U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[x] Quarterly Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2004.
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[ ] Transition Report under Section 13 or 15(d)of the Exchange Act For the
Transition Period from ________ to ___________
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Commission File Number: 000-50095
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IT&E International Group
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(Exact name of small business issuer as specified in its charter)
Nevada 27-0009939
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
505 Lomas Santa Fe Drive, Suite 200, Solana Beach, CA 92075
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(Address of principal executive offices) (zip code)
Issuers telephone number: 858-366-0970
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past 12
months (or 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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Check whether the Registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Common Stock, $0.001 par value per share, 70,000,000 shares authorized,
19,000,000 issued and outstanding as of June 30, 2004. Preferred Stock,
$0.001 par value per share, 5,000,000 shares authorized, 2,820,000 issued
and outstanding as of June 30, 2004.
Traditional Small Business Disclosure Format (check one)
Yes [ ] No [X]
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements................................. 3
Balance Sheet (unaudited)............................ 4
Statements of Operations (unaudited)................. 5
Statements of Cash Flows (unaudited)................. 6
Notes to Financial Statements........................ 7-8
Item 2. Management's Discussion and Analysis of Plan
of Operation........................................ 9
Item 3. Controls and Procedures.............................. 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................... 15
Item 2. Changes in Securities and Use of Proceeds............ 15
Item 3. Defaults upon Senior Securities...................... 15
Item 4. Submission of Matters to a Vote
of Security Holders................................. 15
Item 5. Other Information..................................... 15
Item 6. Exhibits and Reports on Form 8-K......................15-16
Signatures...................................................... 17
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND EXHIBITS
As prescribed by Item 310 of Regulation S-B, the independent auditor has
reviewed these unaudited interim financial statements of the registrant
for the six months ended June 30, 2004. The financial statements reflect
all adjustments which are, in the opinion of management, necessary to a
fair statement of the results for the interim period presented. The
unaudited financial statements of registrant for the six months ended
June 30, 2004, follow.
3
IT&E Corporation
Balance Sheet
(Unaudited)
BALANCE SHEET
June 30,
2004
---------
Assets
Current assets
Cash $ 186,630
Accounts receivable, net of allowance for
doubtful accounts of $45,204 2,510,353
Unbilled revenue 195,607
Prepaid and other current assets 32,283
Advances to employees 46,971
Investments 176,109
------------
Total current assets 3,147,953
------------
Fixed assets, net 63,276
Deposits 41,579
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$ 3,252,808
===========
Liabilities and Stockholders' Equity
Current Liabilities:
Line of credit - bank $ 1,298,015
Accounts payable 353,017
Accrued payroll and employee benefits 354,652
Other current liabilities 3,740
State income tax payable 4,600
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Total current liabilities 2,014,024
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Stockholders' equity:
Preferred stock, Series A, $.001 par value, 5,000,000
shares authorized, no shares issued and outstanding -
Preferred stock, Series B, $.001 par value, 5,000,000
shares authorized, no shares issued and outstanding -
Preferred stock, Series C, $.001 par value, 5,000,000
shares authorized, 2,820,000 shares issued and
outstanding 2,820
Common stock, $.001 par value, 70,000,000 shares
authorized, 19,000,000 shares issued and outstanding 19,000
Additional paid-in capital 599,958
Retained earnings 619,826
-----------
1,238,784
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$ 3,252,808
===========
The accompanying notes are an integral part of these financial statements.
4
IT&E Corporation
Statements of Operations
(Unaudited)
STATEMENTS OF OPERATIONS
For the three months ended For the six months ended
June 30, June 30,
-------------------------- -----------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Revenue $ 3,221,834 $ 2,642,866 $ 6,366,382 $ 4,651,712
Cost of revenue 2,153,185 1,706,569 4,282,538 2,894,216
----------- ----------- ----------- -----------
Gross profit 1,068,649 936,297 2,083,844 1,757,496
Operating expenses:
General and administrative
expenses 872,252 794,100 1,668,773 1,429,313
Sales and marketing
expenses 13,156 10,903 24,836 19,852
Depreciation expense 4,780 4,462 9,636 8,803
Officer salaries 65,000 60,000 120,000 120,000
----------- ----------- ----------- -----------
Total operating expenses 995,188 869,465 1,823,245 1,577,968
----------- ----------- ----------- -----------
Net operating income 113,461 66,832 260,599 179,528
Other income (expense):
Other income - 3,479 - -
Other (expenses) (75,004) (29,195) (60,514) (65,807)
Interest expense (8,778) (5,469) (30,464) (6,152)
----------- ----------- ----------- ------------
Total other income (expense) (83,782) (31,185) (90,978) (71,959)
Income before provision for
income taxes 29,679 35,647 169,621 107,569
Provision for state
income taxes - - - -
----------- ----------- ----------- -----------
Net income $ 29,679 $ 35,647 $ 169,621 $ 107,569
=========== =========== =========== ===========
Weighted average number of
common shares outstanding -
basic and fully diluted 19,000,000 481,500 19,000,000 273,930
=========== =========== =========== ===========
Net income per share -
basic and fully diluted $ 0.00 $ 0.07 $ 0.01 $ 0.39
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
5
IT&E Corporation
Statement of Cash Flow
(Unaudited)
STATEMENT OF CASH FLOWS
For the six months ended
June 30,
---------------------
2004 2003
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Cash flows from operating activities
Net income $ 169,620 $ 107,567
Adjustments to reconcile net (loss) to
net cash (used) by operating activities:
Depreciation expense 9,636 8,803
Loss on disposal of fixed assets - -
Changes in operating assets:
Accounts receivable (674,839) (884,231)
Prepaid and other current assets (19,626) 54,880
Advances to employees 12,337 1,272
Accounts payable 109,560 112,636
Accrued payroll and employee benefits 165,156 63,294
Other current liabilities - (10,683)
State franchise tax payable - -
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Net cash (used) by operating activities (228,156) (564,462)
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Cash flows from investing activities
Purchase of fixed assets (6,295) (11,461)
Deposits (18,196) (1,652)
Investment in Joint Venture (160,109) -
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Net cash (used) by investing activities (184,600) (13,113)
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Cash flows from financing activities
Advances to shareholders - (2,594)
Payments on capital lease obligations - -
Proceeds from line of credit, net 443,000 600,000
Payments made on loan to former shareholder - (36,400)
Distributions to shareholders (16,850) -
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Net cash provided by financing activities 426,150 561,006
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Net increase in cash 13,394 1,431
Cash - beginning 173,236 160,036
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Cash - ending $ 186,630 $ 161,467
========= =========
Supplemental disclosures:
Interest paid $ - $ -
========= =========
Income taxes paid $ - $ -
========= =========
The accompanying notes are an integral part of these financial statements.
6
IT&E Corporation
Notes to financial statements
Note 1 - Basis of presentation
The consolidated interim financial statements included herein, presented in
accordance with United States generally accepted accounting principles and
stated in US dollars, have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate
to make the information presented not misleading.
These statements reflect all adjustments, consisting of normal recurring
adjustments, which, in the opinion of management, are necessary for fair
presentation of the information contained therein. It is suggested that these
consolidated interim financial statements be read in conjunction with the
consolidated financial statements of the Company for the period ended December
31, 2003 and notes thereto. The Company follows the same accounting policies
in the preparation of consolidated interim reports.
Results of operations for the interim periods are not indicative of annual
results.
Note 2 - Fixed assets
Depreciation expense totaled $9,636 and $8,803 for the six-month periods
ended June 30, 2004 and 2003, respectively.
Note 3 - Line of credit - bank
The Company has a $1,500,000 renewable line of credit with a commercial bank.
The line bears interest at the bank's prime rate plus 1%. There was an
outstanding balance as of June 30, 2004 of $1,298,015. The line expires on
November 1, 2004, and is guaranteed by all of the assets of the Company and
the personal guarantees of the stockholders. The line has certain financial
covenants.
The Company recorded interest expense totaling $30,464 and $6,152 for the six
months ended June 30, 2004 and 2003, respectively.
Note 4 - Warrants and options
On April 13, 2004, the Company issued 2,000,000 warrants to several individuals
for cash totaling $2,000. The warrants are convertible on a one-for-one basis
at a price to be agreed upon on the exercise date by the Company's board of
directors and the warrant holders. The exercise date is not sooner than one
year and not later than five years.
7
IT&E Corporation
Notes to financial statements
Note 5 - Reverse Merger
On April 14, 2004, the Company ("IT&E"), Clinical Trials Assistance Corporation,
a Nevada corporation (the "Registrant") or ("CTAL"), and Clinical Trials
Assistance Acquisition Corporation, a Nevada corporation ("Merger Sub"),
entered into an Acquisition Agreement and Plan of Merger (collectively the
"Agreement") pursuant to which the Registrant, through its wholly-owned
subsidiary, Merger Sub, acquired IT&E in exchange for 11,000,000 shares of
the Registrant's common stock which were issued to the holders of IT&E stock
and 2,820,000 preferred shares, which are convertible on a ten-for-one basis
into CTAL $0.001 par value common stock, after they are held for two years
(the "Merger"). Immediately after the Acquisition was consummated and
further to the Agreement, Kamill Rohny, the controlling stockholder of the
Registrant, cancelled 28,000,000 shares of the Registrant's Common Stock held
by him (the "Cancellation"). The transaction contemplated by the Agreement
was intended to be a "tax-free" reorganization pursuant to the provisions of
Section 351 and 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended.
The stockholders of IT&E (six stockholders owning 481,500 shares), who
unanimously approved the acquisition as of the closing date of the Merger and
after giving effect to the Cancellation, now own approximately 80% of the
Registrant's common stock outstanding as of June 10, 2004. This figure is
based on the issuance of 9,000,000 shares of $0.001 par value common stock
and the share dilution upon conversion of the 2,000,000 warrants into common
stock.
For accounting purposes, this transaction was being accounted for as a reverse
merger, since the stockholders of IT&E own a majority of the issued and
outstanding shares of common stock of the Registrant, and the directors and
executive officers of IT&E became the directors and executive officers of the
Registrant.
8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATIONS
IT&E International, Inc. is a leading provider of a broad range of services
to the Life Sciences Industries. The company operates in two main divisions:
The Regulatory Affairs Division; and the Clinical Services & Solutions
Division.
The Regulatory Affairs Division provides services to pharmaceutical, biotech,
healthcare and other Life Science Companies providing to them the expertise
to evaluate, structure, implement and maintain effective quality programs and
processes that ensure compliance with applicable FDA regulations. This
Division offers a diverse all encompassing solution for the validation and
compliance of quality systems, lab and manufacturing processes, clinical
data systems, laboratory automation, content management, electronic document
management, and a complete solution for facilities, utilities and equipment
validation and compliance.
The Clinical Services and Solutions Division offers a full suite of clinical
trial support services. The services offerings include patient and
investigator recruitment, biostatistical analysis, data management, data
entry and verification and regulatory affairs services. In data management,
the group provides case report form design, protocol development, data entry
and verification, full tracking and audit trail documentation, adverse
event reporting and FDA submission. The biostat group provides data mining
studies, data base design, representation at FDA and other regulatory
meetings, and additional specialized biostatistical analysis.
Results of Operations
---------------------
As of June 30, 2004, the Company's current assets exceeded its current
liabilities by approximately $1,238,784.
For the six months ended June 30, 2004, the Company generated revenues of
$6,366,382 as compared to $4,651,712 in revenues for the same period last year.
The cost of revenue for the six months ended June 30, 2004 was $4,282,538 or
67% of revenues as compared to $2,894,216 or 62% of revenues. Total operating
expenses for the six months ended June 30, 2004 were $1,823,245 as compared to
$1,577,968 for the same period last year. The increase in operating expenses
were in line with management's expectations based. For the six months ended
June 30, 2004, the Company generated net income of $169,621 or $0.01 per share
versus net income $107,569 or $0.39 per share for the same period last year.
The decrease in net income per share was based on 273,930 shares issued and
outstanding last year as compared to 19,000,000 shares issued and outstanding
this year.
9
For the three months ended June 30, 2004, the Company generated revenues of
$3,221,834 as compared to $2,642,866 in revenues for the same period last year.
The cost of revenue for the six months ended June 30, 2004 was $2,153,185 or
67% of revenues as compared to $1,706,569 or 65% of revenues. Total operating
expenses for the three months ended June 30, 2004 were $955,188 as compared to
$869,465 for the same period last year. For the three months ended June 30,
2004, the Company generated net income of $29,679 or $0.00 per share versus net
income $35,647 or $0.07 per share for the same period last year.
Results of operations for the interim periods are not indicative of annual
results.
Plan of Operation
-----------------
IT&E International is a for-profit lifesciences organization focused on
providing its clients with solutions to complex needs in clinical research
and regulatory compliance.
Management is in the process of seeking other businesses to acquire so that it
can expand its operations. The analysis of new businesses opportunities and
evaluating new business strategies will be undertaken by or under the
supervision of the Company's directors. In analyzing prospective businesses
opportunities, management will consider, to the extent applicable, the
available technical, financial and managerial resources of any given business
venture. Management will also consider the nature of present and expected
competition; potential advances in research and development or exploration;
the potential for growth and expansion; the likelihood of sustaining a profit
within given time frames; the perceived public recognition or acceptance of
products, services, trade or service marks; name identification; and other
relevant factors. The Company anticipates that the results of operations of
a specific business venture may not necessarily be indicative of the potential
for future earnings, which may be impacted by a change in marketing strategies,
business expansion, modifying product emphasis, changing or substantially
augmenting management, and other factors.
Management will analyze all relevant factors and make a determination based
on a composite of available information, without reliance on any single
factor. The period within which the Company will decide to participate in a
given business venture cannot be predicted and will depend on certain
factors, including the time involved in identifying businesses, the time
required for the Company to complete its analysis of such businesses, the
time required to prepare appropriate documentation and other circumstances.
10
Liquidity and Capital Resources
-------------------------------
At the Company's annual shareholder meeting held on March 5, 2004, the
shareholders of the Company approved a three-for-one forward stock split.
On April 14, 2004, the Registrant entered into a Acquisition Agreement and
Plan of Merger to acquire IT&E International in exchange for 11,000,000 Common
Shares of the Registrant's common stock which were issued to the holders of
IT&E International stock and 2,820,000 preferred shares. Immediately after
the Acquisition was consummated and further to the Agreement, Kamill Rohny,
the then controlling stockholder of the Registrant, resigned as an officer and
director of the Registrant and cancelled 28,000,000 shares of Common Stock
held by him. Therefore, as of April 14, 2004, the Registrant has 19,000,000
Common Shares issued and outstanding.
The Company could be required to secure additional financing to fully implement
its entire business plan. There are no guarantees that such financing will be
available to the Company, or if available, will be on terms and conditions
satisfactory to management.
The Company does not have any preliminary agreements or understandings between
the company and its stockholders/officers and directors with respect to loans
or financing to operate the company. The Company currently has no arrangements
or commitments for accounts and accounts receivable financing.
The Company has no current commitments or other long-term debt. Additionally,
the Company has and may in the future invest in short-term investments from
time to time. There can be no assurance that these investments will result in
profit or loss.
Employees
---------
IT&E employs approximately 80-85 staff employees and utilizes the services
of approximately 50-55 outside consultants who work as independent contractors
for IT&E.
11
Market For Company's Common Stock
(i) Market Information
----------------------
The Company's Common Stock is traded on the OTC Bulletin Board under the
symbol "ITER." There has been limited trading activity in the Common Stock.
There are no assurances trading activity will take place in the future
for the Company's Common Stock.
(a) There are currently 2,000,000 warrants for shares of Common Stock which
are subject to conversion on a one-to-one basis. These are five year warrants,
which include piggyback registration rights on the underlying stock, with an
exercise price of to be mutually determined by the Board of Directors and
Warrant Holder(s), the exercise date is not sooner than one year and not later
than five years, ending April, 2009. There are no outstanding options to
purchase, or securities convertible into, the Company's common stock.
(b) There are currently 1,875,000 shares common stock of the Company which
could be sold under Rule 144k under the Securities Act of 1933, as amended.
(c) The Company did not repurchase any of its shares during the second quarter
of the fiscal year covered by this report.
(ii) Dividends
--------------
Holders of common stock are entitled to receive such dividends as the board
of directors may from time to time declare out of funds legally available for
the payment of dividends. No dividends have been paid on our common stock, and
we do not anticipate paying any dividends on our common stock in the
foreseeable future.
12
Forward-Looking Statements
--------------------------
This Form 10-QSB includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included or incorporated by reference in this
Form 10-QSB which address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including such things
as future capital expenditures (including the amount and nature thereof),
finding suitable merger or acquisition candidates, expansion and growth of the
Company's business and operations, and other such matters are forward-looking
statements. These statements are based on certain assumptions and analyses
made by the Company in light of its experience and its perception of
historical trends, current conditions and expected future developments as
well as other factors it believes are appropriate in the circumstances.
However, whether actual results or developments will conform with the
Company's expectations and predictions is subject to a number of risks and
uncertainties, general economic market and business conditions; the business
opportunities (or lack thereof) that may be presented to and pursued by the
Company; changes in laws or regulation; and other factors, most of which
are beyond the control of the Company.
This Form10-QSB contains statements that constitute "forward-looking
statements." These forward-looking statements can be identified by the use of
predictive, future-tense or forward-looking terminology, such as "believes,"
"anticipates," "expects," "estimates," "plans," "may," "will," or similar
terms. These statements appear in a number of places in this Registration and
include statements regarding the intent, belief or current expectations of
the Company, its directors or its officers with respect to, among other
things: (i) trends affecting the Company's financial condition or results of
operations for its limited history; (ii) the Company's business and growth
strategies; and, (iii) the Company's financing plans. Investors are cautioned
that any such forward-looking statements are not guarantees of future
performance and involve significant risks and uncertainties, and that actual
results may differ materially from those projected in the forward-looking
statements as a result of various factors. Factors that could adversely
affect actual results and performance include, among others, the Company's
limited operating history, dependence on continued growth in the irrigation
industry, potential fluctuations in quarterly operating results and expenses,
government regulation dealing with irrigation systems, technological change
and competition.
Consequently, all of the forward-looking statements made in this Form 10-QSB
are qualified by these cautionary statements and there can be no assurance
that the actual results or developments anticipated by the Company will be
realized or, even if substantially realized, that they will have the expected
consequence to or effects on the Company or its business or operations. The
Company assumes no obligations to update any such forward-looking statements.
13
Item 3. Controls and Procedures
As of the end of the period covered by this report, the Company conducted an
evaluation, under the supervision and with the participation of the principal
executive officer and principal financial officer, of the Company's disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (the "Exchange Act")). Based on this
evaluation, the principal executive officer and principal financial officer
concluded that the Company's disclosure controls and procedures are effective
to ensure that information required to be disclosed by the Company in reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms. There was no change in the Company's
internal control over financial reporting during the Company's most recently
completed fiscal quarter that has materially affected, or is reasonably likely
to materially affect, the Company's internal control over financial reporting.
14
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company is not a party to any legal proceedings.
ITEM 2. Changes in Securities and Use of Proceeds
At the Company's annual shareholder meeting held on March 5, 2004, the
shareholders of the Company approved a three-for-one forward stock split.
On April 14, 2004, the Registrant entered into a Acquisition Agreement and
Plan of Merger to acquire IT&E International in exchange for 11,000,000 Common
Shares of the Registrant's common stock which were issued to the holders of
IT&E International stock and 2,820,000 preferred shares. Immediately after
the Acquisition was consummated and further to the Agreement, Kamill Rohny,
the then controlling stockholder of the Registrant, resigned as an officer and
director of the Registrant and cancelled 28,000,000 shares of Common Stock
held by him. Therefore, as of April 14, 2004, the Registrant has 19,000,000
Common Shares issued and outstanding.
ITEM 3. Defaults upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
During the quarter ended, no matters were submitted to the Company's
security holders.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Title of Document
-----------------------------------------------
31.1 Certifications of the Chief Executive Officer and Chief Financial
Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certifications of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
15
(b) Reports on Form 8-K
The Company filed a Current Report dated April 14, 2004, pursuant to Item 1
("Changes in Control of Registrant"), Item 2 ("Acquisition or Disposition of
Assets"), Item 5 ("Other Events"); and Item 7 ("Exhibits") entitled "Acquisition
of IT&E."
The Company filed an amended Current Report on June 15, 2004, pursuant to
Item 1 ("Changes in Control of Registrant"), Item 2 ("Acquisition or Disposition
of Assets"), Item 5 ("Other Events"); and Item 7 ("Exhibits") entitled
"Acquisition of IT&E."
The Company filed a Current Report dated June 15, 2004, pursuant to Item 9
("Regulation FD Disclosure"), a news release entitled "Clinical Trials
Assistance Corporation to Acquire IT&E Corporation."
The Company filed a Current Report dated June 23, 2004, pursuant to Item 9
("Regulation FD Disclosure"), a news release entitled "IT&E International
Group Announces New Trading Symbol."
16
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
IT&E International Group
------------------------
(Registrant)
Dated: August 12, 2004 By: /s/ Peter R. Sollenne
--------------- -----------------------------
Peter R. Sollenne
Chief Executive Officer
Director
Dated: August 12, 2004 By: /s/ Kelly Alberts
--------------- -----------------------------
Kelly Alberts
President/COO
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
IT&E International Group
Dated: August 12, 2004 By: /s/ Peter R. Sollenne
--------------- -----------------------------
Peter R. Sollenne
Chief Executive Officer
Director
Dated: August 12, 2004 By: /s/ Kelly Alberts
--------------- -----------------------------
Kelly Alberts
President/COO
17