<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES ACT OF 1934
I-TRANSACTION.NET, INC.
-----------------------
(Name of Small Business Issuer in Its Charter)
<TABLE>
<S> <C>
New Jersey
- --------------------------------------- -----------------------
(State of Incorporation) (IRS Employer
Identification Number)
1100 River Birch Street, Hollywood, Florida 33019
- --------------------------------------- -----------------------
(Address of the Principal Executive Offices) (Zip Code)
</TABLE>
Securities to be registered under Section 12(b) of the Act: None
Securities to be registered under Section 12(g) of the Act:
Common Shares
-------------
(Title of Class)
<PAGE>
ITEM 1. DESCRIPTION OF BUSINESS
The Company was incorporated in New Jersey in 1999. The Company had been
previously domiciled in other states, however in December 1998 the Board of
Directors of the Company voted to re-incorporate (re-domicile) in New Jersey.
The predecessor to the Company had been subject to certain lawsuits that
resulted in judgments against the Company. Such judgments were discharged in a
later bankruptcy proceeding. None of the officers or directors of the Company
involved with those proceedings are currently officers or directors of the
Company and have no influence over the affairs of the Company. The Company was
previously known as Phoenix Summus Corp.
The Company designs, develops and deploys business-to-business and
consumer-to-business e-commerce solutions in addition to acting as the back-end
transaction processor for these systems. The Company offers EDI, electronic
funds transfer, and advertising and marketing database support. The Company
through its Dynamic Visions Ltd., subsidiary also produces a virtual reality
arcade game.
PROPRIETARY BUSINESS MANAGEMENT SYSTEM (BMS)
Business customers can use any PC with Internet access to manage their business
through the integrated communication engine (ICE) which is part of the Company's
proprietary Business Management System (BMS). Through ICE, businesses utilize
all forms of communication methods from traditional such as: fax, telephone,
call center and mail; to leading-edge such as: instant messaging, email
re-routed to a cellphone, pager, home telephone or any other electronic device
that supports Internet connectivity. The BSM brings efficient reach, and
increases the immediate responses needed to fulfill the promises of e-business
for customers. The Company provides everything a business needs to bring a BMS
solution to a web site. With the Company's BMS one can:
- Communicate instantly with an instant message, fax-blast, email blast,
etc.
- Send information based on pre-set criteria and collect demographics.
- Track all actions by customer, specific group, end-user, statistics, or
by any field required.
- Perform e-commerce transactions.
- Automate and track all business processes and create automated responses.
- Create knowledge bases on all your products and services.
- Automate your online forms.
The BMS does not require additional software or the installation of a complex
database. This is a finished product that is currently being marketed to various
businesses.
DYNAMIC VISIONS LIMITED
In November 1999 the Company purchased 100% of the issued and outstanding shares
of Dynamic Visions Limited, an Ontario corporation. Consideration for the
purchase was an exchange of 700,000 shares of Company stock for the shares of
Dynamic.
Dynamic Visions is a developer of commercially viable 3D/Virtual Reality (VR)
products for use in both entertainment venues and professional establishments.
Their current product, the Orion Game System, has been installed in over 20
countries in a wide range of venues such as entertainment centers, arcades,
<PAGE>
theme parks, and location based entertainment centers.
The Company has also worked with the Canadian Department Of National Defense in
the development of a low cost PC based ERYX/TOW missile simulator.
Dynamic has intellectual property agreements with companies such as Activision,
3DO, Interplay and Apogee. These companies are some of the world's leading
developers of entertainment/gaming software. Using their software as a
foundation, Dynamic is able to create very specific content cost effectively.
Dynamic modifies games from these companies to work with the Orion Game System
and to add virtual reality elements.
Dynamic sells, leases and has revenue sharing arrangements with its customers.
The average selling price for a game system is $16,000. Leasing is arranged
through third parties. Additionally, Dynamic has entered into revenue sharing
agreements with some customers where Dynamic places a game system with the
customer and the revenue is divided at contracted levels.
THE INDUSTRY
BUSINESS TO BUSINESS E-COMMERCE
Currently, most business to business solutions are managed by phone and
fax using multi-part forms and other paper-based media. There are some
businesses that have enabled electronic ordering through private networks
requiring proprietary software and systems. The Company has created a system of
business to business and consumer to business communications tool that allows
the business or consumer to access information, order, via the Internet. While
there are many companies offering e-commerce solutions, the Company intends to
offer a vertically integrated solution which also encompasses transaction
processing and database solutions. One of the first industries that the Company
intends to target is the financial services industry . The products are intended
to dynamically change the way businesses interact with customers, employees,
clients, associates and end-users. They are fully web based.
VIRTUAL REALITY GAMING
The Virtual Reality Gaming industry has seen the failure of many small
companies as the technology has been expensive to develop thus making entry
level prices high and sometimes out of the reach of smaller arcades. However,
over the past 3 years the reduction in personal computer prices and the
availability of high-end components at commodity prices has enabled some in the
industry to lower costs significantly. This lower cost has allowed greater
penetration and acceptance of virtual reality gaming in arcades. Also, the
emergence of family entertainment centers such as Dave & Busters and GameWorks
has expanded the market for high-end arcade games such as the Orion Game System.
COMPETITION
BUSINESS MANAGEMENT SYSTEM
Although at this time there is no direct competition for the BMS product,
there are many business-to-business and business-to-consumer products on the
market. What sets the Company's BMS apart is that its entire back-end is
web-based (not web-enabled). This translates to extremely low maintenance of a
very high-end database for the customer. There is no need to purchase a server,
there is no IT manager to employ, no multiple licenses to buy, and no need to
engage in time-consuming training programs for employees. Technical support,
round-the-clock maintenance and supervision, plus data encryption security,
transactional processing and replicating server technology are
<PAGE>
provided by the BMS. Customers pay for:
- Exclusive, web-based, administrator-access to their database,
- Reporting and demographics tools,
- Membership services such as registration and profiling for their
end-users,
- Value-added services such as message boards and stock quotes for their
web site,
- Front-end web design and hosting, if necessary.
The BMS requires only a computer with Internet access. Data can be inputted by
the customer or imported from any ODBC existing database.
DYNAMIC VISIONS
At the present time, Dynamic does not have any direct competitors. The
closest competitor would be companies such as SEGA, or NAMCO; major distributors
of arcade/entertainment equipment. However, Dynamic utilizes virtual reality
components not found in other game systems which sets it apart from traditional
arcade game vendors. However, SEGA and NAMCO are much larger, much better
capitalized and have significant name recognition that Dynamic does not. So,
even with technological differentiation Dynamic could be shut out of its primary
markets by its larger competitors.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS
During the last two fiscal years, the Company produced no revenues. It
is only since the interim period from July 1, 1999 through that the Company has
recorded any sales. Those sales have been minimal.
Plan of Operation
The Company will continue its sales of the Orion Game System and will
increase its marketing of the system. The Company has plans to place four
systems in a new family entertainment center in Toronto, Canada. These four
systems will be on a revenue share, where the Company will receive a portion of
the revenue generated by the game system in lieu of an outright purchase by the
customer. Through the use of an in-house marketing and sales team that is
already in place, the Company intends to expand sales and sales efforts.
The Company has just begun marketing its Business Management System
(BMS). It is anticipated that it will take several months before the Company
makes any significant sales of the BMS.
These operations will consume more cash then they generate over the
short-term. Therefore, management believes that it will be necessary to raise
additional capital for the Company through private placements of the Company's
stock or through shareholder loans.
The Company intends to continue research and development on the Orion
Game System and on its BMS. The Company intends to license additional games from
Activision to be ported to the Orion Game System. The Company will also continue
to refine the BMS in response to customer needs and the changing marketplace, as
well as to keep up with fast-changing internet technologies. The Company
believes that it can continue its research and development of its products as
well as increase its marketing efforts without the addition of any more
employees.
ITEM 3. DESCRIPTION OF PROPERTY
<PAGE>
THE COMPANY NEITHER OWNS NOR LEASES ANY REAL OR PERSONAL PROPERTY.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of the Company's Common
Stock beneficially owned as of December 31, 1999 by (i) the owners of more than
five percent (5%) of the Company's Common Stock, (ii) the number of shares of
Common Stock owned by each director and officer, and (iii) the number of shares
of Common Stock owned by all officers and directors as a group:
<TABLE>
<CAPTION>
Name and Address of Number of Shares of Percentage of
Beneficial Owner (1) Common Stock Common Stock
------------------ ------------------ -------------
<S> <C> <C>
David Bruce (ii) 0 0%
Joanne Broeders (ii) 909,090 7.6%
M. Zigan (2) 909,090 7.6%
Icicle Ltd. (2) 909,090 7.6%
Wild Safari Ltd. (2) 909,090 7.6%
Salvatori Ltd. (2) 909,090 7.6%
Wright Technologies (2) 909,090 7.6%
Kensiko Ltd. (2) 909,090 7.6%
Wintergarden Ltd. (3) 909,090 7.6%
D. Mamone (3) 909,090 7.6%
J. Hackett (3) 909,090 7.6%
Lynne Williams (3) 909,090 7.6%
All Executive Officers and
Directors as a Group
(2 persons) (iii) 909,090 7.6%
</TABLE>
(2) The address for all officers and directors of the Company is: 1100
River Birch Street, Hollywood, FL 33019.
(3) The address for these shareholders is: c/o Law Offices of Peter Tuovi,
934 The East Mall, Etobicoke, Ontario Canada
(4) The address for these shareholders is: c/o Accys Management, 934 The
East Mall, Etobicoke, Ontario Canada
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
DAVID BRUCE, DIRECTOR, CHAIRMAN OF THE BOARD. MR. BRUCE graduated from York
University in 1986 with a degree in Business Admin studies. From 1989-1994 he
<PAGE>
worked for Marchment & Mackay Securities as a broker specializing in start-ups
and venture capital. From 1994-1997 Mr. Bruce worked for Price Warner as a
Broker specializing in start-ups and venture capital. From 1997-1998 he was a
partner in Optimax Securities Inc a company specializing in venture capital.
Presently he is a partner with Noble International Corp., a company that
provides start-up financing.
JOANNE BROEDERS, DIRECTOR. MS. BROEDERS' educational background is in legal
studies and finance. Upon graduating n 1994, Ms. Broeders worked as a legal
assistant for a marketing firm. From 1995 to 1998 Ms. Broeders worked for
Capital Canada Ltd., an investment banking firm, as a transaction administrator.
She is a Managing Director t Investor Services Group, Inc., specializing in
start up and venture capital financing, investor relations and public offerings.
ITEM 6. EXECUTIVE COMPENSATION
No officer or director of the Company has received compensation from the
Company.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
THE COMPANY NEITHER OWNS NOR LEASES ANY REAL OR PERSONAL PROPERTY.
OFFICE SERVICES ARE PROVIDED BY A SHAREHOLDER AT NO COST TO THE COMPANY.
Item 8. Description of Securities
The Company is authorized to issue 200,000,000 shares of common stock,
par value $0.001 per share (the "Common Stock"). As of December 31, 1999, there
were 11,113,674 shares of Common Stock outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by the shareholders. There is no cumulative
voting with respect to the election of directors, with the result that the
holders of more than 50% of the shares voting for the election of directors can
elect all of the directors. The holders of Common Stock are entitled to receive
dividends when, as and if declared by the Board of Directors out of funds
legally available for them. In the event of liquidation, dissolution or winding
up of the Company, the holders of Common Stock are entitled to share ratably in
all assets remaining which are available for distribution to them after payment
of liabilities and after provision has been made for each class of stock, if
any, having preference over the Common Stock. Holders of shares of Common Stock,
as such, have no conversion, preemptive or other subscription rights, and there
are no redemption provisions applicable to the Common Stock. All of the
outstanding shares of Common Stock are fully paid and non-assessable.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS OF THE COMPANY'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS.
The Common Shares of the Company trade on the OTC Bulletin Board under
the symbol ITNI. The shares had previously traded under the symbol PXSC.
<TABLE>
<CAPTION>
Fiscal Period Ended High Low
<S> <C> <C>
July 1, 1997 through
September 30, 1997 $ 2.00 $ .80
October 1, 1997 through
December 31, 1997 $200.00 $25.00
January 1, 1998 through
March 31, 1998 $ 28.00 $22.60
April 1, 1998 through
June 30, 1998 $ 21.00 $18.00
July 1, 1998 through
September 30, 1998 $ 55.00 $18.00
October 1, 1998 through
December 31, 1998 $ 35.00 $ 1.00
January 1, 1999 through
March 31, 1999 $ 2.00 $ 1.00
April 1, 1999 through
June 30, 1999 $ 5.75 $ 1.00
July 1, 1999 through
September 30, 1999 $ 2.50 $1.125
October 1, 1999 through
December 31, 1999 $ 4.187 $ 2.75
</TABLE>
ITEM 2. LEGAL PROCEEDINGS
THE COMPANY IS NOT PARTY TO ANY PENDING LEGAL PROCEEDINGS.
THE COMPANY FILED FOR BANKRUPTCY PROTECTION IN THE DOMINION OF
MELCHIZEKEK UNDER CHAPTER 11 OF THE KARITANE BANKRUPTCY CODE. KARITANE AND THE
ENTIRE DOMINION OF MELCHIZEDEK ADOPTED THE ENTIRETY OF THE UNITED STATES FEDERAL
BANKRUPTCY LAWS IN 1991. AS A RESULT OF THE REORGANIZATION, THE COMPANY EMERGED
WITH ITS SOLE ASSET BEING 13,500,000 SHARES OF SKY SCIENTIFIC, INC. PREFERRED
STOCK. AS A PART OF THE PLAN, THE COMPANY EXECUTED A 110:1 SHARE REVERSE SPLIT,
WITH NO SHAREHOLDER TO RECEIVE FEWER THAN 20 SHARES AFTER THE SPLIT. CREDITORS
(OTHER THAN THE FORMER TRANSFER AGENTS' DEBT, WHICH THE COMPANY ASSUMED TO PAY
IN THE FUTURE) RECEIVED 1,581 SHARES ON COMMON STOCK IN 1997, 145,930 SHARES OF
COMMON STOCK IN 1998 AND 5,000 SHARES OF COMMON STOCK IN 1999 ON A POST
CONSOLIDATION BASIS.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
IN NOVEMBER 1999 THE COMPANY ENGAGED DAREN, MARTENFELD, CARR, TESTA AND
COMPANY LLP AS THE COMPANY'S INDEPENDENT ACCOUNANT. THIS REPLACED THE COMPANY'S
FORMER INDEPENDENT ACCOUNTANT FOX BYRD & GOLDEN, P.C. OF DALLAS, TEXAS. THE
COMPANY HAD NO DISAGREEMENTS WITH ITS FORMER INDEPENDENT ACCOUNTANT.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
ON MAY 20, 1999 THE COMPANY SOLD 10,000,000 SHARES OF COMMON STOCK TO
10 UNAFFILIATED ACCREDITED INVESTORS FOR TOTAL CONSIDERATION OF $100,000.
SUBSCRIPTIONS WERE INITIALLY SECURED BY PROMISSORY NOTES, HOWEVER ALL THE
PROMISSORY NOTES HAVE BEEN SATISFIED. THERE WERE NO UNDERWRITING OR OTHER
<PAGE>
DISCOUNTS. THE COMPANY SOLD THE SHARES PURSUANT TO THE EXEMPTION FROM
REGISTRATION CONTAINED IN RULE 504 OF REGULATION D, PROMULGATED UNDER THE
SECURITIES ACT OF 1933 AS AMENDED.
ON SEPTEMBER 29, 1999 THE COMPANY ACQUIRED 100% OF THE OUTSTANDING
COMMON STOCK OF I-TRANSACTION.NET, INC., A BAHAMAS CORPORATION, FOR 1,000,000
SHARES OF COMMON STOCK AND 1,000,000 COMMON STOCK PURCHASE WARRANTS EXERCISABLE
AT $0.25 PER WARRANT. THE SHARES WERE ISSUED PURSUANT TO THE EXEMPTION FROM
REGISTRATION CONTAINED IN REGULATION S, PROMULGATED UNDER THE SECURITIES ACT OF
1933 AS AMENDED. ALL PURCHASERS OF THE SECURITIES WERE NON-US PERSONS AS DEFINED
BY REGULATION AND NO DIRECTED SELLING EFFORTS WERE MADE IN THE UNITED STATES OF
TO US PERSONS.
ON NOVEMBER 15, 1999 THE COMPANY ACQUIRED 100% OF DYNAMIC VISIONS,
LTD., AN ONTARIO CORPORATION FOR 700,000 SHARES OF COMMON STOCK OF THE COMPANY.
THESE SHARES WERE ISSUED PURSUANT TO THE EXEMPTION FROM REGISTRATION CONTAINED
IN REGULATION S, PROMULGATED UNDER THE SECURITIES ACT OF 1933 AS AMENDED. ALL
PURCHASERS OF THE SECURITIES WERE NON-US PERSONS AS DEFINED BY REGULATION AND NO
DIRECTED SELLING EFFORTS WERE MADE IN THE UNITED STATES OF TO US PERSONS.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation provides that to
the fullest extent permitted by the New Jersey Business Corporation Act (the
"NJBCL"), a director shall not be liable to the Company or its shareholders for
monetary damages for breach of fiduciary duty as a Director. Under the NJBCL,
liability of a director may not be limited (i) for any breach of the director's
duty of loyalty to the Company or its shareholders, (ii) for acts or omissions
not in good faith or that involve intentional misconduct or a knowing violation
of law, (iii) in respect of certain unlawful dividend payments or stock
redemptions or repurchases and (iv) for any transaction from which the director
derives an improper personal benefit. The effect of the provisions of the
Company's Certificate of Incorporation is to eliminate the rights of the Company
and its shareholders (through shareholders' derivative suits on behalf of the
Company) to recover monetary damages against a director for breach of the
fiduciary duty of care as a director (including breaches resulting from
negligent or grossly negligent behavior), except in the situations described in
clauses (i) through (iv) above. This provision does not limit or eliminate the
rights of the Company or any shareholder to seek non-monetary relief such as an
injunction or rescission in the event of a breach of a director's duty or care.
In addition, the Company's Certificate of Incorporation provides that the
Company shall indemnify its directors, officers, employees and agents against
losses incurred by any such person by reason of the fact that such person was
acting in such capacity.
The Company intends to enter into indemnification agreements with each
of its directors containing provisions that may require the Company, among other
things, to indemnify its directors against certain liabilities that may arise by
reason of their status or service as directors (other than liabilities arising
from willful misconduct of a culpable nature) and to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified.
The Company believes that such indemnification provisions and
agreements are necessary to attract and retain qualified persons as directors
and executive officers.
Part F/S
The audited financial statements for the years ended June 30, 1997,
June 30, 1998 and Jun 30, 1999 as well as the statements for the unaudited
interim period from July 1, 1999 through December 31, 1999 are attached
hereto as pages F-1 through F-28.
<PAGE>
Part III
Item 1. INDEX TO EXHIBITS
2.1 ARTICLES OF INCORPORATION
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.
/s/ DAVID BRUCE FEBRUARY 9, 2000
- ------------------------------- ----------------
DAVID BRUCE
DIRECTOR, CHAIRMAN OF THE BOARD
/s/ JOANNE BROEDERS FEBRUARY 9, 2000
- ------------------------------- ----------------
JOANNE BROEDERS
DIRECTOR
<PAGE>
I-TRANSACTION.NET INC.
(FORMERLY PHOENIX SUMMUS CORP.)
(A DEVELOPMENT STAGE COMPANY)
(UNAUDITED - PREPARED BY MANAGEMENT)
(U.S. DOLLARS)
SIX MONTH INTERIM FINANCIAL STATEMENTS
AS AT DECEMBER 31, 1999
F-1
<PAGE>
I-TRANSACTION.NET INC.
(FORMERLY PHOENIX SUMMUS CORP.)
(A DEVELOPMENT STAGE COMPANY)
(UNAUDITED - PREPARED BY MANAGEMENT)
CONSOLIDATED BALANCE SHEET
(U.S. DOLLARS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
DEC. 31, DEC. 31,
NOTE 1999 1998
- -------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT
<S> <C> <C>
Cash $ 101,043 $ --
Accounts receivable 17,826 --
Inventory 37,120 --
Prepaid and sundry asset 10,498 --
- -------------------------------------------------------------------------------------------------------------------
166,487 --
CAPITAL ASSETS - NET OF ACCUMULATED
AMORTIZATION OF $4,632 101,861 --
GOODWILL 72,815 --
- -------------------------------------------------------------------------------------------------------------------
$ 341,163 $ --
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES
CURRENT
Bank indebtedness $ 23,649 $ --
Accounts payable and accrued liabilities 127,323 --
Customer deposits 15,480 --
Loans payable, related party, non-interest
bearing and due on demand 37,795 --
- -------------------------------------------------------------------------------------------------------------------
204,247 --
- -------------------------------------------------------------------------------------------------------------------
BANK LOAN 105,386 --
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 200,000,000
shares authorized, 11,913,611 (1998 - 203,611)
shares issued and outstanding 11,914 204
Additional paid-in capital 280,402,132 280,328,642
(Deficit) accumulated during development stage (280,382,516) (280,328,846)
- -------------------------------------------------------------------------------------------------------------------
31,530 --
- -------------------------------------------------------------------------------------------------------------------
$ 341,163 $ --
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Approved by Director
F-2
<PAGE>
I-TRANSACTION.NET INC.
(FORMERLY PHOENIX SUMMUS CORP.)
(A DEVELOPMENT STAGE COMPANY)
(UNAUDITED - PREPARED BY MANAGEMENT)
CONSOLIDATED STATEMENT OF OPERATIONS
(U.S. DOLLARS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS FEBRUARY 28, 1997
ENDED ENDED (INCEPTION) TO
DEC. 31, 1999 DEC. 31, 1998 DEC. 31, 1999
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $ 1,707 $ -- $ 1,707
Cost of sales 836 -- 836
- -------------------------------------------------------------------------------------------------------------------
Gross profit 871 -- 871
Selling expense 8,826 -- 8,826
Administration expense 30,259 -- 58,094
Interest 1,817 -- 1,817
Amortization 4,632 -- 4,632
- -------------------------------------------------------------------------------------------------------------------
Loss from continuing operations (44,663) -- (72,498)
Loss on discontinuance of Forum
Energy, Inc. operations -- -- (278,017,599)
- -------------------------------------------------------------------------------------------------------------------
NET LOSS $ (44,663) $ -- $(278,090,097)
- -------------------------------------------------------------------------------------------------------------------
Per share information:
Basic loss per share from continuing
operations $ -- $ -- $ (0.01)
Discontinued from Forum Energy, Inc.
operations -- -- (25.53)
Weighted average number of
shares 10,888,611 203,611 10,888,611
</TABLE>
F-3
<PAGE>
I-TRANSACTION.NET INC.
(FORMERLY PHOENIX SUMMUS CORP.)
(A DEVELOPMENT STAGE COMPANY)
(UNAUDITED - PREPARED BY MANAGEMENT)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(U.S. DOLLARS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
DEFICIT
COMMON ADDITIONAL ACCUMULATED
COMMON STOCK PAID-IN DURING DEVELOP-
ACTIVITY STOCK AMOUNT CAPITAL MENT STAGE TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
February 27, 1997 132,755,304 $ 1,342,086 $ -- $ (2,292,419) $ (950,330)
Reverse split 110:1 [Note 5(i)] (132,749,204) (1,342,080) 1,342,080 -- --
Shares issued relating to
bankruptcy settlement to
creditors [Note 5(i)] 1,581 2 948,903 -- 948,905
Shares issued on acquisition
of Forum Energy, Inc. (Note 4) 50,000 50 278,018,977 -- 278,019,027
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss from continuing operations
for the year ended June 30, 1998 (18,828) (18,828)
Loss on discontinuance of Forum
Energy, Inc. operations -- -- -- (278,017,599) (278,017,599)
Shares issued relating to bankruptcy
settlement with creditors
[Note 5(i)] 145,930 146 18,682 -- 18,828
- ------------------------------------------------------------------------------------------------------------------------------------
From February 27, 1997
to December 31, 1998 203,611 204 280,328,642 (280,328,846) --
Shares issued relating to bankruptcy
settlement with creditors
[Note 5(i)] 5,000 5 4,995 -- 1,000
Shares issued for cash, net of
issuance costs of $25,000 10,000,000 10,000 65,000 -- 75,000
Issued for services 5,000 5 4,995 -- 5,000
Net loss from continuing
operations for the year
ended June 30, 1999 -- -- -- (8,007) (8,007)
Issuance of 1,000,000 shares
on acquisition of ITNI 1,000,000 1,000 2,500 -- 3,500
Issuance of 700,000 shares
on acquisition of dynamics 700,000 700 -- -- 700
Loss from operations for the
six month period ended
December 31, 1999 -- -- -- (44,663) (44,663)
- ------------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1999 11,913,611 $ 11,914 $ 280,402,132 $(280,382,516) $ 31,530
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-4
<PAGE>
I-TRANSACTION.NET INC.
(FORMERLY PHOENIX SUMMUS CORP.)
(A DEVELOPMENT STAGE COMPANY)
(UNAUDITED - PREPARED BY MANAGEMENT)
STATEMENT OF CASH FLOWS
(U.S. DOLLARS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FEBRUARY 28, 1997
(INCEPTION) TO
- -------------------------------------------------------------------------------------------------------------------
DEC. 31, 1999 DEC. 31, 1998 DEC. 31, 1999
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net loss $ (44,663) $ - $ (72,498)
Adjustment to reconcile net loss to
net cash provided (used in)
operating activities
Amortization of assets 4,632 - 4,632
Changes in assets and liabilities
Accounts receivable (17,826) - (17,826)
Inventory (37,120) - (37,120)
Prepaid and sundry assets (10,498) - (10,498)
Accounts payable and accrued liabilities 102,323 - 102,323
Customer deposits 15,480 - 15,480
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) operating activities 12,325 - (15,510)
- -------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Decrease in promissory note 100,000 - 100,000
Capital expenditures (106,493) - (106,493)
Goodwill (72,815) - (72,815)
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) investing activities (79,308) - (79,308)
- -------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of stock 4,200 - 29,028
Loan payable to related party 34,788 - 37,795
Bank loan 105,389 - 105,389
Bank indebtedness 23,649 - 23,649
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities 168,026 - 195,861
- -------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH DURING THE PERIOD 101,043 - 101,043
CASH AT BEGINNING OF PERIOD - - -
- -------------------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 101,043 - $ 101,043
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
F-5
<PAGE>
I-TRANSACTION.NET INC.
(FORMERLY PHOENIX SUMMUS CORP.)
(A DEVELOPMENT STAGE COMPANY)
(UNAUDITED - PREPARED BY MANAGEMENT)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLARS)
1. DESCRIPTION OF BUSINESS
i-Transaction.net Inc. ("the Company") is a technology development
Company, developing business strategies through acquisition or joint
venture partners.
The Company changed its name from Phoenix Summus Corp. to
i-Transaction.net Inc. on October 26, 1999.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ESTIMATES
The preparation of the Company's financial statements requires management
to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ
from these estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's short-term financial instruments consists of accounts
payable. The carrying amounts of the Company's financial statements
approximates fair value because of their short-term maturities. The Company
does not hold or issue financial instruments for trading purposes nor does
it hold or issue interest rate or leveraged derivative financial
instruments.
NET LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings Per Share." SFAS No. 128 supresedes and simplifies
the existing computational guidelines under Accounting Principles Board
("APB") Opinion No. 15, "Earnings Per Share".
The statement is effective for financial statements issued for periods
ending after December 15, 1997. Among other changes, SFAS No. 128
eliminates the presentation of primary earnings per share and replaces it
with basic earnings per share for which common stock equivalents are not
considered in the computation, it also revised the computation of diluted
earnings per share. The Company has adopted SFAS No. 128 and there is no
material impact to the Company's earnings per share, financial condition,
or results of operations. The Company's earnings per share have been
restated for all periods presented to be consistent with SFAS No. 128.
The basic loss per share is computed by dividing the net loss for the
period by the weighted average number of common shares outstanding for the
period. When present, common stock equivalents are excluded from the
computation if their effect would be anti-dilutive. Shares issued at
inception are considered to be outstanding for the entire period presented.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and other highly liquid debt
instruments with an original maturity of less than three months.
F-6
<PAGE>
I-TRANSACTION.NET INC.
(FORMERLY PHOENIX SUMMUS CORP.)
(A DEVELOPMENT STAGE COMPANY)
(UNAUDITED - PREPARED BY MANAGEMENT)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLARS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Cont'd.)
RECENT PRONOUNCEMENTS
SFAS No. 130, "Reporting Comprehensive Income", establishes guidelines for
all items that are to be recognized under accounting standards as
components of comprehensive income to be reported in the financial
statements. The statement is effective for all periods beginning after
December 15, 1997 and reclassification of financial statements of financial
statements for earlier periods will be required for comparative purposes.
To date, the Company has not engaged in transactions which would result in
any significant difference between its reported net loss and comprehensive
net loss as defined in the statement.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries i-Transaction.net Inc. (ITNI) and Dynamic
Visions Ltd. ("Dynamic"). All intercompany balances and transactions have
been eliminated on consolidation.
CAPITAL ASSETS
Capital assets are carried at cost, less accumulated amortization, which is
based on management's estimates of the assets' useful lives. Amortization
is provided for on a straight line method at an annual rate of 20% for
furniture, computer equipment and other office equipment. Leasehold
improvements are amortized over five years on a straight line basis.
Amortization on the assets acquired during the year is calculated at half
the applicable rate. No amortization is charged on assets disposed of
during the year.
FOREIGN CURRENCY TRANSLATION
Monetary assets and liabilities are translated at exchange rates in effect
at the balance sheet date. Non-monetary assets are translated at exchange
rates in effect when they were acquired. Revenue and expenses are
translated at the approximate average rate of exchange for the year, except
that amortization is translated at the rates used to translate related
assets. The resulting gains or losses on translation are included in the
consolidate statement of operations.
INVENTORY
Inventory is stated at cost, which is not in excess of market value.
GOODWILL
The goodwill which relates to the acquisition of Dynamic, is amortized on a
straight line basis over ten years. The Company reviews the carrying value
of the goodwill for impairment at least annually or whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. Measurement of any impairment would include a comparison of
discounted estimated future operating cash flows anticipated to be
generated during the remaining period to the net carrying value.
F-7
<PAGE>
I-TRANSACTION.NET INC
(FORMERLY PHOENIX SUMMUS CORP.)
(A DEVELOPMENT STAGE COMPANY)
(UNAUDITED - PREPARED BY MANAGEMENT)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLARS)
3. BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation
of the Company as a going concern. However the Company has sustained
continuing operating losses and lacks a source of commercial income, which
creates uncertainty about the Company's ability to continue as a going
concern. The Company's ability to continue operations as a going concern
and to realize its assets and to discharge its liabilities is dependent
upon obtaining additional financing sufficient for continued operations as
well as the achievement and maintenance of a level of profitable
operations.
Management believes that the actions that are being taken and planned to
revise the Company's operations provide for the opportunity for the Company
to continue as a going concern.
4. ACQUISITIONS
i. On September 29, 1999 the Company acquired 100% of the outstanding
common stock of i-Transaction.net Inc., a Bahama Corporation by issuing
1,000,000 shares of common stock and 1,000,000 common stock purchase
warrants exercisable at $0.25 per warrant. The acquisition will be
accounted for under the purchase method of accounting, and accordingly
the results of operations will be included in the results of the
Company from the date of acquisition.
In determining the value of the purchase of ITNI, it is appropriate to
use the quoted market price of the shares of the Company at the time of
acquisition if the shares reflected the fair value of the Company. As
the Company was a `shell Company" at the time of acquisition, the fair
value of the Company was nominal and thus the use of the market value
of the shares of the Company in determining the purchase price would
not be appropriate.
As a result the purchase price was determined based upon the value of
the net assts of ITNI and are as follows:
<TABLE>
<S> <C>
Current assets $ 5,000
Current liabilities (1,500)
- ------------------------------------------------------------------------------------------------------
NET ASSETS ACQUIRED $ 3,500
- ------------------------------------------------------------------------------------------------------
</TABLE>
ii. On November 15, 1999 the Company acquired 100% of Dynamic Visions, Ltd.
("Dynamic"), an Ontario, Canada corporation for 700,000 shares of
common stock of the Company which was issued and subject to Rule 144 of
the Securities and Exchange Act of 1933. The acquisition will be
accounted for under the purchase method of accounting, and accordingly
the results of operations will be included in the results of the
Company from the date of acquisition.
F-8
<PAGE>
I-TRANSACTION.NET INC.
(FORMERLY PHOENIX SUMMUS CORP.)
(A DEVELOPMENT STAGE COMPANY)
(UNAUDITED - PREPARED BY MANAGEMENT)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLARS)
4. ACQUISITIONS - (Cont'd.)
In determining the value of the purchase of Dynamic, it is appropriate
to use the quoted market price of the shares of the Company at the time
of acquisition if the shares reflected the fair value of the Company.
As the Company was a "Shell Company" at the time of acquisition the
fair value of the Company at the time of acquisition was nominal and
thus the use of the market value of the shares of the Company in
determining the purchase price would not be appropriate.
As a result the purchase price was determined based upon the fair value
of the net assts of Dynamic which was determined to be book value. The
balances at November 15, 1999 are unaudited and are as follows:
<TABLE>
<S> <C>
Assets $ 153,279
Liabilities 226,092
- ------------------------------------------------------------------------------------------------------
NET LIABILITIES $ (72,813)
- ------------------------------------------------------------------------------------------------------
</TABLE>
The net liabilities acquired will be considered the goodwill acquired
by the Company.
5. INVESTMENT
The Company owns 13,500,000 shares of Sky Scientic, Inc. preferred stock.
The stock is no longer trading and was deemed to have no value when the
corporation emerged from bankruptcy.
6. STOCKHOLDERS' EQUITY
i. The Company filed for bankruptcy protection in the Dominion of
Melchizekek under Chapter 11 of the Karitane Bankruptcy Code. Karitane
and the entire Dominion of Melchizedek adopted the entirety of the
United States Federal Bankruptcy laws in 1991. As a result of the
reorganization, the Company emerged with its sole asset being
13,500,000 shares of Sky Scientic, Inc. preferred stock. As part of
the plan, the Company executed a 110:1 share reverse split, with no
shareholder to receive fewer than 20 shares after the split. Creditors
(other than the former transfer agents' debt, which the Company
assumed to pay in the future) received 1,581 shares of common stock in
1997, 145,930 shares of common stock in 1998 and 5,000 shares of
common stock in 1999 on a post-consolidated basis.
ii. On March 1, 1999 the Company's Board of Directors approved a 200:1
share reverse split, with no shareholder to receive fewer than 50
shares after the split. All share and per share data included in these
financial statements has been restated to reflect the effect of the
stock split.
iii. On May 20, 1999 the Company issued 10,000,000 shares a $0.01 share
under a Rule 504 offering which was satisfied by the issuance of
promissory notes by the recipients of the stock. The notes bear
interest at 5% per annum and are due May 1, 2000.
F-9
<PAGE>
I-TRANSACTION.NET INC.
(FORMERLY PHOENIX SUMMUS CORP.)
(A DEVELOPMENT STAGE COMPANY)
(UNAUDITED - PREPARED BY MANAGEMENT)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLARS)
6. STOCKHOLDERS' EQUITY - (Cont'.d)
iv. The Company issued 1,000,000 shares of common stock and 1,000,000
common share purchase warrants to acquire ITNI (Note 4).
v. The Company issued 700,000 shares of common stock to acquire Dynamic
(Note 4).
7. INCOME TAXES
Deferred income taxes may arise from temporary differences resulting from
income and expense items reported for financial accounting and tax purposes
in different periods. Deferred taxes are classified as current or
non-current depending on the periods in which the temporary differences are
expected to reverse. The deferred tax asset related to the operating loss
carryforward has been fully reserved.
The Company has not provided current or deferred income taxes for the
period presented due to a loss from operations.
The Company currently has a net operating loss carryforward aggregating
approximately $27,800 which $18,828 expire in 2013 and $9,007 expire in
2014. The tax benefit of the loss has been fully reserved as its
realization in future periods is not assured.
8. RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real or personal property. Office
services are provided without charge by an officer. The cost of such
services are immaterial to the financial statements and, accordingly, have
not been reflected therein. The officers and directors of the Company are
involved in other business activities and may, in future, become involved
in other business opportunities. If a specific business opportunity becomes
available, such persons may face a conflict of interest in carrying out
their specific duties with respect to the Company. The Company has not
established a policy for the resolution of such potential conflicts.
F-10
<PAGE>
PHOENIX SUMMUS CORP.
(A DEVELOPMENT STAGE COMPANY)
(U.S. DOLLARS)
FINANCIAL STATEMENTS
AS AT JUNE 30, 1999 AND 1998
F-11
<PAGE>
DAREN, MARTENFELD, CARR, TESTA AND COMPANY LLP
CHARTERED ACCOUNTANTS
20 Eglinton Avenue West Telephone: 416-480-0160
Suite 2100 Facsimile: 416-480-2646
Toronto, Ontario
M4R 1K8
AUDITORS' REPORT
To the Stockholders' and Board of Directors of
Phoenix Summus Corp.
(A Development Stage Company)
We have audited the balance sheet of PHOENIX SUMMUS CORP. (a development stage
company) as at JUNE 30, 1999 AND 1998 and the statement of operations, cash
flows and changes in stockholders' equity for the years ended JUNE 30, 1999 AND
1998. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. The financial statements of Phoenix Summus Corp.
(a development stage company) from inception (February 28, 1997) to June 30,
1997 were audited by another auditor who issued an unqualified opinion on those
statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of Phoenix Summus Corp. (a development stage
company) as at JUNE 30, 1999 AND 1998 and the results of its operations, cash
flows and changes in stockholders' equity for the years ended JUNE 30, 1999 AND
1998 in accordance with generally accepted accounting principles in the United
States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has suffered recurring losses from operations
and has no established source of revenue, which raise substantial doubts about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 3. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Daren, Martenfeld, Carr, Testa and Company LLP(signed)
DAREN, MARTENFELD, CARR, TESTA AND COMPANY LLP
Toronto, Ontario
February 4, 2000
A Member Firm of
Midsnell International
F-12
<PAGE>
PHOENIX SUMMUS CORP.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
(U.S. DOLLARS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
JUNE 30, JUNE 30, JUNE 30,
NOTE 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT
Promissory notes receivable bearing
interest at 5% per annum and due
May 1, 2000 [6(iii)] $ 100,000 $ -- $ --
- -----------------------------------------------------------------------------------------------------------------------------------
100,000 -- --
Net assets of discontinued Forum Energy,
Inc. operations 4 -- -- 278,017,599
- -----------------------------------------------------------------------------------------------------------------------------------
$ 100,000 $ -- $ 278,017,599
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 25,000 $ -- $ --
Loan payable, related party, non-interest
bearing and due on demand 3,007 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
28,007 -- --
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 200,000,000
shares authorized, 10,213,611 (1998 - 203,611,
1997 - 57,681) shares issued and
outstanding 10,214 204 58
Additional paid-in capital 280,399,632 280,328,642 280,309,960
(Deficit) accumulated during development stage (280,337,853) (280,328,846) (2,292,419)
- -----------------------------------------------------------------------------------------------------------------------------------
71,993 -- 278,017,599
- -----------------------------------------------------------------------------------------------------------------------------------
$ 100,000 $ -- $ 278,017,599
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
Approved by DAVID BRUCE (SIGNED) Director
F-13
<PAGE>
PHOENIX SUMMUS CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
(U.S. DOLLARS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD FROM
DATE OF INCEPTION FEBRUARY 28, 1997
(FEBRUARY 28, 1997) (INCEPTION) TO
JUNE 30, 1999 JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1999
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EXPENSE
Office and general $ 9,007 $ 18,828 $ -- $ 27,835
- -----------------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations (9,007) (18,828) -- (27,835)
Loss on discontinuance of Forum
Energy, Inc. operations -- (278,017,599) -- (278,017,599)
- -----------------------------------------------------------------------------------------------------------------------------------
NET LOSS $(9,007) $(278,036,427) $ -- $(278,045,434)
- -----------------------------------------------------------------------------------------------------------------------------------
Per share information:
Basic loss per share from continuing
operations $ -- $0.18 $ --
Discontinued from Energy, Inc
operations $ -- $2,730 --
Weighted average number of
shares 5,662,605 101,806 57,681
</TABLE>
SEE ACCOMPANYING NOTES.
F-14
<PAGE>
PHOENIX SUMMUS CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(U.S. DOLLARS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
DEFICIT
COMMON ADDITIONAL ACCUMULATED
COMMON STOCK PAID-IN DURING DEVELOP-
ACTIVITY STOCK AMOUNT CAPITAL MENT STAGE TOTAL
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
February 27, 1997 132,755,304 $ 1,342,086 $ -- $ (2,292,419) $ (950,330)
Reverse split 110:1 [Note 5(i)] (132,749,204) (1,342,080) 1,342,080 -- --
Shares issued relating to
bankruptcy settlement to
creditors [Note 5(i)] 1,581 2 948,903 -- 948,905
Shares issued on acquisition
of Forum Energy, Inc. (Note 4) 50,000 50 278,018,977 -- 278,019,027
- ----------------------------------------------------------------------------------------------------------------------
June 30, 1997 57,681 58 280,309,960 (2,292,419) 278,017,599
Net loss from continuing operations
at June 30, 1998 (18,828) (18,828)
Loss on discontinuance of Forum
Energy, Inc. operations -- -- -- (278,017,599) (278,017,599)
Shares issued relating to bankruptcy
settlement with creditors
[Note 5(i)] 145,930 146 18,682 -- 18,828
- ----------------------------------------------------------------------------------------------------------------------
June 30, 1998 203,611 204 280,328,642 (280,328,846) --
Shares issued relating to bankruptcy
settlement with creditors
[Note 5(i)] 5,000 5 4,995 -- 1,000
Shares issued for cash, net of
issuance costs of $25,000 10,000,000 10,000` 65,000 -- 75,000
Issued for services 5,000 5 4,995 -- 5,000
Net loss from continuing
operations June 30, 1999 -- -- -- (8,007) (8,007)
- ----------------------------------------------------------------------------------------------------------------------
June 30, 1999 10,213,611 $ 10,214 $ 280,399,632 $(280,337,853) $ 71,993
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-15
<PAGE>
PHOENIX SUMMUS CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
(U.S. DOLLARS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD FROM
DATE OF INCEPTION FEBRUARY 28, 1997
(FEBRUARY 28, 1997) (INCEPTION) TO
JUNE 30, 1999 JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1999
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Loss from continuing operations $ (9,007) $ (18,828) $ -- $ (27,835)
- --------------------------------------------------------------------------------------------------------------------
Net cash used in continuing
operations $ (9,007) $ (18,828) $ -- (27,835)
- --------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
issuance of common stock $ 1,000 $ 18,828 $ -- $ 24,828
- --------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase in loan payable 3,007 -- -- 3,007
- --------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH -- -- -- --
CASH AT BEGINNING OF YEAR -- -- -- --
- --------------------------------------------------------------------------------------------------------------------
CASH AT END OF YEAR $ -- $ -- $ -- $ --
- --------------------------------------------------------------------------------------------------------------------
Supplemental Disclosure
Acquisition Of Forum Energy, Inc. -- (278,019,027).
Issuance OF Common Stock -- 278,019,027
Conversion OF Debt To Equity -- (948,905)
Issuance OF Common Stock -- 948,905
Disposition OF Forum Energy, Inc. 278,017,599
ISSUANCE OF COMMON STOCK 100,000
</TABLE>
SEE ACCOMPANYING NOTES.
F-16
<PAGE>
PHOENIX SUMMUS CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(U.S. DOLLARS)
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
Phoenix Summus Corp. ("the Company") filed for bankruptcy protection in the
Dominion of Melchizedek under Chapter 11 of the Karitane Bankruptcy Code.
Karitane and the entire Dominion of Melchizedek adopted the entirety of the
United States Federal Bankruptcy Laws in 1991.
After the reorganization, the Company was redomiciled to the State of New
Jersey and re-established itself as a development stage company and its
intent is to locate suitable business ventures to acquire. The Company has
had no significant business activity to date.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ESTIMATES
The preparation of the Company's financial statements requires management
to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ
from these estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's short-term financial instruments consists of accounts
payable. The carrying amounts of the Company's financial statements
approximates fair value because of their short-term maturities. The Company
does not hold or issue financial instruments for trading purposes nor does
it hold or issue interest rate or leveraged derivative financial
instruments.
NET LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings Per Share." SFAS No. 128 supresedes and simplifies
the existing computational guidelines under Accounting Principles Board
("APB") Opinion No. 15, "Earnings Per Share".
The statement is effective for financial statements issued for periods
ending after December 15, 1997. Among other changes, SFAS No. 128
eliminates the presentation of primary earnings per share and replaces it
with basic earnings per share for which common stock equivalents are not
considered in the computation, it also revised the computation of diluted
earnings per share. The Company has adopted SFAS No. 128 and there is no
material impact to the Company's earnings per share, financial condition,
or results of operations. The Company's earnings per share have been
restated for all periods presented to be consistent with SFAS No. 128.
The basic loss per share is computed by dividing the net loss for the
period by the weighted average number of common shares outstanding for the
period. When present, common stock equivalents are excluded from the
computation if their effect would be anti-dilutive. Shares issued at
inception are considered to be outstanding for the entire period presented.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and other highly liquid debt
instruments with an original maturity of less than three months.
F-17
<PAGE>
PHOENIX SUMMUS CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(U.S. DOLLARS)
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Cont'd.)
RECENT PRONOUNCEMENTS
SFAS No. 130, "Reporting Comprehensive Income", establishes guidelines for
all items that are to be recognized under accounting standards as
components of comprehensive income to be reported in the financial
statements. The statement is effective for all periods beginning after
December 15, 1997 and reclassification of financial statements of financial
statements for earlier periods will be required for comparative purposes.
To date, the Company has not engaged in transactions which would result in
any significant difference between its reported net loss and comprehensive
net loss as defined in the statement.
3. BASIS OF PRESENTATION
The accompanying financial statements have been prepared on a "going
concern" basis which contemplates the realization of assets and the
liquidation of liabilities in the ordinary course of business.
The Company has no established source of revenue and has incurred operating
losses since its inception. There can be no assurance that profitable
operations will be attained or that management will be successful in
raising additional equity capital for the Company.
Management plans to seek an operating company as a merger partner for the
Company which would provide a base of operations and additional capital.
4. DISCONTINUANCE OF FORUM ENERGY, INC.
The Company acquired 100% of Forum Energy, Inc. from Pilares Oil and Gas
Inc. on March 13, 1997 for 50,000 post-consolidated shares of common stock,
(10,000,000 pre-consolidated shares of common stock) valued at $278,028,827
and par value of $10,000. On February 9, 1998 the Company returned the Oil
and Gas properties owned by Forum Energy, Inc. to Pilares Oil and Gas Inc.
as per terms of an agreement with Pilares Oil and Gas Inc. In return the
Company was to receive 45,000 post-consolidated shares of common stock
(9,000,000 pre-consolidated shares of common stock). The Company has not
received the shares and does not intend on pursuing the matter.
As the Oil and Gas properties were the only asset of Forum Energy, Inc. and
it has no other business the return of the oil and gas properties will be
treated for accounting purposes as the discontinuance of the operations of
a subsidiary and as a result the 1997 financial statements were restated to
reflect this accounting.
The summarized financial information related to the discontinued Forum
Energy, Inc. business is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
JUNE 30,
1997
- --------------------------------------------------------------------------------
<S> <C>
Current assets $ 278,027,211
Current liabilities 9,612
- --------------------------------------------------------------------------------
Net assets of Forum Energy, Inc. discontinued operations $ 278,017,599
- -----------------------------------------------------------------------------------
</TABLE>
F-18
<PAGE>
PHOENIX SUMMUS CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(U.S. DOLLARS)
- --------------------------------------------------------------------------------
5. INVESTMENT
The Company owns 13,500,000 shares of Sky Scientic, Inc. preferred stock.
The stock is no longer trading and was deemed to have no value when the
corporation emerged from bankruptcy.
6. STOCKHOLDERS' EQUITY
i. The Company filed for bankruptcy protection in the Dominion of
Melchizekek under Chapter 11 of the Karitane Bankruptcy Code. Karitane
and the entire Dominion of Melchizedek adopted the entirety of the
United States Federal Bankruptcy laws in 1991. As a result of the
reorganization, the Company emerged with its sole asset being
13,500,000 shares of Sky Scientic, Inc. preferred stock. As part of the
plan, the Company executed a 110:1 share reverse split, with no
shareholder to receive fewer than 20 shares after the split. Creditors
(other than the former transfer agents' debt, which the Company assumed
to pay in the future) received 1,581 shares of common stock in 1997,
145,930 shares of common stock in 1998 and 5,000 shares of common stock
in 1999 on a post-consolidated basis.
ii. On March 1, 1999 the Company's Board of Directors approved a 200:1
share reverse split, with no shareholder to receive fewer than 50
shares after the split. All share and per share data included in these
financial statements has been restated to reflect the effect of the
stock split.
iii. On May 20, 1999 the Company issued 10,000,000 shares a $0.01 share
under a Rule 504 offering which was satisfied by the issuance of
promissory notes by the recipients of the stock. The notes bear
interest at 5% per annum and are due May 1, 2000.
7. INCOME TAXES
Deferred income taxes may arise from temporary differences resulting from
income and expense items reported for financial accounting and tax purposes
in different periods. Deferred taxes are classified as current or
non-current depending on the periods in which the temporary differences are
expected to reverse. The deferred tax asset related to the operating loss
carryforward has been fully reserved.
The Company has not provided current or deferred income taxes for the
period presented due to a loss from operations.
The Company currently has a net operating loss carryforward aggregating
approximately $27,800 which $18,828 expire in 2013 and $9,007 expire in
2014. The tax benefit of the loss has been fully reserved as its
realization in future periods is not assured.
F-19
<PAGE>
PHOENIX SUMMUS CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(U.S. DOLLARS)
- --------------------------------------------------------------------------------
8. RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real or personal property. Office
services are provided without charge by an officer. The cost of such
services are immaterial to the financial statements and, accordingly, have
not been reflected therein. The officers and directors of the Company are
involved in other business activities and may, in future, become involved
in other business opportunities. If a specific business opportunity becomes
available, such persons may face a conflict of interest in carrying out
their specific duties with respect to the Company. The Company has not
established a policy for the resolution of such potential conflicts.
9. COMPARATIVE FIGURES
Certain figures presented for comparative purposes have been reclassified
to conform to the current year's method of presentation.
10. SUBSEQUENT EVENTS
i. The Company changed its name on October 26, 1999 to i-Transaction.net,
Inc. ("ITNI")
ii. On September 29, 1999 the Company acquired 100% of the outstanding
common stock of i-Transaction.net Inc., a Bahama Corporation by issuing
1,000,000 shares of common stock and 1,000,000 common stock purchase
warrants exercisable at $0.25 per warrant. The acquisition will be
accounted for under the purchase method of accounting, and accordingly
the results of operations will be included in the results of the
Company from the date of acquisition.
In determining the value of the purchase of ITNI, it is appropriate to
use the quoted market price of the shares of the Company at the time of
acquisition if the shares reflected the fair value of the Company. As
the Company was a `shell Company" at the time of acquisition, the fair
value of the Company was nominal and thus the use of the market value
of the shares of the Company in determining the purchase price would
not be appropriate.
As a result the purchase price was determined based upon the value of
the net assts of ITNI and are as follows:
<TABLE>
<S> <C>
Current assets $ 5,000
Current liabilities (1,500)
- -------------------------------------------------------------------------------
NET ASSETS ACQUIRED $ 3,500
- -------------------------------------------------------------------------------
</TABLE>
iii. On November 15, 1999 the Company acquired 100% of Dynamic Visions, Ltd.
("Dynamic"), an Ontario, Canada corporation for 700,000 shares of
common stock of the Company which was issued and subject to Rule 144 of
the Securities and Exchange Act of 1933. The acquisition will be
accounted for under the purchase method of accounting, and accordingly
the results of operations will be included in the results of the
Company from the date of acquisition.
F-20
<PAGE>
PHOENIX SUMMUS CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(U.S. DOLLARS)
- --------------------------------------------------------------------------------
10. SUBSEQUENT EVENTS - (Cont'd.)
In determining the value of the purchase of Dynamic, it is appropriate
to use the quoted market price of the shares of the Company at the time
of acquisition if the shares reflected the fair value of the Company.
As the Company was a "Shell Company" at the time of acquisition the
fair value of the Company at the time of acquisition was nominal and
thus the use of the market value of the shares of the Company in
determining the purchase price would not be appropriate.
As a result the purchase price was determined based upon the fair value
of the net assts of Dynamic which was determined to be book value. The
balances at November 15, 1999 are unaudited and are as follows:
<TABLE>
<S> <C>
Assets $ 153,279
Liabilities 226,092
- -------------------------------------------------------------------------------
NET LIABILITIES $ (72,813)
- -------------------------------------------------------------------------------
</TABLE>
The net liabilities acquired will be considered the goodwill acquired
by the Company.
iv. Subsequent to the year end the Company received the payment of the
promissory notes.
F-21
<PAGE>
[LOGO]
FOX, BYRD & GOLDEN, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Phoenix Summus Corp.
Abilene, Texas
INDEPENDENT AUDITORS' REPORT
----------------------------
We have audited the accompanying consolidated balance sheet of Phoenix Summus
Corp. and Subsidiary (development stage companies) as of June 30, 1997, and
the related consolidated statements of income, stockholders' equity and cash
flows for the period from February 28, 1997 (date of inception) to June 30,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit in accordance with standards established by the
American Institute of Certified Public Accountants.
We conducted our audit 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 audit of the financial
statements provides 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 Phoenix
Summus Corp. and Subsidiary as of June 30, 1997, and the results of its
operations and cash flows for the period then ended in conformity with
generally accepted accounting principles.
As more fully explained in Note 2, the accompanying balance sheet includes
oil and gas properties stated at $278,018,037. The ultimate recovery of such
amount is dependent on the success of future development of the properties
and in the Company's ability to complete the development.
/s/ Fox, Byrd & Golden PC
July 23, 1997
F-22
<PAGE>
PHOENIX SUMMUS CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(A Development Stage Company)
June 30, 1997
-------------------------------------
ASSETS
------
Accounts Receivable $ 990
Oil and Gas Properties (Note 2) 278,018,037
Prepaid Expenses 8,184
------------
$278,027,211
============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES
Accounts payable $ 9,612
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 11,536,380 shares
authorized, issued and outstanding (Note 3) 11,536
Additional paid in capital 280,298,482
Retained earnings (deficit) from February 28, 1997 (2,292,419)
------------
$278,027,211
============
The accompanying notes are an integral part of these financial statements
F-23
<PAGE>
PHOENIX SUMMUS CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(A Development Stage Company)
For the Period from February 28, 1997 (Date of Inception) to June 30, 1997
--------------------------------------------------------------------------
REVENUE $ 0
EXPENSES
-------------
NET INCOME (LOSS) $ 0
=============
NET INCOME (LOSS) PER WEIGHTED SHARE $ 0
=============
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 0
Net Cash Used in Operating Activity $ 0
CASH FLOWS FROM INVESTING ACTIVITIES 0
CASH FLOWS FROM FINANCING ACTIVITIES 0
-------------
NET INCREASE IN CASH 0
CASH, Beginning of period 0
-------------
CASH, End of period $ 0
=============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
-------------------------------------------------
FINANCING AND INVESTING ACTIVITIES
NOT AFFECTING CASH:
Acquisition of subsidiary $(278,019,027)
Issuance of common stock 278,019,027
Conversion of debt to equity (948,905)
Issuance of common stock 948,905
-------------
Total Cash Received $ 0
=============
The accompanying notes are an integral part of these financial statements
F-24
<PAGE>
PHOENIX SUMMUS CORP. AND SUBSIDIARY
STATEMENT OF STOCKHOLDER'S EQUITY
(A Development Stage Company)
For the Period from February 28, 1997 (Date of Inception) to June 30, 1997
--------------------------------------------------------------------------
<TABLE>
<CAPTION>
Additional Retained
Common Paid-in Earnings
Stock Capital (Deficit) Total
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
BALANCE, Beginning of period $ 1,342,086 $ 0 $(2,292,419) $ (950,333)
Reverse split 110:1, February 28, 1997 (1,340,866) 1,340,866 0
316,302 shares of common stock issued
February 28, 1997, valued at $3 per share 316 948,589 948,905
10,000,000 shares of common stock
issued March 13, 1997, valued at $27.80
per share 10,000 278,009,027 278,019,027
----------- ------------ ----------- ------------
BALANCE, End of period $ 11,536 $280,298,482 $(2,292,419) $278,017,599
=========== ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-25
<PAGE>
PHOENIX SUMMUS CORP. AND SUBSIDIARY
NOTES TO THE FINANCIAL STATEMENT
June 30, 1997
-------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements include the accounts of Phoenix Summus Corp. (the
"Company"), a Karitune Island, South Pacific, Dominion of Melchizedek
corporation and its wholly owned subsidiary Forum Energy Ltd. Intercompany
balances and material intercompany transactions have been eliminated in
consolidation. Assets, liabilities, revenues, and expenses are recognized on
the accrual basis of accounting for financial statement presentation. The
Company returned to being a development stage company as of its date of
emergence from bankruptcy, February 28, 1997, and is a development stage
company as of June 30, 1997, as operations have not begun. Planned operations
of the Company include the exploration and production of oil and gas in Texas.
The Company uses the successful efforts method of accounting for oil and gas
producing activities. Costs to acquire mineral interests in oil and gas
properties, to drill and equip exploratory wells that find proved reserves,
and to drill and equip development wells are capitalized. Costs to drill
exploratory wells that do not find proved reserves, geological and
geophysical costs, and costs of carrying and retaining unproved properties
are expensed.
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.
Significant estimates include the valuation of proved undeveloped reserves
related to the oil and gas properties. The ultimate recovery of proved
undeveloped reserves is dependent on the success of future development of the
properties and in the Company's ability to complete the development.
NOTE 2 - INVESTMENT
The Company owns 13,500,000 shares of Sky Scientic, Inc. preferred stock. The
stock is no longer trading and was deemed to have no value when the
corporation emerged from bankruptcy (Note 4).
F-26
<PAGE>
PHOENIX SUMMUS CORP. AND SUBSIDIARY
NOTES TO THE FINANCIAL STATEMENT
June 30, 1997
-------------------------------------
NOTE 3 - OIL AND GAS PROPERTIES
The oil and gas property has been appraised by Nova Petroleum Resource
Co., Certified Petroleum Geologists and Registered Professional
Engineers, in the Executive Summary dated May 1, 1997. This report
classified the petroleum reserves as proved undeveloped reserves and
included the following summary:
Net Present Value Net Present Value
Net Oil Net Gas @ 0% Discount @ 10% Discount
(Bbls) (BdCF) $ USD $ USD
----------- ----------- ----------------- ------------------
33,356,166 0 640,204,892 148,032,584
0 206,364,597 $ 129,985,453
The net present value of the oil and gas reserves is based on estimates of
future cash inflows and cash outflows over 30 years. The cash outflows
include direct and indirect production costs. In addition, future cash
outflows include severance and ad valorem taxes but not income taxes. A
definition of proved undeveloped reserves is presented in the Nova Petroleum
Resource Company report:
UNDEVELOPED--Reserves that are recoverable from additional wells yet to
be drilled.
Undeveloped reserves are those considered proved for production by
reasonable geological interpretation of adequate subsurface control
in reservoirs that are producing or proved by other wells but are
not recoverable from existing wells. This classification of
reserves requires drilling of additional wells, major deepening of
existing wells, or installation of enhanced recovery or other
facilities.
F-27
<PAGE>
PHOENIX SUMMUS CORP. AND SUBSIDIARY
NOTES TO THE FINANCIAL STATEMENT
June 30, 1997
-------------------------------------
NOTE 4 - STOCKHOLDERS' EQUITY
The Company filed for bankruptcy protection in the Dominion of Melchizedek
under Chapter 11 of the Karitune Bankruptcy Code. Karitune and the entire
Dominion of Melchizedek adopted the entirety of the United States Federal
Bankruptcy laws in 1991. As a result of the reorganization, the Company
emerged with its sole asset being 13,500,000 shares of Sky Scientic, Inc.
Preferred Stock. As part of the plan, the Company executed a 110:1 share
reverse split, with no shareholder to receive fewer than 20 shares after the
split. Each creditor (other than the former transfer agents' debt, which the
company assumed to pay in the future) then received one share of stock for
each $3 due. This resulted in an additional 316,302 shares of common stock
being issued.
The final portion of the plan called for the Company to issue 10,000,000
shares of common stock in exchange for the stock of Forum Energy, Inc.
NOTE 5 - ACQUISITION OF SUBSIDIARY
The Company acquired 100% of Forum Energy, Inc. on March 13, 1997, for
10,000,000 shares of common stock, valued at $278,028,827, par value of
$10,000. Forum Energy is also a development stage company with no operating
income or expenses from the time of acquisition through year-end.
F-28
