U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[x] Quarterly Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2004.
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[ ] Transition Report under Section 13 or 15(d)of the Exchange Act For the
Transition Period from ________ to ___________
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Commission File Number: 000-50095
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IT&E International Group
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(Exact name of small business issuer as specified in its charter)
Nevada 27-0009939
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
505 Lomas Santa Fe Drive, Suite 200, Solana Beach, CA 92075
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(Address of principal executive offices) (zip code)
Issuers telephone number: 858-366-0970
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past 12
months (or such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Check whether the Registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Common Stock, $0.001 par value per share, 70,000,000 shares authorized,
19,000,000 issued and outstanding as of September 30, 2004. Preferred Stock,
$0.001 par value per share, 5,000,000 shares authorized, 2,820,000 issued
and outstanding as of September 30, 2004.
Traditional Small Business Disclosure Format (check one)
Yes [ ] No [X]
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements................................. 3
Balance Sheet (unaudited)............................ 4
Statements of Operations (unaudited)................. 5
Statements of Cash Flows (unaudited)................. 6
Notes to Financial Statements........................ 7-8
Item 2. Management's Discussion and Analysis of Plan
of Operation........................................ 9
Item 3. Controls and Procedures.............................. 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................... 18
Item 2. Changes in Securities and Use of Proceeds............ 18
Item 3. Defaults upon Senior Securities...................... 18
Item 4. Submission of Matters to a Vote
of Security Holders................................. 18
Item 5. Other Information..................................... 18
Item 6. Exhibits and Reports on Form 8-K...................... 18
Signatures...................................................... 19
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND EXHIBITS
As prescribed by Item 310 of Regulation S-B, the independent auditor has
reviewed these unaudited interim financial statements of the registrant
for the nine months ended September 30, 2004. The financial statements reflect
all adjustments which are, in the opinion of management, necessary to a
fair statement of the results for the interim period presented. The
unaudited financial statements of registrant for the nine months ended
September 30, 2004, follow.
3
IT&E Corporation
Balance Sheet
(Unaudited)
BALANCE SHEET
September 30,
2004
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Assets
Current assets
Cash $ 291,760
Accounts receivable, net of allowance for
doubtful accounts of $69,703 2,082,356
Unbilled revenue 354,039
Prepaid and other current assets 56,888
Advances to employees 27,984
Investments 176,109
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Total current assets 2,989,136
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Fixed assets, net 93,501
Deposits 41,579
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$ 3,124,216
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Liabilities and Stockholders' Equity
Current Liabilities:
Line of credit - bank $ 1,494,150
Accounts payable 453,156
Accrued payroll and employee benefits 548,126
Other current liabilities 23,779
State income tax payable 4,600
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Total current liabilities 2,523,811
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Stockholders' equity:
Preferred stock, Series A, $.001 par value, 5,000,000
shares authorized, no shares issued and outstanding -
Preferred stock, Series B, $.001 par value, 5,000,000
shares authorized, no shares issued and outstanding -
Preferred stock, Series C, $.001 par value, 5,000,000
shares authorized, 2,820,000 shares issued and
outstanding 2,820
Common stock, $.001 par value, 70,000,000 shares
authorized, 19,000,000 shares issued and outstanding 19,000
Additional paid-in capital 352,860
Retained earnings 225,725
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600,405
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$ 3,124,216
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The accompanying notes are an integral part of these financial statements.
4
IT&E Corporation
Statements of Operations
(Unaudited)
STATEMENTS OF OPERATIONS
For the three months ended For the nine months ended
September 30, September 30,
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2004 2003 2004 2003
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Revenue $ 3,038,582 $ 2,570,229 $ 9,404,394 $ 7,221,941
Cost of revenue 2,410,783 1,550,390 6,693,321 4,444,606
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Gross profit 627,799 1,019,839 2,711,073 2,777,335
Operating expenses:
General and administrative
expenses 853,223 892,834 2,519,828 2,359,947
Sales and marketing
expenses 42,982 8,521 67,819 28,374
Depreciation expense 4,677 4,608 14,314 13,411
Officer salaries 66,731 60,000 186,731 180,000
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Total operating expenses 967,613 965,963 2,788,692 2,581,732
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Net operating income (339,814) 53,876 (77,619) 195,603
Other income (expense):
Other income - 4,220 - 11,453
Other (expenses) (76,397) (6,712) (136,912) (41,952)
Interest expense (18,569) (9,106) (49,032) (15,259)
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Total other income (expense) (94,966) (11,598) (185,944) (45,758)
Income before provision for
income taxes (434,780) 42,278 (263,563) 149,845
Provision for state
income taxes - - - -
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Net income (Loss) $ (434,780) $ 42,278 $ (263,563) $ 149,845
=========== =========== =========== ===========
Weighted average number of
common shares outstanding -
basic and fully diluted 19,000,000 481,500 19,000,000 273,930
=========== =========== =========== ===========
Net income per share -
basic and fully diluted $ (0.02) $ 0.09 $ (0.01) $ 0.55
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The accompanying notes are an integral part of these financial statements.
5
IT&E Corporation
Statement of Cash Flow
(Unaudited)
STATEMENT OF CASH FLOWS
For the nine months ended
September 30,
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2004 2003
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Cash flows from operating activities
Net income $ (263,563) $ 149,846
Adjustments to reconcile net (loss) to
net cash (used) by operating activities:
Depreciation expense 14,314 13,411
Loss on disposal of fixed assets - -
Changes in operating assets:
Accounts receivable (600,881) (885,443)
Prepaid and other current assets (31,895) 66,829
Advances to employees 18,987 (33,687)
Accounts payable & Accrued Liabilities 306,175 20,350
Accrued payroll and employee benefits 252,565 36,305
Other current liabilities - -
State franchise tax payable - -
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Net cash (used) by operating activities (304,298) (602,389)
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Cash flows from investing activities
Purchase of fixed assets (41,197) (12,164)
Deposits (18,196) 3,874
Investment in Valtrek J.V. (160,109) -
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Net cash (used) by investing activities (219,502) (8,290)
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Cash flows from financing activities
Advances to shareholders - (2,594)
Proceeds from AFG financing 20,039 -
Proceeds from line of credit, net 639,135 550,000
Payments made on loan to former shareholder - (36,400)
Distributions to shareholders (16,850) -
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Net cash provided by financing activities 642,324 511,006
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Net increase in cash 118,524 (99.673)
Cash - beginning 173,236 160,036
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Cash - ending $ 291,760 $ 60,363
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Supplemental disclosures:
Interest paid $ - $ -
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Income taxes paid $ - $ -
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The accompanying notes are an integral part of these financial statements.
6
IT&E Corporation
Notes to financial statements
Note 1 - Basis of presentation
The consolidated interim financial statements included herein, presented in
accordance with United States generally accepted accounting principles and
stated in US dollars, have been prepared by the Company, without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading.
These statements reflect all adjustments, consisting of normal recurring
adjustments, which, in the opinion of management, are necessary for fair
presentation of the information contained therein. It is suggested that these
consolidated interim financial statements be read in conjunction with the
consolidated financial statements of the Company for the period ended December
31, 2003 and notes thereto. The Company follows the same accounting policies
in the preparation of consolidated interim reports.
Results of operations for the interim periods are not indicative of annual
results.
Note 2 - Fixed assets
Depreciation expense totaled $14,314 and $13,411 for the nine-month periods
ended September 30, 2004 and 2003, respectively.
Note 3 - Line of credit - bank
The Company has a $1,500,000 renewable line of credit with a commercial bank.
The line bears interest at the bank's prime rate plus 1%. There was an
outstanding balance as of September 30, 2004 of $1,494,150. The line expires on
November 1, 2004, and is guaranteed by all of the assets of the Company and the
personal guarantees of the stockholders. The line has certain financial
covenants.
The Company recorded interest expense of $49,032 for the nine months ended
September 30, 2004 and $15,259 for the nine months ended September 30, 2003.
Note 4 - Warrants and options
On April 13, 2004, the Company issued 2,000,000 warrants to several individuals
for cash totaling $2,000. The warrants are convertible on a one-for-one basis
at a price to be agreed upon on the exercise date by the Company's board of
directors and the warrant holders. The exercise date is not sooner than one
year and not later than five years.
7
IT&E Corporation
Notes to financial statements
Note 5 - Reverse Merger
On April 14, 2004, the Company ("IT&E"), Clinical Trials Assistance Corporation,
a Nevada corporation (the "Registrant") or ("CTAL"), and Clinical Trials
Assistance Acquisition Corporation, a Nevada corporation ("Merger Sub"), entered
into an Acquisition Agreement and Plan of Merger (collectively the "Agreement")
pursuant to which the Registrant, through its wholly-owned subsidiary, Merger
Sub, acquired IT&E in exchange for 11,000,000 shares of the Registrant's common
stock which were issued to the holders of IT&E stock and 2,820,000 preferred
shares, which are convertible on a ten-for-one basis into CTAL $0.001 par value
common stock, after they are held for two years (the "Merger"). Immediately
after the Acquisition was consummated and further to the Agreement, Kamill
Rohny, the controlling stockholder of the Registrant, cancelled 28,000,000
shares of the Registrant's Common Stock held by him (the "Cancellation"). The
transaction contemplated by the Agreement was intended to be a "tax-free"
reorganization pursuant to the provisions of Section 351 and 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended.
The stockholders of IT&E (six stockholders owning 481,500 shares), who
unanimously approved the acquisition as of the closing date of the Merger and
after giving effect to the Cancellation, now own approximately 80% of the
Registrant's common stock outstanding as of June 10, 2004. This figure is based
on the issuance of 9,000,000 shares of $0.001 par value common stock and the
share dilution upon conversion of the 2,000,000 warrants into common stock.
For accounting purposes, this transaction was being accounted for as a reverse
merger, since the stockholders of IT&E own a majority of the issued and
outstanding shares of common stock of the Registrant, and the directors and
executive officers of IT&E became the directors and executive officers of the
Registrant.
Note 6 - Subsequent events
On October 19, 2004 the Company completed a private placement transaction for
the sale of $5,000,000 newly issued convertible notes to Laurus Master Fund,
Ltd., a New York based institutional fund that specialized in direct
investments in growing, small and micro-cap companies. The financing consisted
of two facilities: A $2.5 million facility that was used to pay off the
company's then current Senior Credit Facility with Bank of Walnut Creek, for
$1.5 million and the remaining $1.0 million, net of transaction fees used for
grow working capital; the second facility is a $2.5 million convertible note
which is to be used towards either additional internal growth working capital
requirements or towards a strategic acquisition, which is a part of the
company's strategic long-term growth plans. The transaction also provides
Laurus Funds an additional right to invest up to an additional $2.0 million
prior to July 15, 2005, at their option also to be used towards a strategic
acquisition.
8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATIONS
IT&E International, Inc. is a leading provider of a broad range of services
to the Life Sciences Industries. The company operates in two main divisions:
The Regulatory Affairs Division; and the Clinical Services & Solutions
Division.
The Regulatory Affairs Division provides services to pharmaceutical, biotech,
healthcare and other Life Science Companies providing to them the expertise
to evaluate, structure, implement and maintain effective quality programs and
processes that ensure compliance with applicable FDA regulations. This
Division offers a diverse all encompassing solution for the validation and
compliance of quality systems, lab and manufacturing processes, clinical
data systems, laboratory automation, content management, electronic document
management, and a complete solution for facilities, utilities and equipment
validation and compliance.
The Clinical Services and Solutions Division offers a full suite of clinical
trial support services. The services offerings include patient and
investigator recruitment, biostatistical analysis, data management, data
entry and verification and regulatory affairs services. In data management,
the group provides case report form design, protocol development, data entry
and verification, full tracking and audit trail documentation, adverse
event reporting and FDA submission. The biostat group provides data mining
studies, data base design, representation at FDA and other regulatory
meetings, and additional specialized biostatistical analysis.
Results of Operations
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As of September 30, 2004, the Company's current assets exceeded its current
liabilities by approximately $465,325.
For the nine months ended September 30, 2004, the Company generated revenues of
$9,404,394 as compared to $7,221,941 in revenues for the same period last year.
The cost of revenue for the nine months ended September 30, 2004 was $6,693,321
or 71% of revenues as compared to $4,444,606 or 62% of revenues. The increase
in cost of revenue exceeded management's expectations. Total operating expenses
for the nine months ended September 30, 2004 were $2,788,692 or 30% of revenues
as compared to $2,581,732 or 35% of revenues for the same period last year. The
operating expenses were in line with management's expectations based. For the
nine months ended September 30, 2004, the Company had a net loss of $(263,563)
or $(0.01) per share versus net income $149,845 or $0.55 per share for the same
period last year. The decrease in net income per share was based on 273,930
shares issued and outstanding last year as compared to 19,000,000 shares issued
and outstanding this year.
9
For the three months ended September 30, 2004, the Company had revenues of
$3,038,582 as compared to $2,570,229 in revenues for the same period last year.
The cost of revenue for the three months ended September 30, 2004 was $2,410,783
or 79% of revenues as compared to $1,550,390 or 60% of revenues. Total
operating expenses for the three months ended September 30, 2004 were $967,613
or 32% of revenues as compared to $965,963 or 37% of revenues for the same
period last year. For the three months ended September 30, 2004, the Company
had a net loss of $(434,780) or $(0.02) per share versus net income
$42,278 or $0.09 per share for the same period last year.
Results of operations for the interim periods are not indicative of annual
results.
Plan of Operation
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IT&E International is a for-profit lifesciences organization focused on
providing its clients with solutions to complex needs in clinical research
and regulatory compliance.
Management is in the process of seeking other businesses to acquire so that it
can expand its operations. The analysis of new businesses opportunities and
evaluating new business strategies will be undertaken by or under the
supervision of the Company's directors. In analyzing prospective businesses
opportunities, management will consider, to the extent applicable, the
available technical, financial and managerial resources of any given business
venture. Management will also consider the nature of present and expected
competition; potential advances in research and development or exploration;
the potential for growth and expansion; the likelihood of sustaining a profit
within given time frames; the perceived public recognition or acceptance of
products, services, trade or service marks; name identification; and other
relevant factors. The Company anticipates that the results of operations of
a specific business venture may not necessarily be indicative of the potential
for future earnings, which may be impacted by a change in marketing strategies,
business expansion, modifying product emphasis, changing or substantially
augmenting management, and other factors.
Management will analyze all relevant factors and make a determination based
on a composite of available information, without reliance on any single
factor. The period within which the Company will decide to participate in a
given business venture cannot be predicted and will depend on certain
factors, including the time involved in identifying businesses, the time
required for the Company to complete its analysis of such businesses, the
time required to prepare appropriate documentation and other circumstances.
10
RISK FACTORS
We operate in a market that is highly competitive, and if we are unable to
compete successfully, our revenue could decline and we may be unable to gain
market share.
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The market for life science outsourcing is relatively new and highly
competitive. Our future success will depend on our ability to adapt to
changing technologies, evolving industry standards, product offerings,
evolving demands of the marketplace and to expand our customer base through
long-term contracts.
Some of our competitors have:
o longer operating histories;
o larger customer bases;
o more experience in completing clinical trials in order to obtain
regulatory approvals;
o greater marketing capabilities;
o greater name recognition and longer relationships with clients; and
o significantly greater financial, technical, marketing and public
relations resources than IT&E.
Our competitors may also be better positioned to address technological and
market developments or may react more favorably to technological changes.
We compete on the basis of a number of factors, including;
o breadth and quality of services;
o creative design and systems engineering expertise;
o pricing;
o technological innovation; and
o understanding clients' strategies and needs.
If we fail to gain market share or lose existing market share, our financial
condition, operating results and business could be adversely affected and the
value of the investment in us could be reduced significantly. We may not have
the financial resources, technical expertise or marketing, distribution or
support capabilities to compete successfully.
11
We may not be able to attract, retain or integrate key personnel, which may
prevent us from successfully operating our business.
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We may not be able to retain our key personnel or attract other qualified
personnel in the future. Our success will depend upon the continued service
of key management personnel. The loss of services of any of the key members of
our management team or our failure to attract and retain other key personnel
could disrupt operations and have a negative effect on employee productivity
and morale and harm our financial results.
We may be responsible for maintaining sensitive patient information, and any
unauthorized use or disclosure could result in substantial damage and harm
to our reputation.
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We collect and utilize data derived from various sources to recruit patients
for clinical studies. We have access to names and addresses of potential
patients who may participate in these studies. As a result, we know what
studies are taking place, and who may be participating in these studies. In
order to deliver a targeted mail program, we compile specific demographic
information. We must protect this information to circumvent privacy concerns.
The information keyed to a specific disease state could be inadvertently
disclosed without the consent of the patient. Due to these privacy concerns,
we must take steps to ensure patient lists remain confidential. Any
unauthorized disclosure or use could result in a claim against us for
substantial damages and could harm our reputation. There can be no assurance
that any protection will be available for such data or that others will not
claim rights to such data.
If we do not adequately protect our intellectual property, our business may
suffer, we may lose revenue or we may be required to spend significant time
and resources to defend our intellectual property rights.
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We rely on a combination of copyright, trademark, trade secrets, confidentiality
procedures and contractual procedures to protect our intellectual property
rights. If we are unable to adequately protect our intellectual property, our
business may suffer from the piracy of our technology and the associated loss
in revenue. Any copyrights that we may hold may not sufficiently protect our
intellectual property and may be challenged by third parties. The more widely
we employ successful recruiting methods, the more likely these methods will
become vulnerable to duplication. Other parties may also independently develop
similar or competing methods or services that do not infringe upon our
intellectual property rights. These infringement claims or any future claims
could cause us to spend significant time and money to defend our intellectual
property rights, redesign our products or develop or license a substitute
technology. We may be unsuccessful in acquiring or developing substitute
technology and any required license may be unavailable on commercially
reasonable terms, if at all. In the event of litigation to determine the
validity of any third party claims or claims by us against such third party,
such litigation, whether or not determined in our favor, could result in
significant expense and divert the efforts of our technical and management
personnel, regardless of the outcome of such litigation.
12
Government regulation could adversely effect our profitability.
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Many of our services, including patient recruitment, are subject to government
regulation. For example, our brochures and advertisements to recruit patients
are subject to a Independent Board Review and subsequent approval from the
physician researchers. Although we expect to obtain all required federal and
state permits, licenses, and bonds to operate our business, there can be no
assurance that we will obtain the necessary approvals, which may significantly
impact our revenues and profits. Further, there can be no assurances that our
business will not be subject to more restrictive regulation.
Future sales of our common stock may cause the market price of our common
stock to decline.
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As of September 30, 2004, there were approximately 19,000,000 shares of common
stock outstanding, of which approximately 11,000,000 are restricted securities
under the Securities Act which are held by our affiliates. These restricted
securities will be eligible for sale from time to time upon expiration of
applicable holding periods under Rule 144 under the Securities Act. If these
holders sell in the public market, these sales could cause the market price of
our common stock to decline. This also could make it more difficult for us to
raise funds through future offerings of our common stock.
Issuance of stock to fund our operations may dilute your investment and reduce
your equity interest.
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We may need to raise capital in the future. Any equity financing may have
significant dilutive effect to stockholders and a material decrease in
stockholders' equity interest in IT&E. We may be required to raise capital,
at time and in amount, which are uncertain, especially under the current
capital market conditions, and on undesirable terms. At its sole discretion,
the board of directors may issue additional securities without seeking
stockholder approval.
We may pursue strategic acquisitions or investments in new markets and may
encounter risks associated with these activities that could harm our business
and operating results.
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We may pursue acquisitions of, or investments in, businesses and assets in new
markets that we believe will complement or expand our existing business or our
customer base. Our acquisition strategy involves a number of risks, including:
o difficulty in successfully integrating acquired operations, personnel,
technology, customers, partner relationships, services and businesses
with our operations;
13
o loss of key employees of acquired operations or inability to hire key
employees necessary for our expansion;
o diversion of our capital and management attention away from other
business issues;
o an increase in our expenses and working capital requirements; and
o other financial risks, such as potential liabilities of the businesses
we acquire.
Our growth may be limited and our competitive position may be harmed if we are
unable to identify, finance and complete future acquisitions. We believe that
further expansion may be a prerequisite to our long-term success as some of our
competitors have larger operations, higher revenues and greater financial
resources than us. There can be no assurance that we will be able to identify,
negotiate or finance future acquisitions successfully. Future acquisitions
could result in potentially dilutive issuances of equity securities, the
incurrence of debt, contingent liabilities, amortization expenses related to
goodwill and other intangible assets, a decrease in profitability, or future
losses. The incurrence of debt in connection with any future acquisitions
could restrict our ability to obtain working capital or other financing
necessary to operate our business. Our future acquisitions or investments may
not be successful, and if we fail to realize the anticipated benefits of these
acquisitions reinvestments, our business and operating results could be harmed.
The actual or anticipated resale by the selling stockholders of shares of our
common stock may cause the market price of our common stock to decline.
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The resale of our common stock by the selling stockholders through open market
transactions or other means may, depending upon the timing of the resales,
depress the market price of our common stock. Moreover, actual or anticipated
downward pressure on the market price of our common stock due to actual or
anticipated resales of our common stock could cause some institutions or
individuals to engage in short sales of our common stock, which may itself
cause the market price of our common stock to decline.
Liquidity and Capital Resources
-------------------------------
On October 18, 2004, the Registrant, entered into a Securities Purchase
Agreement with and Laurus Master Funds, Ltd., an accredited investor. Pursuant
to the Agreement, the Registrant sold to Laurus a Secured Convertible Term Note
in an aggregate principal amount of $5,000,000 and issued a warrant to purchase
up to 1,924,000 shares of the Company's common stock. The Company may issue to
Laurus an additional note up to $2,000,000 prior to July 15, 2005. The funds
from the Note will be used to pay off the Company's existing debt in the amount
of $1,500,000 and for working capital; provided, however, $2,500,000 has been
placed in a restricted cash account to be distributed in accordance with the
terms and condition of the Restricted Account Agreement dated October 18, 2004.
The Agreement also grants Laurus a right of first refusal to participate in any
future issuance of debt or equity securities by the Company.
14
The Company could be required to secure additional financing to fully implement
its entire business plan. There are no guarantees that such financing will be
available to the Company, or if available, will be on terms and conditions
satisfactory to management.
The Company does not have any preliminary agreements or understandings between
the company and its stockholders/officers and directors with respect to loans
or financing to operate the company. The Company currently has no arrangements
or commitments for accounts and accounts receivable financing.
Employees
---------
IT&E employs approximately 80-85 staff employees and utilizes the services
of approximately 50-55 outside consultants who work as independent contractors
for IT&E.
Market For Company's Common Stock
(i) Market Information
----------------------
The Company's Common Stock is traded on the OTC Bulletin Board under the
symbol "ITER." There has been limited trading activity in the Common Stock.
There are no assurances trading activity will take place in the future
for the Company's Common Stock.
(a) There are currently 2,000,000 warrants for shares of Common Stock which
are subject to conversion on a one-to-one basis. These are five year warrants,
which include piggyback registration rights on the underlying stock, with an
exercise price of to be mutually determined by the Board of Directors and
Warrant Holder(s), the exercise date is not sooner than one year and not later
than five years, ending April, 2009. There are no outstanding options to
purchase, or securities convertible into, the Company's common stock.
(b) There are currently 1,875,000 shares common stock of the Company which
could be sold under Rule 144k under the Securities Act of 1933, as amended.
(c) The Company did not repurchase any of its shares during the second quarter
of the fiscal year covered by this report.
(ii) Dividends
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Holders of common stock are entitled to receive such dividends as the board
of directors may from time to time declare out of funds legally available for
the payment of dividends. No dividends have been paid on our common stock, and
we do not anticipate paying any dividends on our common stock in the
foreseeable future.
15
Forward-Looking Statements
--------------------------
This Form 10-QSB includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included or incorporated by reference in this
Form 10-QSB which address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including such things
as future capital expenditures (including the amount and nature thereof),
finding suitable merger or acquisition candidates, expansion and growth of the
Company's business and operations, and other such matters are forward-looking
statements. These statements are based on certain assumptions and analyses
made by the Company in light of its experience and its perception of
historical trends, current conditions and expected future developments as
well as other factors it believes are appropriate in the circumstances.
However, whether actual results or developments will conform with the
Company's expectations and predictions is subject to a number of risks and
uncertainties, general economic market and business conditions; the business
opportunities (or lack thereof) that may be presented to and pursued by the
Company; changes in laws or regulation; and other factors, most of which
are beyond the control of the Company.
This Form10-QSB contains statements that constitute "forward-looking
statements." These forward-looking statements can be identified by the use of
predictive, future-tense or forward-looking terminology, such as "believes,"
"anticipates," "expects," "estimates," "plans," "may," "will," or similar
terms. These statements appear in a number of places in this Registration and
include statements regarding the intent, belief or current expectations of
the Company, its directors or its officers with respect to, among other
things: (i) trends affecting the Company's financial condition or results of
operations for its limited history; (ii) the Company's business and growth
strategies; and, (iii) the Company's financing plans. Investors are cautioned
that any such forward-looking statements are not guarantees of future
performance and involve significant risks and uncertainties, and that actual
results may differ materially from those projected in the forward-looking
statements as a result of various factors. Factors that could adversely
affect actual results and performance include, among others, the Company's
limited operating history, dependence on continued growth in the irrigation
industry, potential fluctuations in quarterly operating results and expenses,
government regulation dealing with irrigation systems, technological change
and competition.
Consequently, all of the forward-looking statements made in this Form 10-QSB
are qualified by these cautionary statements and there can be no assurance
that the actual results or developments anticipated by the Company will be
realized or, even if substantially realized, that they will have the expected
consequence to or effects on the Company or its business or operations. The
Company assumes no obligations to update any such forward-looking statements.
16
Item 3. Controls and Procedures
As of the end of the period covered by this report, the Company conducted an
evaluation, under the supervision and with the participation of the principal
executive officer and principal financial officer, of the Company's disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (the "Exchange Act")). Based on this
evaluation, the principal executive officer and principal financial officer
concluded that the Company's disclosure controls and procedures are effective
to ensure that information required to be disclosed by the Company in reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms. There was no change in the Company's
internal control over financial reporting during the Company's most recently
completed fiscal quarter that has materially affected, or is reasonably likely
to materially affect, the Company's internal control over financial reporting.
17
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company is not a party to any legal proceedings.
ITEM 2. Changes in Securities and Use of Proceeds
On October 18, 2004, the Registrant, entered into a Securities Purchase
Agreement with and Laurus Master Funds, Ltd., an accredited investor. Pursuant
to the Agreement, the Registrant sold to Laurus a Secured Convertible Term Note
in an aggregate principal amount of $5,000,000 and issued a warrant to purchase
up to 1,924,000 shares of the Company's common stock. The Company may issue to
Laurus an additional note up to $2,000,000 prior to July 15, 2005. The funds
from the Note will be used to pay off the Company's existing debt in the amount
of $1,500,000 and for working capital; provided, however, $2,500,000 has been
placed in a restricted cash account to be distributed in accordance with the
terms and condition of the Restricted Account Agreement dated October 18, 2004.
The Agreement also grants Laurus a right of first refusal to participate in any
future issuance of debt or equity securities by the Company. (See Current
Report, dated October 18, 2004, filed with the Commission.)
ITEM 3. Defaults upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
During the quarter ended, no matters were submitted to the Company's
security holders.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Title of Document
-----------------------------------------------
31.1 Certifications of the Chief Executive Officer and Chief Financial
Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certifications of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K, during the Quarter ended September 30, 2004.
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").
18
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
IT&E International Group
------------------------
(Registrant)
Dated: November 15, 2004 By: /s/ Peter R. Sollenne
----------------- -----------------------------
Peter R. Sollenne
Chief Executive Officer
Director
Dated: November 15, 2004 By: /s/ Kelly Alberts
----------------- -----------------------------
Kelly Alberts
President/COO
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
IT&E International Group
Dated: November 15, 2004 By: /s/ Peter R. Sollenne
----------------- -----------------------------
Peter R. Sollenne
Chief Executive Officer
Director
Dated: November 15, 2004 By: /s/ Kelly Alberts
----------------- -----------------------------
Kelly Alberts
President/COO
19