10QSB/A 1 s10qsba.txt U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB/A (Mark One) [X] Quarterly Report Under Section 13 Or 15(D) Of The Securities Exchange Act Of 1934 For the quarterly period ended September 30, 2002 [ ] Transition Report Under Section 13 Or 15(D) Of The Exchange Act For the transition period from ____________ to ____________ Commission File No. 0-31507 INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC. Formerly Known As: Precom Technology, Inc. (Name of Small Business Issuer in Its Charter) Florida 06-1588136 State or Other Jurisdiction of I.R.S. Employer Incorporation or Organization) Identification No.) 4232 D-Este Court, Lake Worth, Florida 33467 (Address of Principal Executive Offices) (561) 964-7925 (Issuer's Telephone Number, Including Area Code) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _______ State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of November 1, 2002, the Company had 22,361,615 shares of Common Stock, $0.001 par value, outstanding. Transitional Small Business Disclosure Format (check one): Yes No X__ PART I - FINANCIAL INFORMATION Item 1. Financial Statements: BASIS OF PRESENTATION As used herein, the term "Company" refers to International Trust & Financial Systems, Inc., formerly Precom Technology, Inc., a Florida corporation, unless otherwise indicated. The accompanying unaudited financial statements are presented in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-QSB and item 310 under subpart A of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying statements should be read in conjunction with the audited financial statements for the year ended December 31, 2001, which are included in our Form 10-KSB filed with the Securities and Exchange Commission ("SEC") on April 15, 2002. In the opinion of management, all adjustments (consisting only of normal occurring accruals) considered necessary in order to make the financial statements not misleading, have been included. Operating results for the nine months ended September 2002 are not necessarily indicative of results that may be expected for the year ending December 31, 2002. The financial statements are presented on the accrual basis. INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC. Formerly PRECOM TECHNOLOGY, INC. (A DEVELOPMENT STAGE COMPANY) FINANCIAL STATEMENTS SEPTEMBER 30, 2002 AND 2001 (UNAUDITED) TABLE OF CONTENTS Page No. INDEPENDENT ACCOUNTANT'S REVIEW REPORT 1 FINANCIAL STATEMENTS Balance Sheet 2 Statements of Operations 3 Statement of Stockholders' (Deficit) 4 - 6 Statements of Cash Flows 7 Notes to Financial Statements 8 - 13 Randy Simpson CPA, P.C. 11775 South Nicklaus Road Sandy, Utah 84092 Phone (801) 572-3009 Fax (801) 606-2895 Board of Directors and Stockholders International Trust & Financial Systems, Inc. (A Development Stage Company) . INDEPENDENT ACCOUNTANT'S REVIEW REPORT I have reviewed the accompanying balance sheet of International Trust & Financial Systems, Inc. (a development stage company) as of September 30, 2002, and the related combined statements of operations, stockholders' (deficit) and cash flows for the three months then ended, in accordance with Statements on Standards of Accounting and Review Services issued by the American Institute of Certified Public Accountants. All information included in these financial statements is the representation of the management of International Trust & Financial Systems, Inc. A review consists principally of inquiries of company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, I do not express such an opinion. Based on my review, I am not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming the company will continue as a going concern. As discussed in Note 4 to the financial statements, the Company has incurred net losses of $652,620, has a deficit stockholders' equity, and needs additional capital to finance operations. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans regarding these matters are described in Notes 5 and 7. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. /s/Randy Simpson Randy Simpson, CPA, P.C. A Professional Corporation June 27, 2003 Sandy, Utah INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC. (Formerly PRECOM TECHNOLOGY, INC.) (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS SEPTEMBER 30, 2002 AND 2001 (UNAUDITED) 2002 2001 ASSETS CURRENT ASSETS Cash $ 1,210 $ - TOTAL CURRENT ASSETS 1,210 - PROPERTY AND EQUIPMENT Office equipment 9,239 - Less accumulated depreciation (468) - NET PROPERTY AND EQUIPMENT 8,771 - OTHER ASSETS 1,000 - TOTAL ASSETS $ 10,981 $ - LIABILITIES AND STOCKHOLDERS' (DEFICIT) CURRENT LIABILITIES Accounts payable $ 63,170 $ 100,828 TOTAL CURRENT LIABILITIES 63,170 100,828 STOCKHOLDERS' (DEFICIT) Preferred stock, Series B, no par value Authorized 10,000,000 shares Issued and outstanding - 5,000,000 shares 1,000 - Common stock, par value $ 0.001 per share Authorized 50,000,000 shares Issued and outstanding - 5,152,066 shares 5,152 2,121 Paid in capital in excess of par value of stock 594,279 363,242 Deficit accumulated during the development stage (652,620) (466,191) TOTAL STOCKHOLDERS' (DEFICIT) (52,189) (100,828) TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) $ 10,981 $ - See Accompanying Notes and Accountant's Review Report INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC. (Formerly PRECOM TECHNOLOGY, INC.) (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS FOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001 AND FOR THE PERIOD FROM SEPTEMBER 1, 1996 (DATE OF INCEPTION) TO SEPTEMBER 30, 2002 (UNAUDITED) For the Period From September 1, 1996 (date of Inception) to September 30, 2002 2001 2002 REVENUE $ - $ 6,766 $ 6,766 EXPENSES General and administrative 30,895 4,791 134,848 Development costs - - 373,393 Bad debt expense 150,677 - 150,677 Depreciation 468 - 468 TOTAL EXPENSES 182,040 4,791 659,386 NET INCOME (LOSS) $ (182,040) $ 1,975 $ (652,620) NET (LOSS) PER COMMON SHARE $ ( .068) $ . 000 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 2,668,597 2,020,852 See Accompanying Notes and Accountant's Review Report INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC. (Formerly PRECOM TECHNOLOGY, INC.) STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT) FOR THE PERIOD FROM SEPTEMBER 1, 1996 (DATE OF INCEPTION) TO September 30, 2002 Paid in Deficit Capital in Accumulated Excess of during the Par Value Development Preferred Stock Common Stock of Stock Stage Total Shares Amount Shares Amount September 1 1996 $ $ $ $ $ (Date of Inception) - - - - - - - September, 1996- Shares issued for services - - 50,000 50 950 - 1,000 October, 1996- Shares issued for cash - - 50,000 50 50,134 - 50,084 Net (loss) for the period from September 1, 1996 to December 31, 1996 - - - - - (16,703) (16,703) BALANCE, DECEMBER 31, 1996 $ - $ - $100,000 $100 $50,984 $(16,703) $34,481 March 1997- Shares issued for cash - - 200,000 200 199,800 - 200,000 March 1997-Shares issued for settlement of failed mergers - - 360,410 360 6,849 - 7,209 Net (loss) for the year ended December 31, 1997 - - - - - (178,200) (178,200) BALANCE, DECEMBER 31, 1997 $ - $ - $660,410 $660 $257,633 $(194,903) $63,490 See Accompanying Notes and Independent Auditor's Report INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC. (Formerly PRECOM TECHNOLOGY, INC.) STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT) FOR THE PERIOD FROM SEPTEMBER 1, 1996 (DATE OF INCEPTION) TO SEPTEMBER 30, 2002 Paid in Deficit Capital in Accumulated Excess of during the Par Value Development Preferred Stock Common Stock of Stock Stage Total Shares Amount Shares Amount August 1998- Shares issued for services - - 300,000 300 99,700 - 100,000 Net (loss) for the year ended December 31, 1998 - - - - - (171,241) (171,241) BALANCE, DECEMBER 31, 1998 $ - $ - $960,410 $960 $357,333 $(366,144) $(7,751) Net (loss) for the year ended December 31, 1999 - - - - - (7,249) (7,249) BALANCE, DECEMBER 31, 1999 $ - $ - $960,410 $960 $357,333 $(373,393) $(15,000) August 2000-issuance of common stock for Provence Capital Corporation, Inc. - - 100,000 100 6,870 - 6,970 Net (loss) for the year ended December 31, 2000 - - - - - (58,741) (58,741) BALANCE, DECEMBER 31, 2000 $ - $ - $1,060,410 $1,060 $364,203 $(432,134) $(66,771) Net (loss) for the year ended December 31, 2001 - - - - - (38,446) (38,446) BALANCE, DECEMBER 31, 2001 $ - $ - $1,060,410 $1,060 $364,203 $(470,580) $(105,217) See Accompanying Notes and Independent Auditor's Report INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC. (Formerly PRECOM TECHNOLOGY, INC.) STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT) FOR THE PERIOD FROM SEPTEMBER 1, 1996 (DATE OF INCEPTION) TO SEPTEMBER 30, 2002 Paid in Deficit Capital in Accumulated Excess of during the Par Value Development Preferred Stock Common Stock of Stock Stage Total Shares Amount Shares Amount April 2002- Shares issued for conversion of debt (Unaudited) - - 1,015,406 1,015 100,526 - 101,541 April 2002-preferred shares issued for interest in venture fund (Unaudited) 5,000,000 1,000 - - - - 1,000 May 2002-shares issued for services (Unaudited) - - 1,326,250 1,326 57,909 - 59,235 September 2002- shares issued for debt (Unaudited) - - 1,750,000 1,750 71,542 - 73,292 Net (loss) for the nine months September 30,2002 (Unaudited) - - - - - (182,040) (182,040) BALANCE, SEPTEMBER 30, 2002 5,000,000 $1,000 5,152,066 $5,152 $594,279 $(652,620) $(52,189)
INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC. (Formerly PRECOM TECHNOLOGY, INC.) (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS FOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001 AND FOR THE PERIOD FROM SEPTEMBER 1, 1996 (DATE OF INCEPTION) TO SEPTEMBER 30, 2002 (UNAUDITED) For the period from September 1, 1996 (Date of Inception) to September 30, 2002 2001 2002 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (loss) $ (182,040) $ 1,975 $ 652,620) Adjustments to reconcile net (loss) to net cash (used) by operating activities: Stock issued for merger expenses - - 14,079 Stock issued for services 59,334 - 160,334 Depreciation 468 - 468 Changes in operating assets and liabilities: Increase (decrease) in accounts payable 23,674 (1,975) 63,171 NET CASH (USED) BY OPERATING ACTIVITIES (98,564) - 414,568) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (9,239) - (9,239) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock 174,833 - 425,017 Reduction in advances by officer (73,292) - - NET CASH PROVIDED BY FINANCING ACTIVITIES 101,541 - 425,017 NET INCREASE (DECREASE) IN CASH (6,262) - 1,210 CASH AT BEGINNING OF PERIOD 7,472 - - CASH AT END OF PERIOD $ 1,210 $ - $ 1,210 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for: Interest $ - $ - $ - Taxes $ 100 $ 150 $ 250 SCHEDULE OF NON-CASH FINANCING ACTIVITIES: Issuance of common stock for merger expenses $ - $ - $ 14,179 Issuance of common stock for services $ 59,334 $ - $ 160,334 Issuance of preferred stock for investment $ 1,000 $ - $ 1,000 See Accompanying Notes and Accountant's Review Report INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2002 AND 2001 (UNAUDITED) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business International Trust & Financial Systems, Inc., formerly Precom Technology, Inc. (the "Company") was organized on September 1, 1996, under the laws of the State of Florida. In August 2000, the Company completed a merger with Provence Capital Corporation, Inc. by exchanging 200,000 shares of common stock for 100% of the outstanding shares of Provence Capital Corporation, Inc. In April, 2002, a controlling interest in the Company was acquired by CGI International Holdings, Inc. ("CGI") by the subscription for 40 million shares of the Company's common stock in exchange for a promissory note in the amount of $2 million, secured by the stock issued to CGI. In June 2002, CGI notified the Company that it would not be able to pay the promissory note and the 40 million shares of common stock issued to CGI were cancelled, effective August 1, 2002. Subsequent to the acquisition of control by CGI, the Company organized itself as a financial services holding company and positioned itself to provide financial services to a select group of domestic and foreign high net worth individuals and their business operations. To accomplish this new business strategy, the Company began to negotiate a series of acquisitions in the financial services area; however, due to the uncertainties in the economy, a concerted effort by the Internal Revenue Service to limit or eliminate certain types of tax planning, and undisclosed problems with certain acquisitions, the Company was not able to launch its new financial services strategy successfully in 2002. The Company intends to continue its efforts to develop its financial services business; but the continued uncertainties in the economy make the prospects for success uncertain. Accordingly, the Company has determined to continue its status as a development stage company, and also will seek merger candidates to develop new lines of business for the Company. Name Changes The Company has changed its name as follows: At date of incorporation - Fairbanks, Inc. April 1997 - Jet Vacations, Inc. May 1998 - Precom Technology, Inc. July 2002-International Trust & Financial Systems, Inc. Accounting Estimates Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used. INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2002 AND 2001 (UNAUDITED) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Income Taxes Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax basis of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled as prescribed in FASB Statement No. 109, Accounting for Income Taxes. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Net (Loss) Per Share The Company adopted Statement of Financial Accounting Standards No. 128 that requires the reporting of both basic and diluted earnings (loss) per share. Basic (loss) per share is computed by dividing net (loss) available to common stockholders' by the weighted average number of common shares outstanding for the period. Diluted (loss) per share is not presented because the effect would be anti-dilutive. Property and Equipment Property and equipment consists of office equipment which is recorded at cost and depreciated, for financial reporting purposes, over five years using the straight-line method. Maintenance, repairs and minor renewals are charged to operations as incurred. Additions and betterments are capitalized. When assets are disposed of, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in operations. Impairment losses are recorded in the accounts when events and circumstances indicate the assets may be impaired. If impairment occurs, the loss is measured by comparing the fair value of the asset to its carrying amount. Recent Accounting Pronouncements Recent accounting pronouncements are as follows: FASB 141 - Business Combinations FASB 142 - Goodwill and other Intangible Assets FASB 143 - Accounting for Asset Retirement Obligations FASB 144 - Accounting for the Impairment or Disposal of Long-Lived Assets FASB Interpretation No. 45 - Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others FASB Interpretation No.46 - Consolidation of Variable interest Entities INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2002 AND 2001 (UNAUDITED) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) These FASB statements did not have or are not expected to have a material impact on the Company's financial position or results of operations. In August 2002, Congress adopted the Sarbanes-Oxley Act of 2002, imposing new, more stringent accounting and reporting requirements on all public companies. The Company has complied with all applicable requirements of Sarbanes-Oxley, and these requirements did not have a material impact on the Company's financial position or results of operations. NOTE 2 CAPITAL STOCK Stock Splits On February 5, 2001, the Company effected a 1 for 100 reverse stock split on 19,208,522 shares of its common stock. On March 19, 2001, the Company then had a 10-1 forward stock split on 192,008 shares. On September 10, 2002, the Company effected a 1 for two reverse stock split on 6,804,131 shares, leaving 3,402,066 common shares then outstanding. The stock splits have been retroactively recorded in the financial statements as if they occurred at the date of inception. Warrants On April 6, 2002, the Company issued to Greenwich Financial Group, a holder of the Company's common stock, warrants to purchase 500,000 post split shares of the Company's common stock for $4.00 per share. The warrants expire on April 16, 2005. No warrants were exercised as of September 30, 2002. Stock Option Plan On April 9, 2002, The Company established the 2002 employee stock option plan and reserved 2,321,410 shares of common stock for issuance under the plan. No options have been issued under this plan. Sale to Officer During 2002, the Company's President advanced a total of $174,833 in loans to the Company, evidenced by promissory notes. The first loan in the amount of $101,541 was made in April 2002, and by agreement, was later converted into 1,015,406 common shares of the Company. The second loan in the amount of $73,292 was made from an IRA for the benefit of the President, and was later converted by agreement into 1,750,000 shares of the common stock of the Company. Preferred Stock On June 30, 2002, the Company issued 5,000,000 shares of Series B, no par value convertible preferred stock for a limited partnership interest in INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2002 AND 2001 (UNAUDITED) NOTE 2 CAPITAL STOCK (Continued) Prospect Street Capital Partners, L.P. Series B preferred stock participates in dividends with the Company's par value $.001 common stock and is convertible, at the option of the holder, at any time after issuance into such whole number of fully paid and non-assessable shares of the Company's common stock with a market value at the time of conversion sufficient to meet the capital call of the limited partnership, up to a maximum conversion value of $10,000,000. Management has entered into discussions to cancel these shares and the interest of the Company in the Fund. NOTE 3 DEVELOPMENT STAGE OPERATIONS As of September 30, 2002, the Company was in the development stage of operations. A development stage company is defined as a company that devotes most of its activities to establishing a new business activity. In addition, planned principal activities have not commenced, or have commenced and have not yet produced significant revenue. The Company expensed $373,393 of development costs for the period from September 1, 1996 (date of inception) to September 30, 2002. NOTE 4 GOING CONCERN These financial statements are presented on the basis that the Company is a going concern. Going concern contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable length of time. The Company has incurred net losses of $652,620, has negative stockholders' equity and needs additional capital to finance its operations. These factors raise substantial doubt as to the Company's ability to continue as a going concern. Management's plans to eliminate the going concern situation include, but are not limited to, seeking a merger candidate. (See Notes 5 and 7) NOTE 5 BUSINESS COMBINATIONS Share Exchange Agreement On February 21, 2002, the Company entered into a share exchange agreement with CGI International Holdings, Inc. (CGI). CGI was a diversified financial services company that specialized in a wide range of business activities for its clients including financial and tax planning, asset protection, personal insurance and real estate mortgage services. Subsequently, on April 9, 2002, that transaction was rescinded and in its place, CGI acquired 40 million shares of the Company's common stock in exchange for a secured promissory note in the amount of $2 million, payable in six months. Concurrently individuals who substantially owned CGI became officers and directors of the Company. INTERNATIONAL TRUST & FINANCIAL SYSTEMS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2002 AND 2001 (UNAUDITED) NOTE 5 BUSINESS COMBINATIONS (Continued) In connection with the above agreement, the Company advanced approximately $150,000 to CGI for working capital purposes. On August 1, 2002, CGI advised the Company that it would be unable to pay the promissory note when due. As a result, the 40 million shares of the Company's common stock issued to CGI were cancelled, and the transaction was terminated. In addition, the advance by the Company was determined uncollectible and charged to expense during the third quarter 2002. Acquisition Agreement - Saddleback In June 2002, the Company entered into an acquisition agreement with CGI and with Saddleback Financial, Inc. (Saddleback), an unrelated company based in Orange, CA, for the acquisition of the equipment leasing business and assets of Saddleback. The transaction partially closed on July 1, 2002 with the acquisition of the assets of Saddleback by a newly formed subsidiary of CGI, Saddleback Finance, Inc., a Florida Corporation ("New Saddleback"). Shortly following the partial closing, serious misrepresentations were discovered in the financial information regarding Saddleback by the sellers and the transaction was terminated August 1, 2002 without any consideration being issued by the Company, and without the closing by the Company on any of the acquisition. New Saddleback remained a wholly owned subsidiary of CGI and the Company has no interest or ownership in New Saddleback. NOTE 6 ACCOUNTS PAYABLE During 2002, the Company issued common shares to certain vendors in exchange for the amounts owed by the Company. The payable, which was extinguished by the issuance of common shares, was: Greenwich Financial Group $ 59,334 NOTE 7 SUBSEQUENT EVENT Acquisition Agreement - International Financial Concierge Services, Inc. In October, 2002, the Company agreed to acquire all of the issued and outstanding shares of International Financial Concierge Services, Inc., a Florida corporation based in Boca Raton, FL in exchange for convertible preferred shares of stock. The 3,125,000 shares of preferred stock to be issued in the transaction were convertible into 6,250,000 shares of common stock after January 1, 2003. Shortly after the acquisition agreement was entered into, the transaction was cancelled by mutual agreement of both parties, and no preferred shares of the Company were issued. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations FORWARD-LOOKING STATEMENTS -------------------------- Forward-looking statements, based on management's current views and assumptions, are made throughout this Form 10-QSB. These statements, including consolidated pro forma financial statements, are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results and those presently anticipated or projected. Among the factors that may affect operating results are the following: success of the Company's change in focus, competitive environment, limited capital resources and general economic conditions. OVERVIEW --------- Prior to 2002, the Company was a blind pool whose sole business plan and direction was to identify and merge with an operating business. During 2001, the Company explored merger transactions with a number of entities, but was unable to complete a merger transaction. The Company had no significant assets and its independent auditors expressed a going concern warning in the audit of the Company's financial results for 2001. In early February, 2002, negotiations began between CGI International Holdings, Inc., a Delaware corporation, ("CGI") and the Company and resulted in the execution of a Share Exchange Agreement between CGI and its shareholders and the Company dated February 25, 2002. A copy of the Share Exchange Agreement was included in the Form 8-K reporting the agreement which was filed with the SEC on March 26, 2002. Subsequently, the Company decided to rescind that Agreement and entered into a Subscription Agreement with CGI on April 9, 2002, under which CGI agreed to subscribe for 40,000,000 pre- split shares of our common stock in return for a promissory note, secured by the stock, for $2,000,000 (the "Promissory Note"). This transaction, and a copy of the Subscription Agreement and Promissory Note, were reported on Form 10- QSB/A for the period ending June 30, 2002, filed by the Company with the Securities and Exchange Commission on July 29, 2002. As a result of the agreement with CGI, the Company advance approximately $150,000 to CGI for working capital purposes. On August 1, 2002, the Company agreed to cancel the Subscription Agreement with CGI because CGI had informed the Company that it would be unable to make payment of the Promissory Note by the due date. As a result, the Company also cancelled the 40,000,000 pre-split Shares of Common Stock, par value $.001, issued to CGI (the Subscription Shares") as part of the Subscription Agreement. The Company was also informed by CGI that the proposed transfer of the Subscription Shares to International Financial Concierge Services, Inc. ("IFCS"), as reported in the 10-QSB/A for the period ending June 30, 2002, was not completed and IFCS had obtained no interest in the Subscription Shares issued to CGI. As a result of the cancellation of the Subscription Agreement and the promissory note, and CGI's advice to the Company that it had no assets, the Company also wrote off the advances to CGI for working capital, in the amount of $150,677. Subsequently, on October 8, 2002, the Company entered into a Share Exchange Agreement with the shareholders of IFCS as a result of which, the Company agreed to acquire all of the issued and outstanding shares of IFCS, which would becme a wholly-owned subsidiary of the Company. The controlling shareholders of IFCS were Robert Hipple, Rod Read and Drew Roberts, who are the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, respectively, of the Company. IFCS is Florida corporation engaged in financial, business and estate planning, equipment leasing, and other financial services. This transaction was reported on a Form 8-K/A filed by the Company with the SEC on October 23, 2002, and a copy of the Share Exchange Agreement was filed as an exhibit to that Form 8-K/A. As a result of the acquisition of all of the stock of IFCS, the Company intended to engage in the financial service business, offering financial planning, tax planning, business consulting, mortgage services, equipment lease financing and merchant banking services. To comport with this proposed new business activity, the Company changed its name to International Trust & Financial Systems, Inc. on October 15, 2002 and will do business under the name iTrustFinancial. This name change was reported on a Form 8-K/A filed with the SEC on October 17, 2002 and has been reported to the National Association of Securities Dealers, Inc. The Company also established a new Internet web site at www.itrustfinancial.com and has developed a new logo and corporate identity. As a result of continuing uncertainty in the economy and the increased efforts of the Internal revenue Service to challenge a number of tax planning strategies, the Company and IFCS agreed to cancel the acquisition of IFCS, and no shares of the Company were issued. SADDLEBACK FINANCE, INC. On May 26, 2002, we entered into a Share Exchange Agreement with CGI, Saddleback Financial Corporation, a Delaware corporation ("Saddleback"), Leaseco Holding, Inc., an Illinois corporation and Merchants Capital Corporation for the acquisition of certain assets related to the equipment leasing business of Saddleback, based in Orange, California ("Saddleback Acquisition") by CGI. For further information please refer to our Form 8-K filed with the SEC on June 19, 2002, disclosing the proposed acquisition of certain assets of Saddleback Financial Corporation. The share exchange partially closed as of June 1, 2002 and certain tangible assets of the leasing business were transferred to Saddleback Finance, Inc. ("SFI"), a new subsidiary of CGI, incorporated on May 26, 2002 for that purpose. During June, SFI relocated the offices of the leasing business to new offices in Anaheim, CA due to the failure of the old business to pay rent due to its landlord. Over the next six weeks, SFI began operations of the acquired lease business, although the steps necessary to complete the Share Exchange Agreement had not yet been completed and no shares of the Company's stock had yet been issued as the consideration for the transaction. As a result of the continuing due diligence by the Company, and actual operating results differing significantly from the represented results, on August 15, 2002, SFI, CGI and the Company rescinded the Share Exchange Agreement, and SFI closed the operations in Anaheim, CA and advised the sellers that the business had been closed. No response was received from the seller and the acquisition transaction has been terminated, without the issuance of any shares by the Company. RESULTS OF OPERATIONS --------------------- The Company had no operations in the first three quarters of 2002. The Company's sole business model since early 2000 had been to identify, acquire or merge with a viable business operation. Management made numerous efforts to pursue the Company's original business plan and to raise capital to operate the business. Unfortunately the equity markets underwent significant turmoil and uncertainty over the past two years. As a result, our ambitious plans for a capital-intensive business were unsuccessful and our capital needs could not be realized. Accordingly we abandoned our original business plan and began to look for potential acquisition candidates. These factors raised doubt as to our ability to continue as a going concern and our auditors included a going concern warning in their audit report for the year ended December 31, 2001, as reported on our 10-K filed with the SEC on April 15, 2002. Management's plans to eliminate the going concern situation included but were not limited to seeking a merger or acquisition candidate. A mature and businesslike evaluation of our affairs required the consideration of the foreseeable possibility of business failure. Accordingly, a reverse acquisition transaction or other merger transaction became a possible and foreseeable solution. On October 8, 2002 the Company entered into a Share Exchange Agreement with International Financial Concierge Services, Inc. (IFCS), a Florida based financial planning and services company. The Share Exchange Agreement provides for the exchange of 3,125,000 Series A voting, convertible preferred shares for all of the outstanding shares of IFCS, which became a wholly owned subsidiary of the Company. The Series A preferred shares would be convertible on a one preferred share for two common shares any time after January 1, 2003. The Series A preferred shares are voting shares, and vote on the basis of two votes for each preferred shares outstanding. For further discussion please refer to our Form 8-K/A filed with the SEC on October 23, 2002. IFCS was owned by the principals of the Company, including Mr. Hipple, the CEO, Mr. Read, the COO and Mr. Roberts, the CFO. No independent valuation of IFCS was performed. Subsequently, the Company and IFCS determined not to proceed with the transaction, and the Series A preferred shares were never issued. The Company incurred general and administrative expenses of $30,895 during the third quarter of 2002. This, together with the losses incurred from the rescinded Saddleback Agreement and the writing off of the advance to CGI resulted in a loss for the quarter of $182,040 and a cumulative loss of $189,123 for the year to date. In addition, as of the most recent quarter ending September 30, 2002, we have incurred cumulative net losses of $652,620 from inception. Currently the Company does not have sufficient resources to meet the Company's cash requirements. The Company is currently seeking to raise additional capital through various vehicles including but not limited to acquisitions of other business concerns, private stock placements, debt financings, or public offerings. PART II - OTHER INFORMATION Item 1. Legal Proceedings. The Company is not currently engaged in any legal proceedings and no legal proceedings are currently threatened against the Company. Robert Hipple, CEO of the Company, Rodney Read, COO, and Drew Roberts, CFO, acting as officers of CGI, the former majority shareholder of the Company, were named as defendants in an action entitled David K. Broadbent, as Receiver, et al. vs. CGI International Holdings, Inc. et al filed March 21, 2002 in the United States District Court for the District of Utah, Central Division, Civil Action No. 2:02-C-230. Neither the Company nor its major subsidiary, IFCS, are named in or are parties to the action, and neither had any involvement in any matter alleged in the action. In the action, the Receiver is seeking to ascertain whether any assets of a now defunct, unrelated corporation, by which the three named individuals had been employed prior to October 15, 2001 (Mr. Roberts until December 31, 2001) were acquired by CGI, when it was formed on January 24, 2002. Based on a review of the pleadings and other documents filed in the Receiver action, no liability is expected to result from this action on the part of any of the named individuals, because no assets or other property of the prior, unrelated company are held by CGI, or any of the named individuals. CGI itself, the primary defendant, ceased all business activity in August, 2002 and has no assets, other than a counterclaim filed against a former employee for intentional interference with the business of CGI, and counterclaims and cross-claims which are expected to be filed against the Receiver and other third parties as part of its answer to the Receiver's complaint. Neither the Company nor any subsidiary of the Company acquired any assets of CGI and are not affiliated with CGI in any way. Item 2. Changes in Securities. Effective April 16, 2002, the Company issued warrants to acquire 1,000,000 shares of Common Stock, par value $.001, for a period of three years at a price of $2.00 per share to Greenwich Financial Group ("GFG"). Please refer to Item 5 below for further discussion of the Warrant Agreement. On April 12, 2002, the Company entered into a subscription agreement with Dana Hipple, wife of Robert Hipple, President, CEO and Chairman of the Company, whereby the Company issued 2,030,811 pre-split shares of the Company's common stock for $101,540.55. The proceeds from this subscription were used by the Company for advances to CGI for its operating expenses. The Company also agreed to issue a total of 3,850,000 restricted pre-split shares of the Company's common stock to GFG (the "GFG Shares") as part of the acquisition of a controlling interest in the Company by CGI, in which GFG acted as a consultant to the Company. Issuance of the GFG Shares would be as follows: 100,000 of the GFG Shares have been included in the Company's registration statement on Form S-8 filed with the SEC on May 8, 2002 (the "S-8"). 50,000 of these shares were issued each to Nicholas M. Calapa, director of the Company and Bruce Keller, former director of the Company, pursuant to separate consulting agreements with Messrs. Calapa and Keller. Copies of the consulting agreements are attached as Exhibits 4.2 and 4.3 to the S-8. 1,350,000 of the GFG Shares were to be issued subject to a Lock-up Agreement effective May 8, 2002 (the "Lock-up Agreement") between GFG and the Company. The Lock-up Agreement provided for the release of the subject shares for sale at the rate of 15% per month (210,000 pre-split shares) once the subject shares become free trading as a result of an effective registration of the subject shares and elimination of any transfer restrictions. A copy of the Lock-up Agreement is attached as Exhibit 10.2 to the Company's 10-QSB to the period ending March 30, 2002. The Company agreed to include the 1,350,000 pre-split shares on a Form SB-2 registration statement, which the Company agreed to use its best efforts to file with the SEC by September 15, 2002. The shares have not been issued and no SB-2 filing has been made. The remaining 2,400,000 of the GFG Shares to be issued as part of the acquisition of a controlling interest in the Company by CGI, were to remain restricted shares. On August 1, 2002, the Company and CGI agreed to cancel the acquisition of a controlling interest in the Company by CGI, and the Company and CGI are currently not affiliated or connected in any way. As a result, the Company determined that it had no further obligation to issue additional shares to Greenwich Financial Group, other than the 50,000 shares already issued. The Company issued 1,250,000 pre-split shares of its common stock each to Randall Letcavage and Rosemary Nguyen, principals of iCapital Corporation, pursuant to a Financial Consulting Services Agreement dated April 17, 2002, between the Company and Randall Letcavage and Rosemary Nguyen (the "Financial Consulting Agreement"). These 2,500,000 pre-split shares are included in the S-8 registration statement filed by the Company with the SEC on May 8, 2002. A copy of the Financial Consulting Agreement is attached as Exhibit 4.1 to the S-8. Saddleback Acquisition Pursuant to the Saddleback Acquisition, the Company agreed to issue 1,000,000 shares of non-voting, non-cumulative shares of Class B Preferred Stock to Saddleback Financial Corporation for certain assets other than tangible assets. The Preferred Stock to be issued would be subject to conversion into additional common shares in one year, having a value of $2.5 million, based on the market closing price at that time. The preferred shares were not issued because all of the conditions to closing the transaction were not met. In view of the rescission of the acquisition effective August 15, 2002, these preferred shares will not be issued. As part of the Share Exchange Agreement, the Company also agreed to issue 500,000 pre-split shares of its common stock pursuant to a Consulting Services Agreement, dated June 3, 2002, between the Company and Lee C. Summers, Trustee for Merchants Capital and Yasar Samarah (the "Consulting Agreement"). The 500,000 pre-split shares were included in an S-8 registration statement filed July 3, 2002, but were never issued. A copy of the Consulting Agreement is attached as Exhibit 1 to the S-8. The Consulting Agreement also has been terminated, effective August 15, 2002, as part of the rescission of the Share Exchange Agreement. No services were performed under the Consulting Agreement and the shares were not issued. Acquisition of Interest in Venture Fund Effective June 30, 2002, the Company subscribed for a limited partnership interest in the Prospect Private Equity Fund. The Subscription Agreement, a copy of which is attached as Exhibit 10.3 to our Form 10-QSB/A filed with the Securities and Exchange Commission on July 29, 2002 for the period ending June 30, 2002, was for a $10 million interest in the Fund, and was satisfied with the issuance to the Fund of 5,000,000 shares of Series B convertible preferred stock of the Company. The Series B preferred stock is convertible into common shares having a value of $10 million based on the average trading price of the Company's common shares at the time of conversion. A copy of the Series B Preferred Stock Statement of Rights and Preferences is attached as Exhibit 4.1 to our Form 10-QSB/A filed with the Securities and Exchange Commission on July 29, 2002 for the period ending June 30, 2002. Conversion Of Promissory Note On September 1, 2002, the Company agreed to the conversion of a $75,000 promissory note previously issued to an IRA Account for the benefit of the Company's CEO, Robert Hipple, in exchange for a loan to the Company from the IRA Account in the amount of $73,292. The Company requested the conversion at the price of $0.02 per share, the then current trading price for the shares, which was agreed to by the IRA Account custodian. A total of 1,750,000 post- split shares were issued as a result of the conversion. Reverse Split In accordance with Florida law, the Board of Directors of the Company, Messrs. Hipple, Read and Nicholas M. Calapa, unanimously voted to amend our Articles of Incorporation to effect a reverse split of all outstanding shares of our common stock at an exchange ratio of one-for-two, effective as of the close of business on September 10, 2002. Under Florida Statute Section 607.10025, as amended, no shareholder approval was required. For further discussion of the reverse split, please refer to our Form 8-K filed with the SEC on September 19, 2002. As a result of the one for two reverse split, the number of shares of common stock outstanding was reduced from 46,804,131 to 23,402,066, before giving effect to the cancellation of the 40 million pre-split shares issued to CGI International Holdings, Inc. and the issuance of additional consulting shares. Securities issued in reliance on Regulation S On October 2, 2002 the Company filed Form S-8 with the SEC registering the following shares of common stock, par value $.001, issued as compensation for consulting services provided, or to be provided, to the Company by the following Consultants: Consultants Shares Issued Robert Hipple 4,000,000 Rodney Read 2,250,000 Drew Roberts 2,250,000 Lester Katz 2,550,000 Glenn Liddell 551,250 David E. Smith, III 900,000 Mark Wood 1,350,000 Lana Tabaracci 666,650 Cal Jones 700,000 David Fraidenburg 541,650 Jan Read 316,650 Jackie Groves 336,650 Brian Hansen 250,000 Flashstar Funding Corp. 75,000 Merger Associates, Inc. 1,500,000 Please refer to our Form S-8 filed with the SEC on October 2, 2002, for further discussion and copies of the Consulting Agreements between the Consultants and the Company. Acquisition of International Financial Concierge Services, Inc. On October 8, 2002 the Company entered into a Share Exchange Agreement with International Financial Concierge Services, Inc. (IFCS), a Florida based financial planning and services company, controlled by the principal officers of the Company. The Share Exchange Agreement provides for the exchange of 3,125,000 Series A voting, convertible preferred shares for all of the outstanding shares of IFCS, which became a wholly owned subsidiary of the Company as a result. The Series A preferred shares are convertible on the basis of one preferred share for two common shares any time after January 1, 2003. The transaction was valued at $0.02 per common share equivalent, or $125,000, based on the average trading price for the common shares of the Company. For further discussion please refer to our Form 8-K/A filed with the SEC on November 19, 2002. This transaction was rescinded in early December without the issuance of the Series A preferred shares. Item 3. Defaults Upon Senior Securities. None Item 4. Submission of Matters to a Vote of Security Holders. On October 15, 2002, a majority of the shareholder's entitled to vote for amendments to the Company's Articles of Incorporation, adopted the recommendation of the Board of Directors and adopted a resolution changing the name of the Corporation from Precom Technology, Inc. to International Trust & Financial Systems, Inc. Notification of the name change, along with changes to the Company's trading symbol and CUISP number was made shortly thereafter to the NASD. For further discussion please refer to our Form 8-K filed with the SEC on October 17, 2002. Item 5. Other information. The Company has issued warrants to Greenwich Financial Group ("GFG") to purchase 1,000,000 pre-split shares of the Company's common stock at $2.00 per share for a period of three (3) years commencing April 16, 2002. A copy of the Warrant Agreement with GFG is attached as Exhibit 10.1 to the Company's 10-QSB to the period ending March 30, 2002. Item 6. Exhibits and reports on Form 8-K Exhibits. Exhibits that are required to be attached by Item 601 of Regulation S-B are listed in the Index to Exhibits on page 11 of this Form 10-QSB, and are incorporated herein by this reference. Reports on Form 8-K. The Company filed the following reports on Form 8-K during the quarter for which this report is filed: On September 19, 2002, the Company filed a Form 8-K disclosing the 2 for 1 reverse split of the Company's common stock, par value $.001. On October 10, 2002, the Company filed a Form 8-K disclosing the change of the Company's independent auditor. On October 17, 2002, the Company filed a Form 8-K disclosing the change of the Company's name to International Trust & Financial Systems, Inc. On October 23, 2002, the Company filed a Form 8-K disclosing the acquisition of International Financial Concierge Services, Inc. as a wholly owned subsidiary. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this 10-QSB report to be signed on its behalf by the undersigned thereunto duly authorized. International Trust & Financial Systems, Inc., a Florida corporation By: /s/ Robert HIpple ------------------------- Robert Hipple President and CEO DATED: June 30, 2003 INDEX TO EXHIBITS EXHIBIT NO. PAGE NO. DESCRIPTION 3.1 * Articles of Incorporation, as amended, incorporated by reference to the Registrant's Form 8-K12g3, filed on September 12, 2000. 3.2 * Bylaws, as amended, incorporated by reference to the Registrant's Form 8-K12g3, filed on September 12, 2000. 4.1 * Series B Preferred Stock Statement of Rights and Preferences, incorporated by reference to the Registrant's Form 10-QSB for the period ending June 30, 2002. 10.1 * Warrant Agreement with Greenwich Financial Group effective May 8, 2002, incorporated by reference to the Registrant's Form 10-QSB for the period ending March 31, 2002. 10.2 * Registration and Lock-up Agreement between the Company and Greenwich Financial Group, effective May 8, 2002, incorporated by reference to the Registrant's Form 10-QSB for the period ending March 31, 2002. 10.3.1 * Subscription Agreement for Prospect Private Equity Fund, incorporated by reference to the Registrant's Form 10-QSB for the period ending June 30, 2002 99.1 12 Certification of Chief Executive Officer, for the period ending September 30, 2002 99.2 13 Certification of Chief Financial Officer, for the period ending September 30, 2002 * Previously filed as indicated and incorporated herein by reference from the referenced filings previously made by the Company. CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of PRECOM TECHNOLOGY, INC. (the "Company") for the quarterly period ended September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Robert J. Hipple, as Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: June 30, 2003 by: /s/ Robert Hipple Robert J. Hipple President and Chief Executive Officer This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of PRECOM TECHNOLOGY, INC. (the "Company") for the quarterly period ended September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Drew Roberts, as Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: June 30, 2003 by: /s/Robert Hipple Robert Hipple Chief Financial Officer This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. F-1 13