SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(B) OR (G)
OF THE SECURITIES EXCHANGE ACT OF 1934
___________________
INTRACO SYSTEMS, INC.
(Name of Small Business Issuer in Its Charter)
Nevada 87-0381511
------------ --------------
(State or Other Jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
3998 Florida Atlantic University Boulevard, Suite 210
Boca Raton, Florida 33431
(561) 367-0600
-------------------------------------------
(Address and Telephone Number of Principal Executive Offices)
Copies of communications to:
Michael D. Karsch, Esq.
Broad and Cassel
7777 Glades Road, Suite 300
Boca Raton, Florida 33434
Telephone No. (561) 483-7000
_______________________________
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
To be so registered each class is to be registered
None
------------------ ------------------------
Securities to be registered under Section 12(g) of the Act:
Common Stock
--------------
(Title of class)
THIS DOCUMENT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. INTRACO'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS
DOCUMENT. THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION AND IS QUALIFIED
IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS
APPEARING ELSEWHERE IN THE DOCUMENT AND PARTICULARLY IN THE SECTION ENTITLED
"RISK FACTORS."
PART II
INTRACO SYSTEMS, INC.
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
TABLE OF CONTENTS
Independent Auditor's Report 1
Independent Auditor's Consent Letter 2
Financial Statements:
Balance Sheets as of December 31, 1998 and 1997,
and Unaudited at June 30, 1999 and 1998 3-4
Statements of Operations for the Years Ended December 31, 1998
and 1997, and Unaudited for the Six Months Ended June 30, 1999 and
1998
5
Statements of Changes in Stockholders' Deficit for the Years Ended
December 31, 1998 and 1997, and Unaudited for the Six Months Ended
June 30, 1999 and 1998 6
Statements of Cash Flows for the Years Ended December 31, 1998
and 1997, and Unaudited for the Six Months Ended June 30, 1999 and
1998 7
Notes to Financial Statements 8-14
DASZKAL, BOLTON & MANELA
CERTIFIED PUBLIC ACCOUNTANTS
A PARTNERSHIP OF PROFESSIONAL ASSOCIATIONS
240 W. PALMETTO PARK ROAD, SUITE 300 @ BOCA RATON, FLORIDA 33432
TELEPHONE (561) 367-1040 FAX (561) 750-3236
JEFFREY A. BOLTON, CPA, P.A. MEMBER OF THE AMERICAN INSTITUTE
MICHAEL I. DASZKAL, CPA, P.A. OF CERTIFIED PUBLIC ACCOUNTANTS
ROBERT A. MANELA, CPA, P.A.
TIMOTHY R. DEVLIN, CPA, P.A.
INDEPENDENT AUDITORS REPORT
To the Board of Directors
Intraco Systems, Inc.
We have audited the accompanying balance sheets of Intraco Systems, Inc., as
of December 31, 1998 and 1997, the related statements of operations, changes
in stockholders' deficit 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 the financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 audits provide 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 Intraco Systems, Inc., as of
December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ Daszkal, Bolton & Manela, CPAs
Boca Raton, Florida
February 26, 1999, except for
Notes 12 and 13 as to which the date is
March 3, 1999
DASZKAL, BOLTON & MANELA
CERTIFIED PUBLIC ACCOUNTANTS
A PARTNERSHIP OF PROFESSIONAL ASSOCIATIONS
240 W. PALMETTO PARK ROAD, SUITE 300 @ BOCA RATON, FLORIDA 33432
TELEPHONE (561) 367-1040 FAX (561) 750-3236
JEFFREY A. BOLTON, CPA, P.A. MEMBER OF THE AMERICAN INSTITUTE
MICHAEL I. DASZKAL, CPA, P.A. OF CERTIFIED PUBLIC ACCOUNTANTS
ROBERT A. MANELA, CPA, P.A.
TIMOTHY R. DEVLIN, CPA, P.A.
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the use in this Registration Statement on Form 10-SB of
Intraco Systems, Inc., for the years ended December 31, 1998 and 1997, of our
report dated February 26, 1999.
/s/ Daszkal, Bolton & Manela, CPAs
Boca Raton, Florida Daszkal, Bolton & Manela, CPAs
September 3, 1999
<TABLE>
<CAPTION>
INTRACO SYSTEMS, INC.
BALANCE SHEETS
ASSETS
December 31, June 30,
(Unaudited)
<S> <C> <C> <C> <C>
1998 1997 1999 1998
Current assets:
Cash $ 32,245 $ 255,034 $ 49,264 $ 44,363
Accounts receivable 49,900 235,627 321,000 186,585
Notes receivable - - 125,000 -
Inventory 65,840 - 86,251 -
Interest receivable - - 16,722 -
Prepaid expenses 125,945 127,265 53,866 123,915
------- ------- ------- -------
Total current assets 273,930 617,926 652,103 354,863
------- ------- ------- -------
Property and equipment, net 113,076 73,444 114,865 73,906
Other assets:
Due from related party 46,480 133,410 - 152,858
Note receivable
- related party 123,059 - 48,096 -
Goodwill - - 83,910 -
Due from shareholder 20,500 - - -
Deposits 13,819 2,708 21,064 2,708
------- ------- ------- -------
Total other assets 203,858 136,118 153,070 155,566
------- ------- ------- -------
Total assets $ 590,864 $ 827,488 $ 920,038 $ 584,335
========= ========= ======== =========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
INTRACO SYSTEMS, INC.
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIT
December 31, June 30,
(Unaudited)
<S> <C> <C> <C> <C>
1998 1997 1999 1998
Current liabilities:
Accounts payable $ 332,476 $ 716,146 $ 641,002 $ 289,800
Deferred revenue 152,174 593,733 63,897 515,386
Accrued expenses - - 33,973 -
Customer deposits 172,195 - 31,373 -
Note payable 306,526 50,000 298,890 238,000
Due to shareholde 17,700 - - -
--------- -------- -------- --------
Total current
liabilities 981,071 1,359,879 1,069,135 1,043,186
--------- --------- --------- ---------
Note payable 113,686 - - -
Stockholders' deficit:
Convertible redeemable preferred stock, $.001 par
value, 10,000,000 shares authorized and
52,500 shares issued and outstanding, 7%
cumulative, with a $1.00 per share preference
value 53 - 749 -
Common stock, $.001 and $.001 par value
100,000,000 shares authorized, 9,665,200 and
9,000,000 shares issued and outstanding
9,665 9,000 13,020 9,000
Additional paid-in capital 131,797 23,822 1,352,539 23,822
Subscription receivable - - (566,300) -
Accumulated deficit (645,408) (565,213) (949,105) (491,673)
--------- --------- --------- ---------
Total stockholders'
deficit (503,893) (532,391) (149,097) (458,851)
--------- --------- --------- ---------
Total liabilities
and stockholders'
deficit $ 590,864 $ 827,488 $ 920,038 $ 584,335
========= ========== ========= =========
</TABLE>
See accompanying notes to financial statements
<TABLE>
<CAPTION>
INTRACO SYSTEMS, INC.
STATEMENTS OF OPERATIONS
Years ended Six months ended
December 31, June 30,
(Unaudited)
1998 1997 1999 1998
<S> <C> <C> <C> <C>
Revenues:
Systems/networks $1,248,824 $2,287,861 $1,383,474 $ 693,299
Service contracts 1,456,107 1,268,316 318,139 718,330
--------- --------- --------- --------
Total revenues 2,704,931 3,556,177 1,701,613 1,411,629
--------- --------- --------- ---------
Cost of revenues:
Systems/networks 638,885 1,443,080 1,033,293 313,676
Service contracts 1,073,835 1,163,589 206,687 542,967
--------- --------- --------- --------
Total cost
of revenues 1,712,720 2,606,669 1,239,980 856,643
--------- --------- --------- --------
Gross profit 992,211 949,508 461,633 554,986
General and
administrative 1,037,829 1,116,198 764,007 463,267
--------- --------- --------- --------
Income (loss)
from operations (45,618) (166,690) (302,374) 91,719
Interest income 2,490 1,432 17,018 2,046
Interest expense (37,067) (6,005) (18,341) (20,225)
Income (loss)
before income taxes (80,195) (171,263) (303,697) 73,540
Provision (benefit)
for income taxes - - - -
---------- ---------- --------- --------
Net income (loss) $ (80,195) $ (171,263) $ (303,697) $ 73,540
=========== ========== ========== ========
Net income (loss) per share
(basic and diluted) $ (.009) $ (.019) $ (.03) $ .008
=========== ========== ========== ========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
INTRACO SYSTEMS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
Preferred Common Add'l
Stock Stock Paid-in Subscr. Accum.
Shares Amount Shares Amount Capital Rec. Deficit Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1996
- $ - 100 $ - $ - $ - $ 32,023 $ -
Common stock split
(90,000 to 1)
- - 8,999,900 8,900 (8,900) - - -
Prior period
adjustments
- - - - - - (425,973)(425,973)
- -----------------------------------------------------------------------------
Balance at
December 31, 1996
as adjusted
- - 9,000,000 9,000 (8,900) - (393,950)(393,850)
Conversion of
shareholder note
- - - - 32,722 - - 32,722
Net loss for
the year
- - - - - - (171,263)(171,263)
- -----------------------------------------------------------------------------
Balance at
December 31, 1997
- - 9,000,000 9,000 32,822 - (565,213)(532,391)
Issuance of common
stock for cash
- - 665,200 665 165,635 - - 166,300
Costs associated
with issuance
of stock
- - - -(110,107) - - (110,107)
Issuance of
preferred stock
for cash
52,500 53 - - 52,447 - - 52,500
Net loss for
the year
- - - - - - (80,195) (80,195)
- -----------------------------------------------------------------------------
Balance at
December 31, 1998
52,500 53 9,665,200 9,665 131,797 - (645,408) (503,893)
Net Loss,
June 30, 1999
- - - - - - (303,697) (303,697)
Costs associated with
recapitalization
- - - -(283,153) - - (283,153)
Issuance of
common stock
- - 1,631,300 1,631 902,894 - - 904,525
Costs associated
with issuance
of stock
- - - -(202,964) - - (202,964)
Dividends paid
- - - - (1,092) - - (1,092)
Issuance of preferred
stock for cash
696,000 696 - - 695,304 - - 696,000
Acquisition of
assets of CTE
- - 1,664,489 1,664 1,773 - - 3,437
Issuance of stock
for acquisition
- - 60,000 60 107,980 - - 108,040
Subscriptions
receivable
- - - - - (566,300) - (566,300)
Balance at
June 30, 1999
748,500 749 13,020,989 13,020 1,352,539(566,300)(949,105)(149,097)
------- --- ---------- ------ --------- ------- ------- -------
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
INTRACO SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
Years ended Six months ended
December 31, June 30,
(Unaudited)
<S> <C> <C> <C> <C>
1998 1997 1999 1998
Net (loss) $ (80,195) $(171,263) $(303,697) $ 73,540
Adjustments to reconcile
net loss to net cash
provided (used) by
operating activities:
Depreciation 18,426 16,099 9,602 13,365
Changes in assets
and liabilities:
(Increase) decrease in:
Inventory (65,840) - (20,411) -
Accounts receivable 185,727 (34,855) (271,100) 49,042
Interest receivable - - (16,722) -
Note receivable - related - - 74,963 -
Prepaid expenses 1,320 107,569 72,079 3,350
Due from related
parties (38,929) (133,410) 46,480 (19,448)
Due from Shareholder - - 2,800 -
Security deposits (11,111) - (7,245) -
Increase (decrease) in:
Accounts payable 143,236 609,544 308,526 (152,346)
Accrued expenses - - 33,973 -
Deferred revenue (441,559) 109,094 (88,277) (78,347)
Customer deposits 172,195 - (140,822) -
-------- ------- -------- -------
Net cash provided (used)
by operating activities (116,730) 502,778 (299,851) (110,844)
-------- ------- -------- -------
Cash flows from investing activities:
Purchase of property
and equipment (58,058) (13,931) (5,391) (13,827)
-------- ------- ------- -------
Cash flows from financing activities:
Proceeds from issuance
of common stock 166,300 - 234,792 -
Proceeds from issuance
of preferred stock 52,500 - 696,000 -
Costs associated with
issuance of stock (110,107) - (202,964) -
Dividends paid - - (1,092) -
Repayment of long-term debt (156,694) (290,124) (121,322) (86,000)
Increase stockholder loans - 1,739 - -
Costs associated with
recapitalization - - (283,153) -
--------- -------- -------- -------
Net cash provided (used) by
financing activities (48,001) (288,385) 322,261 (86,000)
--------- -------- -------- -------
Net increase (decrease) in cash (222,789) 200,46 17,019 (210,671)
Cash, beginning of year 255,034 54,572 32,245 255,034
-------- ------ ------- -------
Cash, end of year $ 32,245 $ 255,034 $ 49,264 $44,363
========= ========= ========= ========
Supplemental disclosure of
cash flow information:
Cash paid during the year for:
Interest paid $ 37,067 $ 6,005 $ 18,341 $ 20,225
========= ========= ========= ========
Non-cash transactions affecting
investing activities:
Property and equipment
acquired in acquisition $ - $ - $ 6,000 $ -
========= ========= ========= ========
Non-cash transactions affecting
financing activities:
Conversion of shareholder note
into common stock $ - $ 32,722 $ - $ -
========= ========= ========= ========
Conversion of accounts payable
to note payable $ 438,906 $ - $ - $438,906
========= ========= ========= ========
Common stock issued for note $ - $ - $ 691,300 $ -
========= ========= ========= ========
Issuance of common stock
for acquisition $ - $ - $ 90,000 $ -
========= ========= ========= ========
</TABLE>
See accompanying notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Intraco Systems, Inc., (the "Company") specializes in providing a full range
of computer solutions worldwide based on its software products, complete
systems, complex networks, and Internet solutions. These include hardware
and/or software technical services such as custom software and software
migrations, as well as technical support both on-site and remote as may be
required.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
Property and Equipment
Property and equipment is recorded at cost and is depreciated using the
straight-line method over their estimated useful lives.
Use of Estimates
The preparation of financial statements in conformity with general accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
Revenue Recognition
Generally, revenues from sales of products are recognized when products are
shipped unless the Company has obligations remaining under a sales or
licensing agreement, in which case revenue is either deferred until all
obligations are satisfied or recognized ratably over the term of the
contract. Revenues from sales of maintenance contracts in 1998 and 1997 were
$1,456,407 and $1,268,316, respectively.
Inventory
Inventory consists primarily of computer equipment purchased for resale, and
is stated at the lower of cost or market, with cost determined on the
first-in, first-out (FIFO) method.
Unaudited Interim Information
The information presented as of June 30, 1999 and 1998, and for the six month
periods ended June 30, 1999 and 1998, has not been audited. In the opinion
of management, the unaudited interim financial statements include all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the Company's financial position as of June 30, 1999 and 1998,
and the results of its operations and its cash flows for the six months ended
June 30, 1999 and 1998, and the stockholders deficit for the six months ended
June 30, 1999.
Earnings Per Share
Earnings per share are computed based on the weighted average number of
common shares outstanding during the year. Stock warrants and options
outstanding are common stock equivalents and are included in the calculation of
earnings per share to the extent they are dilutive using the treasury-stock
method. Basic and diluted earnings per share are the same.
NOTE 3 - PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Property and equipment consist of the following:
<S> <C> <C>
1998 1997
Leasehold improvements $ 50,282 $ -
Equipment 111,696 103,919
Furniture and fixtures 22,260 22,260
-------- --------
Total property and equipment 184,238 126,179
Less: accumulated depreciation (71,162) (52,735)
--------- --------
Property and equipment, net $ 113,076 $ 73,444
========= ========
</TABLE>
Depreciation expense for the years ended December 31, 1998 and 1997, was
$18,426 and $16,099, respectively.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company is affiliated with various companies through common ownership.
During the years ended December 31, 1998 and 1997, the Company had the
following transactions with a related party (Intraco, Ltd.):
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
Due from related party - beginning of year $ 133,410 $ -
Sales to related party 235,255 216,000
Cash received (199,126) (82,590)
Less: Amount converted to note receivable
(Due in 36 monthly installments, with
an interest rate of 6%) 123,059 -
-------- ---------
Due from related party - end of year $ 46,480 $ 133,410
========== =========
</TABLE>
The Company paid a minority shareholder of the Company $90,000 during 1998
pursuant to a consulting agreement.
NOTE 5 - OPERATING LEASES
The Company leases facilities and equipment under operating leases, with
terms from three to five years, payable in monthly installments. Total lease
expense for the years ended December 31, 1998 and 1997, was $67,860 and
$45,711, respectively.
Future minimum lease payments for leases with a term in excess of one year
are as follows:
Years ended
December 31,
1999 $157,000
2000 161,000
2001 151,000
2002 130,000
2003 127,000
NOTE 6 - LONG-TERM DEBT
At December 31, 1998 and 1997, long-term debt consists of the following:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Note payable, due on demand,
with an interest rate of 13.5%,
with remaining balance due January 31, 1998. $ - $ 50,000
Note payable due in monthly installments
ranging from $12,000 to $39,000 plus interest at
10%, with remaining balances due March 2000.
Secured by all assets of the Company. 420,212 -
------- -------
Less current portion 306,526 50,000
------- -------
$ 113,686 $ -
======== ========
</TABLE>
Aggregate maturities of long-term debt are as follows:
1999 $306,526
2000 113,686
-------
Total $420,212
========
Total interest expense for the years ended December 31, 1998 and 1997, was
approximately $37,000 and $6,000, respectively.
NOTE 7 - CONCENTRATION OF CREDIT RISK
The Company maintains its cash bank deposit at various financial
institutions. Accounts at these institutions are insured by the Federal
Deposit Insurance Corporation up to $100,000 and the balance, at times, may
exceed federally insured limits. At December 31, 1998, the Company's cash
balance did not exceed the insured limit. The balance exceeded the insurance
limit by approximately $155,000 at December 31, 1997.
NOTE 8 - MAJOR CUSTOMER
Sales to one customer in 1998 and 1997, represented approximately 29% and 64%
of total sales, respectively.
NOTE 9 - PRIOR PERIOD ADJUSTMENTS
During 1997, an adjustment was made to correct the Company's revenue and
expense recognition method relating to its service contracts. In previous
years the Company recognized the revenue and expense on the cash basis. This
error was corrected and revenue and expenses are now recognized when earned
or incurred, respectively. The effect of this adjustment, when reported in the
appropriate year was to decrease stockholders' equity as reported at
December 31, 1996 by $(254,653).
The Company also adjusted the financial statement to correct the
overstatement of the capitalized software costs. During 1997, it was
determined that the capitalized software costs had no future benefit as of
December 31, 1996. The effect of this adjustment, when reported in the
appropriate year was to decrease stockholders' equity as reported at
December 31, 1996 by $(171,320).
The total effect of these adjustments was to decrease the stockholders'
equity balance as reported at December 31, 1996 by $(425,973).
NOTE 10 - STOCKHOLDERS' DEFICIT AND STOCK OPTION PLAN
In August and in November 1998, the Company amended and restated the Articles
of Incorporation. The Company increased the aggregate number of shares to
60,000,000 consisting of 50,000,000 shares of common stock, par value $.001
per share and 10,000,000 shares of preferred stock, par value $.001 per
share, 7% cumulative dividend, payable quarterly starting February 1, 1999.
The preferred stock is redeemable at any time at the option of the Company at
$1.00 per share. Five years from the date of issuance or 180 days after the
effective date of the Company's initial public offering, the holders of at
least 51% of the Series A preferred stock will have one demand registration
right. The Company will be contractually required to use its best efforts to
file a registration statement and to have such registration statement become
effective.
In November of 1998, the Company commenced a Regulation D 504 stock offering
and as a result of the offering the Company issued 665,200 shares of common
stock for $166,300 or $.25 per share. Also in November of 1998, the Company
began a preferred stock offering and as a result of the offering, the Company
issued 52,500 shares of preferred stock of which 12,500 shares were issued
under Regulation D 506 and 40,000 shares under Regulation S, at $1.00 per
share which totals $52,500. Costs incurred associated with these offerings
totaled $110,000. The Company is continuing these offerings of common and
preferred stock and during the period January 1, 1999 through March 3, 1999,
raised additional capital of approximately $328,000.
Holders will have the right to convert the Series A preferred stock, in whole
or in part, at any time, or from time to time, into the common stock, par
value $0.001, of the Company. The initial conversion rate shall be on a
one-to-one basis and shall be subject to proportional stock splits, stock
dividends and reverse stock splits, and to standard weighted average
price-based anti-dilution provisions as well as specific anti-dilution
provisions with respect to any future series of preferred stock.
Stock Option Plan
Under the Company's stock option plan, 2,000,000 shares of common stock were
reserved for issuance upon exercise of options granted to directors, officers
and employees of the Company. Options issued through December 31, 1998, carry
exercise prices equal to that of the fair market value on the date of the
grant. The options vest equally over a period of two years following the
date of grant and the unexercised portion of the options expires and ceases to
be exercisable on the earlier of the tenth year after the date of the grant or
specified date following termination of employment.
The Company has elected to account for the stock options under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees,"
and related interpretations. Accordingly, no compensation expense has been
recognized on the stock options.
Had compensation expense for the stock option plan been determined based on
the fair value of the options at the grant date consistent with the
methodology prescribed under Statement of Financial Standards No. 123,
"Accounting for Stock Based Compensation," the Company's 1998 net loss would
have increased by $6,649. The fair value of each option is estimated on the
date of grant using fair market option pricing model with the following
assumption:
Risk-free interest rate 5.28%
Expected life (years) 10
Expected volatility n/a
Expected dividends None
Weighed average remaining contractual life 1.75 years
A summary of option transactions during the years ended December 31, 1998 and
1997, is shown below:
<TABLE>
<CAPTION>
Weighted Average
Number of Exercise Price
Options Per Option
<S> <C> <C>
Outstanding at December 31, 1997 - $ -
Granted 900,000 .25
Exercised - -
Forfeited (85,000) .25
------- ------
Outstanding at December 31, 1998 815,000 $ .25
======= ======
</TABLE>
NOTE 11 - INCOME TAXES
The provision (benefit) for income taxes is as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Taxes currently payable $ - $ -
Deferred income tax benefit 27,485 229,897
Change in beginning valuation allowance (27,485) (229,897)
------- --------
Provision (benefit) for income taxes $ - $ -
======== =========
</TABLE>
Reconciliation of the Federal statutory income tax rate to the Company's
effective income tax rate is as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Computed at the statutory rates (34%) $(27,266) $(58,229)
Increase (decrease) resulting from:
Non-deductible expenses 2,692 678
State income taxes, net of federal income
tax benefit (2,911) (6,216)
Reinstatement of deferred tax asset at 5/7/97 - (188,554)
Reinstatement/change in deferred tax asset
valuation allowance 27,485 229,897
Other - 22,424
--------- ---------
Tax provision (benefit) $ - $ -
========= =========
</TABLE>
<TABLE>
<CAPTION>
The components of the deferred tax asset were as follows at December 31:
1998 1997
<S> <C> <C>
Net operating loss carryforward $ 249,648 $ 59,519
Deferred revenue 57,263 223,422
------- -------
Total deferred tax asset 306,911 282,941
Deferred tax liabilities:
Deferred costs (41,239) (46,807)
Depreciation expense (8,290) (6,237)
-------- -------
Net deferred tax asset 257,382 229,897
-------- -------
Valuation allowance:
Beginning of year (229,897) -
Decrease (increase) during year (27,485) (229,897)
-------- --------
Ending balance (257,382) (229,897)
-------- --------
Net deferred taxes $ - $ -
========== ==========
</TABLE>
At December 31, 1998 and 1997, the Company has unused net operating
loss carryforwards of approximately $663,000 and $158,000, respectively,
expiring primarily in 2013 and 2012, which are available for use on its
future corporate Federal and State tax returns.
NOTE 12 - SUBSEQUENT EVENTS
During the period from January 1, 1999 to March 3, 1999, the Company raised
additional capital, from stock offerings, totaling, approximately $328,000.
Unaudited
In April of 1999, CTE, a public shell, acquired all of the outstanding common
stock of the Company. For accounting purposes, the acquisition has been
treated as an acquisition of CTE by the Company and as a recapitalization of
the company. As a result of the recapitalization, the Company is now
authorized to issue 100,000,000 shares of common stock.
NOTE 13 - MANAGEMENT'S PLAN
As shown in the accompanying financial statements, the Corporation incurred a
net loss of $80,195 during the year ended December 31, 1998, and $171,263 for
the year ended December 31, 1997. The Company's current liabilities exceeded
its current assets by $707,141 and $741,953, respectively. The ability of
the Corporation to continue as a going concern is dependent on increasing sales
and obtaining additional capital and financing. The financial statements do
not include any adjustments that might be necessary if the Corporation is
unable to continue as a going concern.
Management's plan to increase sales and obtain additional capital includes
several specific actions. On the sales side, greater emphasis will be placed
on systems, web development and services as these areas have higher profit
margins and represent a market which is growing much more rapidly than the
company's traditional contract services. Management is also pursuing an
aggressive acquisition strategy which is expected to add significantly to
revenues and profits while strengthening the organization.
For capital sourcing, management will continue the private placement
offerings of common and preferred stock, which during the period from January
1, 1999 through March 3, 1999 have raised $328,000. In addition, in April 1999
the Company completed a merger with CTE, a public shell. This merger was
accounted for as a reverse merger.
No estimate has been made should management's plan be unsuccessful.
PART III
EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description
<S><C> <C>
EX-27 Financial Data Schedule
</TABLE>
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.
INTRACO SYSTEMS, INC.
Date: September __, 1999 By: /s/ Jack S. Berger
-------------------------
Jack S. Berger, President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 49,264
<SECURITIES> 0
<RECEIVABLES> 462,722
<ALLOWANCES> 0
<INVENTORY> 86,251
<CURRENT-ASSETS> 652,103
<PP&E> 114,865
<DEPRECIATION> 0
<TOTAL-ASSETS> 920,038
<CURRENT-LIABILITIES> 1,069,135
<BONDS> 0
0
749
<COMMON> 13,020
<OTHER-SE> (162,866)
<TOTAL-LIABILITY-AND-EQUITY> 920,038
<SALES> 1,701,613
<TOTAL-REVENUES> 1,701,613
<CGS> 1,239,980
<TOTAL-COSTS> 764,007
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,341
<INCOME-PRETAX> (303,697)
<INCOME-TAX> 0
<INCOME-CONTINUING> (303,697)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (303,697)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
