada.
We currently have insufficient staff to undertake all aspects of
our marketing efforts. We expect to hire or engage marketing and
sales consultants and to additionally seek opportunities for marketing
through channel partners and resellers. We expect to add one service
and support technician as our support and service obligations
increase.
Development
We plan to accelerate our current development activities and to
maintain a strong development focus to support our business
opportunities. Our current development plans include:
(i) complete development of the productivity applications;
and
(ii) complete designs and implementation for the event
management system.
The productivity application is designed for use with the virtual
office to provide a unified base for contact, task, communication, and
resource and document management. We estimate that this application
will be available for customer testing and input in our second
quarter.
The event management system is designed around the needs of
operators of events and will include online ticket and merchandise
sales, provide the firm with Internet access to manage and view
information and update their offerings. We are in the design stage of
this application and expect to proceed to development activities in
the second quarter and to testing and operating our implementation in
the third quarter. Progress in development of this application is
dependant on our completing discussions with industry participants who
can provide input into our designs and assist with introducing the
system to potential customers.
In addition we plan to maintain an ongoing development program
that will continue enhancing and upgrading our systems, developing new
products and services and providing support for our product and
service offerings. Our development staff are also responsible for our
system operation and maintenance responsibilities and for providing
our custom development services. We have budgeted approximately
$62,000 for our development activities over the next six month period
and $20,000 for computer equipment and software. Further additions to
our budget are dependant on the receipt of adequate additional
funding.
To accomplish our development objectives, we will need to hire
additional employees or contractors. Our current plan is to rely on
increasing our three part-time technical consultants' work hours,
which we believe will be satisfactory to accomplish our development
through the end of the second quarter. We believe we can engage
additional consultants and subcontract development staff with the
required skills, as they may be needed.
27
Results of Operations
We have not yet engaged in any revenue-producing activities, nor
are we a party to any binding agreements that will generate revenues.
For the period from incorporation, August 30, 2001 through April 30,
2003, we incurred a deficit of $172,675. Our principal areas of
expenditure during the period were for development costs of $88,308,
rent and occupancy costs of $28,500, system rental of $28,308 and
professional fees of $16,209.
For the year ended April 30, 2003, we incurred a net loss of
$80,237. Our principal areas of expenditure during the year ended
April 30, 2003 were for occupancy costs of $18,000, system rental of
$18,000, development costs of $18,000 and professional fees of
$16,209. Professional fees and office and miscellaneous expenses were
higher due to our increased general operation activities and the costs
of professional assistance with our regulatory filings. Occupancy,
system rental and technical subcontract costs increased, reflecting a
twelve month inclusion for the year compared to the seven month
inclusion in the prior year.
Liquidity and Capital Resources
As of April 30, 2003, we had an accumulated deficit of $172,675
and cash in the bank of $3,818. We had a working capital deficit at
April 30, 2003 of $45,675. The deficit was funded during the period
from incorporation through April 30, 2003 principally by proceeds from
the issuance of common shares of $67,000, conversion of indebtedness
to common shares of $60,000 and accounts payable, and amounts from
related parties of $47,708.
For the year ended April 30, 2003, net cash used in operating
activities was $58,248, which primarily resulted from the net loss of
$80,237 combined with changes in working capital amounts. Net cash
provided by investing activities was $60,000 resulting from net
proceeds from sales of our investments. Non-cash conversion of
indebtedness to common shares was $60,000.
We have incurred net losses each year since inception and have
relied on the sale of our stock from time to time and terms from
related suppliers to fund our operations. In October 2001, we com
pleted a sale of 12,600,000 of our common shares for net proceeds of
$7,000. In May 2002, we completed the conversion of $60,000 of debt
into 7,200,000 shares of our common stock and completed the sale of
7,200,000 shares of our common stock through a private placement, with
net proceeds of $60,000. Furthermore, in June 2003 we completed the
sale of an additional 100,000 shares of our common stock with net
proceeds of $400,000, for a total of $527,000 of funding since
inception.
Management believes that our working capital will be sufficient
to sustain our current planned operations for a period of twelve
months and, while management believes that sales and ultimately
profitable operations, can be attained in the future, there is no
assurance that sales will be made or that if made, they will be of a
28
level required to generate profitable operations to provide positive
cash flow. Management has a desire to expand our planned marketing
and development activities during this period to more fully exploit
market opportunities. Expanding our marketing and development activi
ties would require additional funding. We are unable to predict at
this time the exact amount of any additional working capital we will
require to fund the implementation of our business plan and achieve
cash flow sufficient to sustain operations and achieve profitability.
We may receive additional capital from the exercise of share purchase
warrants or, alternatively, we may seek additional capital in the
private and/or public equity markets through the sale of equity or
debt securities, or through the issuance of debt instruments. If we
receive additional funds through the issuance of equity securities,
however, our existing stockholders may experience significant
dilution. If we issue new securities, they may contain certain
rights, preferences or privileges that are senior to those of our
common stock. Moreover, we may not be successful in obtaining
additional financing when needed or on terms favorable to our
stockholders. As we have no commitments from any third parties to
provide additional equity or debt funding, we cannot provide any
assurance that we will be successful in attaining such additional
funding.
We have commenced initial marketing of our products and services,
however, we have not yet generated any revenues, nor are we a party to
any binding agreements that will generate revenues. Due to our lack
of revenue-production to date, and our lack of contractual commitments
to generate revenue, there is no basis at this time for investors to
make an informed determination as to the prospects for our future
success. For this reason and, as we have not achieved profitable
operations and require additional capital to achieve our objectives,
our auditors have included in their report covering our financial
statements for the period from incorporation to April 30, 2003, that
there is substantial doubt about our ability to continue as a going
concern.
Product Research and Development
We anticipate spending $62,000 over the next twelve month period
for product development to: complete development of productivity
applications and event management system; and complete our
infrastructure development and incorporation of digital certificates
and smartcards in our products and services.
Property or Plant
To complete our infrastructure for commercial operations, we
estimate software licensing costs and the cost for equipment and
related expenses will be approximately $20,000. With adequate addi
tional funding, we would increase this budget by $60,000.
Except as noted above, we do not expect to purchase or sell plant
and significant equipment in the next twelve months.
Employment
We expect our operations to grow to four employees and
contractors from our current level of one full-time and three part-
time contractors. The number and positions of any new employees and
contractors will be determined by additional funding, if obtained.
29
DESCRIPTION OF PROPERTY
We do not own or lease any real property. Our principal
executive offices and our subsidiary's development facilities are
located in property leased by Danby Technologies Corporation, a
company controlled by Mr. Robert Danvers, our President and a
director. These offices are located at 444 Columbia Street E., New
Westminster, B.C. V3L 3W9. We pay $1,500 per month for our office
rent at this location under a month to month agreement, renewable
automatically unless cancelled by either party on 30 days written
notice.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as set forth below, there have been no material
transactions, series of similar transactions, currently proposed
transactions, or series of similar transactions, to which we are or
will be a party, in which the amount involved exceeded $60,000 and in
which any of our directors or executive officers, any security holder
who is known by us to own of record or beneficially more than five per
cent of our common stock, any promoter, or any member of the immediate
family of any of the foregoing persons, had a material interest.
Mr. Robert Danvers may be considered a promoter within the
meaning of the federal securities laws.
During the period from August 30, 2001 (inception), through April 30,
2003:
We acquired from Danby Technologies Corporation, a company
owned and controlled by Robert Danvers, the prior
development, designs and implementations for a virtual office
system for the reimbursement of $60,000 of Danby Technologies
Corporation's prior out of pocket development expenses and a
royalty on future sales of 2%, to an aggregate $250,000 and
thereafter at the rate of 1% of net revenues.
We issued 12,600,000 common shares in a private transaction
to Mr. Robert Danvers, Mr. Danvers spouse, Chantal Trudeau
and their minor children Nicholas and Simon Danvers for an
aggregate consideration of $7,000.
On October 3, 2001 we engaged Danby Technologies Corporation
to provide office premises on a month to month basis at the
rate of $1,500 per month and further to provide us with a
shared internet enabled network system for deploying and
testing our development and the professional staff to
maintain the implementation and undertake development at the
rate of $3,000 per month. In the period from incorporation
to April 30, 2002, we incurred total fees of $85,116 of which
the outstanding balance was $46,565 at April 30, 2003.
We issued 7,080,000 common shares to Danby Technologies
Corporation and 120,000 to a member of their staff in
settlement of the principal amount of $60,000 due Danby
30
Technologies Corporation under the October 3, 2001 purchase
agreement.
Subsequent to April 30, 2003:
We entered into a licensing agreement with CTEC Security
Solutions Inc., a company with directors in common, to enable
us to incorporate private key infrastructure security into
our online systems. The licensing agreement is for a three
year period and allows us to sell commguardT branded products
and services in the United States for a royalty of 10% of the
net sales revenues derived from these products, to an
aggregate $7.5 million and 7.5% thereafter.
At this time we have not formulated any corporate policies
for entering into transactions with affiliated parties.
Members of our management team are not employed by us on a full-
time basis. They are involved in other business activities and may,
in the future become involved in other businesses. If a specific
business opportunity becomes available, such persons may face a
conflict in selecting between our business and their other business
interests. We do not have and do not intend in the future to
formulate a policy for the resolution of such conflicts. We currently
have no agreements with members of our management team.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Infotec's common stock is traded over-the-counter on the OTC
Electronic Bulletin Board under the symbol "IFOB". The following
table sets forth the high and the low bid quotations for the common
stock for the period from inception of trading in February 2003
through April 30, 2003. The closing bid on June 30, 2003 is also
shown. These quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commissions and may not represent actual
transactions.
Period High Low
4th Quarter
February 4, 2003 - April 30, 2003 $2.50 $0.01
On July 31, 2003, the closing bid price for the common stock was $5.50
Holders of Our Common Stock
As of the date of this registration statement, we had
approximately one hundred (100) registered stockholders.
31
Rule 144 Shares
At the date of this prospectus, we have 18,350,000 shares of
common stock outstanding, not included 125,000 shares reserved for
issuance upon exercise of warrants which have been issued and remain
outstanding. A total of 11,150,000 shares of our common stock will be
available for resale to the public at various dates between October 6,
2003 and June 16, 2004 in accordance with the volume and trading
limitations of Rule 144 of the Act. In general, under Rule 144 as
currently in effect, a person who has beneficially owned shares of a
company's common stock for at least one year is entitled to sell
within any three month period a number of shares that does not exceed
the greater of:
1. 1% of the number of shares of our common stock then
outstanding which, in our case, will equal approximately 183,500
shares as of the date of this prospectus; or
2. the average weekly trading volume of our common stock during
the four calendar weeks preceding the filing of a notice on form 144
with respect to the sale.
Sales under Rule 144 are also subject to manner of sale
provisions and notice requirements and to the availability of current
public information about us.
Under Rule 144(k), a person who is not one of our affiliates at
any time during the three months preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least 2
years, is entitled to sell shares without complying with the manner of
sale, public information, volume limitation or notice provisions of
Rule 144.
As of the date of this prospectus, persons who are our affiliates
hold 10,800,000 shares that may be sold pursuant to Rule 144 after
October 6, 2003, April 12, 2004 and May 13, 2004.
Stock Option Grants
To date, we have not granted any stock options.
Registration Rights
We have not granted registration rights to the selling
stockholders or to any other persons.
32
Dividends
There are no restrictions in our articles of incorporation or
bylaws that prevent us from declaring dividends. The Nevada Revised
Statutes, however, do prohibit us from declaring dividends where,
after giving effect to the distribution of the dividend:
1. we would not be able to pay our debts as they become due in
the usual course of business; or
2.our total assets would be less than the sum of our total
liabilities plus the amount that would be needed to satisfy
the rights of stockholders who have preferential rights
superior to those receiving the distribution.
We have not declared any dividends, and we do not plan to
declare any dividends in the foreseeable future.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information relating to all
compensation awarded to, earned by or paid by us during the period
from August 30, 2003 (inception) through April 30, 2003 to: (a) all
individuals, serving as our Chief Executive Officer in the fiscal year
ended April 30, 2003; and (b) each of our executive officers who
earned more than $100,000 during the fiscal year ended April 30, 2003:
Other Securities
Annual Underlying All
Name and Fiscal Compen- Options/ LTIP Other
Principal PositionYearSalary Bonus sation SARs (#)PayoutsCompensation
Robert Danvers 2003 - - - - - -
President, CEO2002 - - - - - -
Effective May 2003, the company has approved a fee of $5,000 per
month to Danby Financial Management Corp., a company controlled by Mr.
Danvers, our President, for services rendered by Mr. Danvers.
Option Grants in Last Fiscal Year
33
We did not grant any stock options to the executive officers
during our most recent fiscal year ended April 30, 2003. We have also
not granted any stock options to executive officers since April 30,
2003.
Compensation of Directors
There are no standard arrangements pursuant to which directors
are compensated for any services provided as director. No additional
amounts are payable to directors for committee participation or
special assignments performed for and on our behalf through to April
30, 2003.
Employment Contracts and Termination of Employment
and Change-in-Control Arrangements
There are no employment contracts, compensatory plans or
arrangements, including payments to be received from us, with respect
to any of our directors or executive officers which would in any way
result in payments to any such person because of his or her
resignation, retirement or other termination of employment with us,
any change in control of us, or a change in the person's
responsibilities following such a change in control.
AVAILABLE INFORMATION
Availability of Additional Information
We have filed a registration statement on form SB-2 under the
Securities Act of 1933 with the Securities and Exchange Commission
with respect to the shares of our common stock offered through this
prospectus. This prospectus is filed as a part of that registration
statement and does not contain all of the information contained in the
registration statement and exhibits. Statements contained in the
registration statement are summaries of the material terms of the
referenced contracts, agreements or documents and are not necessarily
complete. In each instance, we refer you to the copy of the contracts
or other documents filed as exhibits to this registration statement,
and the statements we have made in this prospectus are qualified in
their entirety by reference to the referenced contracts, agreements or
documents.
The registration statement, including all exhibits, may be
inspected without charge at the SEC's Public Reference Room at 450
Fifth Street, N.W. Washington, D.C. 20549. Copies of these materials
may also be obtained from the SEC's Public Reference at 450 Fifth
Street, N.W., Room 1024, Washington D.C. 20549, upon the payment of
prescribed fees. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330.
The registration statement, including all exhibits, has been
filed with the SEC through the Electronic Data Gathering, Analysis and
34
Retrieval system. Following the effective date of the registration
statement, we will become subject to the reporting requirements of the
Exchange Act and in accordance with these requirements, will file
annual, quarterly and special reports, and other information with the
SEC. We also intend to furnish our stockholders with annual reports
containing audited financial statements and other periodic reports as
we think appropriate or as may be required by law. This registration
statement and other filings made by us with the SEC through its
Electronic Data Gathering, Analysis and Retrieval Systems are publicly
available through the SEC's site on the World Wide Web located at
http//www.sec.gov.
REPORTS TO SECURITY HOLDERS
We will voluntarily send a report annually to stockholders
including our annual audited financial statements.
35
FINANCIAL STATEMENTS
Page
Annual Audited Financial Statements
Independent Auditors' Report F-2
Consolidated Financial Statements
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Cash Flows F-5
Consolidated Statement of Stockholders' Deficiency F-6
Notes to the Consolidated Financial Statements F-7 - F-11
F-1
INFOTEC BUSINESS SYSTEMS, INC.
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2003 AND 2002
(Stated in U.S. Dollars)
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Infotec Business Systems, Inc.
(A development stage company)
We have audited the consolidated balance sheets of Infotec Business
Systems, Inc. (a development stage company) as at April 30, 2003 and 2002,
and the consolidated statements of operations, cash flows, and
stockholders' deficiency for the year ended April 30, 2003, and for the
period from August 30, 2001 (date of inception) to April 30, 2002. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform an
audit to obtain reasonable assurance 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, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at April
30, 2003 and 2002, and the results of its operations and cash flows for the
year ended April 30, 2003, and for the period from August 30, 2001 (date of
inception) to April 30, 2002 in conformity with United States generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed
in Note 1(c) to the financial statements, the Company incurred a net loss
of $172,675 since inception, has not attained profitable operations and is
dependent upon obtaining adequate financing to fulfil its development
activities. These factors raise substantial doubt that the Company will be
able to continue as a going concern. Management's plans in regard to these
matters are also discussed in Note 1(c). These consolidated financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
Vancouver, B.C. "Morgan & Company"
June 24, 2003 Chartered Accountants
INFOTEC BUSINESS SYSTEMS, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(Stated in U.S. Dollars)
APRIL 30
2003 2002
----------------
ASSETS
Current
Cash $ 3,818 $ 2,066
Amounts receivable 757 2,094
Prepaid expenses - 633
-----------------
$ 4,575 $ 4,793
=================
LIABILITIES
Current
Accounts payable - related company $ 47,708 $ 90,227
Accounts payable - other 2,542 4
------------------
50,250 90,231
------------------
STOCKHOLDERS' DEFICIENCY
Capital Stock (Note 3)
Authorized:
300,000,000 common shares, par value $0.001
per share
150,000,000 preferred shares, par value
$0.001 per share
Issued and outstanding:
27,000,000 common shares at April 30, 2003
and
12,600,000 common shares at April 30, 2002 27,000 12,600
Additional paid-in capital 100,000 (5,600)
Deficit Accumulated During The Development (172,675) (92,439)
Stage ------------------
(45,675) (85,438)
------------------
$ 4,575 $ 4,793
=================================================================
Nature Of Operations (Note 1)
INFOTEC BUSINESS SYSTEMS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in U.S. Dollars)
PERIOD PERIOD
FROM FROM
DATE OF DATE OF
INCEPTION INCEPTION
YEAR AUGUST 30 AUGUST 30
ENDED 2001 TO 2001 TO
APRIL 30 APRIL 30 APRIL 30
2003 2002 2003
----------------------------------
Expenses
Office and miscellaneous $ 10,028 $ 1,322 $ 11,350
Professional fees 16,209 - 16,209
Rent and occupancy 18,000 10,500 28,500
Equipment rental 18,000 10,308 28,308
Software development costs 18,000 70,308 88,308
---------------------------------
Loss For The Period $ (80,237) $ (92,438) $ (172,675)
=================================================================
Basic And Diluted Loss Per $ (0.01) $ (0.01)
Share
=========================================================
Weighted Average Number Of
Shares Outstanding 26,506,849 10,474,074
=========================================================
INFOTEC BUSINESS SYSTEMS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in U.S. Dollars)
PERIOD PERIOD
FROM FROM
DATE OF DATE OF
INCEPTION INCEPTION
YEAR AUGUST 30 AUGUST 30
ENDED 2001 TO 2001 TO
APRIL APRIL 30 APRIL 30
30
2003 2002 2003
------------------------------
Cash Flows From Operating
Activities
Loss for the period $(80,237) $(92,438) $ (172,675)
Changes in non-cash working
capital balances related to
operations:
Prepaid expenses 633 (633) -
Amounts receivable 1,337 (2,094) (757)
Accounts payable-related company 17,481 90,227 107,708
Accounts payable - other 2,538 4 2,542
------------------------------
(58,248) (4,934) (63,182)
------------------------------
Cash Flows From Financing
Activity
Issuance of share capital 60,000 7,000 67,000
------------------------------
Increase In Cash During The Year 1,752 2,066 3,818
Cash, Beginning Of Year 2,066 - -
------------------------------
Cash, End Of Year $ 3,818 $ 2,066 $ 3,818
==============================
Supplementary Non-Cash Financing
Activity
Shares issued for settlement of
accounts payable $ 60,000 $ - $ 60,000
==============================
INFOTEC BUSINESS SYSTEMS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
APRIL 30, 2003
(Stated in U.S. Dollars)
COMMON STOCK DEFICIT
------------------------- ACCUMULATED
ADDITIONAL DURING THE
PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
-----------------------------------------------
October, 2002 -
Issued for cash 2100000 $ 2,100 $4,900 $ - $ 7,000
Net loss for the - - - (92,438) (92,438)
period ------------------------------------------------
Balance, April 30, 2100000 2,100 4,900 (92,438) (85,438)
2002
May, 2002 - Issued
for settlement of
accounts payable 1,200,000 1,200 58,800 - 60,000
May, 2002 - Issued 1,200,000 1,200 58,800 - 60,000
for cash
February, 2003 -
Forward stock split 22,500,000 22,500 (22,500) - -
(1:6)
Net loss for the - - - (80,237) (80,237)
period -----------------------------------------------
Balance, April 30, 27,000,000 27,000 $100,000 $(172,675)$(45,675)
2003 ===============================================
INFOTEC BUSINESS SYSTEMS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2003 AND 2002
(Stated in U.S. Dollars)
1.NATURE OF OPERATIONS
a)Organization
The Company was incorporated in the State of Nevada, U.S.A. on August
30, 2001. The Company's wholly owned subsidiaries Infotec Business
Strategies, Inc. was incorporated under the laws of the Province of
British Columbia on October 1, 2001 and Eventec Inc. was incorporated
under the laws of Nevada on April 25, 2003. On February 28, 2003, the
Board of Directors authorized a 1:6 forward stock split of the
Company's $0.001 par value common shares and its $0.001 par value
preferred shares. As a result of the split, 22,500,000 additional
common shares were issued and additional paid-in capital was reduced
by $22,500. All references in the accompanying financial statements
to the number of common and preferred shares and per-share amounts for
2002 have been restated to reflect the stock split.
b)Development Stage Activities
The Company is engaged in the development of internet accessible
("online") systems for conducting business processes in real time.
The development is currently focused on a "virtual office" system for
small and medium businesses which provides remote users with access
via a web browser to their software applications, corporate data
storage and integrated business applications for contact management,
time and project management, and client management.
The Company is in the development stage; therefore, recovery of its
assets is dependent upon future events, the outcome of which is
indeterminable. In addition, successful completion of Infotec
Business Systems, Inc.'s development program and its transition,
ultimately to the attainment of profitable operations is dependent
upon obtaining adequate financing to fulfil its development activities
and achieve a level of sales adequate to support its cost structure.
c)Going Concern
The Company will need additional working capital to be successful in
its planned development activities and to service its current
liabilities for the coming year, and, therefore, continuation of the
Company as a going concern is dependent upon obtaining the additional
working capital necessary to accomplish its objective. Management has
developed a strategy, which it believes will accomplish this
objective, and is presently engaged in seeking various sources of
additional working capital including equity funding through a private
placement and long term financing.
INFOTEC BUSINESS SYSTEMS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2003 AND 2002
(Stated in U.S. Dollars)
2.SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of the Company has been prepared
in accordance with generally accepted accounting principles in the
United States. Because a precise determination of many assets and
liabilities is dependent upon future events, the preparation of
consolidated financial statements for a period necessarily involves the
use of estimates which have been made using careful judgement.
The consolidated financial statements have, in management's opinion,
been properly prepared within reasonable limits of materiality, and
within the framework of the significant accounting policies summarized
below:
a)Consolidation
These consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, Infotec Business
Strategies, Inc. and Eventec Inc.
b)Software Development Costs
Software development costs are charged to expense as incurred unless
the development project meets the criteria under United States
generally accepted accounting principles for capitalization.
Capitalization of software development costs begins upon the
establishment of technological feasibility and ceases when the product
is available for general release. The Company has no capitalized
software development costs at April 30, 2003.
c)Development Stage Company
The Company is a development stage company as defined in the
Statements of Financial Accounting Standards No. 7. The Company is
devoting substantially all of its present efforts to establish a new
business and none of its planned principal operations have commenced.
All losses accumulated since inception have been considered as part of
the Company's development stage activities.
d)Income Taxes
The Company has adopted Statement of Financial Accounting Standards
No. 109 - "Accounting For Income Taxes" (SFAS 109). This standard
requires the use of an asset and liability approach for financial
accounting and reporting on income taxes. If it is more likely than
not that some portion, or all if a deferred tax asset, will not be
realized, a valuation allowance is recognized.
INFOTEC BUSINESS SYSTEMS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2003 AND 2002
(Stated in U.S. Dollars)
2.SIGNIFICANT ACCOUNTING POLICIES (Continued)
e)Foreign Currency Translation
The operations of the Company's subsidiary, Infotec Business
Strategies, Inc., are located in New Westminster, Canada and its
functional currency is the Canadian dollar. The consolidated
financial statements have been translated using the current method
whereby the assets and liabilities are translated at the year end
exchange rate, capital accounts at the historical exchange rate, and
revenues and expenses at the average exchange rate for the period.
f)Financial Instruments
The Company's financial instruments consist of cash, amounts
receivable, prepaid expenses and accounts payable.
Unless otherwise noted, it is management's opinion that this Company
is not exposed to significant interest or credit risks arising from
these financial instruments. The fair value of these financial
instruments approximate their carrying values, unless otherwise noted.
g)Basic and Diluted Loss Per Share
The Company computes loss per share in accordance with SFAS No. 128 -
"Earnings Per Share". Under the provisions of SFAS No. 128, basic
loss per share is computed using the weighted average number of common
stock outstanding during the periods. Diluted loss per share is
computed using the weighted average number of common and potentially
dilutive common stock outstanding during the period. As the Company
generated net losses in the period presented, the basic and diluted
loss per share is the same as any exercise of options or warrants
would be anti-dilutive.
3.CAPITAL STOCK
a)During the year, the Company entered into a debt settlement agreement
whereby it settled the $60,000 arising from the purchase of software
development costs by the issuance of 1,200,000 common shares at a
price of $0.05 per share.
b)During the year, the Company completed a private placement of
1,200,000 common shares at $0.05 per share, resulting in proceeds to
the Company of $60,000.
INFOTEC BUSINESS SYSTEMS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2003 AND 2002
(Stated in U.S. Dollars)
4.COMMITMENT
Pursuant to a purchase agreement dated October 3, 2001, the Company
acquired computer software development costs for the consideration of
$60,000, and a royalty of 2% on the net sales revenue of any product or
service that uses all or any portion of the software until the amount
paid totals $250,000, after which the royalty drops to 1%. The royalty
is payable quarterly following the first commercial sale of products or
services.
The software development costs were acquired from Danby Technologies
Corporation ("Danby"), a company controlled by a majority shareholder,
and was recorded at Danby's historical cost base as at April 30, 2002.
5.RELATED PARTY TRANSACTIONS
During the year, the Company entered into transactions (recorded at
exchange values) with related parties as follows:
i)The Company engages Danby Technologies Corporation to provide a shared
internet enabled network system for deploying and testing, and to
provide professional staff to maintain implementation and undertake
development.
ii) The Company rents its office premise from Danby Technologies
Corporation at the rate of $1,500 per month on a month to month basis.
2003 2002
---------------
Equipment rental $ 18,000 $10,308
Software development costs 18,000 10,308
Rent and occupancy 18,000 10,500
------------------
$ 54,000 $31,116
==================
INFOTEC BUSINESS SYSTEMS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2003 AND 2002
(Stated in U.S. Dollars)
6.SUBSEQUENT EVENTS
On June 3, 2003, the Company completed a private placement of 100,000
units at $4.00 per unit for proceeds of $400,000. Each unit consists of
one common share and one common share purchase warrant exercisable at
$4.50 per share during the initial six months, and at an exercise price
of $5.50 for the final six month period. In addition, the Company
issued 25,000 share purchase warrants entitling the holder to purchase
25,000 common shares at a price of $4.50 per share on or before December
14, 2003, and at a price of $5.00 per share on or before June 13, 2004.
In conjunction with the above private placement, certain directors and
stockholders of the Company agreed to return to treasury for
cancellation a total of 8,750,000 common shares.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Nevada General Corporation Law permits the indemnification of
directors, employees, officers and agents of Nevada corporations. Our
articles of incorporation and bylaws provide that we indemnify our
directors and officers to the fullest extent permitted by the Nevada
General Corporation Law. Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors,
officers or persons controlling us pursuant to the foregoing
provisions, we are advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
As authorized by the Nevada General Corporation Law, our articles
of incorporation provide that none of our directors shall be
personally liable to us or our shareholders for monetary damages for
breach of fiduciary duty as a director, except liability for:
" acts or omissions which involve intentional misconduct, fraud
or a knowing violation of law; or
" the payment of dividends in violation of the Nevada Revised
Statutes.
This provision limits our rights and the rights of our
shareholders to recover monetary damages against a director for breach
of the fiduciary duty of care except in the situations described
above. This provision does not limit our rights or the rights of any
shareholder to seek injunctive relief or rescission if a director
breaches his duty of care. These provisions will not alter the
liability of directors under federal securities laws.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated costs of this offering are as follows:
Securities and Exchange Commission registration fee $5.52
Federal Taxes NIL
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State Taxes and Fees NIL
Transfer Agent Fees 1,000.00
Accounting fees and expenses 5,000.00
Legal fees and expenses 15,000.00
Blue Sky fees and expenses 2,000.00
Miscellaneous NIL
_______
Total $ 23,005.52
All amounts are estimates other than the Commission's
registration fee.
We are paying all expenses of the offering listed above. No
portion of these expenses will be borne by the selling stockholders.
The selling stockholders, however, will pay any other expenses
incurred in selling their common stock, including any brokerage
commissions or costs of sale.
RECENT SALES OF UNREGISTERED SECURITIES
We issued 12,600,000 shares of common stock on October 11, 2001
to Mr. Robert Danvers, Mrs. Chantal Trudeau and their minor children.
Mr. Danvers is our President and a director. Mrs. Trudeau is the
spouse of Mr. Danvers. These shares were issued pursuant to Section
4(2) of the Securities Act of 1933 for total proceeds of $7,000. The
12,600,000 shares of common stock are restricted shares as defined in
the Securities Act. Mr. Danvers and Mrs. Trudeau were knowledgeable,
had access to all relevant information in relation to the company and
had the financial capacity to sustain an investment in the company.
On May 13, 2002, we converted liabilities amounting to $60,000
through the issuance of 7,200,000 shares, to 2 persons being Danby
Technologies Corporation as to 7,080,000 shares and to an associate of
Danby Technologies as to 120,000 shares at their direction. These
shares were issued pursuant to Rule 903 of Regulation S (i.e.,
Category 3) of the Securities Act. Each purchaser represented to us
in the subscription agreement that he was a non-U.S. person as defined
in Regulation S. We did not engage in a distribution of this offering
in the United States. Each purchaser represented his intention to
acquire the securities for investment only and not with a view toward
distribution. Each purchaser represented to us that he will resell
such securities only in accordance with the provisions of Regulation S
which prohibit sales to or for the benefit of a U.S. person, pursuant
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to registration under the Act, or pursuant to an available exemption
from registration and agrees not to engage in hedging transactions
with regard to such securities unless in compliance with the Act.
Appropriate legends were affixed to the stock certificate issued to
each purchaser in accordance with Regulation S which, among other
things, precludes transfers except as provided above. The purchasers
had access to financial and other information about us and were
afforded the opportunity to ask questions concerning our operations
and the terms of the debt conversion. Each subscription agreement
precluded transfer except under the above conditions. No registration
rights were granted to any of the purchasers.
We completed an offering of 7,200,000 shares of our common stock
to a total of 25 purchasers on May 14, 2002. The total amount
received from this offering was $60,000. We completed the offering
pursuant to Rule 903 of Regulation S (i.e., Category 3) of the
Securities Act. Each purchaser represented to us in the subscription
agreement that he was a non-U.S. person as defined in Regulation S.
We did not engage in a distribution of this offering in the United
States. Each purchaser represented his intention to acquire the
securities for investment only and not with a view toward
distribution. Each purchaser represented to us that he will resell
such securities only in accordance with the provisions of Regulation S
which prohibit sales to or for the benefit of a U.S. person, pursuant
to registration under the Act, or pursuant to an available exemption
from registration and agrees not to engage in hedging transactions
with regard to such securities unless in compliance with the Act.
Appropriate legends were affixed to the stock certificate issued to
each purchaser in accordance with Regulation S which, among other
things, precludes transfers except as provided above. Each purchaser
was given adequate access to sufficient information about us to make
an informed investment decision. None of the securities were sold
through an underwriter and accordingly, there were no underwriting
discounts or commissions involved. Each subscription agreement
precluded transfer except under the above conditions. No registration
rights were granted to any of the purchasers.
On June 16, 2003, we completed an offering of 100,000 units at a
price of $4.00 per unit to one accredited investor, for a total of
$400,000. Each unit consists of one share of common stock and one
share purchase warrant exercisable at $4.50 per share during the
initial six months, and at an exercise price of $5.50 for the final
six month period. We completed the offering in a private transaction
exempt from registration under the Securities Act of 1933 in reliance
on Section 4(2) of the act. No general solicitation or advertising
was used in connection with this transaction, and the certificates
evidencing the shares that were issued contained a legend restricting
their transferability absent registration under the Securities Act or
the availability of an applicable exemption therefrom. The purchaser
represented his intention to acquire the securities for investment
only and not with a view toward distribution or resale except in
compliance with applicable securities laws. The purchaser was given
adequate access to sufficient information about us to make an informed
investment decision. We had reasonable grounds to believe that the
purchaser was an accredited investor, as defined by Rule 501 of
Regulation D. None of the securities were sold through an underwriter
and accordingly, there were no underwriting discounts or commissions
involved. The subscription agreement precluded transfer except under
the above conditions. No registration rights were granted to the
purchaser.
We did not utilize an underwriter for any of the foregoing.
Other than the securities mentioned or referenced above, we have not
issued or sold any securities since incorporation.
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EXHIBITS
A. Exhibits
Number Description of exhibit
3.1 Articles of Incorporation (1)
3.1a Form of Certificate Change (2)
3.2 Bylaws (1)
4.1 Reg S Securities Subscription Agreement (1)
5.1 Opinion of Adorno & Yoss, P.A., with consent to use (1)
10.1 Purchase Agreement with Danby Technologies Corporation (1)
10.2 Debt Settlement Agreement with Danby Technologies Corporation (1)
10.3 Services Engagement with Danby Technologies Corporation (1)
10.4 Deferral of Engagement Fees with Danby Technologies Corporation (1)
10.5 License Agreement (3)
21 Subsidiaries of the Issuer (3)
23.1 Consent of Morgan and Company, Chartered Accountants (4)
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___________________
(1) Incorporated by reference to the registration
statement on Form SB-2 file number 333-90618, as amended, as declared
effective by the Securities and Exchange Commission on November 5,
2002.
(2) Incorporated by reference to the Form 8-K filed with the
Securities and Exchange Commission on March 7, 2003.
(3) Incorporated by reference to the annual report on Form 10-KSB, as
filed with the Securities and Exchange Commission on July 21, 2003.
(4) Filed herewith.
UNDERTAKINGS
The undersigned registrant hereby undertakes:
1.To file, during any period in which we offer or sell
securities, a post-effective amendment to this registration
statement:
(i) To include any prospectus
required by Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any
facts or events which, individually or together, represent
a fundamental change in the information in the
registration statement, and Notwithstanding the foregoing,
and increase or decrease in volumes of securities offered
(if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed
with the Commission pursuant to rule 424(b) if, in the
aggregate, the changes in the volume and price represent
no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement; and
(iii) To include any additional or
changed material information on the plan of distribution.
2.That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such
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securities at that time shall be deemed to be the initial
bona fide offering thereof.
3.To remove from registration by means of a post-effective
amendment any of the securities being registered hereby which
remain unsold at the termination of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and
controlling persons pursuant to the provisions above, or otherwise, we
have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed
in the Securities Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities, other than the payment by us of expenses incurred or paid
by one of our directors, officers, or controlling persons in the
successful defense of any action, suit or proceeding, is asserted by
one of our directors, officers, or controlling persons in connection
with the securities being registered, we will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification is against public policy as expressed in the
Securities Act, and we will be governed by the final adjudication of
such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of
1933, the registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form SB-2
and authorized this amendment to the registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in
the City of New Westminster, British Columbia, Canada, on July 31,
2003.
Infotec Business Systems, Inc.
(Registrant)
By: /s/ Robert Danvers
Robert Danvers
President
In accordance with the requirements of the Securities Act of
1933, this amendment to the registration statement has been signed by
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the following persons in the capacities and on the dates stated.
Signature Title Date
/s/ Robert Danvers President,
Chief Executive July 31, 2003
Robert Danvers Officer and Director
(Principal Executive,
Financial and
Accounting Officer)
Secretary, Treasurer and
/s/ Stephen Jackson Director July 31, 2003
Stephen Jackson
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