U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
[X] Quarterly Report Under Section 13 Or 15(D) Of The Securities
Exchange Act Of 1934
For the quarterly period ended September 30, 2002
[ ] Transition Report Under Section 13 Or 15(D) Of The Exchange Act
For the transition period from ____________ to ____________
Commission File No. 0-31507
INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC.
Formerly Known As:
Precom Technology, Inc.
(Name of Small Business Issuer in Its Charter)
Florida 06-1588136
State or Other Jurisdiction of I.R.S. Employer
Incorporation or Organization) Identification No.)
4232 D-Este Court, Lake Worth, Florida 33467
(Address of Principal Executive Offices)
(561) 964-7925
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No _______
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: As of
November 1, 2002, the Company had 22,361,615 shares of Common Stock,
$0.001 par value, outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X__
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
BASIS OF PRESENTATION
As used herein, the term "Company" refers to International Trust &
Financial Systems, Inc., formerly Precom Technology, Inc., a Florida
corporation, unless otherwise indicated. The accompanying unaudited
financial statements are presented in accordance with generally
accepted accounting principles for interim financial information and
the instructions to Form 10-QSB and item 310 under subpart A of
Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The accompanying
statements should be read in conjunction with the audited financial
statements for the year ended December 31, 2001, which are included
in our Form 10-KSB filed with the Securities and Exchange Commission
("SEC") on April 15, 2002. In the opinion of management, all
adjustments (consisting only of normal occurring accruals) considered
necessary in order to make the financial statements not misleading,
have been included. Operating results for the nine months ended
September 2002 are not necessarily indicative of results that may be
expected for the year ending December 31, 2002. The financial
statements are presented on the accrual basis.
INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC.
Formerly PRECOM TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 AND 2001
(UNAUDITED)
TABLE OF CONTENTS
Page No.
INDEPENDENT ACCOUNTANT'S REVIEW REPORT 1
FINANCIAL STATEMENTS
Balance Sheet 2
Statements of Operations 3
Statement of Stockholders' (Deficit) 4 - 6
Statements of Cash Flows 7
Notes to Financial Statements 8 - 13
Randy Simpson CPA, P.C.
11775 South Nicklaus Road
Sandy, Utah 84092
Phone (801) 572-3009
Fax (801) 606-2895
Board of Directors and Stockholders
International Trust & Financial Systems, Inc.
(A Development Stage Company)
..
INDEPENDENT ACCOUNTANT'S REVIEW REPORT
I have reviewed the accompanying balance sheet of International Trust &
Financial Systems, Inc. (a development stage company) as of September 30,
2002,
and the related combined statements of operations, stockholders' (deficit)
and
cash flows for the three months then ended, in accordance with Statements on
Standards of Accounting and Review Services issued by the American Institute
of
Certified Public Accountants. All information included in these financial
statements is the representation of the management of International Trust &
Financial Systems, Inc.
A review consists principally of inquiries of company personnel and
analytical
procedures applied to financial data. It is substantially less in scope than
an audit in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, I do not express such an opinion.
Based on my review, I am not aware of any material modifications that should
be
made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the company
will continue as a going concern. As discussed in Note 4 to the financial
statements, the Company has incurred net losses of $652,620, has a deficit
stockholders' equity, and needs additional capital to finance operations.
These conditions raise substantial doubt about its ability to continue as a
going concern. Management's plans regarding these matters are described in
Notes 5 and 7. The financial statements do not include any adjustments that
might result from the outcome of these uncertainties.
/s/Randy Simpson
Randy Simpson, CPA, P.C.
A Professional Corporation
June 27, 2003
Sandy, Utah
INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC.
(Formerly PRECOM TECHNOLOGY, INC.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
SEPTEMBER 30, 2002 AND 2001
(UNAUDITED)
2002 2001
ASSETS
CURRENT ASSETS
Cash $ 1,210 $ -
TOTAL CURRENT ASSETS 1,210 -
PROPERTY AND EQUIPMENT
Office equipment 9,239 -
Less accumulated depreciation (468) -
NET PROPERTY AND EQUIPMENT 8,771 -
OTHER ASSETS 1,000 -
TOTAL ASSETS $ 10,981 $ -
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 63,170 $ 100,828
TOTAL CURRENT LIABILITIES 63,170 100,828
STOCKHOLDERS' (DEFICIT)
Preferred stock, Series B, no par value
Authorized 10,000,000 shares
Issued and outstanding - 5,000,000 shares 1,000 -
Common stock, par value $ 0.001 per share
Authorized 50,000,000 shares
Issued and outstanding - 5,152,066 shares 5,152 2,121
Paid in capital in excess of par value of stock 594,279 363,242
Deficit accumulated during the development stage (652,620) (466,191)
TOTAL STOCKHOLDERS' (DEFICIT) (52,189) (100,828)
TOTAL LIABILITIES AND STOCKHOLDERS'
(DEFICIT) $ 10,981 $ -
See Accompanying Notes and Accountant's Review Report
INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC.
(Formerly PRECOM TECHNOLOGY, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001
AND FOR THE PERIOD FROM SEPTEMBER 1, 1996 (DATE OF INCEPTION) TO
SEPTEMBER 30, 2002
(UNAUDITED)
For the Period
From September 1,
1996 (date of
Inception) to
September 30,
2002 2001 2002
REVENUE $ - $ 6,766 $ 6,766
EXPENSES
General and administrative 30,895 4,791 134,848
Development costs - - 373,393
Bad debt expense 150,677 - 150,677
Depreciation 468 - 468
TOTAL EXPENSES 182,040 4,791 659,386
NET INCOME (LOSS) $ (182,040) $ 1,975 $ (652,620)
NET (LOSS) PER COMMON SHARE $ ( .068) $ . 000
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 2,668,597 2,020,852
See Accompanying Notes and Accountant's Review Report
INTERNATIONAL TRUST & FINANCIAL
SYSTEMS, INC.
(Formerly PRECOM TECHNOLOGY, INC.)
STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT)
FOR THE PERIOD FROM SEPTEMBER 1, 1996 (DATE OF
INCEPTION)
TO September 30, 2002
<ON>
Paid in Deficit
Capital
in Accumulated
Excess
of during the
Par
Value Development
Preferred Stock Common Stock of
Stock Stage Total
Shares Amount Shares Amount
September 1 1996 $ $ $
$ $
(Date of Inception) - - - -
- - - -
September, 1996-
Shares issued for services - - 50,000 50
950 - 1,000
October, 1996-
Shares issued for cash - - 50,000 50
50,134 - 50,084
Net (loss) for the period from
September 1, 1996 to
December 31, 1996 - - - -
- - (16,703) (16,703)
BALANCE, DECEMBER 31, 1996 $ - $ - $100,000 $100
$50,984 $(16,703) $34,481
March 1997-
Shares issued for cash - - 200,000 200
199,800 - 200,000
March 1997-Shares issued
for settlement of failed mergers - - 360,410 360
6,849 - 7,209
Net (loss) for the year ended
December 31, 1997 - - - -
- - (178,200) (178,200)
BALANCE, DECEMBER 31, 1997 $ - $ - $660,410 $660
$257,633 $(194,903) $63,490
See Accompanying Notes and Independent Auditor's
Report
INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC.
(Formerly PRECOM TECHNOLOGY, INC.)
STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT)
FOR THE PERIOD FROM SEPTEMBER 1, 1996 (DATE OF
INCEPTION)
TO SEPTEMBER 30, 2002
Paid in
Deficit
Capital
in Accumulated
Excess
of during the
Par
Value Development
Preferred Stock Common Stock of
Stock Stage Total
Shares Amount Shares Amount
August 1998-
Shares issued for services - - 300,000 300
99,700 - 100,000
Net (loss) for the year ended
December 31, 1998 - - - -
- - (171,241) (171,241)
BALANCE, DECEMBER 31, 1998 $ - $ - $960,410 $960
$357,333 $(366,144) $(7,751)
Net (loss) for the year ended
December 31, 1999 - - - -
- - (7,249) (7,249)
BALANCE, DECEMBER 31, 1999 $ - $ - $960,410 $960
$357,333 $(373,393) $(15,000)
August 2000-issuance of common
stock for Provence Capital
Corporation, Inc. - - 100,000 100
6,870 - 6,970
Net (loss) for the year ended
December 31, 2000 - - - -
- - (58,741) (58,741)
BALANCE, DECEMBER 31, 2000 $ - $ - $1,060,410 $1,060
$364,203 $(432,134) $(66,771)
Net (loss) for the year ended
December 31, 2001 - - - -
- - (38,446) (38,446)
BALANCE, DECEMBER 31, 2001 $ - $ - $1,060,410 $1,060
$364,203 $(470,580) $(105,217)
See Accompanying Notes and Independent Auditor's
Report
INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC.
(Formerly PRECOM TECHNOLOGY, INC.)
STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT)
FOR THE PERIOD FROM SEPTEMBER 1, 1996 (DATE OF
INCEPTION)
TO SEPTEMBER 30, 2002
Paid in
Deficit
Capital
in Accumulated
Excess
of during the
Par
Value Development
Preferred Stock Common Stock of
Stock Stage Total
Shares Amount Shares Amount
April 2002- Shares issued for
conversion of debt (Unaudited) - - 1,015,406 1,015
100,526 - 101,541
April 2002-preferred shares
issued for interest in
venture fund (Unaudited) 5,000,000 1,000 - -
- - - 1,000
May 2002-shares issued
for services (Unaudited) - - 1,326,250 1,326
57,909 - 59,235
September 2002- shares issued
for debt (Unaudited) - - 1,750,000 1,750
71,542 - 73,292
Net (loss) for the nine months
September 30,2002 (Unaudited) - - - -
- - (182,040) (182,040)
BALANCE, SEPTEMBER 30, 2002 5,000,000 $1,000 5,152,066 $5,152
$594,279 $(652,620) $(52,189)
INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC.
(Formerly PRECOM TECHNOLOGY, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001
AND FOR THE PERIOD FROM SEPTEMBER 1, 1996 (DATE OF INCEPTION) TO
SEPTEMBER 30, 2002
(UNAUDITED)
For the period
from September 1,
1996 (Date of Inception)
to
September 30,
2002 2001 2002
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Income (loss) $ (182,040) $ 1,975 $ 652,620)
Adjustments to reconcile net (loss)
to net cash (used) by operating activities:
Stock issued for merger expenses - -
14,079
Stock issued for services 59,334 -
160,334
Depreciation 468 -
468
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable 23,674 (1,975)
63,171
NET CASH (USED) BY
OPERATING ACTIVITIES (98,564) - 414,568)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (9,239) - (9,239)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 174,833 -
425,017
Reduction in advances by officer (73,292) - -
NET CASH PROVIDED BY
FINANCING ACTIVITIES 101,541 - 425,017
NET INCREASE (DECREASE) IN CASH (6,262) - 1,210
CASH AT BEGINNING OF PERIOD 7,472 - -
CASH AT END OF PERIOD $ 1,210 $ - $ 1,210
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Cash paid during the period for:
Interest $ - $ - $ -
Taxes $ 100 $ 150 $ 250
SCHEDULE OF NON-CASH FINANCING
ACTIVITIES:
Issuance of common stock for merger expenses $ - $ - $ 14,179
Issuance of common stock for services $ 59,334 $ - $ 160,334
Issuance of preferred stock for investment $ 1,000 $ - $ 1,000
See Accompanying Notes and Accountant's Review Report
INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 AND 2001
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
International Trust & Financial Systems, Inc., formerly Precom Technology,
Inc.
(the "Company") was organized on September 1, 1996, under the laws of the
State
of Florida. In August 2000, the Company completed a merger with Provence
Capital Corporation, Inc. by exchanging 200,000 shares of common stock for
100%
of the outstanding shares of Provence Capital Corporation, Inc. In April,
2002,
a controlling interest in the Company was acquired by CGI International
Holdings, Inc. ("CGI") by the subscription for 40 million shares of the
Company's common stock in exchange for a promissory note in the amount of $2
million, secured by the stock issued to CGI. In June 2002, CGI notified the
Company that it would not be able to pay the promissory note and the 40
million
shares of common stock issued to CGI were cancelled, effective August 1,
2002.
Subsequent to the acquisition of control by CGI, the Company organized itself
as
a financial services holding company and positioned itself to provide
financial
services to a select group of domestic and foreign high net worth individuals
and their business operations. To accomplish this new business strategy, the
Company began to negotiate a series of acquisitions in the financial services
area; however, due to the uncertainties in the economy, a concerted effort by
the Internal Revenue Service to limit or eliminate certain types of tax
planning, and undisclosed problems with certain acquisitions, the Company was
not able to launch its new financial services strategy successfully in 2002.
The Company intends to continue its efforts to develop its financial services
business; but the continued uncertainties in the economy make the prospects
for
success uncertain. Accordingly, the Company has determined to continue its
status as a development stage company, and also will seek merger candidates
to
develop new lines of business for the Company.
Name Changes
The Company has changed its name as follows:
At date of incorporation - Fairbanks, Inc.
April 1997 - Jet Vacations, Inc.
May 1998 - Precom Technology, Inc.
July 2002-International Trust & Financial Systems, Inc.
Accounting Estimates
Management uses estimates and assumptions in preparing financial statements
in
accordance with generally accepted accounting principles. Those estimates
and
assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues
and
expenses. Actual results could vary from the estimates that were used.
INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 AND 2001
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes
Provisions for income taxes are based on taxes payable or refundable for the
current year and deferred taxes on temporary differences between the amount
of
taxable income and pretax financial income and between the tax basis of
assets
and liabilities and their reported amounts in the financial statements.
Deferred tax assets and liabilities are included in the financial statements
at
currently enacted income tax rates applicable to the period in which the
deferred tax assets and liabilities are expected to be realized or settled as
prescribed in FASB Statement No. 109, Accounting for Income Taxes. As
changes
in tax laws or rates are enacted, deferred tax assets and liabilities are
adjusted through the provision for income taxes.
Net (Loss) Per Share
The Company adopted Statement of Financial Accounting Standards No. 128 that
requires the reporting of both basic and diluted earnings (loss) per share.
Basic (loss) per share is computed by dividing net (loss) available to common
stockholders' by the weighted average number of common shares outstanding for
the period. Diluted (loss) per share is not presented because the effect
would
be anti-dilutive.
Property and Equipment
Property and equipment consists of office equipment which is recorded at cost
and depreciated, for financial reporting purposes, over five years using the
straight-line method. Maintenance, repairs and minor renewals are charged to
operations as incurred. Additions and betterments are capitalized. When
assets
are disposed of, the related cost and accumulated depreciation are removed
from
the accounts and any gain or loss is included in operations. Impairment
losses
are recorded in the accounts when events and circumstances indicate the
assets
may be impaired. If impairment occurs, the loss is measured by comparing the
fair value of the asset to its carrying amount.
Recent Accounting Pronouncements
Recent accounting pronouncements are as follows:
FASB 141 - Business Combinations
FASB 142 - Goodwill and other Intangible Assets
FASB 143 - Accounting for Asset Retirement Obligations
FASB 144 - Accounting for the Impairment or Disposal of Long-Lived Assets
FASB Interpretation No. 45 - Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others
FASB Interpretation No.46 - Consolidation of Variable interest Entities
INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 AND 2001
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
These FASB statements did not have or are not expected to have a material
impact
on the Company's financial position or results of operations.
In August 2002, Congress adopted the Sarbanes-Oxley Act of 2002, imposing
new,
more stringent accounting and reporting requirements on all public companies.
The Company has complied with all applicable requirements of Sarbanes-Oxley,
and
these requirements did not have a material impact on the Company's financial
position or results of operations.
NOTE 2 CAPITAL STOCK
Stock Splits
On February 5, 2001, the Company effected a 1 for 100 reverse stock split on
19,208,522 shares of its common stock. On March 19, 2001, the Company then
had
a 10-1 forward stock split on 192,008 shares. On September 10, 2002, the
Company effected a 1 for two reverse stock split on 6,804,131 shares, leaving
3,402,066 common shares then outstanding.
The stock splits have been retroactively recorded in the financial statements
as
if they occurred at the date of inception.
Warrants
On April 6, 2002, the Company issued to Greenwich Financial Group, a holder
of
the Company's common stock, warrants to purchase 500,000 post split shares of
the Company's common stock for $4.00 per share. The warrants expire on April
16,
2005. No warrants were exercised as of September 30, 2002.
Stock Option Plan
On April 9, 2002, The Company established the 2002 employee stock option plan
and reserved 2,321,410 shares of common stock for issuance under the plan. No
options have been issued under this plan.
Sale to Officer
During 2002, the Company's President advanced a total of $174,833 in loans to
the Company, evidenced by promissory notes. The first loan in the amount of
$101,541 was made in April 2002, and by agreement, was later converted into
1,015,406 common shares of the Company. The second loan in the amount of
$73,292 was made from an IRA for the benefit of the President, and was later
converted by agreement into 1,750,000 shares of the common stock of the
Company.
Preferred Stock
On June 30, 2002, the Company issued 5,000,000 shares of Series B, no par
value
convertible preferred stock for a limited partnership interest in
INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 AND 2001
(UNAUDITED)
NOTE 2 CAPITAL STOCK (Continued)
Prospect Street Capital Partners, L.P. Series B preferred stock participates
in
dividends with the Company's par value $.001 common stock and is convertible,
at
the option of the holder, at any time after issuance into such whole number
of
fully paid and non-assessable shares of the Company's common stock with a
market
value at the time of conversion sufficient to meet the capital call of the
limited partnership, up to a maximum conversion value of $10,000,000.
Management has entered into discussions to cancel these shares and the
interest
of the Company in the Fund.
NOTE 3 DEVELOPMENT STAGE OPERATIONS
As of September 30, 2002, the Company was in the development stage of
operations. A development stage company is defined as a company that devotes
most of its activities to establishing a new business activity. In addition,
planned principal activities have not commenced, or have commenced and have
not
yet produced significant revenue.
The Company expensed $373,393 of development costs for the period from
September
1, 1996 (date of inception) to September 30, 2002.
NOTE 4 GOING CONCERN
These financial statements are presented on the basis that the Company is a
going concern. Going concern contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business over a
reasonable
length of time. The Company has incurred net losses of $652,620, has
negative
stockholders' equity and needs additional capital to finance its operations.
These factors raise substantial doubt as to the Company's ability to continue
as
a going concern.
Management's plans to eliminate the going concern situation include, but are
not
limited to, seeking a merger candidate. (See Notes 5 and 7)
NOTE 5 BUSINESS COMBINATIONS
Share Exchange Agreement
On February 21, 2002, the Company entered into a share exchange agreement
with
CGI International Holdings, Inc. (CGI). CGI was a diversified financial
services company that specialized in a wide range of business activities for
its
clients including financial and tax planning, asset protection, personal
insurance and real estate mortgage services. Subsequently, on April 9, 2002,
that transaction was rescinded and in its place, CGI acquired 40 million
shares
of the Company's common stock in exchange for a secured promissory note in
the
amount of $2 million, payable in six months. Concurrently individuals who
substantially owned CGI became officers and directors of the Company.
INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 AND 2001
(UNAUDITED)
NOTE 5 BUSINESS COMBINATIONS (Continued)
In connection with the above agreement, the Company advanced approximately
$150,000 to CGI for working capital purposes.
On August 1, 2002, CGI advised the Company that it would be unable to pay the
promissory note when due. As a result, the 40 million shares of the
Company's
common stock issued to CGI were cancelled, and the transaction was
terminated.
In addition, the advance by the Company was determined uncollectible and
charged
to expense during the third quarter 2002.
Acquisition Agreement - Saddleback
In June 2002, the Company entered into an acquisition agreement with CGI and
with Saddleback Financial, Inc. (Saddleback), an unrelated company based in
Orange, CA, for the acquisition of the equipment leasing business and assets
of
Saddleback. The transaction partially closed on July 1, 2002 with the
acquisition of the assets of Saddleback by a newly formed subsidiary of CGI,
Saddleback Finance, Inc., a Florida Corporation ("New Saddleback"). Shortly
following the partial closing, serious misrepresentations were discovered in
the
financial information regarding Saddleback by the sellers and the transaction
was terminated August 1, 2002 without any consideration being issued by the
Company, and without the closing by the Company on any of the acquisition.
New
Saddleback remained a wholly owned subsidiary of CGI and the Company has no
interest or ownership in New Saddleback.
NOTE 6 ACCOUNTS PAYABLE
During 2002, the Company issued common shares to certain vendors in exchange
for
the amounts owed by the Company. The payable, which was extinguished by the
issuance of common shares, was:
Greenwich Financial Group $ 59,334
NOTE 7 SUBSEQUENT EVENT
Acquisition Agreement - International Financial Concierge Services, Inc.
In October, 2002, the Company agreed to acquire all of the issued and
outstanding shares of International Financial Concierge Services, Inc., a
Florida corporation based in Boca Raton, FL in exchange for convertible
preferred shares of stock. The 3,125,000 shares of preferred stock to be
issued
in the transaction were convertible into 6,250,000 shares of common stock
after
January 1, 2003. Shortly after the acquisition agreement was entered into,
the
transaction was cancelled by mutual agreement of both parties, and no
preferred
shares of the Company were issued.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FORWARD-LOOKING STATEMENTS
- --------------------------
Forward-looking statements, based on management's current views and
assumptions, are made throughout this Form 10-QSB. These statements,
including consolidated pro forma financial statements, are subject to certain
risks and uncertainties that could cause actual results to differ materially
from historical results and those presently anticipated or projected. Among
the factors that may affect operating results are the following: success of
the Company's change in focus, competitive environment, limited capital
resources and general economic conditions.
OVERVIEW
- ---------
Prior to 2002, the Company was a blind pool whose sole business plan and
direction was to identify and merge with an operating business. During 2001,
the Company explored merger transactions with a number of entities, but was
unable to complete a merger transaction. The Company had no significant
assets and its independent auditors expressed a going concern warning in the
audit of the Company's financial results for 2001.
In early February, 2002, negotiations began between CGI International
Holdings, Inc., a Delaware corporation, ("CGI") and the Company and resulted
in the execution of a Share Exchange Agreement between CGI and its
shareholders and the Company dated February 25, 2002. A copy of the Share
Exchange Agreement was included in the Form 8-K reporting the agreement which
was filed with the SEC on March 26, 2002. Subsequently, the Company decided
to rescind that Agreement and entered into a Subscription Agreement with CGI
on April 9, 2002, under which CGI agreed to subscribe for 40,000,000 pre-
split
shares of our common stock in return for a promissory note, secured by the
stock, for $2,000,000 (the "Promissory Note"). This transaction, and a copy
of
the Subscription Agreement and Promissory Note, were reported on Form 10-
QSB/A
for the period ending June 30, 2002, filed by the Company with the Securities
and Exchange Commission on July 29, 2002. As a result of the agreement with
CGI, the Company advance approximately $150,000 to CGI for working capital
purposes.
On August 1, 2002, the Company agreed to cancel the Subscription Agreement
with CGI because CGI had informed the Company that it would be unable to make
payment of the Promissory Note by the due date. As a result, the Company
also
cancelled the 40,000,000 pre-split Shares of Common Stock, par value $.001,
issued to CGI (the Subscription Shares") as part of the Subscription
Agreement. The Company was also informed by CGI that the proposed transfer
of
the Subscription Shares to International Financial Concierge Services, Inc.
("IFCS"), as reported in the 10-QSB/A for the period ending June 30, 2002,
was
not completed and IFCS had obtained no interest in the Subscription Shares
issued to CGI. As a result of the cancellation of the Subscription Agreement
and
the promissory note, and CGI's advice to the Company that it had no assets,
the
Company also wrote off the advances to CGI for working capital, in the amount
of
$150,677.
Subsequently, on October 8, 2002, the Company entered into a Share Exchange
Agreement with the shareholders of IFCS as a result of which, the Company
agreed
to acquire all of the issued and outstanding shares of IFCS, which would
becme a
wholly-owned subsidiary of the Company. The controlling shareholders of IFCS
were Robert Hipple, Rod Read and Drew Roberts, who are the Chief Executive
Officer, Chief Operating Officer and Chief Financial Officer, respectively,
of
the Company. IFCS is Florida corporation engaged in financial, business and
estate planning, equipment leasing, and other financial services. This
transaction was reported on a Form 8-K/A filed by the Company with the SEC on
October 23, 2002, and a copy of the Share Exchange Agreement was filed as an
exhibit to that Form 8-K/A.
As a result of the acquisition of all of the stock of IFCS, the Company
intended
to engage in the financial service business, offering financial planning, tax
planning, business consulting, mortgage services, equipment lease financing
and merchant banking services. To comport with this proposed new business
activity, the Company changed its name to International Trust & Financial
Systems, Inc. on October 15, 2002 and will do business under the name
iTrustFinancial. This name change was reported on a Form 8-K/A filed with
the
SEC on October 17, 2002 and has been reported to the National Association of
Securities Dealers, Inc. The Company also established a new Internet web
site
at www.itrustfinancial.com and has developed a new logo and corporate
identity.
As a result of continuing uncertainty in the economy and the increased
efforts
of the Internal revenue Service to challenge a number of tax planning
strategies, the Company and IFCS agreed to cancel the acquisition of IFCS,
and
no shares of the Company were issued.
SADDLEBACK FINANCE, INC.
On May 26, 2002, we entered into a Share Exchange Agreement with CGI,
Saddleback Financial Corporation, a Delaware corporation ("Saddleback"),
Leaseco Holding, Inc., an Illinois corporation and Merchants Capital
Corporation for the acquisition of certain assets related to the equipment
leasing business of Saddleback, based in Orange, California ("Saddleback
Acquisition") by CGI. For further information please refer to our Form 8-K
filed with the SEC on June 19, 2002, disclosing the proposed acquisition of
certain assets of Saddleback Financial Corporation. The share exchange
partially closed as of June 1, 2002 and certain tangible assets of the
leasing
business were transferred to Saddleback Finance, Inc. ("SFI"), a new
subsidiary
of CGI, incorporated on May 26, 2002 for that purpose. During June, SFI
relocated the offices of the leasing business to new offices in Anaheim, CA
due to the failure of the old business to pay rent due to its landlord. Over
the next six weeks, SFI began operations of the acquired lease business,
although the steps necessary to complete the Share Exchange Agreement had not
yet been completed and no shares of the Company's stock had yet been issued
as
the consideration for the transaction. As a result of the continuing due
diligence by the Company, and actual operating results differing
significantly
from the represented results, on August 15, 2002, SFI, CGI and the Company
rescinded the Share Exchange Agreement, and SFI closed the operations in
Anaheim, CA and advised the sellers that the business had been closed. No
response was received from the seller and the acquisition transaction has
been
terminated, without the issuance of any shares by the Company.
RESULTS OF OPERATIONS
- ---------------------
The Company had no operations in the first three quarters of 2002. The
Company's sole business model since early 2000 had been to identify, acquire
or
merge with a viable business operation. Management made numerous efforts to
pursue the Company's original business plan and to raise capital to operate
the
business. Unfortunately the equity markets underwent significant turmoil and
uncertainty over the past two years. As a result, our ambitious plans for a
capital-intensive business were unsuccessful and our capital needs could not
be realized. Accordingly we abandoned our original business plan and began
to
look for potential acquisition candidates. These factors raised doubt as to
our ability to continue as a going concern and our auditors included a going
concern warning in their audit report for the year ended December 31, 2001,
as
reported on our 10-K filed with the SEC on April 15, 2002. Management's plans
to eliminate the going concern situation included but were not limited to
seeking a merger or acquisition candidate. A mature and businesslike
evaluation of our affairs required the consideration of the foreseeable
possibility of business failure. Accordingly, a reverse acquisition
transaction or other merger transaction became a possible and foreseeable
solution.
On October 8, 2002 the Company entered into a Share Exchange Agreement with
International Financial Concierge Services, Inc. (IFCS), a Florida based
financial planning and services company. The Share Exchange Agreement
provides for the exchange of 3,125,000 Series A voting, convertible preferred
shares for all of the outstanding shares of IFCS, which became a wholly owned
subsidiary of the Company. The Series A preferred shares would be
convertible
on a one preferred share for two common shares any time after January 1,
2003.
The Series A preferred shares are voting shares, and vote on the basis of two
votes for each preferred shares outstanding. For further discussion please
refer to our Form 8-K/A filed with the SEC on October 23, 2002. IFCS was
owned by the principals of the Company, including Mr. Hipple, the CEO, Mr.
Read, the COO and Mr. Roberts, the CFO. No independent valuation of IFCS was
performed. Subsequently, the Company and IFCS determined not to proceed with
the transaction, and the Series A preferred shares were never issued.
The Company incurred general and administrative expenses of $30,895 during
the third quarter of 2002. This, together with the losses incurred from the
rescinded Saddleback Agreement and the writing off of the advance to CGI
resulted in a loss for the quarter of $182,040 and a cumulative loss of
$189,123
for the year to date. In addition, as of the most recent quarter ending
September 30, 2002, we have incurred cumulative net losses of $652,620 from
inception.
Currently the Company does not have sufficient resources to meet the
Company's
cash requirements. The Company is currently seeking to raise additional
capital through various vehicles including but not limited to acquisitions of
other business concerns, private stock placements, debt financings, or public
offerings.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is not currently engaged in any legal proceedings and no legal
proceedings are currently threatened against the Company.
Robert Hipple, CEO of the Company, Rodney Read, COO, and Drew Roberts, CFO,
acting as officers of CGI, the former majority shareholder of the Company,
were named as defendants in an action entitled David K. Broadbent, as
Receiver, et al. vs. CGI International Holdings, Inc. et al filed March 21,
2002 in the United States District Court for the District of Utah, Central
Division, Civil Action No. 2:02-C-230. Neither the Company nor its major
subsidiary, IFCS, are named in or are parties to the action, and neither had
any involvement in any matter alleged in the action. In the action, the
Receiver is seeking to ascertain whether any assets of a now defunct,
unrelated corporation, by which the three named individuals had been employed
prior to October 15, 2001 (Mr. Roberts until December 31, 2001) were acquired
by CGI, when it was formed on January 24, 2002. Based on a review of the
pleadings and other documents filed in the Receiver action, no liability is
expected to result from this action on the part of any of the named
individuals, because no assets or other property of the prior, unrelated
company are held by CGI, or any of the named individuals. CGI itself, the
primary defendant, ceased all business activity in August, 2002 and has no
assets, other than a counterclaim filed against a former employee for
intentional interference with the business of CGI, and counterclaims and
cross-claims which are expected to be filed against the Receiver and other
third parties as part of its answer to the Receiver's complaint. Neither the
Company nor any subsidiary of the Company acquired any assets of CGI and are
not affiliated with CGI in any way.
Item 2. Changes in Securities.
Effective April 16, 2002, the Company issued warrants to acquire 1,000,000
shares of Common Stock, par value $.001, for a period of three years at a
price of $2.00 per share to Greenwich Financial Group ("GFG"). Please refer
to Item 5 below for further discussion of the Warrant Agreement.
On April 12, 2002, the Company entered into a subscription agreement with
Dana
Hipple, wife of Robert Hipple, President, CEO and Chairman of the Company,
whereby the Company issued 2,030,811 pre-split shares of the Company's common
stock for $101,540.55. The proceeds from this subscription were used by the
Company for advances to CGI for its operating expenses.
The Company also agreed to issue a total of 3,850,000 restricted pre-split
shares of the Company's common stock to GFG (the "GFG Shares") as part of the
acquisition of a controlling interest in the Company by CGI, in which GFG
acted as a consultant to the Company. Issuance of the GFG Shares would be as
follows:
100,000 of the GFG Shares have been included in the Company's
registration statement on Form S-8 filed with the SEC on May 8, 2002
(the "S-8"). 50,000 of these shares were issued each to Nicholas M.
Calapa, director of the Company and Bruce Keller, former director of the
Company, pursuant to separate consulting agreements with Messrs. Calapa
and Keller. Copies of the consulting agreements are attached as
Exhibits 4.2 and 4.3 to the S-8.
1,350,000 of the GFG Shares were to be issued subject to a Lock-up
Agreement effective May 8, 2002 (the "Lock-up Agreement") between GFG
and the Company. The Lock-up Agreement provided for the release of the
subject shares for sale at the rate of 15% per month (210,000 pre-split
shares) once the subject shares become free trading as a result of an
effective registration of the subject shares and elimination of any
transfer restrictions. A copy of the Lock-up Agreement is attached as
Exhibit 10.2 to the Company's 10-QSB to the period ending March 30,
2002. The Company agreed to include the 1,350,000 pre-split shares on a
Form SB-2 registration statement, which the Company agreed to use its
best efforts to file with the SEC by September 15, 2002. The shares
have not been issued and no SB-2 filing has been made. The remaining
2,400,000 of the GFG Shares to be issued as part of the acquisition of a
controlling interest in the Company by CGI, were to remain restricted
shares. On August 1, 2002, the Company and CGI agreed to cancel the
acquisition of a controlling interest in the Company by CGI, and the
Company and CGI are currently not affiliated or connected in any way. As a
result, the Company determined that it had no further obligation to issue
additional shares to Greenwich Financial Group, other than the 50,000 shares
already issued.
The Company issued 1,250,000 pre-split shares of its common stock each to
Randall Letcavage and Rosemary Nguyen, principals of iCapital Corporation,
pursuant to a Financial Consulting Services Agreement dated April 17, 2002,
between the Company and Randall Letcavage and Rosemary Nguyen (the "Financial
Consulting Agreement"). These 2,500,000 pre-split shares are included in the
S-8 registration statement filed by the Company with the SEC on May 8, 2002.
A copy of the Financial Consulting Agreement is attached as Exhibit 4.1 to
the
S-8.
Saddleback Acquisition
Pursuant to the Saddleback Acquisition, the Company agreed to issue 1,000,000
shares of non-voting, non-cumulative shares of Class B Preferred Stock to
Saddleback Financial Corporation for certain assets other than tangible
assets. The Preferred Stock to be issued would be subject to conversion into
additional common shares in one year, having a value of $2.5 million, based
on
the market closing price at that time. The preferred shares were not issued
because all of the conditions to closing the transaction were not met. In
view of the rescission of the acquisition effective August 15, 2002, these
preferred shares will not be issued. As part of the Share Exchange Agreement,
the Company also agreed to issue 500,000 pre-split shares of its common stock
pursuant to a Consulting Services Agreement, dated June 3, 2002, between the
Company and Lee C. Summers, Trustee for Merchants Capital and Yasar Samarah
(the "Consulting Agreement"). The 500,000 pre-split shares were included in
an S-8 registration statement filed July 3, 2002, but were never issued. A
copy
of the Consulting Agreement is attached as Exhibit 1 to the S-8. The
Consulting
Agreement also has been terminated, effective August 15, 2002, as part of the
rescission of the Share Exchange Agreement. No services were performed under
the Consulting Agreement and the shares were not issued.
Acquisition of Interest in Venture Fund
Effective June 30, 2002, the Company subscribed for a limited partnership
interest in the Prospect Private Equity Fund. The Subscription Agreement, a
copy of which is attached as Exhibit 10.3 to our Form 10-QSB/A filed with the
Securities and Exchange Commission on July 29, 2002 for the period ending
June
30, 2002, was for a $10 million interest in the Fund, and was satisfied with
the issuance to the Fund of 5,000,000 shares of Series B convertible
preferred
stock of the Company. The Series B preferred stock is convertible into
common
shares having a value of $10 million based on the average trading price of
the
Company's common shares at the time of conversion. A copy of the Series B
Preferred Stock Statement of Rights and Preferences is attached as Exhibit
4.1
to our Form 10-QSB/A filed with the Securities and Exchange Commission on
July
29, 2002 for the period ending June 30, 2002.
Conversion Of Promissory Note
On September 1, 2002, the Company agreed to the conversion of a $75,000
promissory note previously issued to an IRA Account for the benefit of the
Company's CEO, Robert Hipple, in exchange for a loan to the Company from the
IRA Account in the amount of $73,292. The Company requested the conversion
at
the price of $0.02 per share, the then current trading price for the shares,
which was agreed to by the IRA Account custodian. A total of 1,750,000 post-
split shares were issued as a result of the conversion.
Reverse Split
In accordance with Florida law, the Board of Directors of the Company,
Messrs.
Hipple, Read and Nicholas M. Calapa, unanimously voted to amend our Articles
of Incorporation to effect a reverse split of all outstanding shares of our
common stock at an exchange ratio of one-for-two, effective as of the close
of
business on September 10, 2002. Under Florida Statute Section 607.10025, as
amended, no shareholder approval was required. For further discussion of the
reverse split, please refer to our Form 8-K filed with the SEC on September
19, 2002.
As a result of the one for two reverse split, the number of shares of common
stock outstanding was reduced from 46,804,131 to 23,402,066, before giving
effect to the cancellation of the 40 million pre-split shares issued to CGI
International Holdings, Inc. and the issuance of additional consulting
shares.
Securities issued in reliance on Regulation S
On October 2, 2002 the Company filed Form S-8 with the SEC registering the
following shares of common stock, par value $.001, issued as compensation for
consulting services provided, or to be provided, to the Company by the
following Consultants:
Consultants Shares Issued
Robert Hipple 4,000,000
Rodney Read 2,250,000
Drew Roberts 2,250,000
Lester Katz 2,550,000
Glenn Liddell 551,250
David E. Smith, III 900,000
Mark Wood 1,350,000
Lana Tabaracci 666,650
Cal Jones 700,000
David Fraidenburg 541,650
Jan Read 316,650
Jackie Groves 336,650
Brian Hansen 250,000
Flashstar Funding Corp. 75,000
Merger Associates, Inc. 1,500,000
Please refer to our Form S-8 filed with the SEC on October 2, 2002, for
further discussion and copies of the Consulting Agreements between the
Consultants and the Company.
Acquisition of International Financial Concierge Services, Inc.
On October 8, 2002 the Company entered into a Share Exchange Agreement with
International Financial Concierge Services, Inc. (IFCS), a Florida based
financial planning and services company, controlled by the principal officers
of the Company. The Share Exchange Agreement provides for the exchange of
3,125,000 Series A voting, convertible preferred shares for all of the
outstanding shares of IFCS, which became a wholly owned subsidiary of the
Company as a result. The Series A preferred shares are convertible on the
basis of one preferred share for two common shares any time after January 1,
2003. The transaction was valued at $0.02 per common share equivalent, or
$125,000, based on the average trading price for the common shares of the
Company. For further discussion please refer to our Form 8-K/A filed with the
SEC on November 19, 2002. This transaction was rescinded in early December
without the issuance of the Series A preferred shares.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
On October 15, 2002, a majority of the shareholder's entitled to vote for
amendments to the Company's Articles of Incorporation, adopted the
recommendation of the Board of Directors and adopted a resolution changing
the
name of the Corporation from Precom Technology, Inc. to International Trust &
Financial Systems, Inc. Notification of the name change, along with changes
to
the Company's trading symbol and CUISP number was made shortly thereafter to
the
NASD. For further discussion please refer to our Form 8-K filed with the SEC
on
October 17, 2002.
Item 5. Other information.
The Company has issued warrants to Greenwich Financial Group ("GFG") to
purchase 1,000,000 pre-split shares of the Company's common stock at $2.00
per
share for a period of three (3) years commencing April 16, 2002. A copy of
the Warrant Agreement with GFG is attached as Exhibit 10.1 to the Company's
10-QSB to the period ending March 30, 2002.
Item 6. Exhibits and reports on Form 8-K
Exhibits. Exhibits that are required to be attached by Item 601 of
Regulation
S-B are listed in the Index to Exhibits on page 11 of this Form 10-QSB,
and are incorporated herein by this reference.
Reports on Form 8-K. The Company filed the following reports on Form 8-K
during the quarter for which this report is filed:
On September 19, 2002, the Company filed a Form 8-K disclosing the 2 for
1 reverse split of the Company's common stock, par value $.001.
On October 10, 2002, the Company filed a Form 8-K disclosing the change
of the Company's independent auditor.
On October 17, 2002, the Company filed a Form 8-K disclosing the change
of the Company's name to International Trust & Financial Systems, Inc.
On October 23, 2002, the Company filed a Form 8-K disclosing the
acquisition of International Financial Concierge Services, Inc. as a
wholly owned subsidiary.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange
Act of 1934, the Registrant has duly caused this 10-QSB report to be signed
on
its behalf by the undersigned thereunto duly authorized.
International Trust & Financial Systems, Inc.,
a Florida corporation
By:
/s/ Robert HIpple
- -------------------------
Robert Hipple
President and CEO
DATED: June 30, 2003
INDEX TO EXHIBITS
EXHIBIT NO. PAGE NO. DESCRIPTION
3.1 * Articles of Incorporation, as amended,
incorporated by reference to the Registrant's
Form 8-K12g3, filed on September 12, 2000.
3.2 * Bylaws, as amended, incorporated by reference
to the Registrant's Form 8-K12g3, filed on
September 12, 2000.
4.1 * Series B Preferred Stock Statement of Rights
and Preferences, incorporated by reference to
the Registrant's Form 10-QSB for the period
ending June 30, 2002.
10.1 * Warrant Agreement with Greenwich Financial
Group effective May 8, 2002, incorporated by
reference to the Registrant's Form 10-QSB for
the period ending March 31, 2002.
10.2 * Registration and Lock-up Agreement between the
Company and Greenwich Financial Group,
effective May 8, 2002, incorporated by
reference to the Registrant's Form 10-QSB for
the period ending March 31, 2002.
10.3.1 * Subscription Agreement for Prospect Private
Equity Fund, incorporated by reference to the
Registrant's Form 10-QSB for the period ending
June 30, 2002
99.1 12 Certification of Chief Executive Officer, for
the period ending September 30, 2002
99.2 13 Certification of Chief Financial Officer, for
the period ending September 30, 2002
* Previously filed as indicated and incorporated herein by reference from
the
referenced filings previously made by the Company.
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of PRECOM TECHNOLOGY,
INC. (the
"Company") for the quarterly period ended September 30, 2002 as filed with
the Securities and
Exchange Commission on the date hereof (the "Report"), Robert J. Hipple, as
Chief Executive
Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350,
as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best
of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities
Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial
condition and results of operations of the Company.
Date: June 30, 2003
by:
/s/ Robert Hipple
Robert J. Hipple
President and Chief Executive Officer
This certification accompanies the Report pursuant to Section 906 of the
Sarbanes-Oxley Act of
2002 and shall not, except to the extent required by the Sarbanes-Oxley Act
of 2002, be deemed
filed by the Company for purposes of Section 18 of the Securities Exchange
Act of 1934, as
amended.
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of PRECOM TECHNOLOGY,
INC. (the
"Company") for the quarterly period ended September 30, 2002 as filed with
the Securities and
Exchange Commission on the date hereof (the "Report"), Drew Roberts, as Chief
Financial
Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350,
as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best
of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities
Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial
condition and results of operations of the Company.
Date: June 30, 2003
by:
/s/Robert Hipple
Robert Hipple
Chief Financial Officer
This certification accompanies the Report pursuant to Section 906 of the
Sarbanes-Oxley Act of
2002 and shall not, except to the extent required by the Sarbanes-Oxley Act
of 2002, be deemed
filed by the Company for purposes of Section 18 of the Securities Exchange
Act of 1934, as
amended.
F-1
13