As filed with the U. S. Securities and Exchange Commission on April 17, 2000
File No. _______________________
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Pursuant to Section 12(b) or (g) of the Securities and Exchange Act of 1934
Investment Technology, Inc.
(Exact name of small business issuer as specified in its charter)
Nevada 88-0431927
- ---------------------------- ----------------------------
(State of incorporation) (IRS Employer ID Number)
5235 Island Chain Road, Las Vegas NV 89118
------------------------------------------
(Address of principal executive offices)
(702) 248-1118
--------------
(Issuer's telephone number)
Thomas D. Vidmar, President
5235 Island Chain Road, Las Vegas NV 89118
(702) 248-1118 (voice) (702) 656-6419 (fax)
-------------------------------------------
(Name, address, and phone number for agent for service)
- --------------------------------------------------------------------------------
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value.
<PAGE>
PART I
Item 1 - Description of Business
General
- -------
Investment Technology, Inc. (Company) is filing this Form 10-SB on a voluntary
basis in order to make the Company's financial information equally available to
all interested parties, including potential investors, and to meet certain
listing requirements for publicly traded securities.
Caution Regarding Forward-Looking Information
- ---------------------------------------------
This Form 10-SB may contain certain forward-looking statements and information
relating to the Company that are based on the beliefs of the Company or
management as well as assumptions made by and information currently available to
the Company or management. When used in this document, the words "anticipate,"
"believe," "estimate," "expect" and "intend" and similar expressions, as they
relate to the Company or its management, are intended to identify forward-
looking statements. Such statements reflect the current view of the Company
regarding future events and are subject to certain risks, uncertainties and
assumptions, including the risks and uncertainties noted. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those described herein as
anticipated, believed, estimated, expected or intended. In each instance,
forward-looking information should be considered in light of the accompanying
meaningful cautionary statements herein.
History of the Company
- ----------------------
Investment Technology, Inc. (Company) was originally incorporated as Career
Opportunities, Inc. in 1983 under the laws of the State of Oregon. The Company
changed its corporate name to Career Opportunities (Int'l), Ltd. in May 1997.
On December 15, 1997, the Company merged with and into USFC, Inc. (a dormant
publicly-owned Washington corporation) with the exchange of approximately
4,993,413 shares of USFC for 100% of the issued and outstanding shares of the
Company. For accounting purposes, this transaction was treated as a reverse
merger whereby the Company was the acquiring entity for accounting purposes
while USFC was the acquiring company for legal purposes. The historical
financial statements of the Company became the restated historical financial
statements of the continuing entity. Concurrent with the merger, the resulting
entity was reincorporated in the State of Oregon and changed its corporate name
to Distance Learning Systems, Inc.
USFC, Inc. was originally incorporated in 1968 under the laws of the State of
Washington. USFC successfully completed a public offering pursuant to a
registration exemption under Regulation A of the U. S. Securities and Exchange
Commission in January 1970.
On July 19, 1999, the Company changed its state of incorporation from Oregon to
Nevada by means of a merger with and into a Nevada corporation formed on July 2,
1999 solely for the purpose of effecting the reincorporation. The Certificate of
Incorporation and Bylaws of the Nevada corporation are the Certificate of
Incorporation and Bylaws of the surviving corporation. Such Certificate of
Incorporation changed the Company's name to Investment Technology, Inc. and
modified the Company's capital structure to allow for the issuance of 10,000,000
shares of common stock with a par value of $0.001 per share.
2
<PAGE>
For all periods from inception through June 30, 1999, the Company was in the
business of providing educational research and analysis services to write and
publish specialized study guides for adult learners; specifically tutorial
assistance to nurses and other related persons who aspire to higher education
credentials and who can qualify for and pass examinations administered from the
Regents College program located in the State of New York.
In June 1999, DLS transferred 100% of its assets to a group of then-controlling
shareholders in exchange for the assumption of all outstanding and contingent
liabilities. Effective June 30, 1999, the Company had no assets, liabilities or
operations.
In July 1999, and concurrent with the merger into the Nevada corporation and a
corresponding change in control of the Company, the business of the Company was
then focused on the intent to develop or acquire companies that would depend
entirely or to a great extent on marketing their goods and/or services over the
Internet. The funds necessary to facilitate the change in control of the Company
were provided by an individual who became a shareholder in the Company. These
funds were structured as a debt of the Company to be repaid from the future net
income of the Company. The corresponding offset to this debt is a receivable
from the various shareholders in the Company, post change of control and bears
equal terms to the underlying debt.
The Company entered into a merger agreement with Alger International Rarities,
Inc. on July 15, 1999 and rescinded this transaction on October 21, 1999. There
was no material transactions of economic substance involved in the merger,
rescission or other interim period transactions.
On November 15, 1999, the Company completed design of its first Internet web
site, CoinsToday.com, which offered precious metal, such as platinum, gold or
silver, or other rare coins to collectors and investors.
On December 17, 1999, the Company entered into an Acquisition Agreement to
acquire the assets and continuing operations of PageRiver.com, a privately-owned
company based in Las Vegas, Nevada. The terms of the acquisition were $50,000
cash at closing, a $75,000 note payable due on April 17, 2000 and a $100,000
installment note payable, with payments commencing in April 2000. The initial
$50,000 funding, and subsequent working capital, was provided by Stephan G.
Herold, a shareholder in the Company.
As a part of the PageRiver.com transaction, the seller guaranteed a minimum
number of hosting accounts during the succeeding 120 day period. A reduction in
the number of accounts guaranteed would result in a corresponding reduction of
the $75,000 note due in April 2000, initially, and subsequently, a reduction in
the $100,000 installment note.
Neither of these ventures developed per the initial expectations and, on
December 31, 1999, effective at the start of business on January 1, 2000, they
were conveyed to a group controlled by Stephan G. Herold (Herold Group) for the
assumption of all liabilities, actual and contingent, of PageRiver.com and the
Company as incurred in the initial acquisition discussed above.
The minimal operations of PageRiver.com are included in the Company's financial
statements for the holding period of December 17, 1999 through December 31, 1999
as discontinued operations.
With the disposition of all activities and/or operations, the Company became
fully dependent upon the support of its controlling shareholders for the
maintenance of its corporate status and to provide all working capital support
for the Company's behalf. The controlling shareholders intend to continue the
funding of necessary expenses to sustain the corporate entity.
3
<PAGE>
The long-term goal of the Company is to grow through the acquisition and
development of multi-faceted marketing businesses. During the first quarter of
2000, the Company entered into negotiations with Pharmedical Corporation, a
privately-owned Nevada corporation. The successful completion of these
negotiations could result in the purchase of Pharmedical by the Company or a
merger of the two companies. Should said negotiations be successful, the
transaction could be completed within the second quarter of 2000. Pharmedical is
involved in the business of manufacturing and distribution of over-the-counter
health, beauty and wellness products for the consumer market.
Environmental matters
- ---------------------
The Company has no known exposures to any federal, state and local laws and
substantial regulation under these laws by governmental agencies, including the
United States Environmental Protection Agency (EPA), the Occupational Safety and
Health Administration (OSHA), various state agencies and county and local
authorities.
Inflation
- ---------
Inflation has not historically been a material factor in the Company's
operations and is not expected to have a material impact on the Company or it's
operations in the future.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
(1) Caution Regarding Forward-Looking Information
This quarterly report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of the Company
or management as well as assumptions made by and information currently available
to the Company or management. When used in this document, the words
"anticipate," "believe," "estimate," "expect" and "intend" and similar
expressions, as they relate to the Company or its management, are intended to
identify forward- looking statements. Such statements reflect the current view
of the Company regarding future events and are subject to certain risks,
uncertainties and assumptions, including the risks and uncertainties noted.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated, expected or
intended. In each instance, forward-looking information should be considered in
light of the accompanying meaningful cautionary statements herein.
(2) General comments, Results of Operations and/or Plan of Operation
Investment Technology, Inc. (Company) was originally incorporated as Career
Opportunities, Inc. in 1983 under the laws of the State of Oregon. The Company
changed its corporate name to Career Opportunities (Int'l), Ltd. in May 1997.
On December 15, 1997, the Company merged with and into USFC, Inc. (a dormant
publicly-owned Washington corporation) with the exchange of approximately
4,993,413 shares of USFC for 100% of the issued and outstanding shares of the
Company. For accounting purposes, this transaction was treated as a reverse
merger whereby the Company was the acquiring entity for accounting purposes
while USFC was the acquiring company for legal purposes. The historical
financial statements of the Company became the restated historical financial
statements of the continuing entity. Concurrent with the merger, the resulting
entity was reincorporated in the State of Oregon and changed its corporate name
to Distance Learning Systems, Inc.
USFC, Inc. was originally incorporated in 1968 under the laws of the State of
Washington. USFC successfully completed a public offering pursuant to a
registration exemption under Regulation A of the U. S. Securities and Exchange
Commission in January 1970.
4
<PAGE>
On July 19, 1999, the Company changed its state of incorporation from Oregon to
Nevada by means of a merger with and into a Nevada corporation formed on July 2,
1999 solely for the purpose of effecting the reincorporation. The Certificate of
Incorporation and Bylaws of the Nevada corporation are the Certificate of
Incorporation and Bylaws of the surviving corporation. Such Certificate of
Incorporation changed the Company's name to Investment Technology, Inc. (ITI)
and modified the Company's capital structure to allow for the issuance of
10,000,000 shares of common stock with a par value of $0.001 per share.
For all periods from inception through June 30, 1999, the Company was in the
business of providing educational research and analysis services to write and
publish specialized study guides for adult learners; specifically tutorial
assistance to nurses and other related persons who aspire to higher education
credentials and who can qualify for and pass examinations administered from the
Regents College program located in the State of New York.
In June 1999, DLS transferred 100% of its assets to a group of then-controlling
shareholders in exchange for the assumption of all outstanding and contingent
liabilities. As of June 30, 1999, the Company has no assets, liabilities or
operations.
In intervening periods, the Company attempted to develop and/or acquire various
business entities or opportunities which would market or sell their respective
products via the Internet. None of these situations were as successful as
anticipated and were discontinued as of December 31, 1999.
With the disposition of all operations, the Company became fully dependent upon
the support of its controlling shareholders for the maintenance of its corporate
status and to provide all working capital support for the Company's behalf. The
controlling shareholders intend to continue the funding of necessary expenses to
sustain the corporate entity.
On June 25, 1999, the Company transferred 100% of the assets of Distance
Learning Systems, Inc. to a group of then- controlling shareholders in exchange
for the assumption of all outstanding and contingent liabilities. The effect of
this transaction was that as of June 30, 1999, the Company had no assets,
liabilities or operations.
The results of the Company's operations for the respective periods presented are
reported as a component of discontinued operations in the consolidated
statements of operations. Additionally, the respective gain or loss incurred on
the sale of the Company's operations are also presented separately as a
component of discontinued operations.
Summarized results of operations for the disposed operations for the six months
ended June 30, 1999 and the year ended December 31, 1998, respectively, are as
follows:
June 30, December 31,
1999 1998
------------ ------------
Net sales $ 199,002 $ 565,597
============ ============
Operating income (loss) $ (1,000,065) $ (76,619)
============ ============
Loss from discontinued operations $ (839,143) $ 102,416
============ ============
During December 1999, the Company acquired PageRiver.com, an entity engaged in
providing Internet site hosting and development services. This acquisition was
not successful and all efforts towards this acquisition were abandoned as of
December 31, 1999. There were no significant revenues or expenses related to
this endeavor.
5
<PAGE>
Summarized results of operations for this unsuccessful effort for the month of
December 1999 is as follows
Month of
December 1999
-------------
Net sales $ 15,225
=============
Operating income $ (33,382)
=============
Loss from discontinued operations $ (33,382)
=============
(3) Liquidity and Capital Resources
Liquidity has been required primarily by the ventures that were disposed of as
of December 31, 1999. With the disposition of all operations, the Company became
fully dependent upon the support of its controlling shareholders for the
maintenance of its corporate status and to provide all working capital support
for the Company's behalf. The controlling shareholders intend to continue the
funding of necessary expenses to sustain the corporate entity.
(4) Year 2000 Considerations
The year 2000 date change is believed to have affected virtually all computers
and organizations. The Company has no information systems including its main
computer hardware and software, personal computer hardware and software and
associated peripheral devices or general telecommunication systems. Through the
date of this report has not experienced any significant difficulties with its
information systems or that of any of its suppliers, shippers or business
partners.
Item 3 - Description of Property
The Company's executive and administrative offices are located at 5235 Island
Chain Road, Las Vegas, Nevada 89118 in space provided at no cost by one of its
shareholders. The requirements of the Company are nominal as of the date of this
filing. Future operations of the Company will be conducted in the premises of
any entity which the Company may acquire or merge with at a future date.
(Remainder of this page left blank intentionally.)
6
<PAGE>
Item 4 - Security Ownership of Certain Beneficial Owners and Management
The following information table sets forth certain information regarding the
Company's common stock ownership on April 11, 2000 by (1) any person (including
any "group") who is known by the Company to own beneficially more than 5.0% of
its outstanding common stock, (2) each director and executive officer, and (3)
all executive officers and directors as a group:
Name and Address Shares owned Percentage owned
---------------- ------------ ----------------
Stephan G. Herold 2,000,000 44.36%
5235 Island Chain Road
Las Vegas NV 89118
Thomas D. Vidmar 540,000 11.98%
5235 Island Chain Road
Las Vegas NV 89118
Donald B. Laws 517,000 11.47%
5235 Island Chain Road
Las Vegas NV 89118
All officers and directors as
a group, including affiliates 1,057,000 23.45%
Item 5 - Directors, Executive Officers, Promoters and Control Persons
Name Age Position
---------------- --- ----------------------
Thomas D. Vidmar 52 President and Director
Donald B. Laws 58 Director
Thomas D. Vidmar has served as President and Director of the Company since the
July 1999 change in control of the Company. Since 1985, Mr. Vidmar has been an
independent financial consultant based in Las Vegas, Nevada. Mr. Vidmar formerly
held sales positions with K-Tel International and pharmaceutical manufacturers,
Pfizer and Baxter Travenol.
Donald B. Laws has served as a Director of the Company since the July 1999
change in control of the Company. Mr. Laws has been a self-employed broker of
health care properties on a National basis since 1992. From 1983 to 1991, he was
the founder and executive officer of a private security firm that eventually
employed approximately 550 persons with gross annual revenues of approximately
$10,000,000. Prior to 1983, Mr. Laws was the Executive Vice President of a
National security firm which acquired Pinkerton's, a historically known company
providing private security services. Mr. Laws is an Air Force veteran, has
served in law enforcement in Ohio and Arizona and has been the news director of
a radio station.
Item 6 - Executive Compensation
The following Summary Compensation Table sets forth, for the years indicated,
all cash compensation paid, distributed or accrued for services, including
salary and bonus amounts, rendered in all capacities for the Company to its
President and Chief Executive Officer and any other executive officer of the
Company which received remuneration in excess of $100,000 during the referenced
periods. All other compensation related tables required to be reported have been
omitted as there has been no applicable compensation awarded to, earned by or
paid to any of the Company's executive officers in any fiscal year to be covered
by such tables.
7
<PAGE>
<TABLE>
<CAPTION>
Note that the Company was a holding company for the three years prior to June
30, 1999 and paid no compensation or other remuneration to its officer's,
directors or other affiliates during that time period.
Summary Compensation Table
Annual Compensation Long-Term
------------------- Compensation
Awards Payouts
------ -------
Other Restricted Securities All
Salary/ Annual Stock Underlying LTIP Other
Name/Title Year Bonus Compensation Awards Options/SARs Payouts Compensation
- ---------- ---- ------- ------------ ------ ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas D. Vidmar, 1999 $-0- NA NA NA NA NA
President 1998 $-0- NA NA NA NA NA
1997 $-0- NA NA NA NA NA
</TABLE>
Director Compensation
The Company does not currently pay a director fee for attending scheduled and
special meetings of the Board of Directors. The Company does not pay the
expenses of all of its directors in attending board meetings. Further, none of
the Management Advisory Board members receive any compensation for their
service.
Item 7 - Certain Relationships and Related Party Transactions
The Company has one note payable to Stephan G. Herold in the principal amount of
approximately $200,000. The note bears interest at 8.0%, commencing January 1,
2000. Principal and accrued interest is repayable in monthly installments equal
to 15.0% of the net profits, if any, of the Company. However, the note may be
prepaid at any time without penalty and the note is unsecured.
The Company has an advance from Thomas D. Vidmar in the amount of approximately
$9,949. This advance is non-interest bearing and is payable in monthly
installments of $500 per month with a balloon payment of approximately $6,949 on
August 15, 2000. The advance may be prepaid at any time without penalty and is
unsecured.
The Company has various advances receivable from various shareholders related to
the utilization of the proceeds of the Herold note to facilitate the July 1999
change in control of the Company. The terms and conditions of these advances are
equivalent to the Herold Note.
Item 8 - Description of Securities
As of April 12, 2000, the Company had approximately 263 holders of record,
exclusive of ownership held in street name, of its Common Stock. Outstanding
shares of the Company's Common Stock at April 12, 2000 totaled 4,508,351 . The
Company's transfer agent is Pacific Stock Transfer Company, P. O. Box 93385, Las
Vegas, NV 89193; Phone (702) 361- 3033.
The authorized capital stock of the Company consists of 50,000,000 of $0.001par
value common stock and no preferred stock.
8
<PAGE>
Per the Company's By-Laws, each outstanding share shall be entitled to one vote
in each matter submitted to vote at a meeting of shareholders, and in all
elections for directors, every shareholder shall have the right to vote the
number of shares owned by such shareholder for as many persons as there are
directors multiplied by the number of such shares or to distribute such
cumulative votes in any proportion among any number of candidates. Each
shareholder may vote either in person or by proxy, as provided in Section 8 of
the Company's By-Laws.
The Company has no preferred stock, debentures, warrants, options or other
instruments outstanding that could be converted into common stock of the
Company.
PART II
Item 1 - Market Price and Dividends on the Company's Common Equity and Other
Related Shareholder Matters
As of the date of this filing, the Company's common stock is traded on the
NASDAQ Pink Sheets, effective October 9, 1999, "INZS". As of April 12, 2000,
approximately 2,900,000 of the 4,508,351 shares issued and outstanding are
deemed to be "restricted securities", as defined in Rule 144 under The
Securities Act of 1933. Restricted shares may be sold in the public market only
if registered or if they qualify for an exemption from registration under Rule
144 promulgated under The Securities Act of 1933.
In general, under Rule 144, any person, or persons whose shares are aggregated,
who has beneficially owned restricted shares for at least one year is entitled
to sell, within any three-month period, a number of shares that does not exceed
the greater of 1.0% of the then outstanding shares of common stock, or the
average weekly trading volume during the four (4) calendar weeks preceding such
sales. Sales under Rule 144 are also subject to the requirements as to the
manner of sale, notice and availability of current public information about the
Company. In addition, restricted shares, which have been beneficially owned for
at least two years and which are held by non-affiliates may be sold free of any
restrictions under Rule 144.
In August 1999, the Company filed a request for clearance of quotations on the
OTC Bulletin Board under SEC Rule 15c2- 11, Subsection (a)(5) with NASD
Regulation Inc. A Clearance Letter was issued to the Company on September 15,
1999 and the Company was issued its trading symbol "INZS". The Company's first
posted trade was conducted shortly thereafter. On or about October 9, 1999, the
Company's common stock was dropped by the NASDAQ Electronic Bulletin Board and
was listed thereafter on the NASDAQ "Pink Sheets". The quoted market prices of
the Company's common stock on the NASDAQ Electronic Bulletin Board, per data
listed by National Quotation Bureau, Inc., are as follows:
High Low
----- -----
Third quarter 1999 (September 15, 1999 to September 30, 1999) $2.13 $0.56
Fourth quarter 1999 (through October 9, 1999) $0.47 $0.28
Quotations after October 9, 1999 are not readily available due to the
Company's listing in the "Pink Sheets" and limited market activity as a
result of the delisting from the NASDAQ Electronic Bulletin Board.
Dividend policy
- ---------------
The Company has never paid or declared a cash dividend on its common stock. The
Board of Directors does not intend to declare or pay cash dividends in the
foreseeable future. It is the current policy to retain all earnings, if any, to
support future growth and expansion.
9
<PAGE>
Item 2 - Legal Proceedings
The Company is not involved in any legal proceedings as either plaintiff or
defendant, nor is it aware of any threatened legal proceedings, as of the date
of filing.
Item 3 - Changes in and Disagreements with Accountants
None
Item 4 - Recent Sales of Unregistered Securities
In August 1999, the Company's Board of Directors approved a 1 for 4 reverse
stock split on the issued and outstanding common stock of the Company. The
issued and outstanding shares of common stock shown in the accompanying
financial statements reflect the effect of the reverse stock split as if the
reverse split had occurred as of the beginning of the first period presented in
the accompanying financial statements.
On July 7, 1998, the Company issued approximately 759,000 shares (approximately
189,750 post-reverse stock split shares) of restricted, unregistered common
stock to various individuals for services rendered in conjunction with the
reverse merger combination of Career Opportunities (Int'l), Ltd. and USFC, Inc.
This transaction was valued at approximately $7,590, which approximated the fair
value of the Company's stock issued and the fair value of the services rendered.
On August 13, 1999, the Company issued approximately 2,900,000 post-reverse
stock split shares to various individuals involved in providing consulting
services related to the July 1999 change in control of the Company and a
proposed merger transaction. This transaction was valued at approximately
$2,900, which approximated the fair value of the Company's stock issued and the
fair value of the services rendered.
Item 5 - Indemnification of Directors and Officers
None
(Remainder of this page left blank intentionally)
10
<PAGE>
PART III
Item 1 - Index to Financial Statements and Exhibits
Financial Statements
--------------------
The following financial statements are submitted as part of this report:
Annual Financial Statements
Reports of Independent Certified Public Accountants F-2
Balance Sheets
as of December 31, 1999 and 1998 F-3
Statements of Operations and Comprehensive Income
for the years ended December 31, 1999 and 1998 F-4
Statement of Changes in Stockholders' Equity
for the years ended December 31, 1999 and 1998 F-5
Statements of Cash Flows
for the years ended December 31, 1999 and 1998 F-6
Notes to Financial Statements F-7
Interim Financial Statements
Independent Accountant's Report F-12
Balance Sheets
as of March 31, 2000 and 1999 F-13
Statements of Operations and Comprehensive Income
for the three months ended March 31, 2000 and 1999 F-14
Statements of Cash Flows
for the three months ended March 31, 2000 and 1999 F-15
Notes to Financial Statements F-16
Exhibits
--------
3.1 Articles of Incorporation, including subsequent amendments and
merger documents
3.2 Corporate By-Laws
4 Specimen Stock Certificate
10.1 Asset purchase agreement by and between PageRiver.com and
Investment Technology, Inc.
27.1 Financial Data Schedule
(Remainder of this page left blank intentionally)
11
<PAGE>
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.
INVESTMENT TECHNOLOGY, INC.
April 14 , 2000 /s/ Thomas D. Vidmar
-------- ---------------------------
Thomas D. Vidmar
President, Director and
Chief Financial Officer
12
<PAGE>
INVESTMENT TECHNOLOGY, INC.
(formerly Distance Learning Systems, Inc.)
CONTENTS
Page
----
Annual Financial Statements
Reports of Independent Certified Public Accountants F-2
Balance Sheets
as of December 31, 1999 and 1998 F-3
Statements of Operations and Comprehensive Income
for the years ended December 31, 1999 and 1998 F-4
Statement of Changes in Stockholders' Equity
for the years ended December 31, 1999 and 1998 F-5
Statements of Cash Flows
for the years ended December 31, 1999 and 1998 F-6
Notes to Financial Statements F-7
Interim Financial Statements
Independent Accountant's Report F-12
Balance Sheets
as of March 31, 2000 and 1999 F-13
Statements of Operations and Comprehensive Income
for the three months ended March 31, 2000 and 1999 F-14
Statements of Cash Flows
for the three months ended March 31, 2000 and 1999 F-15
Notes to Financial Statements F-16
F-1
<PAGE>
S. W. HATFIELD, CPA
certified public accountants
Member: American Institute of Certified Public Accountants
SEC Practice Section
Information Technology Section
Texas Society of Certified Public Accountants
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
Board of Directors and Stockholders
Investment Technology, Inc.
(formerly Distance Learning Systems, Inc.)
We have audited the accompanying balance sheets of Investment Technology, Inc.
(a Nevada corporation) (formerly Distance Learning Systems, Inc., an Oregon
corporation ) as of December 31, 1999 and 1998 and the related statements of
operations and comprehensive income, changes in stockholders' equity and cash
flows for each of the years ended December 31, 1999 and 1998, respectively.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated 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 audits 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Investment
Technology, Inc. (formerly Distance Learning Systems, Inc.) as of December 31,
1999 and 1998 and the related statements of operations, changes in stockholders'
equity and cash flows for each of the years then ended, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company is dependent upon its majority shareholder to
maintain the corporate status of the Company and to provide all nominal working
capital support on the Company's behalf. Because of the Company's lack of
operating assets, its continuance is fully dependent upon the majority
shareholder's continuing support. This situation raises a substantial doubt
about the Company's ability to continue as a going concern. The majority
shareholder intends to continue the funding of nominal necessary expenses to
sustain the corporate entity. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
S. W. HATFIELD, CPA
Dallas, Texas
April 11, 2000
Use our past to assist your future sm
P. O. Box 820395 9002 Green Oaks Circle, 2nd Floor
Dallas, Texas 75382-0395 Dallas, Texas 75243-7212
214-342-9635 (voice) (fax) 214-342-9601
800-244-0639 [email protected]
F-2
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT TECHNOLOGY, INC.
(formerly Distance Learning Systems, Inc.)
BALANCE SHEETS
December 31, 1999 and 1998
ASSETS
------
1999 1998
---------- ----------
<S> <C> <C>
Current assets
Cash on hand and in bank $ 9,457 $ 156
Advances to shareholders 200,000 --
Net current assets of discontinued operations 11,976 1,549,323
---------- ----------
Total current assets 221,433 1,549,479
---------- ----------
Other assets
Net other assets of discontinued operations -- 67,672
---------- ----------
Total other assets -- 67,672
---------- ----------
TOTAL ASSETS $ 221,433 $1,617,151
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities
Accounts payable - trade $ 14,491 $ --
Notes payable to shareholders 209,949 --
Net current liabilities of discontinued operations 30,375 $ 11,345
---------- ----------
Long-term liabilities
Net other liabilities of discontinued operations -- 575,882
---------- ----------
Total liabilities 254,815 587,227
---------- ----------
Commitments and contingencies
Stockholders' equity Common stock - $0.001 par value
50,000,000 shares authorized
4,508,351 and 1,608,351 shares
issued and outstanding, respectively 4,508 1,608
Additional paid-in capital 143,959 143,959
Accumulated deficit (181,849) 884,357
---------- ----------
Total stockholders' equity (33,382) 1,029,924
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 221,433 $1,617,151
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
INVESTMENT TECHNOLOGY, INC.
(formerly Distance Learning Systems, Inc.)
STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME Years ended
December 31, 1999 and 1998
1999 1998
----------- -----------
Net revenues $ -- $ --
Operating expenses
General and administrative expenses 2,900 --
----------- -----------
Loss from continuing operations
before income taxes (2,900) --
Income tax benefit (expense) -- --
----------- -----------
Loss from continuing operations (2,900) --
----------- -----------
Discontinued operations, net of income taxes
Income (Loss) from discontinued operations,
net of income taxes of $(160,922) and
$(179,035), respectively (872,525) 102,416
Income (Loss) on disposition, net of income
taxes of $(182,663) and $-0-, respectively (190,781) --
----------- -----------
Income (loss) from discontinued operations (1,063,306) 102,416
----------- -----------
Net Income (Loss) (1,066,206) 102,416
Other comprehensive income -- --
----------- -----------
Comprehensive Income (Loss) $(1,066,206) $ 102,416
=========== ===========
Earnings (Loss) per weighted-average
share of common stock outstanding
From continuing operations $ 0.00 $ 0.00
From discontinued operations (0.39) 0.07
----------- -----------
Total earnings (loss) per share $ (0.39) $ 0.07
=========== ===========
Weighted-average number of common shares outstanding 2,728,625 1,569,465
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT TECHNOLOGY, INC.
(formerly Distance Learning Systems, Inc.)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended December 31, 1999 and 1998
Common Stock Additional
------------ paid-in Retained
Shares Amount capital earnings Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1998 5,674,333 $ 5,674 $ 132,303 $ 781,941 $ 919,918
Effect of 1 for 4 reverse stock
split in August 1999 (4,255,732) (4,256) 4,256 -- --
----------- ----------- ----------- ----------- -----------
Balances at January 1, 1998,
restated 1,418,601 1,418 136,559 781,941 919,918
Stock issued for professional services 759,000 759 6,831 -- 7,590
Effect of 1 for 4 reverse stock split (569,250) (569) 569 -- --
Net income for the year -- -- -- 102,416 102,416
----------- ----------- ----------- ----------- -----------
Balances at December 31, 1998 1,608,351 1,608 143,959 884,357 1,029,824
Common stock issued for
professional services 2,900,000 2,900 -- -- 2,900
Net loss for the period -- -- -- (1,066,206) (1,066,206)
----------- ----------- ----------- ----------- -----------
Balances at December 31, 1999 4,508,351 $ 4,508 $ 143,959 $ (181,849) $ (33,382)
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
INVESTMENT TECHNOLOGY, INC.
(formerly Distance Learning Systems, Inc.)
STATEMENTS OF CASH FLOWS
Years ended December 31, 1999 and 1998
1999 1998
----------- -----------
Cash flows from operating activities
Net income (loss) for the period $(1,066,206) $ 102,416
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation and amortization 9,810 19,619
Provision for bad debts 977,707 --
Common stock issued for various expenses 2,900 7,590
Provision for income taxes (160,922) (179,035)
Loss on disposition of operations 190,781 --
Increase in accounts payable - trade 14,491 --
Change in net assets and liabilities
of discontinued operations 20,994 30,663
----------- -----------
Net cash provided by (used in) operating activities (10,445) (18,747)
----------- -----------
Cash flows from investing activities
Cash advanced to shareholders (200,000) --
Net change in other assets
of discontinued operations -- --
----------- -----------
Net cash used in investing activities (200,000) --
----------- -----------
Cash flows from financing activities
Cash received in loans from shareholders 237,300 --
Cash transferred in disposition of operations (819) --
Net change in long-term liabilities
of discontinued operations (16,735) 11,088
----------- -----------
Net cash provided by (used in) financing activities 219,746 11,088
----------- -----------
Increase (Decrease) in Cash 9,301 (7,659)
Cash at beginning of period 156 7,815
----------- -----------
Cash at end of period $ 9,457 $ 156
=========== ===========
Supplemental disclosure of interest
and income taxes paid
Interest paid for the period $ -- $ --
=========== ===========
Income taxes paid for the period $ -- $ --
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
INVESTMENT TECHNOLOGY, INC.
(formerly Distance Learning Systems, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS
Investment Technology, Inc. (Company) was originally incorporated as Career
Opportunities, Inc. in 1983 under the laws of the State of Oregon. The Company
changed its corporate name to Career Opportunities (Int'l), Ltd. in May 1997.
On December 15, 1997, the Company merged with and into USFC, Inc. (USFC) (a then
dormant publicly-owned Washington corporation) with the exchange of
approximately 4,993,413 shares of USFC for 100% of the issued and outstanding
shares of the Company. For accounting purposes, this transaction was treated as
a reverse merger whereby the Company was the acquiring entity for accounting
purposes while USFC was the acquiring company for legal purposes. The historical
financial statements of the Company became the restated historical financial
statements of the continuing entity. Concurrent with the merger, the resulting
entity was reincorporated in the State of Oregon and changed its corporate name
to Distance Learning Systems, Inc. (DLS).
USFC, Inc. was originally incorporated in 1968 under the laws of the State of
Washington. USFC successfully completed a public offering pursuant to a
registration exemption under Regulation A of the U. S. Securities and Exchange
Commission in January 1970.
On July 19, 1999, the Company changed its state of incorporation from Oregon to
Nevada by means of a merger with and into a Nevada corporation formed on July 2,
1999 solely for the purpose of effecting the reincorporation. The Certificate of
Incorporation and Bylaws of the Nevada corporation are the Certificate of
Incorporation and Bylaws of the surviving corporation. Such Certificate of
Incorporation changed the Company's name to Investment Technology, Inc. (ITI)
and modified the Company's capital structure to allow for the issuance of
50,000,000 shares of common stock with a par value of $0.001 per share.
For the period from 1983 through June 30, 1999, the Company was in the business
of providing educational research and analysis services to write and publish
specialized study guides for adult learners; specifically tutorial assistance to
nurses and other related persons who aspire to higher education credentials and
who can qualify for and pass examinations administered from the Regents College
program located in the State of New York.
In June 1999, DLS transferred 100% of its assets to a group of then-controlling
shareholders in exchange for the assumption of all outstanding and contingent
liabilities. As of June 30, 1999, the Company had no assets, liabilities or
operations.
During December 1999, the Company attempted to acquire an entity engaged in
providing Internet site hosting and development services. This attempted
acquisition was not successful and all efforts towards this acquisition were
abandoned as of December 31, 1999. There were no significant revenues or
expenses related to this endeavor.
With the disposition of all operations, the Company became fully dependent upon
the support of its controlling shareholders for the maintenance of its corporate
status and to provide all working capital support for the Company's behalf. The
controlling shareholders intend to continue the funding of necessary expenses to
sustain the corporate entity.
F-7
<PAGE>
INVESTMENT TECHNOLOGY, INC.
(formerly Distance Learning Systems, Inc.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS - Continued
The preparation of financial statements in conformity with generally 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.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Cash and cash equivalents
-------------------------
The Company considers all cash on hand and in banks, including accounts in
book overdraft positions, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
Cash overdraft positions may occur from time to time due to the timing of
making bank deposits and releasing checks, in accordance with the
Company's cash management policies.
2. Income taxes
------------
The Company uses the asset and liability method of accounting for income
taxes. At December 31, 1999 and 1998, respectively, the deferred tax asset
and deferred tax liability accounts, as recorded when material to the
financial statements, are entirely the result of temporary differences.
Temporary differences represent differences in the recognition of assets
and liabilities for tax and financial reporting purposes, primarily
accumulated depreciation and amortization, allowance for doubtful accounts
and vacation accruals.
The Company utilized the installment method of reporting collections on
its contracts related to the provision of educational research and
analysis services to write and publish specialized study guides for adult
learners; specifically tutorial assistance to nurses and other related
persons who aspire to higher education credentials and who can qualify for
and pass examinations administered from the Regents College program
located in the state of New York. Accordingly, this treatment creates a
deferred tax liability related to the timing of reporting the income from
contracts between its financial statements and its tax returns.
Due to the provisions of Internal Revenue Code Section 338, the Company
will have no net operating loss carryforwards available to offset
financial statement or tax return taxable income in future periods as a
result of a change in control involving 50 percentage points or more of
the issued and outstanding securities of the Company.
3. Earnings (loss) per share
-------------------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of December 31, 1999 and 1998, the
Company has no outstanding warrants and options issued and outstanding.
F-8
<PAGE>
INVESTMENT TECHNOLOGY, INC.
(formerly Distance Learning Systems, Inc.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE C - DISCONTINUED OPERATIONS
On June 25, 1999, the Company transferred 100% of its assets to a group of
then-controlling shareholders in exchange for the assumption of all outstanding
and contingent liabilities. As of June 30, 1999, the Company had no assets,
liabilities or operations.
The results of the Company's operations for the respective periods presented are
reported as a component of discontinued operations in the consolidated
statements of operations. Additionally, the respective gain or loss incurred on
the sale of the Company's operations are also presented separately as a
component of discontinued operations.
Summarized results of operations for the disposed operations for the six months
ended June 30, 1999 and December 31, 1998, respectively, are as follows:
June 30, December 31,
1999 1998
------------ ------------
Net sales $ 199,002 $ 565,597
============ ============
Operating income (loss) $ (1,000,065) $ (76,619)
============ ============
Loss from discontinued operations $ (839,143) $ 102,416
============ ============
During December 1999, the Company attempted to acquire an entity engaged in
providing Internet site hosting and development services. This attempted
acquisition was not successful and all efforts towards this acquisition were
abandoned as of December 31, 1999. There were no significant revenues or
expenses related to this endeavor.
Summarized results of operations for this unsuccessful effort for the month of
December 1999 is as follows
Month of
December 1999
-------------
Net sales $ 15,225
=========
Operating income $ (33,382)
=========
Loss from discontinued operations $ (33,382)
=========
NOTE D - ADVANCES TO SHAREHOLDERS
The Company has advanced certain funds to various shareholders aggregating
approximately $200,000. These advances are due on demand and bear interest at
8.0%, commencing January 1, 2000. The advances are informally collateralized by
the respective shareholder's holdings in the Company's common stock.
F-9
<PAGE>
INVESTMENT TECHNOLOGY, INC.
(formerly Distance Learning Systems, Inc.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE E - ADVANCES AND NOTES PAYABLE TO SHAREHOLDERS
Notes payable to shareholders as of December 31, 1999 and 1998 consist of the
following:
1999 1998
-------- --------
Note payable to a shareholder. Interest at 8.0%,
commencing January 1, 2000. Principal and
accrued interest is repayable in monthly installments
equal to 15.0% of the net profits, if any, of the
Company. However, the note may be prepaid
at any time without penalty. Unsecured $200,000 $ --
Advance payable to a shareholder. Non-interest bearing
Payable in monthly installments of $500 per month and
a balloon payment of approximately $6,949 on August 15,
2000. The advance may be prepaid at any time without
penalty. Unsecured 9,949 --
-------- --------
$209,949 $ --
======== ========
NOTE D - COMMON STOCK TRANSACTIONS
In August 1999, the Company's Board of Directors approved a 1 for 4 reverse
stock split on the issued and outstanding common stock of the Company. The
issued and outstanding shares of common stock shown in the accompanying
financial statements reflect the effect of the reverse stock split as if the
reverse split had occurred as of the beginning of the first period presented in
the accompanying financial statements.
On December 15, 1997, the Company issued approximately 4,993,413 shares
(approximately 1,392,312 reverse stock split shares) of restricted, unregistered
common stock, pursuant to a merger agreement, in exchange for 100% of the issued
and outstanding shares of Career Opportunities (Int'l), Ltd.
On July 7, 1998, the Company issued approximately 759,000 shares (approximately
189,750 reverse stock split shares) of restricted, unregistered common stock to
various individuals for services rendered in conjunction with the reverse merger
combination of Career Opportunities (Int'l), Ltd. and USFC, Inc. This
transaction was valued at approximately $7,590, which approximated the fair
value of the Company's stock issued and the fair value of the services rendered.
On August 13, 1999, the Company issued approximately 2,900,000 post-reverse
stock split shares to various individuals involved in providing consulting
services related to the July 1999 change in control of the Company and a
proposed merger transaction. This transaction was valued at approximately
$2,900, which approximated the fair value of the Company's stock issued and the
fair value of the services rendered.
F-10
<PAGE>
INVESTMENT TECHNOLOGY, INC.
(formerly Distance Learning Systems, Inc.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE E - SUBSEQUENT EVENTS
During the first quarter of 2000, the Company entered into negotiations with
Pharmedical Corporation, a privately-owned Nevada corporation. The successful
completion of these negotiations could result in the purchase of Pharmedical by
the Company or a merger of the two companies. Should said negotiations be
successful, the transaction could be completed within the second quarter of
2000. Pharmedical is involved in the business of manufacturing and distribution
of over-the- counter health, beauty and wellness products for the consumer
market.
F-11
<PAGE>
S. W. HATFIELD, CPA
certified public accountants
Member: American Institute of Certified Public Accountants
SEC Practice Section
Information Technology Section
Texas Society of Certified Public Accountants
Independent Accountant's Report
-------------------------------
Board of Directors and Shareholders
Investment Technology, Inc.
We have reviewed the accompanying balance sheets of Investment Technology, Inc.
(a Nevada corporation) as of March 31, 2000 and 1999 and the accompanying
statement of operations and comprehensive income and statement of cash flows for
the three months ended March 31, 2000 and 1999. These financial statements are
prepared in accordance with the instructions for Form 10-QSB, as issued by the
U. S. Securities and Exchange Commission, and are the sole responsibility of the
company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression on an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company is dependent upon its majority shareholder to
maintain the corporate status of the Company and to provide all nominal working
capital support on the Company's behalf. Because of the Company's lack of
operating assets, its continuance is fully dependent upon the majority
shareholder's continuing support. This situation raises a substantial doubt
about the Company's ability to continue as a going concern. The majority
shareholder intends to continue the funding of nominal necessary expenses to
sustain the corporate entity. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
S. W. HATFIELD, CPA
Dallas, Texas
April 12, 2000
Use our past to assist your future sm
P. O. Box 820395 9002 Green Oaks Circle, 2nd Floor
Dallas, Texas 75382-0395 Dallas, Texas 75243-7212
214-342-9635 (voice) (fax) 214-342-9601
800-244-0639 [email protected]
F-12
<PAGE>
<TABLE>
<CAPTION>
Investment Technology, Inc.
(formerly Distance Learning Systems, Inc.)
Balance Sheets
March 31, 2000 and 1999
(Unaudited)
ASSETS
------
2000 1999
--------- ---------
<S> <C> <C>
Current assets
Cash on hand and in bank $ -- $ --
Advances to shareholders 200,000 --
--------- ---------
Total current assets 200,000 --
--------- ---------
TOTAL ASSETS $ 200,000 $ --
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities
Accounts payable - trade $ -- $ --
Notes payable to shareholders 209,949 --
--------- ---------
Total liabilities 209,949 --
--------- ---------
Commitments and contingencies
Stockholders' equity Common stock - $0.001 par value
50,000,000 shares authorized
4,508,351 and 1,608,351 shares
issued and outstanding, respectively 4,508 1,608
Additional paid-in capital 143,959 143,959
Accumulated deficit (158,416) (145,567)
--------- ---------
Total stockholders' equity (9,949) --
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 200,000 $ --
========= =========
</TABLE>
The financial information included herein has been prepared by management
without audit by independent certified public accountants. See accompanying
accountants' review report. The accompanying notes are an integral part of these
financial statements.
F-13
<PAGE>
Investment Technology, Inc.
(formerly Distance Learning Systems, Inc.)
Statements of Operations and Comprehensive Income
Three months ended March 31, 2000 and 1999
(Unaudited)
Three months Three months
ended ended
March 31, March 31,
2000 1999
----------- -----------
Net revenues $ -- $ --
Operating expenses
General and administrative expenses (23,433) --
----------- -----------
Income from continuing
operations before income taxes 23,433 --
Income tax benefit (expense) -- --
----------- -----------
Income from continuing operations 23,433 --
----------- -----------
Discontinued operations, net of income taxes
Income (Loss) from discontinued operations,
net of income taxes of $(160,922) -- (839,143)
Income (Loss) on disposition, net of income
taxes of $(182,663) -- (190,781)
----------- -----------
Income (loss) from discontinued operations -- (1,029,924)
----------- -----------
Net Income (Loss) 23,433 (1,029,924)
Other comprehensive income -- --
----------- -----------
Comprehensive Income (Loss) $ 23,433 $(1,029,924)
=========== ===========
Earnings (Loss) per weighted-average
share of common stock outstanding
From continuing operations $ 0.01 $ 0.00
From discontinued operations 0.00 (0.64)
----------- -----------
Total earnings (loss) per share $ 0.01 $ (0.64)
=========== ===========
Weighted-average number of common shares outstanding 4,508,351 1,608,351
=========== ===========
The financial information included herein has been prepared by management
without audit by independent certified public accountants. See accompanying
accountants' review report. The accompanying notes are an integral part of these
financial statements.
F-14
<PAGE>
<TABLE>
<CAPTION>
Investment Technology, Inc.
(formerly Distance Learning Systems, Inc.)
Statements of Cash Flows
Three months ended March 31, 2000 and 1999
(Unaudited)
Three months Three months
ended ended
March 31, March 31,
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) for the period $ 23,433 $(1,029,924)
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation and amortization -- 9,810
Provision for bad debts -- 977,707
(Decrease) in accounts payable - trade (14,491) --
Change in net assets and liabilities
of discontinued operations (8,942) 29,946
----------- -----------
Net cash provided by (used in) operating activities (9,457) 17,398
----------- -----------
Cash flows from investing activities
Net change in other assets of discontinued operations -- --
----------- -----------
Net cash used in investing activities -- --
----------- -----------
Cash flows from financing activities
Cash transferred in disposition of operations -- (819)
Net change in long-term liabilities
of discontinued operations -- (16,735)
----------- -----------
Net cash provided by (used in) financing activities -- (17,554)
----------- -----------
Increase (Decrease) in Cash (9,457) (156)
Cash at beginning of period 9,457 156
----------- -----------
Cash at end of period $ -- $ --
=========== ===========
Supplemental disclosure of interest
and income taxes paid
Interest paid for the period $ -- $ --
=========== ===========
Income taxes paid for the period $ -- $ --
=========== ===========
</TABLE>
The financial information included herein has been prepared by management
without audit by independent certified public accountants. See accompanying
accountants' review report. The accompanying notes are an integral part of these
financial statements.
F-15
<PAGE>
Investment Technology, Inc.
(formerly Distance Learning Systems, Inc.)
Notes to Financial Statements
Note A - Organization and Description of Business
Investment Technology, Inc. (Company) was originally incorporated as Career
Opportunities, Inc. in 1983 under the laws of the State of Oregon. The Company
changed its corporate name to Career Opportunities (Int'l), Ltd. in May 1997.
On December 15, 1997, the Company merged with and into USFC, Inc. (USFC) (a then
dormant publicly-owned Washington corporation) with the exchange of
approximately 4,993,413 shares of USFC for 100% of the issued and outstanding
shares of the Company. For accounting purposes, this transaction was treated as
a reverse merger whereby the Company was the acquiring entity for accounting
purposes while USFC was the acquiring company for legal purposes. The historical
financial statements of the Company became the restated historical financial
statements of the continuing entity. Concurrent with the merger, the resulting
entity was reincorporated in the State of Oregon and changed its corporate name
to Distance Learning Systems, Inc. (DLS).
USFC, Inc. was originally incorporated in 1968 under the laws of the State of
Washington. USFC successfully completed a public offering pursuant to a
registration exemption under Regulation A of the U. S. Securities and Exchange
Commission in January 1970.
On July 19, 1999, the Company changed its state of incorporation from Oregon to
Nevada by means of a merger with and into a Nevada corporation formed on July 2,
1999 solely for the purpose of effecting the reincorporation. The Certificate of
Incorporation and Bylaws of the Nevada corporation are the Certificate of
Incorporation and Bylaws of the surviving corporation. Such Certificate of
Incorporation changed the Company's name to Investment Technology, Inc. (ITI)
and modified the Company's capital structure to allow for the issuance of
50,000,000 shares of common stock with a par value of $0.001 per share.
For the period from 1983 through June 30, 1999, the Company was in the business
of providing educational research and analysis services to write and publish
specialized study guides for adult learners; specifically tutorial assistance to
nurses and other related persons who aspire to higher education credentials and
who can qualify for and pass examinations administered from the Regents College
program located in the State of New York.
In June 1999, DLS transferred 100% of its assets to a group of then-controlling
shareholders in exchange for the assumption of all outstanding and contingent
liabilities. As of June 30, 1999, the Company had no assets, liabilities or
operations.
During December 1999, the Company attempted to acquire an entity engaged in
providing Internet site hosting and development services. This attempted
acquisition was not successful and all efforts towards this acquisition were
abandoned as of December 31, 1999. There were no significant revenues or
expenses related to this endeavor.
With the disposition of all operations, the Company became fully dependent upon
the support of its controlling shareholders for the maintenance of its corporate
status and to provide all working capital support for the Company's behalf. The
controlling shareholders intend to continue the funding of necessary expenses to
sustain the corporate entity.
F-16
<PAGE>
Investment Technology, Inc.
(formerly Distance Learning Systems, Inc.)
Notes to Financial Statements - Continued
Note A - Organization and Description of Business - Continued
During interim periods, the Company follows the accounting policies set forth in
its annual audited financial statements contained elsewhere in this document.
The information presented herein does not include all disclosures required by
generally accepted accounting principles and the users of financial information
provided for interim periods should refer to the annual financial information
and footnotes contained in its annual audited financial statements contained
elsewhere in this document when reviewing the interim financial results
presented herein.
In the opinion of management, the accompanying interim financial statements,
prepared in accordance with the instructions for Form 10-QSB, are unaudited and
contain all material adjustments, consisting only of normal recurring
adjustments necessary to present fairly the financial condition, results of
operations and cash flows of the Company for the respective interim periods
presented. The current period results of operations are not necessarily
indicative of results which ultimately will be reported for the full fiscal year
ending December 31, 2000.
The preparation of financial statements in conformity with generally accepted
accounting principles 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.
Note B - Summary of Significant Accounting Policies
1. Cash and cash equivalents
-------------------------
The Company considers all cash on hand and in banks, including accounts in
book overdraft positions, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
Cash overdraft positions may occur from time to time due to the timing of
making bank deposits and releasing checks, in accordance with the
Company's cash management policies.
2. Income taxes
------------
The Company uses the asset and liability method of accounting for income
taxes. At March 31, 2000 and 1999, respectively, the deferred tax asset
and deferred tax liability accounts, as recorded when material to the
financial statements, are entirely the result of temporary differences.
Temporary differences represent differences in the recognition of assets
and liabilities for tax and financial reporting purposes, primarily
accumulated depreciation and amortization, allowance for doubtful accounts
and vacation accruals.
The Company utilized the installment method of reporting collections on
its contracts related to the provision of educational research and
analysis services to write and publish specialized study guides for adult
learners; specifically tutorial assistance to nurses and other related
persons who aspire to higher education credentials and who can qualify for
and pass examinations administered from the Regents College program
located in the state of New York. Accordingly, this treatment creates a
deferred tax liability related to the timing of reporting the income from
contracts between its financial statements and its tax returns.
F-17
<PAGE>
Investment Technology, Inc.
(formerly Distance Learning Systems, Inc.)
Notes to Financial Statements - Continued
Note B - Summary of Significant Accounting Policies - Continued
2. Income taxes
------------
Due to the provisions of Internal Revenue Code Section 338, the Company
will have no net operating loss carryforwards available to offset
financial statement or tax return taxable income in future periods as a
result of a change in control involving 50 percentage points or more of
the issued and outstanding securities of the Company.
3. Earnings (loss) per share
-------------------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of March 31, 2000 and 1999, the Company
has no outstanding warrants and options issued and outstanding.
Note C - Discontinued Operations
On June 25, 1999, the Company transferred 100% of its assets to a group of
then-controlling shareholders in exchange for the assumption of all outstanding
and contingent liabilities. As of June 30, 1999, the Company had no assets,
liabilities or operations.
The results of the Company's operations for the respective periods presented are
reported as a component of discontinued operations in the consolidated
statements of operations. Additionally, the respective gain or loss incurred on
the sale of the Company's operations are also presented separately as a
component of discontinued operations.
Summarized results of operations for the disposed operations for the six months
ended June 30, 1999 and December 31, 1998, respectively, are as follows:
June 30, December 31,
1999 1998
------------ ------------
Net sales $ 199,002 $ 565,597
============ ============
Operating income (loss) $ (1,000,065) $ (76,619)
============ ============
Loss from discontinued operations $ (839,143) $ 102,416
============ ============
During December 1999, the Company attempted to acquire an entity engaged in
providing Internet site hosting and development services. This attempted
acquisition was not successful and all efforts towards this acquisition were
abandoned as of December 31, 1999. There were no significant revenues or
expenses related to this endeavor.
F-18
<PAGE>
Investment Technology, Inc.
(formerly Distance Learning Systems, Inc.)
Notes to Financial Statements - Continued
Note C - Discontinued Operations - Continued
Summarized results of operations for this unsuccessful effort for the month of
December 1999 is as follows
Month of
December 1999
-------------
Net sales $ 15,225
=============
Operating income $ (33,382)
=============
Loss from discontinued operations $ (33,382)
=============
Note D - Advances to Shareholders
The Company has advanced certain funds to various shareholders aggregating
approximately $200,000. These advances are due on demand and bear interest at
8.0%, commencing January 1, 2000. The advances are informally collateralized by
the respective shareholder's holdings in the Company's common stock.
Note E - Advances and Notes Payable to Shareholders
Notes payable to shareholders as of March 31, 2000 and 1999 consist of the
following:
2000 1999
-------- --------
Note payable to a shareholder. Interest at 8.0%,
commencing January 1, 2000. Principal and
accrued interest is repayable in monthly installments
equal to 15.0% of the net profits, if any, of the
Company. However, the note may be prepaid
at any time without penalty. Unsecured $200,000 $ --
Advance payable to a shareholder. Non-interest bearing
Payable in monthly installments of $500 per month and
a balloon payment of approximately $6,949 on August 15,
2000. The advance may be prepaid at any time without
penalty. Unsecured 9,949 --
-------- --------
$209,949 $ --
======== ========
F-19
<PAGE>
Investment Technology, Inc.
(formerly Distance Learning Systems, Inc.)
Notes to Financial Statements - Continued
Note D - Common Stock Transactions
In August 1999, the Company's Board of Directors approved a 1 for 4 reverse
stock split on the issued and outstanding common stock of the Company. The
issued and outstanding shares of common stock shown in the accompanying
financial statements reflect the effect of the reverse stock split as if the
reverse split had occurred as of the beginning of the first period presented in
the accompanying financial statements.
On July 7, 1998, the Company issued approximately 759,000 shares (approximately
189,750 reverse stock split shares) of restricted, unregistered common stock to
various individuals for services rendered in conjunction with the reverse merger
combination of Career Opportunities (Int'l), Ltd. and USFC, Inc. This
transaction was valued at approximately $7,590, which approximated the fair
value of the Company's stock issued and the fair value of the services rendered.
On August 13, 1999, the Company issued approximately 2,900,000 post-reverse
stock split shares to various individuals involved in providing consulting
services related to the July 1999 change in control of the Company and a
proposed merger transaction. This transaction was valued at approximately
$2,900, which approximated the fair value of the Company's stock issued and the
fair value of the services rendered.
Note E - Commitments and Contingencies
During the first quarter of 2000, the Company entered into negotiations with
Pharmedical Corporation, a privately-owned Nevada corporation. The successful
completion of these negotiations could result in the purchase of Pharmedical by
the Company or a merger of the two companies. Should said negotiations be
successful, the transaction could be completed within the second quarter of
2000. Pharmedical is involved in the business of manufacturing and distribution
of over-the- counter health, beauty and wellness products for the consumer
market.
F-20
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