U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-24641
IMMUNOTECHNOLOGY CORPORATION
----------------------------
(Name of Small Business Issuer as specified in its charter)
Delaware 84-1016435
(State or other jurisdiction of (I.R.S. employer
incorporation or organization identification No.)
1661 Lakeview Circle
Ogden, UT 84403
(Address of principal executive offices)
Issuer's telephone number, including area code: (801) 399-3632
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
$.00001 par value common stock
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 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.
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of Issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.
The Issuer's revenues for the fiscal year ended June 30, 2004 were -0-.
As of November 15, 2004, 50,000,000 shares of the Issuer's common stock were
issued and outstanding of which 8,742,015 were held by non-affiliates. As of
November 15, 2004, there was no active market in the Issuers securities.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
TABLE OF CONTENTS
Page
PART I
Item 1. Description of Business...........................................2
Item 2. Properties........................................................7
Item 3. Legal Proceedings.................................................7
Item 4. Submission of Matters to a Vote of Security Holders...............7
PART II
Item 5. Market for the Registrant's Common Stock and Related Security
Holder Matters...................................................8
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operation..............................................10
Item 7. Financial Statements............................................19
Item 8. Changes and Disagreements with Accountants on Accounting and
Financial Disclosure..............................................31
Item 8A. Controls and Procedures...........................................31
Item 8B. Other Information.................................................31
PART III
Item 9 . Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act...............32
Item 10. Executive Compensation............................................33
Item 11. Security Ownership of Certain Beneficial Owners and Management....35
Item 12. Certain Relationships and Related Party Transactions..............36
Item 13. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.37
Item 14. Principal Accounting Fees and Services............................38
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General and History
Immunotechnology Corporation (the "Company") is a Delaware corporation
which is currently inactive. The Company was incorporated on November 30, 1989,
in the state of Delaware. The Company's predecessor was LJC Corporation, a Utah
corporation, organized on November 8, 1984 ("LJC"). On October 7, 1989, LJC
acquired ImmunoTechnology Laboratories, Inc., a privately-held Colorado
corporation ("ITL"), in a reverse merger transaction. As a result of this
transaction, ITL became a wholly owned subsidiary of LJC. On October 10, 1989,
LJC changed its name to ImmunoTechnology Laboratories, Inc. ("ITL-UT"). ITL was
formed for the purpose of engaging in the business of operating a medical test
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related laboratory. The Company's only business has been the operation of ITL,
whose operations were discontinued in 1992.
In 1989, the Company changed its domicile from the State of Utah to the
State of Delaware and its name from ImmunoTechnology Laboratories, Inc. to
Immunotechnology Corporation through a reincorporation merger. The merger was
effective on December 21, 1989.
Since discontinuing the operations of ITL, we have has been seeking
potential business acquisition or opportunities in an effort to commence
business operations. We do not propose to restrict our search for a business
opportunity to any particular industry or geographical area and may, therefore,
engage in essentially any business in any industry. We have unrestricted
discretion in seeking and participating in a business opportunity, subject to
the availability of such opportunities, economic conditions, and other factors.
On April 21, 2003, we entered into an Agreement and Plan of Merger with
Ultimate Security Systems Corporation. In August 2004, the Company and USSC
agreed to terminate the Merger Agreement. We had filed a Form S-4 registration
statement with the Securities and Exchange Commission to register shares we
intended to issue in connection with the merger, but as a result of the
termination of the Agreement, in August, 2004, we withdrew such registration
statement from the Securities and Exchange Commission before it was declared
effective. As part of our termination agreement with USSC, we paid USSC a
termination fee of $125,000. We are currently looking for an alternative
acquisition transaction.
Business Plan
Our current business plan is to serve as a vehicle for the acquisition of,
or the merger or consolidation with another company (a "Target Business"). We
intend to utilize our limited current assets, equity securities, debt
securities, borrowings or a combination thereof in effecting a Business
Combination with a Target Business which we believe has significant growth
potential. Our efforts in identifying a prospective Target Business are expected
to emphasize businesses primarily located in the United States; however, we
reserve the right to acquire a Target Business located primarily elsewhere.
While we may, under certain circumstances, seek to effect Business Combinations
with more than one Target Business, as a result of our limited resources we
will, in all likelihood, have the ability to effect only a single Business
Combination.
We may effect a Business Combination with a Target Business which may be
financially unstable or in its early stages of development or growth. To the
extent we effect a Business Combination with a financially unstable company or
an entity in its early stage of development or growth (including entities
without established records of revenue or income), we will become subject to
numerous risks inherent in the business and operations of financially unstable
and early stage or potential emerging growth companies. In addition, to the
extent that we effect a Business Combination with an entity in an industry
characterized by a high level of risk, the Company will become subject to the
currently unascertainable risks of that industry. An extremely high level of
risk frequently characterizes certain industries which experience rapid growth.
Although management will endeavor to evaluate the risks inherent in a particular
industry or Target Business, there can be no assurance that we will properly
ascertain or assess all risks.
3
Probable Lack of Business Diversification. As a result of our limited
resources, in all likelihood, we will have the ability to effect only a single
Business Combination. Accordingly, the prospects for our success will be
entirely dependent upon the future performance of a single business. Unlike
certain entities that have the resources to consummate several Business
Combinations or entities operating in multiple industries or multiple segments
of a single industry, it is highly likely that we will not have the resources to
diversify its operations or benefit from the possible spreading of risks or
offsetting of losses. Our probable lack of diversification may subject us to
numerous economic, competitive and regulatory developments, any or all of which
may have a material adverse impact upon the particular industry in which we may
operate subsequent to consummation of a Business Combination. The prospects for
our success may become dependent upon the development or market acceptance of a
single or limited number of products, processes or services. Accordingly,
notwithstanding the possibility of capital investment in and management
assistance to the Target Business by us, there can be no assurance that the
Target Business will prove to be commercially viable.
No Independent Appraisal of Potential Acquisition Candidates. We do not
anticipate that we will obtain an independent appraisal or valuation of a Target
Business. Therefore, our stockholders will need to rely primarily upon
management to evaluate a prospective Business Combination.
Limited Ability to Evaluate Management of a Target Business. The role of
our present management, following a Business Combination, cannot be stated with
any certainty. Although we intend to scrutinize closely the management of a
prospective Target Business in connection with its evaluation of the
desirability of effecting a Business Combination with such Target Business,
there can be no assurance that our assessment of such management will prove to
be correct. While it is possible that certain of our directors or our executive
officers will remain associated in some capacities with the Company following
consummation of a Business Combination, it is unlikely that any of them will
devote a substantial portion of their time to the affairs of the Company
subsequent thereto. Moreover, there can be no assurance that such personnel will
have significant experience or knowledge relating to the operations of the
particular Target Business. We also may seek to recruit additional personnel to
supplement the incumbent management of the Target Business. There can be no
assurance that we will have the ability to recruit additional personnel or that
such additional personnel will have the requisite skills, knowledge or
experience necessary or desirable to enhance the incumbent management. In
addition, there can be no assurance that the future management of the Company
will have the necessary skills, qualifications or abilities to manage a public
company intending to embark on a program of business development.
Selection of a Target Business and Structuring of a Business Combination.
Our management has substantial flexibility in identifying and selecting a
prospective Target Business within the specified businesses. In evaluating a
prospective Target Business, management will consider, among other factors, the
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following: (i) costs associated with effecting the Business Combination; (ii)
equity interest in and opportunity for control of the Target Business; (iii)
growth potential of the Target Business; (iv) experience and skill of management
and availability of additional personnel of the Target Business; (v) capital
requirements of the Target Business; (vi) competitive position of the Target
Business; (vii) stage of development of the Target Business; (viii) degree of
current or potential market acceptance of the Target Business; (ix) proprietary
features and degree of intellectual property or other protection of the Target
Business; (x) the financial statements of the Target Business; and (xi) the
regulatory environment in which the Target Business operates.
The foregoing criteria are not intended to be exhaustive and any
evaluation relating to the merits of a particular Target Business will be based,
to the extent relevant, on the above factors as well as other considerations
deemed relevant by management in connection with effecting a Business
Combination consistent with our business objectives. In connection with its
evaluation of a prospective Target Business, management anticipates that it will
conduct a due diligence review which will encompass, among other things, meeting
with incumbent management and inspection of facilities, as well as a review of
financial, legal and other information which will be made available to us.
The time and costs required to select and evaluate a Target Business
(including conducting a due diligence review) and to structure and consummate
the Business Combination (including negotiating relevant agreements and
preparing requisite documents for filing pursuant to applicable securities laws
and state "blue sky" and corporation laws) cannot presently be ascertained with
any degree of certainty. Our current executive officers and directors intend to
devote only a small portion of their time to the affairs of the Company and,
accordingly, consummation of a Business Combination may require a greater period
of time than if our management devoted their full time to the Company's affairs.
However, each of our officers and directors will devote such time as they deem
reasonably necessary to carry out the business and affairs of the Company,
including the evaluation of potential Target Businesses and the negotiation of a
Business Combination and, as a result, the amount of time devoted to the
business and affairs of the Company may vary significantly depending upon, among
other things, whether we have identified a Target Business or is engaged in
active negotiation of a Business Combination. Any costs incurred in connection
with the identification and evaluation of a prospective Target Business with
which a Business Combination is not ultimately consummated will result in a loss
to the Company and reduce the amount of capital available to otherwise complete
a Business Combination or for the resulting entity to utilize.
We anticipate that various prospective Target Businesses will be brought
to its attention from various non-affiliated sources, including securities
broker-dealers, investment bankers, venture capitalists, bankers, other members
of the financial community and affiliated sources, including, possibly, our
executive officer, directors and their affiliates. While we have not yet
ascertained how, if at all, we will advertise and promote the Company, it may
elect to publish advertisements in financial or trade publications seeking
potential business acquisitions. While we do not presently anticipate engaging
the services of professional firms that specialize in finding business
acquisitions on any formal basis (other than the independent investment banker),
we may engage such firms in the future, in which event we may pay a finder's fee
or other compensation.
5
As a general rule, Federal and state tax laws and regulations have a
significant impact upon the structuring of business combinations. We will
evaluate the possible tax consequences of any prospective Business Combination
and will endeavor to structure a Business Combination so as to achieve the most
favorable tax treatment to the Company, the Target Business and their respective
stockholders. There can be no assurance that the Internal Revenue Service or
relevant state tax authorities will ultimately assent to the Company's tax
treatment of a particular consummated Business Combination. To the extent the
Internal Revenue Service or any relevant state tax authorities ultimately
prevail in recharacterizing the tax treatment of a Business Combination, there
may be adverse tax consequences to the Company, the Target Business and their
respective stockholders. Tax considerations as well as other relevant factors
will be evaluated in determining the precise structure of a particular Business
Combination, which could be effected through various forms of a merger,
consolidation or stock or asset acquisition.
There currently are no limitations on our ability to borrow funds to
effect a Business Combination. However, our limited resources and lack of
operating history may make it difficult to borrow funds. The amount and nature
of any borrowings by the Company will depend on numerous considerations,
including our capital requirements, potential lenders' evaluation of our ability
to meet debt service on borrowings and the then prevailing conditions in the
financial markets, as well as general economic conditions. We do not have any
arrangements with any bank or financial institution to secure additional
financing and there can be no assurance that such arrangements if required or
otherwise sought, would be available on terms commercially acceptable or
otherwise in the best interests of the Company. Our inability to borrow funds
required to effect or facilitate a Business Combination, or to provide funds for
an additional infusion of capital into a Target Business, may have a material
adverse effect on our financial condition and future prospects, including the
ability to effect a Business Combination. To the extent that debt financing
ultimately proves to be available, any borrowings may subject us to various
risks traditionally associated with indebtedness, including the risks of
interest rate fluctuations and insufficiency of cash flow to pay principal and
interest. Furthermore, a Target Business may have already incurred debt
financing and, therefore, all the risks inherent thereto.
Competition
We expect to encounter intense competition from other entities having
business objectives similar to that of the Company. Many of these entities are
well established and have extensive experience in connection with identifying
and effecting business combinations directly or through affiliates. Many of
these competitors possess greater financial, technical, human and other
resources than we do and there can be no assurance that the Company will have
the ability to compete successfully. Our financial resources will be limited in
comparison to those of many of its competitors. Further, such competitors will
generally not be required to seek the prior approval of their own stockholders,
which may enable them to close a Business Combination more quickly than the
Company. This inherent competitive limitation may compel us to select certain
less attractive Business Combination prospects. There can be no assurance that
such prospects will permit us to satisfy our stated business objectives.
6
Uncertainty of Competitive Environment of Target Business
In the event that we succeed in effecting a Business Combination, we will,
in all likelihood, become subject to intense competition from competitors of the
Target Business. In particular, certain industries which experience rapid growth
frequently attract an increasingly large number of competitors including
competitors with increasingly greater financial, marketing, technical, human and
other resources than the initial competitors in the industry. The degree of
competition characterizing the industry of any prospective Target Business
cannot presently be ascertained. There can be no assurance that, subsequent to a
Business Combination, we will have the resources to compete effectively,
especially to the extent that the Target Business is in a high-growth industry.
Certain Securities Laws Considerations
Under the Federal securities laws, public companies must furnish
stockholders certain information about significant acquisitions, which
information may require audited financial statements for an acquired company
with respect to one or more fiscal years, depending upon the relative size of
the acquisition. Consequently, we will only be able to effect a Business
Combination with a prospective Target Business that has available audited
financial statements or has financial statements which can be audited.
Employees
As of the date of this Prospectus, we have no full time employees.
ITEM 2. PROPERTIES
Our offices are located at 1661 Lakeview Circle, Ogden, UT 84403. The
Company, pursuant to an oral agreement, utilizes an office at the residence of
Mark A. Scharmann, a stockholder of the Company and the Company's President. We
pay no rent or other fees for the use of such facilities.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were presented to our shareholders for a vote during the last
quarter of the fiscal year ending June 30, 2004.
7
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The table on the following page sets forth, for the respective periods
indicated the prices for the Company's common stock in the over-the-counter
market as reported by the NASD's OTC Bulletin Board. The bid prices represent
inter-dealer quotations, without adjustments for retail mark-ups, mark-downs or
commissions and may not necessarily represent actual transactions. There is
currently limited trading volume in our shares.
High Bid Low Bid
-------- -------
Fiscal Year Ended June 30, 2002
-------------------------------
First Quarter $0.40 $ 0.12
Second Quarter $0.35 $ 0.13
Third Quarter $0.15 $ 0.15
Fourth Quarter $0.25 $ 0.12
Fiscal Year Ended June 30, 2003
-------------------------------
First Quarter $0.12 $ 0.11
Second Quarter $0.24 $ 0.10
Third Quarter $0.74 $ 0.14
Fourth Quarter* $1.80 $ 0.10
Fiscal Year Ended June 30, 2004
-------------------------------
First Quarter $0.14 $ 0.065
Second Quarter $0.11 $ 0.07
Third Quarter $0.09 $ 0.03
Fourth Quarter $0.06 $ 0.02
*On May 28, 2003, the Company effected a 5 for 1 forward split of its
common stock. The high bid price for the quarter indicated of $1.80 represents
the high bid on May 23, 2003 immediately prior to the forward split. The low bid
price of $0.10 represents the low bid on June 26, 2003, subsequent to the
forward split.
At November 15, 2004, the Company's Common Stock was quoted on the OTC
Bulletin Board ("IMNT") at a bid and asked price of $0.02 and $0.03
respectively. Due to the late filing of this annual report, an "E" was appended
to the Company's symbol on October 20, 2004, indicating that the Company is
ineligible for listing until it is current in its reporting obligations, and
subject to
8
delisting if it fails to become current within 30 calendar days, or November 19,
2004. Upon the filing of this report, the Company will apply to have the "E"
removed from its symbol.
Shares Issued in Unregistered Transactions
During the last three years, the Company issued the securities listed
below in unregistered transactions. Each of the sales was sold in reliance on
the exemption provided for in Section 4(2) of the Securities Act of 1933, as
amended. No underwriting fee or other compensation was paid in connection with
the issuance of shares.
Total
Consideration
Name Date Shares Issued (1) Paid (2)
Mark A. Scharmann 8/22/01 5,183,945 $32,399.67
David Knudson 8/22/01 5,069,710 $31,685.79
Mark A. Scharmann 6/27/02 6,464,945 $40,405.91
David Knudson 12/19/02 3,281,400 $20,508.74
(1) The Company effectuated a 5 for 1 forward stock split in May 2003. The
number of shares listed above give effect to such stock split.
(2) The consideration paid for these shares was the conversion of debt owed by
the Company to Mr. Scharmann and Mr. Knudson.
Purchases of Equity Securities By Small Business Issuers and Affiliated
Purchasers
We purchased no securities from any of our shareholders in private
transactions or in market transactions during the last fiscal year.
Holders
As of November 15, 2004, there were 50,000,000 shares of common stock
outstanding and approximately 45 stockholders of record of common stock.
Dividends
The Company has not paid any cash dividends to date and does not
anticipate or contemplate paying dividends in the foreseeable future. It is the
present intention of management to utilize all available funds for the
development of the Company's business.
Limitation on Directors' Liability, Charter Provisions and Other Matters
Delaware law authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of directors' fiduciary duty of care. The duty of care
requires that, when acting on behalf of the corporation, directors must exercise
9
an informed business judgment based on all material information reasonably
available to them. Absent the limitations authorized by Delaware, directors are
accountable to corporations and their stockholders for monetary damages for
conduct constituting gross negligence in the exercise of their duty of care.
Delaware law enables corporations to limit available relief to equitable
remedies such as injunction or rescission. Our Certificate of Incorporation
limits the liability of our directors to us or to our stockholders (in their
capacity as directors but not in their capacity as officers) to the fullest
extent permitted by Delaware law.
The inclusion of this provision in the Certificate of Incorporation may
have the effect of reducing the likelihood of derivative litigation against
directors and may discourage or deter stockholders or management from bringing a
lawsuit against directors for breach of their duty of care, even though such an
action, if successful, might otherwise have benefited the Company and its
stockholders.
Our Bylaws provide indemnification to our officers and directors and
certain other persons with respect to certain matters. Insofar as
indemnification for liabilities arising under the 1933 Act may be permitted to
our directors and officers, we have been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the 1933 Act and is, therefore, unenforceable.
Transfer Agent and Registrar
Our transfer agent is Corporate Stock Transfer, 3200 Cherry Creek South
Drive, Denver, CO 80209-3244; telephone (303) 282-4800.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
Overview
Immunotechnology is an inactive company with limited assets and no
operations. We have been inactive for several years. In 2003 we entered into a
merger agreement to acquire an operating company. We filed a registration
statement on Form S-4 to register securities which we intended to issue in
connection with such merger. In August 2004, we terminated the merger agreement
we had previously entered into and we withdrew the Form S-4 before it was
declared effective. We are now looking for alternative acquisition targets.
Because we have no cash assets, we will be required to issue shares of our
common stock in connection with any merger or other acquisition transaction into
which we enter.
Liquidity and Capital Resources
As of June 30, 2004, the Company had no assets. The Company is dependent
upon loans and advances from its management and affiliates to fund its expenses
pending the completion of a merger or acquisition. As of June 30, 2004, the
Company had total liabilities of $177,740.
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The Company intends to pay for various filing fees and professional fees
relating to its reporting obligations and to fund the costs which may arise from
seeking new business opportunities.
In August 2004, subsequent to the end of our fiscal year, we terminated
our merger agreement with Ultimate Securities Systems, Inc. Pursuant to the
terms of the termination agreement, we were required to pay $125,000 to Ultimate
Securities Systems as a termination fee. Inasmuch as we did not have sufficient
funds to pay the termination fee, we borrowed all $125,000 from several lenders.
Details as to those loans are as follows:
Loan Principal Due Option
Lender Date Amount (1) Date Shares (2)
------ ---- ---------- ---- ----------
Rich Robinson 8/12/04 $50,000 11/10/04 500,000
Doug Eilertson 8/13/04 $50,000 11/11/04 500,000
Steve Scharmann 8/25/04 $10,000 11/23/04 100,000
Jill Corry 10/5/04 $10,000 1/3/05 100,000
(1) Interest accrues.
(2) These options are exercisable at $.01 per share for a period of two
years and were granted as additional incentive for the loans.
We anticipate that the above-listed notes will be extended by the lenders.
However, we have not completed our efforts to extend such notes and there can be
no assurance we will be able to do so. The remaining $5,000 necessary was
borrowed from our president Mark Scharmann.
In order to fund our professional fees and the costs related to locating,
analyzing and negotiating potential acquisitions, we must raise additional
capital. We may attempt to borrow funds from our officers, shareholders or
others and we may attempt to raise additional capital from the sale of our
securities in a private offering. Since 1997, our president Mark Scharmann has
made numerous advances to the Company as funds were needed for the Company's
expenses. As of June 30, 2004, we owed Mr. Scharmann $100,628.38. As of
September 30, 2004, we owed Mr. Scharmann $140,243.16. There can be no assurance
that we will be able to raise additional capital from either loan or equity
transactions. If we are not able to raise additional capital to fund the
professional fees related to our annual and quarterly filings with the
Securities and Exchange Commission, we may be unable to file the required
reports on a timely basis. In such event we would not be able to maintain a
quotation on the OTCBB. This could reduce our attractiveness as a merger vehicle
It is likely that the Company will be required to raise additional
capital in order to attract and potential acquisition partner but there can be
11
no assurance that the Company will be able to raise any additional capital. It
is also likely that any future acquisition will be made through the issuance of
shares of the Company's common stock which will result in the dilution of the
percentage ownership of the current shareholders.
The auditors' report on the Company's June 30, 2004 financial statements
contains a going concern qualification, which provides that the Company's
ability to continue as a going concern is dependent upon it raising additional
capital. The Company will continue to be an inactive company unless and until it
raises additional capital and acquires an operating company. There can be no
assurance that either will occur.
Results of Operations
We have not had any active operations since 1992 and we generated no
revenue for the year ended June 30, 2004 or the year ended June 30, 2003. We had
total expenses of $76,912 for the year ended June 30, 2004, and total expenses
of $72,367 for the year ended June 30, 2003. We do not anticipate that the
Company will generate any revenues until, it acquires or merges with another
company.
Critical Accounting Policies
This Management's Discussion and Analysis of Financial Condition and
Results of Operations discuss the Company's Financial Statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States. We have terminated our previous operations and such operations
are treated as discontinued operations for financial statement purposes.
We anticipate that in the future, the preparation of our financial
statements will require management to make estimates and assumptions that will
affect reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. On an
ongoing basis, management will evaluate its estimates and assumptions, including
those related to inventory, income taxes, revenue recognition and restructuring
initiatives. We anticipate that management will base its estimates and judgments
on historical experience of the operations we may acquire and on various other
factors that are believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying value of assets
and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.
Management believes the following critical accounting policies, among
others, will affect its more significant judgments and estimates used in the
preparation of our Financial Statements following the completion of
an acquisition:
Income Taxes. In determining the carrying value of the Company's net
deferred tax assets, the Company will be required to assess the likelihood of
sufficient future taxable income in certain tax jurisdictions, based on
estimates and assumptions, to realize the benefit of these assets. If these
12
estimates and assumptions change in the future, the Company may record a
reduction in the valuation allowance, resulting in an income tax benefit in the
Company's Statements of Operations. Management will be required to evaluate the
realizability of the deferred tax assets and assesses the valuation allowance
quarterly.
Goodwill and Other Long-Lived Asset Valuations. In June 2001, the FASB
issued SFAS 141, "Business Combinations", and SFAS 142, "Goodwill and Other
Intangible Assets", effective for fiscal years beginning after December 15, 2001
with early adoption permitted for companies with fiscal years beginning after
March 15, 2001. We currently have no intangible assets. At such time as we have
intangible assets, we will adopt the new rules on accounting for goodwill and
other intangible assets, Under the new rules, goodwill and intangible assets
deemed to have indefinite lives will no longer be amortized but will be subject
to annual impairment tests in accordance with the statements. Other intangible
assets will continue to be amortized over their useful lives.
Revenue Recognition. At such time as we have revenues from operations, we
will adopt revenue recognitions policies consistent with generally acceptable
accounting standards.
Stock-Based Compensation. In December 2002, the FASB issued SFAS 148,
"Accounting for Stock-Based Compensation" -- Transition and Disclosure, which
amends SFAS 123. SFAS 148 provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. SFAS 148 also requires prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. As permitted by SFAS 123, we have elected to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations including Financial Accounting Standards
Board ("FASB") Interpretation No. 44, "Accounting for Certain Transactions
Involving Stock Compensation -- an Interpretation of APB Opinion No. 25," and
have adopted the disclosure-only provisions of SFAS 123. Accordingly, for
financial reporting purposes, compensation cost for stock options granted to
employees is measured as the excess, if any, of the estimated fair market value
of our stock at the date of the grant over the amount an employee must pay to
acquire the stock. Equity instruments issued to non-employees are accounted for
in accordance with FAS 123 and Emerging Issues Task Force ("EITF") Abstract No.
96-18, "Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling Goods or Services."
Interest Rate Risk
We currently have debt and will undoubtedly incur debt to finance our
operations. We anticipate that a substantial amount of our future debt and the
associated interest expense will be subject to changes in the level of interest
rates. Increases in interest rates would result in incremental interest expense.
13
Plan of Operation
The Company's current plan of operation is to acquire another operating
company. (See "Item 1 - Description of Business - Current Business Plan.")
It is likely that any acquisition will be a "reverse merger" acquisition
whereby the Company acquires a larger company by issuing shares of the Company's
common stock to the shareholders of the larger company. Although the Company
would be the surviving or parent company from a corporate law standpoint, the
shareholders of the larger company would be the controlling shareholders of the
Company and the larger company would be treated as the survivor or parent
company from an accounting point of view. It can be expected that any company
which may desire to be acquired by the Company will do so as method of
potentially becoming a public company more quickly and less expensively than if
such company undertook its own public offering. Even if the Company is able to
acquire another company, there can be no assurance that the Company will ever
operate at a profit.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that is material to
investors.
Contractual Obligations and Commitments
Except for the payment of accrued management compensation, accrued taxes,
rent and other payables, all of which are described in the financial statements
attached hereto, we have no contractual commitments or obligations.
Inflation
The Company does not believe that inflation will negatively impact its
business plans.
Forward Outlook and Risks
This Form 10-KSB contains and incorporates by reference certain
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act with respect to results of our
operations and businesses. All statements, other than statements of historical
facts, included in this Form 10-KSB, including those regarding market trends,
our financial position, business strategy, projected costs, and plans and
objectives of management for future operations, are forward-looking statements.
In general, such statements are identified by the use of forward- looking words
or phrases including, but not limited to, "intended," "will," "should," "may,"
"expects," "expected," "anticipates," and "anticipated" or the negative thereof
or variations thereon or similar terminology. These forward-looking statements
are based on our current expectations. Although we believe that the expectations
14
reflected in such forward-looking statements are reasonable, there can be no
assurance that such expectations will prove to be correct. Because
forward-looking statements involve risks and uncertainties, our actual results
could differ materially. Important factors that could cause actual results to
differ materially from our expectations are disclosed hereunder and elsewhere in
this Form 10-KSB. These forward-looking statements represent our judgment as of
the date of this Form 10-KSB. All subsequent written and oral forward-looking
statements attributable to Immunotechnology Corporation are expressly qualified
in their entirety by the Cautionary Statements. We disclaim, however, any intent
or obligation to update our forward-looking statements.
Operating History; No Assets; No Present Source of Revenues. We have been
inactive since 1992. We intend to attempt to commence active operations in the
future by acquiring a Target Business. Potential investors should be aware that
there is only a limited basis upon which to evaluate our prospects for achieving
our intended business objectives. We have no resources and have had no revenues
since 1992. In addition, we will not generate any revenues (other than
investment income) until, at the earliest, the consummation of a Business
Combination. Moreover, there can be no assurance that any Target Business will
derive any material revenues from its operations or operate on a profitable
basis.
Possibility of Total Loss of Investment. An investment in the Company, is
an extremely high risk investment, and should not be made unless the investor
has no need for current income from the invested funds and unless the investor
can afford a total loss of his or her investment.
Absence of Substantive Disclosure Relating to Prospective Business
Combinations; Investment in the Company Versus Investment in a Target Business.
We have not yet identified a prospective Target Business. Accordingly, investors
will have no substantive information concerning consummation of any specific
Business Combination in considering a purchase of the Preferred Shares in this
offering.
Seeking to Achieve Public Trading Market through Business Combination.
While a prospective Target Business may deem a consummation of a Business
Combination with the Company desirable for various reasons, a Business
Combination may involve the acquisition of, merger or consolidation with, a
company which does not need substantial additional capital, but which desires to
establish a public trading market for its shares, while avoiding what it may
deem to be adverse consequences of undertaking a public offering itself,
including time delays, significant expense, loss of voting control and the time
and expense incurred to comply with various Federal and state securities laws
that regulate initial public offerings. Nonetheless, there can be no assurance
that there will be an active trading market for the Company's securities
following the completion of a Business Combination or, if a market does develop,
as to the market price for the Company's securities.
Uncertain Structure of Business Combination. The structure of a future
transaction with a Target Business cannot be determined at the present time and
may take, for example, the form of a merger, an exchange of stock or an asset
acquisition. We may form one or more subsidiary entities to complete a Business
Combination and may, under certain circumstances, distribute the securities of
15
subsidiaries to our stockholders. There can be no assurance that a market would
develop for the securities of any subsidiary distributed to stockholders or, if
it did, any assurance as to the prices at which such securities might trade. The
structure of a Business Combination or the distribution of securities to
stockholders may result in taxation of the Company, the Target Business or
stockholders.
Unspecified Target Business; Unascertainable Risks. We have not selected
an acquisition or other Business Combination as of the date of this Form 10-KSB.
Accordingly, there is no basis for prospective investors to evaluate the
possible merits or risks of the Target Business or the particular sector of the
technology industries in which the Company may ultimately operate. To the extent
we effect a Business Combination with a financially unstable company or an
entity in its early stage of development or growth (including entities without
established records of revenues or income), we will become subject to numerous
risks inherent in the business and operations of financially unstable and early
stage or potential emerging growth companies. Although management will endeavor
to evaluate the risks inherent in a particular Target Business or industry,
there can be no assurance that we will properly ascertain or assess all such
risks.
Probable Lack of Business Diversification. As a result of our limited
resources, in all likelihood, we will have the ability to complete only a single
Business Combination. Accordingly, our prospects for success will be entirely
dependent upon the future performance of a single business. Unlike certain
entities which have the resources to consummate several Business Combinations or
entities operating in multiple industries or multiple segments of a single
industry, it is highly likely that the we will not have the resources to
diversify our operations or benefit from the possible spreading of risks or
offsetting of losses. Our probable lack of diversification may subject us to
numerous economic, competitive and regulatory developments, any or all of which
may have a material adverse impact upon the particular industry in which we may
operate subsequent to a consummation of a Business Combination. There can be no
assurance that the Target Business will prove to be commercially viable.
Conflicts of Interest; Absence of Independent Directors. None of the
Company's directors or executive officers are required to commit their full time
to the affairs of the Company and it is likely that such persons will not devote
a substantial amount of time to the affairs of the Company. Such personnel will
have conflicts of interest in allocating management time among various business
activities. As a result, the consummation of a Business Combination may require
a greater period of time than if the Company's management devoted their full
time to the Company's affairs.
Limited Ability to Evaluate Target Business Management; Possibility That
Management Will Change. The role of the present management in the operations of
a Target Business of the Company following a Business Combination cannot be
stated with certainty. Although we intend to scrutinize closely the management
of a prospective Target Business in connection with our evaluation of the
desirability of effecting a Business Combination with such Target Business,
there can be no assurance that our assessment of such management will prove to
be correct, especially in light of the possible inexperience of current key
16
personnel of the Company in evaluating certain types of businesses. While it is
possible that certain of our directors or executive officers will remain
associated in some capacities with the Company following a consummation of a
Business Combination, it is unlikely that any of them will devote a substantial
portion of their time to the affairs of the Company subsequent thereto.
Moreover, there can be no assurance that such personnel will have significant
experience or knowledge relating to the operations of the Target Business
acquired by the Company. We may also seek to recruit additional personnel to
supplement the incumbent management of the Target Business. There can be no
assurance that we will successfully recruit additional personnel or that the
additional personnel will have the requisite skills, knowledge or experience
necessary or desirable to enhance the incumbent management. In addition, there
can be no assurance that our future management will have the necessary skills,
qualifications or abilities to manage a public company embarking on a program of
business development.
Competition. We expect to encounter intense competition from other
entities having business objectives similar to our business objectives. Many of
these entities, including venture capital partnerships and corporations, shell
companies, large industrial and financial institutions, small business
investment companies and wealthy individuals, are well-established and have
extensive experience in connection with identifying and effecting Business
Combinations directly or through affiliates. Many of these competitors possess
greater financial, technical, human and other resources than the Company and
there can be no assurance that the Company will have the ability to compete
successfully. The Company's financial resources will be limited in comparison to
those of many of its competitors. Further, such competitors will generally not
be required to seek the prior approval of their own stockholders, which may
enable them to close a Business Combination more quickly than we can. This
inherent competitive limitation may compel us to select certain less attractive
Business Combination prospects. There can be no assurance that such prospects
will permit us to achieve our business objectives.
Uncertainty of Competitive Environment of Target Business. In the event
that we succeed in effecting a Business Combination, we will, in all likelihood,
become subject to intense competition from competitors of the Target Business.
In particular, certain industries which experience rapid growth frequently
attract an increasingly larger number of competitors, including competitors with
greater financial, marketing, technical, human and other resources than the
initial competitors in the industry. The degree of competition characterizing
the industry of any prospective Target Business cannot presently be ascertained.
There can be no assurance that, subsequent to a consummation of a Business
Combination, we will have the resources to compete in the industry of the Target
Business effectively, especially to the extent that the Target Business is in a
high-growth industry.
Additional Financing Requirements. We will not generate any revenues
until, at the earliest, the consummation of a Business Combination. We cannot
ascertain the capital requirements for any particular Business Combination we
may consider. We will likely be required to seek additional financing. There can
be no assurance that such financing will be available on acceptable terms, or at
all. To the extent that additional financing proves to be unavailable when
needed to consummate a particular Business Combination, we would, in all
17
likelihood, be compelled to restructure the transaction or abandon that
particular Business Combination and seek an alternative Target Business
candidate, if possible. In addition, in the event of the consummation of a
Business Combination, we may require additional financing to fund the operations
or growth of the Target Business. Our failure to secure additional financing
could have a material adverse effect on the continued development or growth of
the Target Business. We do not have any arrangements with any bank or financial
institution to secure additional financing and there can be no assurance that
any such arrangement, if required or otherwise sought, would be available on
terms deemed to be commercially acceptable and in our best interests.
No Appraisal of Potential Business Combination. We do not anticipate that
we will obtain an independent appraisal or valuation of a Target Business.
Accordingly, our stockholders will need to rely primarily upon management to
evaluate a prospective Business Combination.
Limited Public Market for Securities. Currently, there is only a limited
public market for our common stock and no assurance can be given that an active
market will develop or if developed, that it will be sustained. It is unlikely
that any market will develop prior to the consummation of a Business
Combination. Even if a Business Consummation is completed, there can be no
assurance that a trading market for our securities will ever develop.
Risk of Application of Penny Stock Rules. Our common stock is subject to
the penny stock rules as adopted by the Securities and Exchange Commission (the
"Commission"). The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document prepared by the Commission that provides
information about penny stocks and the nature and level of risks in the penny
stock market. The broker-dealer also must provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction and monthly account statements showing
the market value of each penny stock held in the customer's account. In
addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from such rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules. If our common stock remains subject to the penny stock rules,
investors in the Offering may find it more difficult to sell their shares.
18
ITEM 7. FINANCIAL STATEMENTS
Index to Financial Statements
Immunotechnology Corporation Financial Statements Page
Report of Independent Registered Public Accounting Firm...............20
Independent Auditors' Report .........................................21
Balance Sheets........................................................22
Statements of Operations..............................................23
Statements of Stockholders' Equity Deficit............................24
Statements of Cash Flows..............................................25
Notes to Financial Statements.........................................26
19
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders of
Immunotechnology Corporation
(A Development Stage Company)
Ogden, Utah
We have audited the accompanying balance sheet of Immunotechnology Corporation
(a development stage company) as of June 30, 2004, and the related statements of
operations, stockholders' equity (deficit) and cash flows for the year ended
June 30, 2004 and from inception of the development stage on July 1, 1992. The
financial statements for the year ended June 30, 2003 and from inception of the
development stage on July 1, 1992 through June 30, 2003 were audited by other
auditors whose report expressed an unqualified opinion with a going concern
uncertainty. 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.
We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). 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 provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Immunotechnology Corporation (a
development stage company) as of June 30, 2004, and the results of its
operations and its cash flows for the year ended June 30, 2004 and from
inception of the development stage on July 1, 1992 in conformity with accounting
principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered losses from operations, has a
stockholders deficit and minimal working capital. Together these factors raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ HJ & Associates, LLC
Salt Lake City, Utah
November 12, 2004
20
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Immunotechnology Corporation
We have audited the accompanying balance sheet of Immunotechnology Corporation
(A Delaware Corporation in the Development Stage), as of June 30, 2003, and
statements of operations stockholders' deficit, and cash flows for the years
ended June 30, 2003 and 2002 and the period from inception of the development
stage (July 1, 1992) through June 30, 2003. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ImmunoTechnology Corporation (a
development stage company) as of June 30, 2003, and the results of its
operations and its cash flows for the years ended June 30, 2003 and 2002 and the
period from inception of the development stage (July 1, 1992) through June 30,
2003, in conformity with accounting principles generally accepted in the United
States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company does not generate revenue and has a net
capital deficiency that raises substantial doubt about its ability to continue
as a going concern. Management's plans in regard to these matters are also
described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Rose, Snyder & Jacobs
Rose, Snyder & Jacobs
A Corporation of Certified Public Accountants
October 21, 2003, except for Note 7, for which the date is October 28, 2003.
21
IMMUNOTECHNOLOGY CORPORATION
(A Development Stage Company)
Balance Sheet
ASSETS
June 30,
2004
------------
CURRENT ASSETS
Cash $ -
------------
TOTAL ASSETS $ -
============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Bank overdraft $ 122
Accounts payable 53,483
Note payable 21,807
Loans from officer (Note 3) 100,628
Accrued interest 1,700
------------
Total Current Liabilities 177,740
------------
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, par value $0.00001 per share
Authorized - 5,000,000 shares
Issued - none -
Common stock, par value $0.00001 per share
Authorized - 50,000,000 shares
Outstanding - 50,000,000 shares 500
Paid-in capital 441,544
Accumulated deficit prior to the development stage (151,332)
Accumulated deficit during the development stage (468,452)
------------
Total Stockholders' Equity (Deficit) (177,740)
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ -
============
The accompanying notes are an integral part of these financial statements.
22
IMMUNOTECHNOLOGY CORPORATION
(A Development Stage Company)
Statements of Operations
From Inception
of the
Development
For the Years Ended Stage, July 1
June 30, 1992 through
-------------------------
2004 2003 June 30, 2004
------------ ------------ -------------
REVENUE $ - $ - $ -
OPERATING EXPENSES
Professional fees 59,696 54,572 298,726
Transfer agent 531 1,245 5,976
Taxes and licenses - - 1,637
Bank fees and service charges 524 710 4,644
Travel 35,283 13,371 118,484
Office expense 2,037 15 12,037
Interest expense 9,841 2,454 26,548
------------ ------------ ------------
Total Operating Expenses 107,912 72,367 468,052
------------ ------------ ------------
NET LOSS $ (107,912)$ (72,367) $ (468,052)
============ ============ ============
BASIC LOSS PER COMMON SHARE $ (0.00)$ (0.00)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES 50,000,000 45,433,905
============ ============
The accompanying notes are an integral part of these financial statements.
23
IMMUNOTECHNOLOGY CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
Common Stock Additional
------------------------ Paid-in Accumulated
Shares Amount Capital Deficit
----------- ----------- ----------- -----------
Balance, July 1, 1992 5,789,980 $ 58 $ 134,592 $ (151,332)
Issuance of common stock upon
conversion of debt 24,210,020 242 151,070 -
Activity July 1, 1992 through
June 30, 2001 - - - (229,777)
----------- ----------- ----------- ------------
Balance, June 30, 2001 30,000,000 300 285,662 (381,109)
Issuance of common stock upon
conversion of debt 10,253,655 103 64,065 -
Net loss for the year ended
June 30, 2002 - - - (57,996)
----------- ----------- ----------- ------------
Balance at June 30, 2002 40,253,655 403 349,727 (439,105)
Issuance of common stock upon
conversion of debt 9,746,345 97 60,817 -
Stock split in the form of a
dividend - - - (400)
Net loss for the year ended
June 30, 2003 - - - (72,367)
----------- ----------- ----------- ------------
Balance at June 30, 2003 50,000,000 500 410,544 (511,872)
Contributed services - - 31,000 -
Net loss for the year ended
June 30, 2004 - - - (107,912)
----------- ----------- ----------- ------------
Balance at June 30, 2004 50,000,000 $ 500 $ 441,544 $ (619,784)
=========== =========== =========== ============
The accompanying notes are an integral part of these financial statements.
24
IMMUNOTECHNOLOGY CORPORATION
(A Development Stage Company)
Statements of Cash Flows
From
Inception of
Development
For the Years Ended Stage on
June 30, July 1, 1992
-------------------------- Through
2004 2003 June 30, 2004
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (107,912) $ (72,367)$ (468,052)
Contributed services 31,000 - 31,000
Adjustments to reconcile net loss to net
cash used by operating activities:
Increase (decrease) in accrued expenses (4,415) 12,902 50,506
------------ ------------ ------------
Net Cash Used by Operating Activities (81,327) (59,465) (386,546)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Advance to an officer - - (10,000)
Repayment of advance to an officer - - 10,000
------------ ------------ ------------
Net Cash Provided by Investing Activities - - -
- - -
CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdraft (874) 973 122
Advances from an officer 80,394 59,000 377,625
Proceeds from notes payable 1,807 20,000 29,307
Repayments of advances to an officer - (20,508) (20,508)
------------ ------------ ------------
Net Cash Provided by Financing Activities 81,327 59,465 386,546
------------ ------------ ------------
NET INCREASE IN CASH - - -
CASH AT BEGINNING OF YEAR - - -
------------ ------------ ------------
CASH AT END OF PERIOD $ - $ - $ -
============ ============ ============
Supplementary Disclosures:
Interest paid in cash $ - $ 475 $ 2,211
The accompanying notes are an integral part of these financial statements.
25
IMMUNOTECHNOLOGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
June 30, 2004 and 2003
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Business Organization and Going Concern
Immunotechnology Corporation (Immuno) was incorporated on November 30, 1989
under the laws of the State of Delaware. Immunotechnology Corporation operated a
medical test laboratory until 1992, when it ceased operations. Presently, the
Company has no operations.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements during the year ended June 30, 2004, the Company did not generate any
revenue, and has a net capital deficiency. These factors among others may
indicate that the Company will be unable to continue as a going concern for a
reasonable period of time. For the year ended June 30, 2004, the Company funded
its disbursements by loans from officers and an individual. The Company
reentered the development stage on July 1, 1992.
The financial statements do not include any adjustments relating to the
recoverability of assets and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.
The Company is not operating, and will attempt to locate a new business
(operating company), and offer itself as a merger vehicle for a company that may
desire to go public through a merger rather than through its own public stock
offering.
b. Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a June 30 year end.
c. Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments with maturities
of three months or less at the time of acquisition.
26
IMMUNOTECHNOLOGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
June 30, 2004 and 2003
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
d. Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
e. Revenue Recognition
The Company currently has no source of revenues. Revenue recognition policies
will be determined when principal operations begin.
f. New Accounting Pronouncements
During the year ended June 30, 2004, the Company adopted the following
accounting pronouncements which had no impact on the financial statements or
results of operations:
o SFAS No. 143, Accounting for Asset Retirement Obligations;
o SFAS No.145, Recision of FASB Statements 4, 44, and 64, amendment of
Statement 13, and Technical Corrections;
o SFAS No. 146, Accounting for Exit or Disposal Activities;
o SFAS No. 147, Acquisitions of certain Financial Institutions;
o SFAS No. 148, Accounting for Stock Based Compensation;
o SFAS No.149, Amendment of Statement 133 on Derivative Instruments and
Hedging Activities; and
o SFAS No.150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity.
In addition, during the year ended June 30, 2004, FASB Interpretations No. 45
and No. 46, along with various Emerging Issues Task Force Consensuses (EITF)
were issued and adopted by the Company and had no impact on its financial
statements.
These newly issued accounting pronouncements had no effect on the Company's
current financial statements and did not impact the Company.
27
IMMUNOTECHNOLOGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
June 30, 2004 and 2003
NOTE 2 - INCOME TAXES
Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss and tax
credit carryforwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.
Net deferred tax assets consist of the following components as of June 30, 2004
and 2003:
2004 2003
------------ ------------
Deferred tax assets:
NOL Carryover $ 230,205 $ 170,000
Deferred tax liabilities: - -
Valuation allowance (230,205) (170,000)
------------ ------------
Net deferred tax assets $ - $ -
============ ============
The income tax provision differs from the amount of income tax determined by
applying the U.S. federal and state income tax rates to pretax income
from continuing operations for the years ended June 30, 2004 and 2003 due to the
following:
2004 2003
------------ ------------
Book income $ (42,085) $ (24,605)
Meals & Entertainment 6,880 2,275
Valuation allowance 23,200 22,330
------------ ------------
$ - $ -
============ ============
28
NOTE 2 - INCOME TAXES (CONTINUED)
At June 30, 2004, the Company had net operating loss carryforwards of
approximately $590,000 that may offset future taxable income. The loss
carryforwards expire through 2004. No tax benefit has been reported in the June
30, 2004 financial statements since the potential tax benefit is offset by a
valuation allowance of the same amount.
Due to the change in ownership provisions of the Tax Reform Act of 1986, net
operating loss carryforwards for Federal income tax reporting purposes are
subject to annual limitations. Should a change in ownership occur, net operating
loss carryforwards may be limited as to use in future years.
NOTE 3 - RELATED PARTY TRANSACTIONS
During the years ended June 30, 2004 and 2003, two officers advanced money to
the Company for a total of $80,394 and $59,000, respectively. On August 22,
2001, $64,086 of advances, including related interest was converted into shares
of common stock. On December 19, 2002, $60,915 of advances, including related
interest was converted into shares of common stock. During the year ended June
30, 2003, the Company repaid $20,508 to one of the officers. All advances bear
interest at a rate of 10%.
An officer of the company (who resigned in May 2003) is a principal in a
consulting firm to which the company paid professional fees totaling $27,456 and
$17,313 during the years ended June 30, 2004 and 2003, respectively. Additional
fees in the amount of $8,198 and $23,004 had not yet been paid at June 30, 2004
and June 30, 2003 respectively and were included in accrued expenses.
NOTE 4 - COMMON STOCK
On March 31, 1999, the Company converted its advances from an officer, notes
payable to minority shareholders and related accrued interest totaling $116,448
into 18,631,655 shares of common stock or $0.00625 per share. On June 21, 2000,
the Company converted its advances from another officer and related accrued
interest totaling $34,864 into 5,578,365 shares of common stock or $0.00625 per
share. On August 22, 2001, the Company converted $64,086 of loans from officers
and related accrued interest into 10,253,655 shares of common stock or $0.00625
per share. During the year ended June 30, 2003 the Company converted $60,914 of
loans from officers and accrued interest into 9,746,345 or $0.00625 per share.
NOTE 5 -STOCK SPLIT
On May 13, 2003, the Board of Directors approved a 5 for 1 stock split of the
outstanding common stock in the form of a dividend. All references to common
stock have been retroactively restated.
29
IMMUNOTECHNOLOGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
June 30, 2004 and 2003
NOTE 6 - CONTRIBUTED SERVICES
During the year an officer of the Company contributed services to the Company
valued at $31,000. This contribution of services has been accounted for as an
increase in additional paid-in capital.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company was a defendant in a lawsuit where the plaintiff alleged unsolicited
fax advertisement violations. The outcome of this lawsuit did not have material
effect on the operations of the Company and its financial position. The Company
accrued $17,000 for legal services performed prior to the development stage.
Should this balance accrue interest, the liability could increase by
approximately $26,000. The Company has not had any correspondence with this
creditor since September, 1999; accordingly the $17,000 remains accrued in the
financial statements.
NOTE 8 - SUBSEQUENT EVENTS
On August 11, 2004 the company signed an agreement rescinding the Agreement and
Plan of Merger with Ultimate Securities Systems Corporation (USSC). The
rescission called for a payment of $125,000 from Immuno to USSC. Non-affiliated
individuals loaned $120,000 to the company for this purpose, and the company's
president has loaned approximately $40,000 additionally to Immuno since June 30,
2004. Payment of the $125,000 was made in full in August, 2004.
30
ITEM 8. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Rose, Snyder & Jacobs ("Rose Firm") resigned as our principal
accountants effective October 4, 2004. The Rose Firm's audit reports on the
Company's financial statements as of, and for, the years ended June 30, 2003 and
2002 did not contain an adverse opinion or a disclaimer of opinion and were not
qualified or modified as to audit scope. The audit reports were qualified as to
uncertainty as to the Company continuing as a going concern.
During the Company's two most recent fiscal years ended June 30, 2004 and
the subsequent interim period through the date of the Rose Firm's resignation,
(i) there were no disagreements with the Rose Firm on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedures, which disagreements, if not resolved to the Rose Firm's
satisfaction, would have caused the Rose Firm to make reference to the subject
matter of the disagreement(s) in connection with its report, and (ii) there were
no "reportable events" as such term is defined in Item 304(a)(1)(v) of
Regulation S-K.
The Company has appointed the CPA firm of H & J associates, LLC to be its
principal accountants and auditors.
ITEM 8A. CONTROLS AND PROCEDURES
An evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures within 90 days prior to the filing date of
this Annual Report on Form 10-KSB was conducted under the supervision and with
the participation of our management, including our chief executive officer and
chief financial officer. Based on that evaluation, our management, including our
chief executive officer and chief financial officer, concluded that our
disclosure controls and procedures are functioning effectively to provide
reasonable assurance that all information required to be disclosed by
Immunotechnology Corporation reports filed under the Securities Exchange Act of
1934, as amended, is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms. A controls system, no
matter how well designed and operated, cannot provide absolute assurance that
the objectives of the controls system are met, and no evaluation of controls can
provide absolute assurance that all control issued and instances of fraud, if
any, within the company have been detected. Subsequent to the date of the most
recent evaluation of Immunotechnology Corporation's internal controls, there
have been no significant changes in our internal controls or in other factors
that could significantly affect these internal controls, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
ITEM 8B. OTHER INFORMATION.
Not applicable.
31
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
A. Identification of Directors and Executive Officers. The current
directors and officers of the Company, who will serve until the next annual
meeting of shareholders or until their successors are elected or appointed and
qualified, are set forth below:
Name Age Position
Mark Scharmann 46 President/Treasurer/Director
Dan Price 50 Vice President/Director
Mark Scharmann. Mr. Scharmann has been a private investor and business
consultant since 1981. Mr. Scharmann became involved in the consulting
business following his compilation and editing in 1980 of a publication
called Digest of Stocks Listed on the Intermountain Stock Exchange. In 1981
he compiled and edited an 800 page publication called the OTC Penny Stock
Digest. Mr. Scharmann has rendered consulting services to public and private
companies regarding reverse acquisition transactions and other matters. Mr.
Scharmann was vice president of OTC Communications, Inc. from March 1984 to
January 1987. From 1982 to 1996, he was the president of Royal Oak Resources
Corporation. In 1996, Royal Oak Resources completed and acquisition and in
connection therewith changed its name to Hitcom Corporation. Mr. Scharmann
was the President of Norvex, Inc., a blank check company which completed an
acquisition and in connection therewith, changed its name to Capital Title.
Mr. Scharmann is a promoter of Nightingale, Inc., a publicly-held corporation
blank check company. He has also been an officer and director of several
other blind pool companies.
Dan O. Price. Since February 2001, Mr. Price has been working as an
Enrollment Counselor for the University of Phoenix. From 1998 to October
2000, Mr. Price worked as an evaluator at Learning Technics, Kirkland, WA and
Salt Lake City, UT. From 1993 to 1998, Mr. Price served as Vice-President of
Corporate Development for Troika Capital Investment. Prior to that, Mr.
Price worked for seven (7) years as the National Sales Director for a
business providing electronic bankcard processing and other merchant
services. For four (4) years he worked as an Organizational Manager involved
in direct sales of educational material, with 50 sales people in the western
states under his management. Mr. Price has been in sales and marketing for
twenty (20) years and sales management and business management for fifteen
(15) years. Mr. Price received his B.A. from Weber State College in 1983.
He has served as an officer and director on two (2) small publicly traded
companies.
B. Significant Employees. None
C. Family Relationships. There are no family relationships among the
Company's officers and directors.
32
D. Other Involvement in Certain Legal Proceedings. There have been no
events under any bankruptcy act, no criminal proceedings and no judgments or
injunctions material to the evaluation of the ability and integrity of any
director or executive officer during the last five years.
E. Compliance With Section 16(a). Section 16(a) of the Securities Exchange
Act of 1934, as amended, requires the Company's directors and executive
officers, and persons who beneficially own more than 10% of a registered class
of the Company's equity securities, to file reports of beneficial ownership and
changes in beneficial ownership of the Company's securities with the SEC on
Forms 3 (Initial Statement of Beneficial Ownership), 4 (Statement of Changes of
Beneficial Ownership of Securities) and 5 (Annual Statement of Beneficial
Ownership of Securities). Directors, executive officers and beneficial owners of
more than 10% of the Company's Common Stock are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms that they file. Based
solely on our review of Forms 4 filed with the Securities and Exchange
Commission, it appears that all required Form 4's have been filed.
Code of Ethics
We have not yet adopted a code of ethics that applies to all executive
officers, directors and employees of the Company. We intend to do so within the
next fiscal year.
Audit Committee Financial Expert
We have not established an audit committee or designated any person as our
financial expert. We anticipate that we will not establish an audit committee or
designate a financial expert until such time as we complete an acquisition.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid by the
Company for services rendered during the last three years to the Company's Chief
Executive Officer and to the Company's most highly compensated executive
officers other than the CEO, whose annual salary and bonus exceeded $100,000:
================================================================================
SUMMARY COMPENSATION TABLE
--------------------------------------------------------------------------------
Annual Compensation
--------------------------------------------------------------------------------
Commissions Restricted
and Other Annual Stock Options/
Name and Principal Bonuses Compensation Awards SAR's
Position Year Salary ($) ($) ($) (#)
================================================================================
Mark Scharmann 2004 -0- -0- -0- -0- -0-
President 2003 -0- -0- -0- -0- -0-
2002 -0- -0- -0- -0- -0-
================================================================================
33
Stock Options
The following table sets forth certain information concerning stock
options granted during fiscal 2004 to the named executive officers.
Options Grants in the Year Ended June 30, 2004
================================================================================
Percentage
Number of of Total Exercise
Securities Options Granted or
Underlying to Base Price Expiration
Name Options Granted Employees in Per Share Date
(#) Fiscal Year ($)
================================================================================
Mark Scharmann -0- -0- N/A N/A
================================================================================
The following table sets forth information concerning the number and value
of options held at June 30, 2004 by each of the named executive officers. No
options held by such executive officers were exercised during the year ended
June 30, 2004.
Option Values at June 30, 2004
================================================================================
Number of Unexercised Value of Unexercised
Options at In-the-Money Options
June 30, 2004 (#) At June 30, 2004($)
--------------------------------------------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
================================================================================
Mark Scharmann -0- -0- N/A N/A
================================================================================
Compensation of Directors
The Company does not currently compensate its directors for director
services to the Company.
Employment Agreements
The Company is currently not a party to any employment agreement.
Equity Compensation Plan
We are not a party to any equity compensation plan.
34
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table sets forth information regarding shares of the
Company's common stock beneficially owned as of November by: (i) each officer
and director of the Company; (including and (ii) each person known by the
Company to beneficially own 5 percent or more of the outstanding shares of the
Company's common stock.
Name Amount and
and Address Nature of Percent of
of Beneficial Beneficial Class(1)
Owner Ownership Ownership
-------------------------------------------------------------------------------
Mark Scharmann(1) 28,318,510 56.6%
1661 Lakeview Circle
Ogden, UT 84403
Dan Price(1) -0- 0%
1661 Lakeview Circle
Ogden, UT 84403
David Knudson 12,939,475 25.9%
1661 Lakeview Circle
Ogden, UT 84403
All Officers and Directors 28,318,510 56.6%
as a Group (2 Persons)
===============================================================================
Total Shares Issued 50,000,000 100%
(1)These individuals are the officers and directors of the Company.
Unless otherwise indicated in the footnotes below, the Company has been
advised that each person above has sole voting power over the shares indicated
above. All of the individuals listed above are officers and directors of the
Company.
Security Ownership of Management
See Item 4(a) above.
Changes in Control
We currently have no proposed change of control transaction. We are
continuing to discuss business combinations with other Target Businesses. If,
and when we complete a Business Combination, it will likely result in a change
of control.
35
Outstanding Options
In August and October 2004 we issued options which entitle the holders to
purchase a total of 1,200,000 shares of our common stock at a price of $.01 per
share. These options expire two years from the date of issuance. These options
were issued as additional consideration for the option holders making loans to
the Company. These options and the loans related to these options are further
described in Item 6 of this Form 10-KSB.
Currently, all of our authorized shares have been issued and outstanding.
We anticipate that we will either effect a reverse stock split of our
outstanding shares or will increase the number of our authorized shares. Until
we do this, the options described above may not be exercised.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In May 2003, the Company effectuated a 5 for 1 forward stock split. All
share information set forth below gives effect to such forward stock split, even
those transactions occurring prior to the date of such forward split.
Mark A. Scharmann, an officer and director of Immunotechnology advanced
money to Immunotechnology during the year ended June 30, 1999. The advances bear
interest at a rate of 10% per annum and have no maturity date. At March 31,
1999, Immunotechnology converted its advances from Mr. Scharmann, notes payable
to minority shareholders and related accrued interest totaling $116,448 into
18,631,655 shares of common stock or $.00625 per share.
On April 2, 1999, Immunotechnology loaned Mr. Scharmann $10,000. The
advance was evidenced by a demand note with interest at the rate of 10% per
annum. This advance was paid in full in August 1999.
On June 21, 2000, Immunotechnology's board of directors approved the
issuance of 5,578,365 shares of Immunotechnology's common stock to David
Knudson, the then secretary and treasurer of Immunotechnology, in exchange for
the conversion of $34,864.78 in principal and accrued interest pursuant to the
terms of a Promissory Note between Immunotechnology and Mr. Knudson.
David Knudson, a former officer and director of Immunotechnology, is a
principal in a consulting firm to which Immunotechnology has paid the following
professional fees:
Fiscal Year Total Fees Paid Fees Accrued But NotPaid
2002 $13,475 -0-
2003 $17,313 $23,004
2004 $27,456 $ 8,198
36
In August 2001, the Company issued 5,183,945 shares of its common stock to
Mark A. Scharmann in consideration of the conversion of a promissory note in the
amount of $32,399.67 into equity. In August 2001, the Company issued 5,069,710
shares of its common stock to David Knudson in consideration of a promissory
note in the amount of $31,685.79 into equity.
In June 2002, the Company issued 6,464,945 shares of its common stock in
consideration of the conversion of a promissory note in the amount of $40,405.91
into equity. In December 2002, the Company issued 3,281,400 shares of its common
stock in consideration of the conversion of a promissory note in the amount of
$20,508.74 into equity.
During the year ended June 30, 2003, Immunotechnology repaid $20,508 to
Mark Scharmann, our president, for funds loaned to us.
During the year ended June 30, 2004, Mark A. Scharmann loaned the Company a
total of $80,394 by making advances to the Company from time to time. These
loans bear interest at the rate of 10% per annum and are payable on demand.
As of June 30, 2004, we owed Mr. Scharmann $100,628.38. As of September 30,
2004, we owe Mr. Scharmann $140,243.16.
Parents of Company
The only parents of the Company, as defined in Rule 12b-2 of the Exchange
Act, are the officers and directors of the Company. For information regarding
the share holdings of the Company's officers and directors, see Item 11.
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
Exhibits
Exhibit
Number Exhibit
3.1 Amended and Restated Articles of Incorporation (1)
3.2 Bylaws (1)
21.1 Subsidiaries of Registrant (None)
31.1 Certification of Chief Executive Officer and
Principal Financial Officer in accordance with 18U .S.C.
Section 1350, as adopted by Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer and
Principal Financial Officer in accordance with 18 U.S.C.
Section 1350, as adopted by Section 906 of the
Sarbanes-Oxley Act of 2002
(1) Previously Filed
37
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The Company's previous auditor was the firm of Rose, Snyder & Jacobs who
served as auditors for approximately five years. In October 2004 Rose, Snyder &
Jacobs resigned and we appointed HJ Associates as our auditor.
Audit Fees. The aggregate fees billed by Rose Snyder & Jacobs for
professional services rendered for the audit of our annual financial statements
included in our Annual Report on Form 10-KSB for the fiscal year ended June 30,
2003 and for the review of quarterly financial statements included in our
Quarterly Reports on Form 10-QSB for the quarters ending September 30, 2003,
December 31, 2003 and March 31, 2003, were $15,925. HJ & Associates billed us
$5,750 for services rendered for the audit of our financial statements for the
year ended June 30, 2004.
Audit Related Fees. For the fiscal year ended June 30, 2003, no fees were
billed for assurance and related services by Rose Snyder & Jacobs relating to
the resolution of SEC comments which are not reported under the caption "Audit
Fees." For the fiscal year ended June 30, 2004, no fees were billed for
assurance and related services by HJ & Associates relating to the resolution of
SEC comments which are not reported under the caption "Audit Fees."
Tax Fees. For the fiscal year ended June 30, 2004, the aggregate fees
billed by Rose Snyder & Jacobs for other non-audit professional services, other
than those services listed above totaled $-0-. For the fiscal year ended June
30, 2004, the aggregate fees billed by HJ Associates for other non-audit
professional services other than those services listed above totaled $-0-.
We did not use Rose Snyder & Jacobs and we do not use JH & Associates for
financial information system design and implementation. These services, which
include designing or implementing a system that aggregates source data
underlying the financial statements or generates information that is significant
to our financial statements, are provided internally or by other service
providers. We did not engage Rose Snyder & Jacobs nor do we engage HJ &
Associates to provide compliance outsourcing services.
Effective May 6, 2003, the Securities and Exchange Commission adopted rules
that require that before our auditor engaged by us to render any auditing or
permitted non-audit related service, the engagement be:
o approved by our audit committee (which consists of our entire board of
directors); or
o entered into pursuant to pre-approval policies and procedures
established by the audit committee, provided the policies and
procedures are detailed as to the particular service, the audit
committee is informed of each service, and such policies and
procedures do not include delegation of the audit committee's
responsibilities to management.
38
Our entire Board of Directors currently acts as our audit committee. Our
Board of Directors pre-approves all services provided by our independent
auditors. The pre-approval process has just been implemented in response to the
new rules, and therefore, the audit committee does not have records of what
percentage of the above fees were pre-approved. However, all of the above
services and fees were reviewed and approved by the audit committee either
before or after the respective services were rendered. The Board of Directors
has considered the nature and amount of fees billed by Rose Snyder & Jacobs and
HJ Associates and believes that the provision of services for activities
unrelated to the audit is compatible with maintaining auditor independence.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Immunotechnology Corporation
Date: November 17, 2004 By: /s/ Mark A. Scharmann
President/Principal Executive Officer
Principal Financial Officer
In accordance with the Securities Exchange Act, this report has been signed
below by the following persons on behalf of the Company and in the capacities
and on the dates indicated.
Signature Capacity Date
/s/ Mark A. Scharmann President/Treasurer/Director November 17, 2004
/s/ Dan Price Director November 17, 2004
39