U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ___________ to ___________
Commission File Number: 000-50095
IT&E INTERNATIONAL GROUP
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(Name of Small Business Issuer in Its Charter)
Nevada 77-0436157
------------------------------- -----------------------------------
(State or other jurisdiction of I.R.S. Employer Identification #
incorporation or organization)
505 Lomas Santa Fe Drive, Suite 200, Solana Beach, California 92075
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(Address of principal executive offices) (Zip Code)
(858) 366-0970
--------------------------
Issuer's Telephone Number
Securities registered under Section 12(b) of the Exchange Act:
Title of each class registered: None Name of each exchange on which
registered: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.001
-----------------------------
(Title of class)
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 [ ]
Check if no disclosure of delinquent filers in response to Item 405
of Regulation S-B is contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $13,843,137.
The aggregate market value on December 31, 2004 of voting stock held by
non-affiliates was $3,840,000.
Common Stock, $0.001 par value per share, 70,000,000 shares authorized,
19,000,000 issued and outstanding as of December 31, 2004. Preferred Stock,
$0.001 par value per share, 5,000,000 shares authorized, 2,820,000 Series C,
issued and outstanding as of December 31, 2004.
Documents incorporated by reference: See Item 13. Exhibits and Reports
on Form 8-K in Part III.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
1
Forward-Looking Statements
This report contains forward-looking statements. The forward-looking
statements include all statements that are not statements of historical fact.
The forward-looking statements are often identifiable by their use of words
such as "may," "expect," "believe," "anticipate," "intend," "could,"
"estimate," or "continue," "plans" or the negative or other variations of
those or comparable terms. Our actual results could differ materially from
the anticipated results described in the forward-looking statements. Factors
that could affect our results include, but are not limited to, those discussed
in Item 6, "Management's Discussion and Analysis or Plan of Operation" and
included elsewhere in this report.
2
CONTENTS
PAGE
PART I
Item 1. Description of Business........................................4
Item 2. Description of Property.......................................11
Item 3. Legal Proceedings.............................................11
Item 4. Submission of Matters to a Vote of Security Holders...........12
PART II
Item 5. Market for Common Equity and Related Stockholder Matters......13
Item 6. Management's Discussion and Analysis or Plan of Operation.....14
Item 7. Financial Statements..........................................18
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................19
Item 8A. Controls and Procedures.......................................19
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the
Exchange Act...............................................20
Item 10. Executive Compensation........................................23
Item 11. Security Ownership of Certain Beneficial Owners and
Management.................................................26
Item 12. Certain Relationships and Related Transactions................28
Item 13. Exhibits and Reports on Form 8-K..............................28
Item 14. Principal Accountant Fees and Services........................29
SIGNATURES ..............................................................30
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
(i) Business Development, Organization and Acquisition Activities
IT&E International Group., a life science company, hereinafter referred to
as "we", "us", "our", "the Company", "IT&E" or "the Registrant" was
organized under the name Clinical Trials Assistance Corporation, or
("Clinical Trials") by the filing of Articles of Incorporation with the
Secretary of State of the State of Nevada on April 22, 2002. On June
14, 2004, Clinical Trials merged with IT&E International, Inc. and amended
its Articles to change the corporate name to IT&E International Group.
We are a life sciences organization focused on providing our clients with
solutions to complex needs in clinical research and regulatory compliance.
Our strengths are derived from a solid foundation of forward thinking and
continuous investment in training and research. We serve a variety of clients,
including those in the private industry, public institutions, research
facilities and the government. By focusing on specialized practice areas in
regulatory compliance, clinical research, and international development of
global health and advanced technology research, we are able to offer solutions
with one common goal in mind, to improve the human condition by delivering
forward thinking solutions to the global community.
(ii) Principal Products, Services, and Principal Markets
IT&E is a leading provider of a broad range of services to the Life Sciences
Industries. We primarily provide our clients with solutions to complex needs
in clinical research and regulatory compliance.
We provide regulatory compliance services to pharmaceutical, biotech,
healthcare and other life science companies by providing to them the expertise
to evaluate, structure, implement and maintain effective quality programs and
processes that ensure compliance with applicable FDA regulations. We offer a
diverse, all encompassing solution for the validation and compliance of quality
systems, laboratory 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.
We also offer a full suite of clinical trial support services, such as patient
and investigator recruitment, biostatistical analysis, data management, data
entry and verification and regulatory affairs services. In data management, we
provide case report form design, protocol development, data entry and
verification, full tracking and audit trail documentation, adverse event
reporting and FDA submission. Our biostatistical analysis group provides data
mining studies, database design, representation at FDA and other regulatory
meetings, and additional specialized biostatistical analysis.
4
Program Management and Outsourcing
----------------------------------
IT&E's clients rely on us to protect the integrity of their data and provide
for a secure environment for successful delivery. Our program managers
consist of senior medical professionals with specific expertise in designing,
developing, and managing Phase I through Phase III and Post-Marketing Clinical
Trials. Program managers work directly with our trial sponsors to ensure that
all deliverables are met and budget constraints are followed closely. They can
also serve as liaisons between the numerous coordinating sites and individuals
involved in the final completion of the project.
We offer a complete range of validation and compliance services from management
consulting to protocol development and execution. We are dedicated to
designing, developing and implementing practices that protect the integrity
of the computerized systems and equipment used in health product research
and manufacturing processes. We ensure that these systems are maintained
in a validated state throughout their entire lifecycle by following
documented protocols and standardized procedures. IT&E has the ability
to deliver regulatory compliance services in the following fields:
o Guidelines Interpretation
o Planning & Strategy
o Corporate policies and procedures
o Methodology
o Independent Vendor Audits & Assessments
o SOP Generation and Revision
o Gap Analysis
o Risk Analysis - Business and Regulatory
o Remediation
o Training end users and program managers
IT&E provides services in the CSV, Part 11, Part 210/211, Part 58, Part 320,
Part 820/QSR, GAMP4 as well as European and Asian standards. Our validation
and compliance team designs, develops and implements practices that protect
the integrity of the computerized systems, equipment and facilities used in
health product research and manufacturing processes. Further, we ensure
that these systems are maintained in a validated state throughout their
entire lifecycle by following documented protocols and standardized
procedures. By analyzing market trends, continually reengineering our best
practices, utilizing leading technology and keeping abreast of changes
from the regulatory bodies, we are able to ensure a high degree of quality
standards are being met.
In addition, we specialize in quality procedures, programs and management
consulting in FDA regulated areas within the pharmaceutical and biotechnology
industries including: audits, remediation, quality systems, and validation
and qualification of processes, cleaning, environment, and computerized
systems. We have developed and implemented several plant-wide systems in the
pharmaceutical and biotechnology industries and are recognized as a and
verifiable quality leader. Along with the strategic alliance, of a proprietary
methodology, with Correlate & IBM, IT&E has developed and has access to an
extensive database which includes formats and templates
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to get projects off and running quicker and maximize the efficiency in
development and the ensuing validation and compliance processes. We provide
services focused around GxP compliance, validation and regulatory
affairs for the life sciences industry, including the following:
o Computer Systems Validation (CSV)
o 21 CFR Part 210/211 - Good Manufacturing Practices
o 21 CFR Part 11 - Electronic Signatures and Electronic Records
o Several other FDA and EMEA regulated areas
o Computerized Systems Validation
o Cleaning Validation
o Facility, equipment and Utility Validation
o Sterilization and Sanitization Validation
o Process Validation
IT&E offers a complete solution
for the clinical trials and clinical research industry, including:
Clinical Data Entry and Data Management
---------------------------------------
IT&E is capable of providing SAS (R) end-to-end solutions throughout every
stage of a drug's lifecycle: from discovery, development, and through
commercialization. We focus on assessing, advising, and designing
comprehensive systems solutions in the pharmaceutical, biotechnology, and
medical devices industries. We provide leading and emerging pharmaceutical
and biotechnology companies with project-based consulting services in the
areas of Data Management (SAS(R) databases and Oracle(R) Clinical systems),
Clinical Programming, Biostatistics, and Clinical Validation (GCP). The
IT&E team of project/program managers bring an average of 10+ years of
biopharma experience to their clients, as well as the tools, talent and
strategies necessary to carry a project from conception to completion.
IT&E's extensive database selects and employs project-specific analysts to
provide constant monitoring of project scope, budget, and deliverables while
utilizing the IT&E custom Project Tracking System to provide clients with
real-time, comprehensive status reports.
6
Data Management
---------------
IT&E provides a full range of data management solutions, including SAS(R)
databases and Oracle(R) Clinical, as well as web-based or conventional
means of data capture. Following are some of the specific areas of
expertise:
o SAS (R) databases - Major functions supported
o Datasets
o Case Report Form design and analysis
o Safety Information
o Data marts for Data mining
o Integrated Data Analysis Systems
o Data Validation Specifications
o Database Design, install, and upgrade
o Data Quality Assurance
o Global Database Integration
o Oracle(R) Clinical - Major functions supported
o Define and manage a Clinical Study (Protocol)
o Define data elements to be collected in a Clinical study
o Define and generate data entry screens
o Define edit checks to be applied to the data
o Validation and derivation procedures [data]
o Collect and manage the data
o Data Extract to SAS for analysis
Clinical Programming
--------------------
IT&E provides accurate and reliable programming to support regulatory
submissions and clinical study reports. Because of the extensive experience
of the IT&E consultants, we are able to optimize the flow of valuable
scientific and operational data thereby assisting our clients to get their
products to market faster.
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Biostatistics
-------------
IT&E's biostatisticians focus on the delivery of quality design consulting
and statistical analyses for clients engaged in complex clinical studies.
This team delivers superior results for targeted summaries of key findings
within the regulatory finding process, as well as producing creative
scientific presentations. Some of the areas of expertise are as follows:
o Clinical Study Design
o Estimation of sample size
o Trial duration
o Structuring of treatment comparisons
o Definition of key endpoints
o Number and timing of analyses
o Precise interpretations of results
o Data displays and interpretations
o Clinical development programs
o ISS/ISE preparation
o Prepare integrated clinical/statistical reports
o Design tables and graphics
o Analysis planning and preparation
o Summary of statistical methodologies
o Support submissions to regulatory agencies (FDA)
Clinical Validation (GCP)
-------------------------
IT&E's clinical validation practice goes hand-in-hand with the efforts of the
Compliance Group. Our regulatory and safety services must compliment our
clients' drug development process from beginning to end. The IT&E and Client
Partnership is truly a "Partnership That Works". By partnering with our
clients to design a study that combines an unsurpassed understanding of the
regulatory environment and current FDA regulations, we ensure a smooth and
efficient development cycle. IT&E has designed its own Clinical Validation
Methodology for the enterprise that is designed to satisfy regulated business
practices and procedures that involves multiple groups within the organization
(users, systems, database administrators, and other support staff).
8
Typically, the IT&E Validation Plan describes the system and scope, outlines
the schedule and resources (GANTT), defines the testing strategy (and SOPs),
and describes the deliverables that will document the validation process.
The steps are as follows:
o Validation Plan Preparation
o System Inventory Preparation
o Preparing the work plan using the 5C's: System Classification, Complexity,
Control, Compliance, Criticality
o Preparing Individual System Profiles & Gap Analysis
o Global Technological & Procedural Gap Matrix Preparation
o Preparing, Monitoring and Executing various Validation Protocols
including Design Qualifications (DQ), Installation Qualifications (IQ),
Operational Qualifications, (OQ), Performance Qualifications (PQ),
Equipment Qualifications (EQ)
o Risk Analysis Matrix (The validation effort is premised on a determination
of risk and after addressing the 5 C's can we ascertain what level of
design documentation is sufficient for a specified system)
(iii) Competition
------------------
The drug and medical device development outsourcing industry consists of
hundreds of smaller, limited-service providers and a number of full-service
global development companies. The industry continues to experience
consolidation and, in recent years, a group of large, full-service competitors
has emerged. This trend of industry consolidation appears to have created
greater competition among the larger companies for clients and acquisition
candidates.
In addition to competing with a number of other global, full-service companies,
IT&E also competes against some medium-sized companies, in-house research and
development departments of pharmaceutical and biotechnology companies, as well
as universities and teaching hospitals. In addition, the industry has few
barriers to entry. Newer, smaller entities with specialty focuses, such as
those aligned to a specific disease or therapeutic area, compete aggressively
against larger companies for clients. Increased competition might lead to
price and other forms of competition that might adversely affect our operating
results.
IT&E competes on the basis of a number of factors, including reputation for on-
time quality performance, expertise and experience in specific therapeutic
areas, scope of service offerings, price, strengths in various geographic
markets, technological expertise and systems, data management capabilities for
time savings with data integrity, ability to acquire, process, analyze and
report data in a time-saving accurate manner, ability to manage large-scale
clinical trials both domestically and internationally, and expertise and
experience in healthcare economics. There are no assurances that IT&E
will be able to compete favorability in these areas.
9
For specialty areas such as laboratory and manufacturing validation, medical
communications, and protocol development, IT&E competes in a market that has
a myriad of niche providers. For the most part, these niche providers offer
specialty services and products with a focus on a specific geographic region,
a particular service or function and/or a specific stage or phase of drug
development. By contrast, IT&E provides its services on a global basis across
functional areas. IT&E competes principally on the basis of reputation,
scientific and technical expertise, experience and qualifications of
professional staff, quality of services, and ability to deliver quality
products to the client's specifications. The outsourced preclinical research
industry consists of a number of large providers and numerous smaller niche
companies. As such, there is significant competition for these opportunities,
and IT&E success will depend on our ability to identify and competitively bid
for risk-sharing programs that are likely to be productive.
(iv) Government Regulation
--------------------------
IT&E's clients are subject to extensive regulations by government agencies.
Consequently, the services IT&E provides for these clients must comply with
relevant laws and regulations.
Prior to commencing human clinical trials in the United States, a company
developing a new drug must file an Investigational New Drug application, or
IND, with the FDA. The IND must include information about animal toxicity and
distribution studies, manufacturing and control data, stability data and a
detailed plan, or study protocol, for the proposed clinical trial of the drug
or biologic in humans. If the FDA does not object within 30 days after the
IND is filed, human clinical trials may begin. The study protocol will also
be reviewed and approved by the institutional review board, or IRB, in each
institution in which a study is conducted, and the IRB may impose additional
requirements on the way in which the study is conducted in its institution.
Human trials usually start on a small scale to assess safety and then expand
to larger trials to test efficacy along with safety in the target population.
The trials are generally conducted in three phases, which sometimes overlap,
although the FDA may require a fourth phase as a condition of approval. After
the successful completion of the first three clinical phases, a company
requests approval for marketing its product by submitting a new drug
application, or NDA. The NDA is a comprehensive, multi-volume filing that
includes, among other things, the results of all pre-clinical and clinical
studies, information about how the product will be manufactured and tested,
additional stability data and proposed labeling. The FDA's review can last
from six months to many years, with the average review lasting 18 months.
Once the NDA is approved, the product may be marketed in the United States
subject to any conditions imposed by the FDA.
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IT&E must conform to regulatory requirements that are designed to ensure the
quality and integrity of the testing process. To help ensure compliance with
these regulations, IT&E has established quality assurance at our laboratory
facilities to monitor ongoing compliance by auditing test data and conducting
regular inspections of testing procedures and our laboratory facilities.
(v) Employees
--------------
At December 31, 2004, IT&E employed approximately 100 employees. These
employees represent the following employment mix for the company: 10%
administration, 7% recruiting, 5% sales, and 78% contract service providers.
Additionally we utilize the services of approximately 30 outside consultants
who work as independent contractors for IT&E.
ITEM 2. DESCRIPTION OF PROPERTY.
A. Description of Property
We do not own any real estate properties. Our executive offices are located
at 505 Lomas Santa Fe Drive, Suite 200, Solana Beach, California 92075 and our
telephone number is (858) 366-0970. We pay a base monthly rent of
approximately $7,000, which includes rent, common area maintenance, insurance
and real estate taxes. Management believes that these facilities are adequate
for our current and anticipated needs.
We also maintain an office at:
31 N. Second Street, Ste. 250
San Jose, CA 95113
B. Investment Policies
The Company does not currently own and the Company has not made any investments
in real estate, including real estate mortgages, and the Company does not
intend to make such investments in the near future.
ITEM 3. LEGAL PROCEEDINGS.
We are not a party to any legal proceeding. The Company from time to time may
be involved in litigation incident to the conduct of its business. Certain
litigation with third parties and present and former shareholders of the
Company are routine and incidental.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Registrant held its annual shareholder meeting on March 5, 2004.
At this meeting the shareholders voted and approved the following
proposals:
1. To increase the number of the Company's authorized Common Shares,
from twenty million (20,000,000) to seventy million (70,000,000) shares;
2. Election of two Directors (Kamill Rohny and Eugene P. Boling, MD);
3 Forward Split the Common Stock three-for-one;
4. Approval to issue warrants to purchase up to 1,800,000 shares of
the Company's Common Stock;
5. Ratification of Beckstead and Watts, LLP as independent auditors.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
A. MARKET INFORMATION
Our Common Stock is quoted on the OTC Bulletin Board under the symbol ITER,
since October 27, 2003. As of December 31, 2004, there were approximately 200
holders of record of our Common Stock. The following table sets forth the high
and low bid prices for our Common Stock for the periods indicated as reported
by the OTC Bulletin Board. The prices state inter-dealer quotations, which do
not include retail mark-ups, mark-downs or commissions. Such prices do not
necessarily represent actual transactions.
FISCAL 2003 High Low
-------------------------------- ---- ----
Cleared for trading on October 27, 2003
Quarter ended December 31, 2003 $0.00 $0.00
FISCAL 2004
-------------------------------- ---- ----
Quarter ended March 31, 2004 $0.00 $0.00
Quarter ended June 30, 2004 $2.05 $1.25
Quarter ended September 30, 2004 $1.94 $0.62
Quarter ended December 31, 2004 $1.00 $0.16
The source of this information is the OTC Bulletin Board and other quotation
services. The quotations reflect inter-dealer prices, without retail markup,
markdown or commission and may not represent actual transactions.
B. HOLDERS
-----------
As of December 31, 2004, there were approximately 200 holders of record of our
common stock.
C. DIVIDENDS
-------------
To date, we have not paid any dividends on its common stock and do not expect
to declare or pay any dividends on such common stock in the foreseeable future.
Payment of any dividends will be dependent upon future earnings, if any, our
financial condition, and other factors as deemed relevant by our Board of
Directors.
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D. STOCK REPURCHASE
--------------------
The Company did not repurchase any of its shares during the fiscal year covered
by this report.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Introduction
------------
On April 14, 2004, IT&E International Group entered into an Acquisition
Agreement and Plan of Merger with Clinical Trials Assistance Corporation, or
Clinical Trials, through its wholly-owned subsidiary, Merger Sub. Pursuant to
the Acquisition Agreement, Clinical Trials 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 can be converted
for common shares at a ten-for-one ratio, after they are held for two years.
Additionally, once the merger was consummated and further to the Agreement,
the then controlling stockholder of the Registrant, cancelled 28,000,000
shares of the Registrant's Common Stock held by him. Clinical Trials and
IT&E were engaged in the same general business. 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.
Company Overview
----------------
We are a life sciences service organization focused on providing our clients
with project-based consulting services in the areas of FDA regulatory
compliance, data management, biometrics and clinical validation throughout the
clinical trials lifecycle. Our services range from recruitment of patients for
clinical trials and providing skilled personnel to assist with managing
clinical trials, to providing enterprise software solutions and training to
manage data to ensure FDA compliance. We also provide validation services for
new pharmaceutical manufacturing facilities. We serve a variety of clients,
including those in the private industry, public institutions, research
facilities and the government.
Our client list includes such well-known companies as Eli Lilly, Novartis,
Pfizer, Bristol-Myers Squibb, Glaxo Smith Kline Abbott, Schering-Plough,
Amgen, Baxter, Aventis Pasteur, Wyeth, Vaxgen, Boston Scientific and
Genentech. We are in the process of seeking other businesses to acquire so
that we can expand our operations. The analysis of new businesses opportunities
and evaluation of new business strategies will be undertaken by or under the
supervision of our Board of Directors. In analyzing prospective businesses
opportunities, management will consider, to the extent applicable, the
14
available technical, financial and managerial resources of any given business
venture. We 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.
We 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 we 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 us to complete our analysis of such businesses, the
time required to prepare appropriate documentation and other circumstances.
The overall outlook for our continued financial growth remains very positive as
our pipeline for new customers remains solid. We will continue to move ahead
on the execution of our strategic plans to raise additional capital to be used
to make further strategic acquisitions in the coming quarters, positioning IT&E
for a leadership position in our industry.
Results of Operations
---------------------
As of December 31, 2004, the Company's current assets exceeded its current
liabilities by $4,086,665. This includes a $5.0 million financing from Laurus
Master Fund Ltd., or Laurus, an institutional fund that specializes in direct
investments in growing, small and micro-cap companies, that closed in October
2004. Of these funds, $2.5 million are restricted and under the control of
Laurus for either additional growth working capital or for a future acquisition,
which is a part of our long-term strategy. The loan has a three year term and
an interest rate of prime plus 2.5%. Interest has been payable monthly.
Principal payments of $83,333.33 commence on May 1, 2005.
Accounts receivable at December 31, 2004 was $2.6 million, net of an allowance
for doubtful accounts of $75,000, as compared to accounts receivable at December
31, 2003 of $1.6 million, net of an allowance for doubtful accounts of $118,000.
The increase was due primarily to an aggressive sales strategy during the second
and third quarter of 2004 to sign new long-term and preferred vendor
relationships with the leading pharmaceutical and biotechnology companies to
further expand and broaden our customer base. An additional result of
establishing contracts with such established companies is that the risk of
uncollectible accounts is reduced. We review our outstanding receivables on a
monthly basis to determine collectibility.
15
For the year ended December 31, 2004, we generated service revenues of
$13.4 million as compared to $10.0 million in revenues for the year ended
December 31, 2003, an increase of 34%. Service revenues for the fourth quarter
ended December 31, 2004, were $4.0 million as compared to $2.8 million during
the same quarter of 2003, an increase of 44% from the prior year's fourth
quarter. This increase in revenues is a direct result in our change in sales
strategy noted above.
Our strategy of signing major clients has begun to produce some good results.
We have signed new agreements with several big pharmaceutical companies, large
biotech firms, an alternative supplement manufacturers, and a medical device
company. In addition, we expanded our extensive services to clients supporting
the U.S. Government's Bio Defense initiatives by assisting companies that are
producing needed vaccines for anti-terrorism measures.
We have also secured renewals and extensions of major initiatives within
existing clients, such as Schering-Plough, Pfizer, Novartis, GlaxoSmithKline,
Baxter Pharmaceutical, Aventis Pasteur, Bayer, Wyeth Global, Genentech, Chiron,
Amgen, Boston Scientifc and VaxGen.
The cost of revenue for the year ended December 31, 2004 was $$9.5 million,
or 71% of revenues, as compared to $6.4 million, or 64% of revenues for the year
ended December 31, 2004. Our gross profit for the fourth quarter of 2004 was
29% as compared to 36% during the same quarter of 2003. The increase in cost of
revenue exceeded management's expectations and we are working to improve these
margins by way of controlling the cost of providing our contractors to the
customer.
Total operating expenses for the year ended December 31, 2004 were $4.3 million,
or 32% of revenues, as compared to $3.4 million, or 34% of revenues, for the
same period last year. Total operating expenses for the fourth quarter of 2004
were $1.5 million as compared to $866,000 for the same period in 2003. During
2004, we incurred costs not previously incurred, such as costs associated with
our reverse merger with Clinical Trials Assistance Corporation, costs associated
with becoming a public entity and costs associated with the amortization of loan
fees related to the convertible loan with Laurus. In addition to the
significant investment to broaden our customer base, we began to implement a
company-wide quality management system to better serve our customers. We also
added depth to our management team and began the process of recruiting
independent outside Board members. We expect these costs to continue during
2005 as we continue to grow as a public entity and move ahead with our strategy
of seeking follow-on investors to support our acquisition strategy and prepare
for our future move to a National Stock Exchange.
For the year ended December 31, 2004, we had a net loss of $499,000, or $0.03
per share, as compared to net income $82,000, or $0.17 per share, for the same
period in 2003. The number of shares used in the calculation of earnings per
share changed substantially as a result of our merger with Clinical Trials
Assistance Corporation. At December 31, 2003 481,500 shares were issued and
outstanding as compared to 19,000,000 shares issued and outstanding at December
31, 2004.
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Need for Additional Funding
---------------------------
With our current contract backlog and sales pipeline of $33.0 million, the
highest in company history, and our current cash and accounts receivables
balance, we believe that we have adequate resources to fund our operations
through 2005. There can be no assurance that market conditions will permit
us to raise sufficient funds for strategic acquisitions or that additional
financing will be available when needed or on terms acceptable to
us.
Liquidity and Capital Resources
-------------------------------
The Company is authorized to issue 70,000,000 shares of its $0.001 par value
common stock, 5,000,000 shares of its $0.001 par value Series A preferred
stock, 5,000,000 shares of its $0.001 par value Series B preferred stock, and
5,000,000 shares of its $0.001 par value Series C preferred shares.
On October 18, 2004, we issued a $5,000,000 secured convertible term note
("Note") to Laurus Master Fund, Ltd. ("Laurus"). The Note is convertible into
shares of our common stock at an initial conversion price of $0.75 per share.
Pursuant to this agreement, we also issued to Laurus a warrant ("Warrant") to
purchase up to 1,924,000 shares of our common stock, of which 962,000 shares
will have an exercise price of $0.94 and 962,000 shares will have an exercise
price of $1.12. The warrants expire on October 18, 2011.
The Note has a term of three years and accrues interest at the prime rate plus
2.5% per year (7.50% as of December 31, 2004). The Note is secured by all our
assets and the assets of our subsidiaries. The Note consists of a non-
restricted facility of $2.5 million and a restricted facility of $2.5 million.
The non-restricted facility was used to pay off an outstanding line of credit
of approximately $1.5 million, with the remaining $1.0 million, net of
transaction fees, being used for working capital. The second $2.5 million
facility is restricted for either additional internal growth working capital
requirements or for a future acquisition, which is a part of our strategic
long-term growth plans. These funds are under the sole dominion and control of
Laurus as security for our obligations under the Securities Purchase Agreement
and other related agreements. (See financial footnote 6 entitled "Convertible
Debt.")
17
ITEM 7. FINANCIAL STATEMENTS.
a) Financial Statements
IT&E INTERNATIONAL GROUP
FINANCIAL STATEMENTS
December 31, 2003
December 31, 2004
CONTENTS
PAGE
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-1
BALANCE SHEET F-2
STATEMENTS OF OPERATIONS F-3
STATEMENT OF STOCKHOLDERS' EQUITY F-4
STATEMENTS OF CASH FLOWS F-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-6-17
18
BECKSTEAD AND WATTS, LLP
----------------------------
CERTIFIED PUBLIC ACCOUNTANTS
2425 W Horizon Ridge Parkway
Henderson, NV 89052
702.257.1984 (tel)
702.362.0540 (fax)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the accompanying balance sheets of IT&E International Group
(the "Company"), as of December 31, 2004 and 2003, and the related statement of
operations, stockholders' equity, and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with the standards of Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of IT&E International Group as of
December 31, 2004 and 2003, and the results of its operations and cash flows
for the years then ended, in conformity with U.S. generally accepted accounting
principles.
/s/ Beckstead and Watts, LLP
-----------------------------
Henderson, Nevada
March 22, 2005
F-1
IT&E INTERNATIONAL GROUP
Balance Sheet
December 31, December 31,
2004 2003
Assets ------------ -------------
Current assets:
Cash - unrestricted $ 402,779 $ 173,236
Cash - restricted 2,506,862 -
Accounts receivable, net of
allowance for doubtful accounts
of $75,000 and $118,118, respectively 2,644,501 1,639,907
Unbilled revenue 133,398 195,607
Prepaid and other current assets 77,175 71,965
------------ ------------
Total current assets 5,764,715 2,080,715
------------ ------------
Fixed assets, net 313,435 82,618
Loan fees, net 807,144 -
Deposits 33,723 23,382
------------ ------------
$ 6,919,018 $ 2,186,715
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 612,647 $ 254,855
Accrued payroll and employee benefits 322,300 168,296
Line of credit - bank - 855,015
Current portion of capital lease
obligations 3,089 -
Current portion of convertible
note payable 666,667 -
Deferred rent 30,293 -
Other accrued liabilities 43,055 27,731
------------ ------------
Total current liabilities 1,678,050 1,305,897
Long-term capital lease obligations,
less current portion 16,015 -
Long-term convertible note payable,
less current portion 4,333,333 -
------------ ------------
6,027,398 1,305,897
Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value,
70,000,000 shares authorized,
19,000,000 shares issued and
outstanding 19,000 100,750
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 -
Additional paid-in capital 862,720 273,930
Retained earnings 7,080 506,138
------------ ------------
891,620 880,818
------------ ------------
$ 6,919,018 $ 2,186,715
============ ============
The accompanying notes are an integral part of these financial statements.
F-2
IT&E INTERNATIONAL GROUP
Statements of Operations
For the years ended
------------------------------
December 31,
2004 2003
------------ -------------
Service revenue $ 13,437,388 $ 10,018,459
Reimbursement revenue 405,749 392,426
------------- -------------
Total revenue 13,843,137 10,410,885
Cost of revenue 9,497,806 6,444,287
Reimbursable out-of-pocket expenses 405,749 392,426
------------- -------------
Gross profit 3,939,582 3,574,173
Operating Expenses:
General and administrative expenses 2,876,100 2,795,472
Sales and marketing expenses 982,077 333,730
Depreciation expense 21,588 18,438
Officer salaries 457,981 300,000
------------- -------------
Total operating expenses 4,337,746 3,447,640
------------- -------------
Net operating income (loss) (398,165) 126,533
Other income (expense):
Interest income 3,298 -
Other income (expense) 32,831 (8,298)
Interest expense (137,022) (33,206)
------------- -------------
Total other income (expense) (100,893) (41,504)
------------- -------------
Income (loss) before provision
for income taxes (499,058) 85,029
Provision for income taxes - 3,000
------------- -------------
Net income (loss) $ (499,058) $ 82,029
============= =============
Weighted average number of
common shares outstanding - basic
and fully diluted 19,000,000 481,500
============= =============
Net income (loss) per share - basic
and fully diluted $ (0.03) $ 0.17
============= =============
The accompanying notes are an integral part of these financial statements.
F-3
IT&E INTERNATIONAL GROUP
STATEMENTS OF STOCKHOLDERS' EQUITY
STATEMENT OF STOCKHOLDERS' EQUITY
Total
Common Stock Preferred Stock Additional Stock-
------------- --------------- Paid-in Retained holders'
Shares Amount Shares Amount Capital Earnings Equity
------- ------ ------ ----- --------- -------- -------
Balance,
Dec 31, 2002 481,500 $100,750 - - $ 273,930 $424,109 $ 798,789
Net income 82,029 82,029
-------- ------- ------- ------ --------- -------- ----------
Balance,
Dec 31,
2003 481,500 100,750 - - 273,930 506,138 880,818
Merger
Trans-
action 18,518,500 (81,750) 2,820,000 2,820 78,930 - -
Issuance of
Warrants 509,860 - 509,860
Net loss (499,058) (499,058)
-------- ------- ------- ------ -------- -------- ----------
Balance,
Dec 31,
2004 19,000,000 $19,000 2,820,000 $2,820 $862,720 $ 7,080 $ 891,620
========== ======= ========== ======= ======== ======== =========
The accompanying notes are an integral part of these financial statements.
F-4
IT&E INTERNATIONAL GROUP
Statements of Cash Flow
For the years ended
------------------------------
December 31,
2004 2003
------------ -------------
Cash flows from operating activities
Net income (loss) (499,058) 82,029
Adjustments to reconcile net income (loss)
to net cash used by operating activities:
Depreciation expense 21,588 18,438
Amortization of loan fees 60,235 -
Loss on disposal of fixed assets - 8,298
Deferred rent 30,293 -
Changes in assets and liabilities:
Accounts receivable (1,004,594) (854,727)
Unbilled revenue 62,209 (112,130)
Prepaid and other current assets (5,210) 7,170
Accounts payable 357,791 48,423
Accrued payroll and employee benefits 154,004 51,180
Other accrued liabilities 15,324 3,000
----------- ----------
Net cash used by operating activities (807,418) (748,319)
----------- ----------
Cash flows from investing activities
Purchase of fixed assets, including
internal-use software (252,405) (57,355)
Deposits (10,341) 2,853
Loan fees (357,519) -
----------- ----------
Net cash used by investing activities (620,265) (54,502)
----------- ----------
Cash flows from financing activities
Proceeds from line of credit 758,000 816,021
Payments on line of credit (1,613,015) -
Proceeds from capital lease obligation 20,039 -
Payments on capital lease obligations (935) -
Proceeds from convertible note payable 5,000,000 -
----------- ----------
Net cash provided by financing activities 4,164,089 816,021
----------- ----------
Net increase in cash and cash equivalents 2,736,405 13,200
Cash and cash equivalents, beginning of year 173,236 160,036
----------- ----------
Cash and cash equivalents, end of year 2,909,641 173,236
=========== ===========
Supplemental disclosures:
Interest paid 82,109 -
=========== ===========
Income taxes paid - -
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-5
IT&E INTERNATIONAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
------------------
In this discussion, the terms "Company", "we", "us", and "our", refer to IT&E
International Group and subsidiaries, except where it is made clear otherwise.
We are a life sciences service organization focused on providing our clients
with project-based consulting services in the areas of FDA regulatory
compliance, data management, biometrics and clinical validation throughout the
clinical trials lifecycle. Our services range from recruitment of patients for
clinical trials and providing skilled personnel to assist with managing
clinical trials, to providing enterprise software solutions and training to
manage data to ensure FDA compliance. We also provide validation services for
new pharmaceutical manufacturing facilities. We serve a variety of clients,
including those in the private industry, public institutions, research
facilities and the government.
We were incorporated in the State of Nevada in 2002 as Clinical Trials
Assistance Corporation. In April 2004, we merged with IT&E International, Inc.
and changed our name to IT&E International Group.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
----------------
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
We maintain an allowance for doubtful accounts for estimated losses resulting
from an inability of clients to make required payments. This allowance is based
on account receivables, historical collection experience, current economic
trends, and changes in the customer payment terms.
F-6
IT&E INTERNATIONAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Cash and Cash Equivalents, including Restricted Cash
----------------------------------------------------
We consider all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents. Our restricted cash
equivalents consist primarily of a short-term money market deposit. Our cash
accounts are with certain financial institutions. The balances in these
accounts exceed the maximum U.S federally insured amount. We have not
experienced any losses in such accounts and we believe that we are not exposed
to any significant credit risk on our cash and cash equivalents.
Revenue Recognition, Accounts Receivable, and Unbilled Receivables
------------------------------------------------------------------
Revenues are derived primarily from FDA validation and compliance outsourcing
services, consulting, and systems integration. Revenues are recognized on a
time-and-materials, level-of-effort, percentage-of-completion, or straight-line
basis. Before revenues are recognized, the following four criteria must be met:
(a) persuasive evidence of an arrangement exists; (b) delivery has occurred or
services rendered; (c) the fee is fixed and determinable; and
(d) collectibility is reasonably assured. We determine if the fee is fixed and
determinable and collectibility is reasonably assured based on our judgment
regarding the nature of the fee charged for services rendered and products
delivered and the collectibility of those fees. Arrangements range in length
from less than one year to several years.
Revenues from time-and-materials arrangements are generally recognized based
upon contracted hourly billing rates as the work progresses. Revenues from
level-of-effort arrangements are recognized based upon a fixed price for the
level of resources provided. Revenues from fixed fee arrangements for
consulting are generally recognized on a rate per hour or percentage-of-
completion basis. For each of our fixed fee contracts we maintain estimates of
total revenue and cost over the contract term. For purposes of periodic
financial reporting on the fixed price consulting contracts, we accumulate
total actual costs incurred to date under the contract. The ratio of those
actual costs to its then-current estimate of total costs for the life of the
contract is then applied to its then-current estimate of total revenues for the
life of the contract to determine the portion of total estimated revenues that
should be recognized. We follow this method because reasonably dependable
estimates of the revenues and costs applicable to various stages of a contract
can be made.
F-7
IT&E INTERNATIONAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Revenues recognized on fixed price consulting contracts are subject to
revisions as the contract progresses to completion. If we do not accurately
estimate the resources required or the scope of the work to be performed, do
not complete our projects within the planned periods of time, or do not satisfy
our obligations under the contracts, then profit may be significantly and
negatively affected or losses may need to be recognized. Revisions in our
contract estimates are reflected in the period in which the determination is
made that facts and circumstances dictate a change of estimate. Favorable
changes in estimates result in additional revenues recognized, and unfavorable
changes in estimates result in a reduction of recognized revenues. Provisions
for estimated losses on individual contracts are made in the period in which
the loss first becomes known.
At the beginning of 2003, we adopted EITF 00-21, "Accounting for Revenue
Arrangements with Multiple Deliverables," which addresses how to account for
arrangements that involve the delivery or performance of multiple products,
services, and/or rights to use assets. Revenue arrangements with multiple
deliverables are divided into separate units of accounting if the deliverables
in the arrangement meet the following criteria: (1) the delivered item has
value to the customer on a stand-alone basis; (2) there is objective and
reliable evidence of the fair value of undelivered items; and (3) delivery of
any undelivered item is probable. Arrangement consideration is allocated among
the separate units of accounting based on their relative fair values, with the
amount allocated to the delivered item being limited to the amount that is not
contingent on the delivery of additional items or meeting other specified
performance conditions.
On certain contracts, or elements of contracts, costs are incurred subsequent
to the signing of the contract, but prior to the rendering of service and
associated recognition of revenue. Where such costs are incurred and
realization of those costs is either paid for upfront or guaranteed by the
contract, those costs are deferred and later expensed over the period of
recognition of the related revenue. At December 31, 2004 and 2003, the Company
had no deferred costs.
Unbilled receivables represent revenues recognized for services performed that
were not billed at the balance sheet date. The majority of these amounts are
billed in the subsequent month. As of December 31, 2004 and 2003, the Company
had unbilled revenues included in current receivables of $133,398 and $195,607,
respectively.
F-8
IT&E INTERNATIONAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Reimbursable Out-of-Pocket Expenses
-----------------------------------
In addition to the standard costs incurred to provide services to our
customers, we pay other incidental expenses, in excess of contract amounts,
which are generally reimbursable under the terms of the contract. These
expenses are recorded as both revenues and direct cost of services in
accordance with the provisions of EITF 01-14, "Income Statement
Characterization of Reimbursements Received for `Out-of-Pocket' Expenses
Incurred."
Credit Risks
------------
Financial instruments that subject us to concentrations of credit risks consist
primarily of cash and cash equivalents and billed and unbilled accounts
receivable. Our clients are primarily involved in the healthcare and
pharmaceutical industries. The significant majority of our accounts receivable
exposure is to large, well established firms. Concentrations of credit risk
with respect to billed and unbilled accounts receivable are mitigated, to some
degree, based upon the nature of our clients. Management considers the
likelihood of material credit risk exposure as remote.
The healthcare and life sciences industries may be affected by economic
factors, which may impact accounts receivable. At December 31, 2004,
approximately 75% of the outstanding trade receivables are due from nine
customers who also accounted for approximately 65% of total sales. Management
does not believe that any single customer or geographic area represents
significant credit risk.
Fair Value of Financial Instruments
-----------------------------------
The carrying value of cash and cash equivalents, restricted cash, accounts
receivable, accounts payable, and certain other liabilities approximate their
estimated fair values due to the short-term nature of these instruments.
Investments available for sale are carried at fair value.
F-9
IT&E INTERNATIONAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation and amortization are
provided on a straight-line basis in amounts sufficient to relate the cost
of
depreciable assets to operations over their estimated service lives,
which range from three to seven years. Leasehold improvements are amortized
over the lives of the respective leases or the service lives of the
improvements, whichever are shorter.
We account for costs incurred to develop computer software for internal use in
accordance with Statement of Position (SOP) 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. As required by SOP
98-1, we capitalize the costs incurred during the application development
stage, which include costs to design the software configuration and interfaces,
coding, installation, and testing. Costs incurred during the preliminary
project along with post-implementation stages of internal use computer software
are expensed as incurred. Capitalized development costs are amortized over
various periods up to three years. Costs incurred to maintain existing product
offerings are expensed as incurred. The capitalization and ongoing assessment
of recoverability of development costs requires considerable judgment by
management with respect to certain external factors, including, but not limited
to, technological and economic feasibility, and estimated economic life. For
the years ended December 31, 2004 and December 31, 2003, we capitalized product
development costs of $210,444 and $16,000, respectively, and will begin to
amortize such costs in 2005 over the estimated useful life of three years.
Upon sale or retirement of property and equipment, the costs and related
accumulated depreciation are eliminated from the accounts, and any gain or loss
on such disposition is reflected in the consolidated statements of operations.
Expenditures for repairs and maintenance are charged to operations as incurred.
Income Taxes
------------
Income taxes are computed using the asset and liability approach, which
requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in our
financial statements or tax returns. In estimating future tax consequences, we
generally consider all expected future events other than the enactment of
changes in tax law or rates. If it is more likely than not that some portion
or all of a deferred tax asset will not be realized, a valuation allowance is
recorded.
F-10
IT&E INTERNATIONAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net Income (Loss) Per Share
---------------------------
Net income (loss) per basic share is computed using the weighted average number
of common shares outstanding. Net income (loss) per diluted share is computed
using the weighted average common shares and potential common shares
outstanding. Dilution is computed by applying the treasury stock method. Under
this method, options and warrants are assumed to be exercised at the beginning
of the period (or at the time of issuance, if later), and as if funds obtained
thereby were used to purchase common stock at the average market price during
the period. Warrants to purchase 3,924,000 shares of common stock were
outstanding during 2004, but were not included in the computation of earnings
per diluted shares because the effect would be antidilutive. There were no
stock options issued and outstanding as of December 31, 2004 and 2003.
Recent Accounting Pronouncements
--------------------------------
In December 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard No. 123 (revised 2004) "Share-Based
Payment" ("SFAS 123R), which is a revision of FASB Statement No. 123,
Accounting for Stock-Based Compensation. Statement 123(R) supersedes APB
Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB
Statement No. 95, Statement of Cash Flows. Generally, the approach in Statement
123R is similar to the approach described in Statement 123. However, Statement
123R requires all share-based payments to employees, including grants of
employee stock options, to be recognized in the income statement based on their
fair values. Pro forma disclosure is no longer an alternative.
Statement 123R must be adopted no later than July 1, 2005. Early adoption will
be permitted in periods in which financial statements have not yet been
issued. We expect to adopt Statement 123R on July 1, 2005. Statement 123R
permits public companies to adopt its requirements using one of two methods:
1. A "modified prospective" method in which compensation cost is recognized
beginning with the effective date (a) based on the requirements of Statement
123R for all share-based payments granted after the effective date and (b)
based on the requirements of Statement 123 for all awards granted to employees
prior to the effective date of Statement 123R that remain unvested on the
effective date.
2. A "modified retrospective" method which includes the requirements of the
modified prospective method described above, but also permits entities to
restate based on the amounts previously recognized under Statement 123 for
purposes of pro forma disclosures either (a) all prior periods presented or (b)
prior interim periods of the year of adoption.
We are currently evaluating the two different methods for the adoption of
Statement 123 and have not determined which of the two methods we will adopt.
F-11
IT&E INTERNATIONAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
To date, we have not issued stock-based payments to our employees, though we
anticipate the issuance of stock options during 2005. As such, we have not
recognized any stock-based compensation during 2004 and 2003.
We believe that the adoption of Statement 123R's fair value method will have a
material impact on our result of operations, although it will have no impact on
our overall financial position. The impact of adoption of Statement 123R
cannot be predicted at this time because it will depend on levels of share-
based payments granted in the future. Statement 123R also requires the benefits
of tax deductions in excess of recognized compensation cost to be reported as a
financing cash flow, rather than as an operating cash flow as required under
current literature. This requirement will reduce net operating cash flows and
increase net financing cash flows in periods after adoption. We cannot
estimate what those amounts will be as it will depend on the levels of share-
based payments granted in the future.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its
scope as a liability (or an asset in some circumstances). Many of these
instruments were previously classified as equity. The guidance in SFAS No. 150
is generally effective for all financial instruments entered into or modified
after May 31, 2003, and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003. We do not believe that the
adoption of SFAS No. 150 will have a material impact on our financial
statements.
In December 2003, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 104 (SAB 104), "Revenue Recognition", which supersedes
SAB 101, "Revenue Recognition in Financial Statements." SAB 104's primary
purpose is to rescind the accounting guidance contained in SAB 101 related to
multiple-element revenue arrangements that was superseded as a result of the
issuance of EITF 00-21, "Accounting for Revenue Arrangements with Multiple
Deliverables" and to rescind the SEC's related "Revenue Recognition in
Financial Statements Frequently Asked Questions and Answers" issued with SAB
101 that had been codified in SEC Topic 13, "Revenue Recognition." While the
wording of SAB 104 has changed to reflect the issuance of EITF 00-21, the
revenue recognition principles of SAB 101 remain largely unchanged by the
issuance of SAB 104, which was effective upon issuance. The adoption of SAB 104
did not have a material effect on our financial position or results of
operations.
Reclassification
----------------
Certain amounts in the 2003 financial statements have been reclassified to
conform to the presentation of the 2004 financial statements.
F-12
IT&E INTERNATIONAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. MERGER WITH CLINICAL TRIALS ASSISTANCE CORPORATION
On April 14, 2004, the Company, Clinical Trials Assistance Corporation, a
Nevada corporation ("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
CTAL, through its wholly-owned subsidiary, Merger Sub, acquired IT&E in
exchange for 11,000,000 shares of CTAL common stock which were issued to the
holders of IT&E stock (the "Merger"). Immediately after the Acquisition was
consummated, and further to the Agreement, CTAL's controlling stockholder
cancelled 28,000,000 shares of CTAL'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 (three 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
CTAL's outstanding common stock. 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.
This transaction was 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
CTAL, and the directors and executive officers of IT&E became the directors and
executive officers of the CTAL.
As a part of this transaction, 2,000,000 warrants were issued 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.
4. ADVANCES TO EMPLOYEES
At December 31, 2004 and 2003, the Company had advanced $21,525 and $46,971,
respectively, to certain employees. The notes are non-interest bearing and due
during 2005. During 2005, an employee advance of $20,000 was deemed
uncollectible.
F-13
IT&E INTERNATIONAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 2004 and 2003 consisted of the
following:
2004 2003
--------- ---------
Computers $ 135,971 $ 113,940
Furniture and fixtures 41,007 21,082
Internal-use software 210,444 16,000
Leasehold improvements 17.898 1,731
--------- ---------
405,320 152,753
Less accumulated depreciation ( 91,885) ( 70,135)
--------- ---------
$ 313,435 $ 82,618
========= =========
Depreciation expense totaled $21,588 and $18,438 during the years ended
December 31, 2004 and 2003, respectively.
6. CONVERTIBLE DEBT
On October 18, 2004, we issued a $5,000,000 secured convertible term note
("Note") to Laurus Master Fund, Ltd. ("Laurus"). The Note is convertible into
shares of our common stock at an initial conversion price of $0.75 per share.
Pursuant to this agreement, we also issued to Laurus a warrant ("Warrant") to
purchase up to 1,924,000 shares of our common stock, of which 962,000 shares
will have an exercise price of $0.94 and 962,000 shares will have an exercise
price of $1.12. The warrants expire on October 18, 2011.
The Note has a term of three years and accrues interest at the prime rate plus
2.5% per year (7.50% as of December 31, 2004). The Note is secured by all our
assets and the assets of our subsidiaries. The Note consists of a non-
restricted facility of $2.5 million and a restricted facility of $2.5 million.
The non-restricted facility was used to pay off an outstanding line of credit
of approximately $1.5 million, with the remaining $1.0 million, net of
transaction fees, being used for working capital. The second $2.5 million
facility is restricted for either additional internal growth working capital
requirements or for a future acquisition, which is a part of our strategic
long-term growth plans. These funds are under the sole dominion and control of
Laurus as security for our obligations under the Securities Purchase Agreement
and other related agreements.
F-14
IT&E INTERNATIONAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Interest on the unrestricted principal amount is payable monthly, in arrears,
on the first business day of each calendar month until the maturity date.
Under the terms of the Note, the monthly interest payment and the monthly
principal payment are payable either in cash at 103% of the respective monthly
amortization amounts or, if certain criteria are met, in shares of our common
stock. The minimum monthly principal repayment of $83,333.33 commences on May
1, 2005, and continues through the October 18, 2007 maturity date. The
principal criteria for the monthly payments to be made in shares of our common
stock include:
o the effectiveness of a current registration statement covering
the shares of our common stock into which the principal and interest
under the Note are convertible;
o an average closing price of our common stock for the previous five
trading days greater than or equal to 110% of the fixed conversion
price; and
o the amount of such conversion not exceeding 25% of the aggregate
dollar trading volume of our common stock for the previous 22 trading
days.
We may prepay the non-restricted facility of the Note at any time by paying
125% of the principal amount then outstanding, together with accrued but unpaid
interest thereon. We may also prepay the restricted facility of the Note at
any time by paying 115% of the principal amount then outstanding, together with
accrued but unpaid interest thereon. Upon an event of default under the Note,
Laurus may demand repayment of the outstanding principal balance at a rate of
125% of the non-restricted facility of the Note and 115% of the outstanding
principal balance of the restricted facility, plus any accrued interest. If
the Note remains outstanding after an event of default that is not cured, the
interest rate increases to 1.5% per month.
On a month-by-month basis, if we register the shares of common stock issuable
upon conversion of the Note and upon exercise of the Warrant on a registration
statement declared effective by the Securities and Exchange Commission, and the
market price of our common stock for five consecutive trading days exceeds the
conversion price by at least 25%, then the interest rate on the Note for the
succeeding calendar month shall be reduced by 1% for every 25% increase in the
market price of our common stock above the conversion price of the Note, but in
no event shall the interest rate be less than zero percent.
Laurus also has the option to convert all or a portion of the Note into shares
of our common stock at any time, subject to limitations described below, at a
conversion price of $0.75 per share, subject to adjustment as described below.
The Note is currently convertible into 8,590,667 shares of our common stock,
excluding the conversion of any accrued interest. Laurus is limited on its
ability to convert is the conversion of the Note or the exercise of the Warrant
would cause the shares then held be Laurus to exceed 4.99% of our outstanding
shares of common stock unless there has been an event of default or Laurus
provides us with 75 days prior notice.
F-15
IT&E INTERNATIONAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We were obligated to file a registration statement with the Securities and
Exchange Commission ("SEC") registering the resale of shares of our common
stock issuable upon conversion of the Note and exercise of the Warrant by
November 17, 2004, and to have such Statement declared effective by the SEC by
no later than January 25, 2005. We timely filed the registration statement,
but it has not yet been declared effective. If the registration statement is
not declared effective within the timeframe described, if the registration
statement is suspended other than as permitted in the Registration Rights
Agreement, or if our common stock is not listed for three consecutive trading
days, we are obligated to pay Laurus additional cash fees. The cash fees are
2.0% of the original principal amount of the Note for each 30 day period in
which we fail to correct these issues. Since the registration statement has
not yet been declared effective, we are incurring monthly cash fees to Laurus.
The fair value of the warrants has been estimated on the date of grant using
the Black-Scholes option pricing model. The weighted average fair value of
these warrants are $0.28 and $0.25. The following assumptions were used in
computing the fair value of these warrants: weighted average risk-free interest
rate of 6.0%, zero dividend yield, volatility of the Company's common stock of
86.81% and an expected life of the warrants of two years. Approximately
$510,000 was added to financing costs as a result of the warrants. No warrants
have been exercised through December 31, 2004. In addition to the costs related
to the warrants, we also incurred approximately, $358,000 of loan origination
costs for the debt. We will amortize the total loan costs over the period of
the loan. We amortized approximately $60,000 for the period ending December
31, 2004.
Future maturities of long-term debt are as follows as of December 31, 2004:
2005 $ 666,667
2006 1,000,000
2007 3,333,333
2008 -
2009 -
Thereafter -
----------
$5,000,000
==========
7. COMMITMENTS AND CONTINGENCIES
During 2004, we entered into a new capital lease obligation totaling $20,039.
This leased equipment has accumulated depreciation of $1,391 at December 31,
2004.
F-16
IT&E INTERNATIONAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. COMMITMENTS AND CONTINGENCIES (Continued)
Future minimum lease payments on the capital lease obligation at December 31,
2004 are as follows:
For the year ending December 31:
1 $ 5,654
2 5,654
3 5,654
4 5,654
5 3,769
--------
Total 26,385
Less amount representing interest ( 7,281)
--------
Present value of capital lease payments $ 19,104
========
The Company also leases its office facilities, certain office space, and living
accommodations for consultants on short-term projects under operating leases
that expire over the next three years. At December 31, 2004, the Company was
obligated under non-cancelable operating leases with future minimum rentals as
follows:
Years Ending
1 $ 133,241
2 97,402
3 79,971
---------
Total $ 310,614
=========
Rent expense was $226,036 and $206,154 for the years ended December 31, 2003
and 2002, respectively.
We are involved in various legal actions arising in the normal course of
business. We believe that the outcome of these matters will not have a material
adverse effect on our financial position or results of operation.
8. PROFIT SHARING PLANS
We provide a 401(k) salary deferral plan for eligible employees. Employees may
elect to reduce their compensation by an amount that will not exceed the total
amount allowed by the Internal Revenue Code for all contributions to qualified
plans. The plan does provide for discretionary contributions by the employer.
No contributions were made by the Company to the plan for the years ended
December 31, 2004 and 2003.
F-17
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None -- Not applicable.
ITEM 8A. CONTROLS AND PROCEDURES
As of December 31, 2004, IT&E International Group carried out an evaluation
of the effectiveness of the design and operation of its disclosure controls
and procedures. This evaluation was carried out under the supervision and
with the participation of management, including our Chief Principal Officer.
Based upon that evaluation, our Chief Principal Officer concluded that IT&E
International Group's disclosure controls and procedures are effective.
There have been no significant changes in our internal controls or in
other factors that could significantly affect internal controls subsequent
to the date we carried out the evaluation.
19
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The names, ages and positions of the Company's directors and executive officers
are as follows:
Director of
Name Age Position with Registrant Registrant Since
----------------- --- ------------------------ ----------------
Peter R. Sollenne 56 CEO/Director April, 2004
Kelly Alberts 37 President/COO/Director April, 2004
Tony Allocca 61 VP Ops/Director April, 2004
Mike Ruchman 55 Vice President Sales N/A
David Vandertie 44 Chief Financial Officer N/A
Biographies
-----------
Peter R. Sollenne, Chief Executive Officer/Director
---------------------------------------------------
Mr. Sollenne has served as our Chief Executive Officer since December 2003.
From May 2000 to December 2003, Mr. Sollenne was President and Chief Executive
Officer at FastBreak Growth, Inc. a strategic management consulting and
business solutions company. From December 1998 to May 2000, Mr. Sollenne
was Chief Executive Officer, President and Chief Operating Officer of
re-Solutions, Inc., an information technology professional services company.
Mr. Sollenne received his Bachelors of Science in Accounting/Business
Administration from Boston College and is a CPA.
Kelly Alberts, Co-Founder, President/COO/Director
-------------------------------------------------
Mr Alberts has served as our President and Chief Operating Officer since our
inception in 1996. Mr. Alberts received his Bachelors of Science from the
University of Iowa.
Tony Allocca, Co-Founder, Vice President Operations/Director
------------------------------------------------------------
Mr. Allocca has served as our Vice President of Operations since our inception
in 1996. Mr. Allocca is a graduate of the University of Maryland and served in
the United States Air Force.
20
Mike Ruchman, Vice President Sales
----------------------------------
Mr. Ruchman has served as our Vice President of Sales since June, 2004. From
1999 to June 2004, Mr. Ruchman served as our Sales Director for Regulatory
Compliance and Clinical consulting. From 1997 to 1999, Mike was the Vice
President of Sales for XXCAL/NTS Corp. Mr. Ruchman holds a Bachelors of
Science in Mechanical Engineering from California State University Los Angeles,
a Masters of Science in Civil Engineering from California State University
Los Angeles, a MBA and an MS in Information Systems Technology from the
University of Texas.
David Vandertie, Chief Financial Officer
----------------------------------------
Mr. Vandertie has served as our Chief Financial Officer since January 2005.
From June 2004 to December 2004, Mr. Vandertie was a financial consultant.
From May 2002 to June 2004, Mr. Vandertie was Vice President and Chief
Financial Officer at Althea Technologies, Inc., a biotech contract service
organization. From June 2000 to May 2002, Mr. Vandertie was Director of
Finance and Purchasing at Torrey Mesa Research Institute, a subsidiary of
Syngenta AG. From April 1999 to June 2000, Mr. Vandertie was Corporate
Controller at Quidel Corporation, a manufacturer of diagnostic test kits.
Mr. Vandertie is a graduate of the University of Wisconsin, Whitewater, where
he earned a Bachelor of Business Administration Degree in Accounting, and is
a CPA.
Family Relationships
--------------------
None.
Audit Committee
---------------
The company does not have a separately-designated standing Audit Committee.
The members of the Board of Directors sit as the Audit Committee. Accordingly,
the Company does not have an audit committee financial expert.
Code of Ethics
--------------
The company has not adopted a Code of Ethics for the Board and the salaried
employees.
21
Committees and Procedures
-------------------------
(1) The Registrant has no standing audit, nominating and compensation
committees of the Board of Directors, or committees performing
similar functions. The Board acts itself in lieu of committees
due to its small size.
(2) The view of the board of directors is that it is appropriate for the
Registrant not to have such a committee because its sole director
participates in the consideration of director nominees and the
board is so small.
(3) The sole member of the Board who acts as nominating committee is
not independent, pursuant to the definition of independence of a
national securities exchange registered pursuant to section 6(a)
of the Act (15 U.S.C. 78f(a).
(4) The nominating committee has no policy with regard to the
consideration of any director candidates recommended by security
holders, but the committee will consider director candidates
recommended by security holders.
(5) The basis for the view of the board of directors that it is
appropriate for the Registrant not to have such a policy is that
there is no need to adopt a policy for a small company.
(6) The nominating committee will consider candidates recommended by
security holders, and by security holders in submitting such
recommendations.
(7) There are no specific, minimum qualifications that the nominating
committee believes must be met by a nominee recommended by security
holders except to find anyone willing to serve with clean background.
(8) The nominating committee's process for identifying and evaluation
nominees for director, including nominees recommended by security
holders, is to find anyone willing to serve with clean background.
There are no differences in the manner in which the nominating
committee evaluates nominees for director based on whether the
nominee is recommended by a security holder, or found by the board.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and
executive officers, and persons who beneficially own more than ten percent of a
registered class of our equity securities (referred to as "reporting persons"),
to file with the Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership of common stock and other
Neighborhood Connections, Inc. equity securities. Reporting persons are
required by Commission regulations to furnish us with copies of all Section
16(a) forms they file.
22
ITEM 10. EXECUTIVE COMPENSATION.
Compensation for 2004 is noted below. We do not have any employment contracts
for our executive officers or directors.
The following table reflects certain compensation due to be paid to our
Executive Officers during the current fiscal year.
Annual Compensation
Other
Annual
Compen
Name and Principal Position Year Salary($) Bonus ($) sation ($)
----------------------------------------------------------------------------
Kelly Alberts, Pres/COO/Dir. 2004 144,615 - -
Tony Allocca, VP Ops/Dir. 2004 132,500 - -
Peter R. Sollenne, CEO/Director 2004 175,000 - -
Mike Ruchman, VP Sales 2004 150,000 1,500 -
David Vandertie, CFO 2004 6,250 - -
----------------------------------------------------------------------------
Long Term Compensation
Awards Payouts
------------------- ----------------
All
Restricted Number Other
Stock of LTIP Compen-
Award(s) Options/ Payouts sation
Name and Principal Position Year ($) Warrants ($) ($)
-------------------------------------------------------------------------------
Kelly Alberts, Pres/COO/Dir. 2004 0 0 0 0
Tony Allocca, VP Ops/Dir. 2004 0 0 0 0
Peter R. Sollenne, CEO/Director 2004 0 0 0 0
Mike Ruchman, VP Sales 2004 0 0 0 0
David Vandertie, CFO 2004 0 0 0 0
----------------------------------------------------------------------------
23
Option/SAR Grants
-----------------
We did not grant any options or any stock appreciation rights during the year
ended December 31, 2004. We have not granted any stock appreciation rights.
Compensation of Directors
-------------------------
No compensation was paid to our Directors for any service provided as a Director
during the year ended December 31, 2004. There are no other formal or informal
understandings or arrangements relating to compensation; however, Directors may
be reimbursed for all reasonable expenses incurred by them in conducting our
business. These expenses would include out-of-pocket expenses for such items
as travel, telephone, and postage.
Employment Contracts
--------------------
We do not have any employment contracts in place with our Officers or Directors.
Equity Compensation Plan Information
------------------------------------
We do not currently have a formal Employee Benefit and Consulting Services
Compensation Plan in effect.
Audit Committee
---------------
The company does not have an Audit Committee. The sole members of the
Board sits as the Audit Committee. No qualified financial expert has been
hired because the company is to small to afford such expense.
Code of Ethics
--------------
The company has not adopted a Code of Ethics for the Board and the salaried
employees.
24
Committees and Procedures
-------------------------
(1) The Registrant has no standing audit, nominating and compensation
committees of the Board of Directors, or committees performing
similar functions. The Board acts itself in lieu of committees
due to its small size.
(2) The view of the board of directors is that it is appropriate for the
Registrant not to have such a committee because its sole director
participates in the consideration of director nominees and the
board is so small.
(3) The sole member of the Board who acts as nominating committee is
not independent, pursuant to the definition of independence of a
national securities exchange registered pursuant to section 6(a)
of the Act (15 U.S.C. 78f(a).
(4) The nominating committee has no policy with regard to the
consideration of any director candidates recommended by security
holders, but the committee will consider director candidates
recommended by security holders.
(5) The basis for the view of the board of directors that it is
appropriate for the Registrant not to have such a policy is that
there is no need to adopt a policy for a small company.
(6) The nominating committee will consider candidates recommended by
security holders, and by security holders in submitting such
recommendations.
(7) There are no specific, minimum qualifications that the nominating
committee believes must be met by a nominee recommended by security
holders except to find anyone willing to serve with clean background.
(8) The nominating committee's process for identifying and evaluation
nominees for director, including nominees recommended by security
holders, is to find anyone willing to serve with clean background.
There are no differences in the manner in which the nominating
committee evaluates nominees for director based on whether the
nominee is recommended by a security holder, or found by the board.
25
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
A. Security Ownership
The following table sets forth certain information concerning the beneficial
ownership of our outstanding common stock as of December 31, 2004, by each
person known by IT&E International Group to own beneficially more than
5% of the outstanding common stock, by each of our directors and officer and
by all of our directors and officers as a group. Unless otherwise indicated
below, to our knowledge all persons listed below have sole voting and
investment power with respect to their shares of common stock except to
the extent that authority is shared by spouses under applicable law.
Amount
Title Name and Address of shares Percent
of of Beneficial held by of
Class Owner of Shares Position Owner Class (1)
------------------------------------------------------------------------------
Common Kelly Alberts(2) Pres/COO/Dir. 5,967,500 31.41%
Common Tony Allocca(3) VP Ops/Dir. 4,647,500 24.46%
Common Peter R. Sollenne(4) CEO/Director 385,000 2.03%
Common Mike Ruchman (5) VP Sales - -
Common David Vandertie (6) CFO - -
Common Kamill Rohny(7) Shareholder 1,500,000 7.89%
- ------------------------------------------------------------------------------
All Executive Officers as
a Group (5 persons) 11,000,000 57.89%
(1) The percentages listed in the Percent of Class column are based upon
19,000,000 issued and outstanding shares of Common Stock.
(2) Kelly Alberts, 505 Lomas Santa Fe Drive, Suite 200, Solana Beach,
California 92075, he owns 1,529,850 Preferred shares which converts
to ten-for-one common stock after a holding period of two years. These
shares have ten-for-one voting rights.
(3) Tony Allocca, 505 Lomas Santa Fe Drive, Suite 200, Solana Beach,
California 92075, he owns 1,191,450 Preferred shares which converts
to ten-for-one common stock after a holding period of two years. These
shares have ten-for-one voting rights.
26
(4) Peter R. Sollenne, 505 Lomas Santa Fe Drive, Suite 200, Solana Beach,
California 92075, he owns 98,700 Preferred shares which converts to
ten-for-one common stock after a holding period of two years. These
shares have ten-for-one voting rights.
(5) Mike Ruchman, 505 Lomas Santa Fe Drive, Suite 200, Solana Beach,
California 92075
(6) David Vandertie, 505 Lomas Santa Fe Drive, Suite 200, Solana Beach,
California, 92075
(7) Kamill Rohny, 2078 Redwood Crest, Vista, California 92081-7340.
B. Persons Sharing Ownership of Control of Shares
No persons other than Kelly Alberts (President/Director) and Tony Allocca
(VP Operations/Director) own or shares the power to vote ten percent (10%) or
more of the Company's securities.
C. Non-voting Securities and Principal Holders Thereof
The Company has not issued any non-voting securities.
D. Options, Warrants and Rights
There are no options, warrants or rights to purchase securities of the
Company.
E. Parents of the Issuer
Under the definition of parent, as including any person or business
entity who controls substantially all (more than 80%) of the issuers of
common stock, the Company has no parents.
27
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Through a Board Resolution, the Company hired the professional services of
Beckstead & Watts, LLP, Certified Public Accountants, to perform the annual
audit of the Company's financial statements. Beckstead & Watts, LLP own
no stock in the Company.
The company has no formal contracts with its accountant, they are paid on a
fee for service basis.
At December 31, 2004, the Company had advanced $21,525 to certain employees.
The notes are non-interest bearing and due during 2005.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
31.1 Certification of Principal Executive Officer to Section 302
of the Sarbanes-Oxley Act of 2002, promulgated under the
Securities Exchange Act of 1934, as amended.
32.1 Certification of Principal Executive Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
---------------------------
(b) REPORTS ON FORM 8-K
The Company filed a Current Report dated October 18, 2004, pursuant to Item
1.01; ("Entry into a Material Definitive Agreement"); Item 3.02 ("Unregistered
Sales of Equity Securities"); and Item 9.01 ("Exhibits").
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."
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 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."
28
Item 14. Principal Accountant Fees and Services
AUDIT FEES
The aggregate fees billed by the Company's auditors for professional services
rendered in connection with the audit of the Company's annual consolidated
financial statements for fiscal 2004 and 2003 and reviews of the consolidated
financial statements included in the Company's Forms 10-KSB for fiscal 2004 and
2003 were approximately $36,000 and $12,000, respectively.
AUDIT-RELATED FEES
The Company's auditors did not bill any additional fees for assurance and
related services that are reasonably related to the performance of the audit or
review of the Company's financial statements and are not reported under "Audit
Fees" above.
TAX FEES
The aggregate fees billed by the Company's auditors for professional services
for tax compliance, tax advice, and tax planning were $0 and $0 for fiscal 2004
and 2003, respectively.
ALL OTHER FEES
The aggregate fees billed by the Company's auditors for all other non-audit
services rendered to the Company, such as attending meetings and other
miscellaneous financial consulting, in fiscal 2004 and 2003 were $0 and $0,
respectively.
29
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended, the Registrant caused this report to be signed on its behalf by the
undersigned and duly authorized on March 24, 2004.
IT&E International Group
------------------------------
(Registrant)
By: /s/ Peter R. Sollenne
---------------------------
Peter R. Sollenne
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
Date: March 24, 2005 By: /s/ Kelly Alberts
--------------------- ----------------------------
Kelly Alberts
President/COO
30