U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report Pursuant To Section 13 Or 15(d) Of The Securities
Exchange Act Of 1934
For the fiscal year ended AUGUST 31, 2005
[ ] Transition Report Under Section 13 Or 15(d) Of The Securities
Exchange Act Of 1934
COMMISSION FILE NUMBER 000-50298
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INTEGRATED SECURITY TECHNOLOGIES, INC.
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(Name of small business issuer in its charter)
NEVADA 98-0376008
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
SUITE 1500, 885 WEST GEORGIA ST. VANCOUVER, B.C., CANADA V6C 3E8
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(Address of principal executive offices) (Zip Code)
778-322-7165
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Issuer's telephone number
Securities registered under Section 12(b) of the
Exchange Act: NONE.
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Securities registered under Section 12(g) of the
Exchange Act: COMMON STOCK,
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PAR VALUE $0.001 PER SHARE.
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES [X] NO [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant'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. [X]
State issuer's revenues for its most recent fiscal year: $NIL
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The aggregate value of the voting stock held by non-affiliates of the
registrant, computed by reference to the price at which the common equity was
sold as of October 28, 2005 was $4,508,460.
As of October 28, 2005, the issuer had outstanding 18,475,551 shares of Common
Stock.
Transitional Small Business Disclosure Format (check one): YES NO X
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INTEGRATED SECURITY TECHNOLOGIES, INC.
ANNUAL REPORT ON FORM 10-KSB
INDEX
PAGE
PART I
Item 1. Description Of Business. 4
Item 2. Description Of Property. 11
Item 3. Legal Proceedings. 11
Item 4. Submission Of Matters To A Vote Of Security Holders. 11
PART II
Item 5. Market For Common Equity And Related Stockholder Matters. 11
Item 6. Management's Discussion And Analysis Or Plan Of Operation. 12
Item 7. Financial Statements. 15
Item 8A. Controls and Procedures. 24
PART III
Item 9. Directors, Executive Officers, Promoters And Control Persons;
Compliance With Section 16(a) Of The Exchange Act. 25
Item 10. Executive Compensation. 26
Item 11. Security Ownership Of Certain Beneficial Owners And Management
and Related Stockholder Matters. 27
Item 12. Certain Relationships And Related Transactions. 28
Item 13. Exhibits And Reports On Form 8-K. 29
Item 14. Principal Accountant Fees and Services. 30
PART I
Certain statements contained in this Form 10-KSB constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934 (the "Exchange Act"). These statements, identified by words such as
"plan", "anticipate," "believe," "estimate," "should," "expect" and similar
expressions, include our expectations and objectives regarding our future
financial position, operating results and business strategy. These statements
reflect the current views of management with respect to future events and are
subject to risks, uncertainties and other factors that may cause our actual
results, performance or achievements, or industry results, to be materially
different from those described in the forward-looking statements. Such risks and
uncertainties include those set forth under the caption "Management's Discussion
and Analysis or Plan of Operation" and elsewhere in this Form 10-KSB. We do not
intend to update the forward-looking information to reflect actual results or
changes in the factors affecting such forward-looking information. We advise you
to carefully review the reports and documents we file from time to time with the
Securities and Exchange Commission ("SEC"), particularly our quarterly reports
on Form 10-QSB and our current reports on Form 8-K.
As used in this annual report, the terms "we", "us", "our", and "our company"
mean Integrated Security Technologies, Inc. unless otherwise indicated. All
dollar amounts in this annual report are in U.S. dollars unless otherwise
stated.
GLOSSARY OF TECHNICAL TERMS
The following defined technical terms are used in our annual report:
ADIT An opening driven horizontally into the side of a
mountain or hill for providing access to a mineral deposit.
ASSAY A chemical test performed on a sample of ores or
minerals to determine the amount of valuable metals
contained.
BRECCIA Rock consisting of angular fragments in a matrix of
finer-grained cementing material.
BATHOLITH A large mass of igneous rock extending to great depth
with its upper portion dome-like in shape. It has
crystallized below surface, but may be exposed as a result
of erosion of the overlying rock. Smaller masses of igneous
rocks are known as bosses or plugs.
FAULT A break in the Earth's crust caused by tectonic forces
which have moved the rock on one side with respect to the
other; faults may extend many kilometers, or be only a few
centimeters in length; similarly, the movement or
displacement along the fault may vary widely.
FELDSPAR A group of rock-forming minerals.
FRACTURE A break in the rock, the opening of which affords the
opportunity for entry of mineral-bearing solutions. A "cross
fracture" is a minor break extending at more-or-less right
angles to the direction of the principal fractures.
IGNEOUS A type of rock that has been formed by the
consolidation of magma, a molten substance from the earth's
core.
INTRUSIVE A body of igneous rock formed by the consolidation of
magma intruded into other rocks, in contrast to lavas, which
are extruded upon the surface.
MASSIVE Solid (without fractures) wide (thick) rock unit.
META-VOLCANIC Metamorphosed volcanic rocks.
MINERALIZATION The concentration of metals and their chemical
compounds within a body of rock.
ORE A mixture of minerals and gangue from which at least
one metal can be extracted at a profit.
PLUTON Body of rock exposed after solidification at great depth.
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QUARTZ A mineral whose composition is silicon dioxide. A
crystalline form of silica.
RESERVE For the purposes of this annual report: that part of a
mineral deposit that could be economically and legally
extracted or produced at the time of the reserve
determination. Reserves consist of:
(1) Proven (Measured) Reserves. Reserves for which: (a)
quantity is computed from dimensions revealed in outcrops,
trenches, workings or drill holes; grade and/or quality are
computed from the results of detailed sampling; and (b) the
sites for inspection, sampling and measurement are spaced so
closely and the geologic character is so well defined that
size, shape, depth and mineral content of reserves are
well-established.
(2) Probable (Indicated) Reserves. Reserves for which
quantity and grade and/or quality are computed from
information similar to that used for proven (measured)
reserves, but the sites for inspection, sampling and
measurement are farther apart or are otherwise less
adequately spaced. The degree of assurance, although lower
than that for proven (measured) reserves, is high enough to
assume continuity between points of observation.
SHEAR The deformation of rocks by lateral movement along
innumerable parallel planes, generally resulting from
pressure.
STRUCTURAL Pertaining to geologic structure.
VEIN An occurrence of ore with an irregular development in
length, width and depth usually from an intrusion of igneous
rock.
VOLCANICS Volcanically formed rocks.
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
We were incorporated on April 12, 2002, under the laws of the State of Nevada.
We are an exploration stage company engaged in the acquisition and exploration
of mineral properties. We own four mineral claims that we refer to as the Saucy
mineral claims and six mineral claims that we refer to as the Salsa mineral
claims. The Saucy and Salsa mineral claims are located adjacent to each other
in the Province of British Columbia, Canada. Both the Saucy and the Salsa
mineral claims are held in the name of our wholly owned subsidiary, Iguana
Explorations Inc. Further exploration of these mineral claims is required
before a final determination as to their viability can be made. No commercially
viable mineral deposit may exist on our mineral claims. Our plan of operations
is to carry out exploration work on these claims in order to ascertain whether
they possess deposits of gold, copper or silver. We can provide no assurance
that our mineral claims contain a mineral deposit until appropriate exploratory
work is done and an evaluation based on that work concludes further work
programs are justified. At this time, we have no known reserves on our mineral
claims.
DESCRIPTION AND LOCATION OF SAUCY MINERAL CLAIMS AND SALSA MINERAL CLAIMS
Saucy Mineral Claims
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The Saucy mineral claims are comprised of four mineral claims located on the
north side of the Ashlu River about 29 miles from the town of Squamish and about
35 miles north of Vancouver, British Columbia, Canada.
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The Saucy mineral claims were recorded with the Ministry of Energy and Mines for
the Province of British Columbia, Canada under the following names and claim
numbers:
NAME OF MINERAL CLAIM TENURE NUMBER EXPIRY DATE
SAUCY #1 393633 June 4, 2006
SAUCY #2 393634 June 4, 2006
SAUCY #3 393635 June 4, 2006
SAUCY #4 393636 June 4, 2006
Salsa Mineral Claims
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The Salsa mineral claims were acquired by us in January of 2004 for a total of
$400 and are comprised of six mineral claims located adjacent to the southeast
corner of the Saucy mineral claims. Both the Saucy mineral claims and the Salsa
mineral claims are accessible by logging road.
The Salsa mineral claims were recorded with the Ministry of Energy and Mines for
the Province of British Columbia, Canada under the following names and claim
numbers:
NAME OF MINERAL CLAIM TENURE NUMBER EXPIRY DATE
SALSA 1 416629 November 30, 2005
SALSA 2 416630 November 30, 2005
SALSA 3 416631 November 30, 2005
SALSA 4 416632 November 30, 2005
SALSA 5 407660 January 3, 2007
SALSA 6 407661 January 3, 2007
We intend to extend our claims to the Saucy mineral claims and the Salsa mineral
claims on the expiration date of those claims. Mineral claims of this type may
be extended either by completing a minimum of $500 in exploration or development
work on the individual mineral claim and filing a report on the work completed
with the Ministry of Energy and Mines or by paying a filing fee in lieu of
performing such work. The fee amount is approximately $100 per claim, per year
in the first three years, and $200 per claim, per year afterwards. Under the
applicable legislation, exploration and development work completed on a mineral
claim in excess of the minimum requirements may be carried forward and applied
to the future requirements for maintaining that claim and may also be applied
against the current and future requirements for other mineral claims. Based on
our work done to date on the Saucy mineral claims, we have already completed
enough exploration work to extend the Saucy mineral claims and the Salsa mineral
claims for approximately 10 more years without the payment of filing fees.
Title to the Saucy mineral claims and the Salsa mineral claims is held in the
name of our wholly owned subsidiary Iguana Explorations Inc. The Province of
British Columbia owns surface rights to the land covering our mineral claims.
To our knowledge, there are no aboriginal land claims that might affect our
title to the mineral claims or to the Province's title to the surface rights.
There is no viable way for us to determine what claims, if any, certain
aboriginal groups may make. The Government of British Columbia has adopted a
policy that no private property rights will be expropriated to settle aboriginal
land claims, however we can provide no assurances that our title to the mineral
claims will not, in the future, become subject to such aboriginal claims.
Our subsidiary is the sole legal owner of the Saucy mineral claims and the Salsa
mineral claims and no other person or entity has any interest in the mineral
claims.
GEOLOGY OF THE MINERAL CLAIMS
We engaged Mr. W.G. Timmins to prepare a geological evaluation report on the
Saucy mineral claims. Mr. Timmins is a consulting geologist and registered
professional engineer in the Geological Section of the Association of
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Professional Engineers and Geoscientists of British Columbia. Mr. Timmins has
practiced in his profession for 39 years and been a registered professional
engineer since 1969.
Mr. Timmins recommended a two-stage exploration program for the Saucy mineral
claims to determine whether there are mineral deposits of gold, silver or copper
on those claims: Stage 1 consisting of reconnaissance geology and sampling at an
estimated cost of $5,000; and Stage 2 consisting of trenching, sampling,
prospecting and mapping at an estimated cost of $10,000.
We completed Stage 1 in 2002 and Mr. Timmins recommended proceeding to Stage
2 which was completed in November of 2003.
We received a report from Mr. Timmins dated December 10, 2003 reporting on
completion of Stage 2 of the program. Mr. Timmins reported that the main
mineral vein on the Saucy claims narrowed in width and had decreasing gold
values. Mr. Timmins advised that it is normal for this type of quartz vein to
exhibit pinching and swelling with variable gold values. Based on the work on
the Saucy claims and on information contained in previously reported work on
ground adjacent to the Saucy claims, Mr. Timmins reported that the vein
structure on the Saucy claims may extend into a wider vein on the adjacent areas
which reportedly carry significant gold values. Based on that conclusion, Mr.
Timmins recommended that we acquire the Salsa claims. Mr. Timmins also
recommended that we conduct a work program on the Salsa mineral claims
consisting of blasting, sampling, prospecting, geological mapping and assays at
an estimated cost of $7,000.
The geological review and interpretations required in stages one and two of the
exploration program have been and will continue to be comprised of reviewing the
data acquired and analyzing this data to assess the potential mineralization of
the mineral claims. Geological review entails the geological study of an area to
determine the geological characteristics, identification of rock types and any
obvious indications of mineralization. The purpose of undertaking the
geological review is to determine if there is sufficient indication of
mineralization to warrant additional exploration. Positive results at each
stage of the exploration program would be required to justify continuing with
the next stage. Such positive results would include the identification of the
zones of mineralization.
CURRENT STATE OF EXPLORATION
Our mineral claims presently do not have any mineral reserves. The property
that is the subject to our mineral claims is undeveloped and does not contain
any open-pit or underground mines. There is no plant or equipment located on
the property that is the subject of the mineral claim. Currently, there is no
power supply to the mineral claims.
We have only recently commenced exploration of the mineral claim and this
exploration is currently in the preliminary stages. Our planned exploration
program is exploratory in nature and no mineral reserves may ever be found.
COMPLIANCE WITH GOVERNMENT REGULATION
We will be required to comply with all regulations, rules and directives of
governmental authorities and agencies applicable to the exploration of minerals
in the Province of British Columbia. The main agency that governs the
exploration of minerals in the Province of British Columbia, Canada, is the
Ministry of Energy and Mines.
The Ministry of Energy and Mines manages the development of British Columbia's
mineral resources, and implements policies and programs respecting their
development while protecting the environment. In addition, the Ministry
regulates and inspects the exploration and mineral production industries in
British Columbia to protect workers, the public and the environment.
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The material legislation applicable to us is the Mineral Tenure Act,
administered by the Mineral Titles Branch of the Ministry of Energy and Mines,
and the Mines Act, as well as the Health, Safety and Reclamation Code and the
Mineral Exploration Code.
The Mineral Tenure Act and its regulations govern the procedures involved in the
location, recording and maintenance of mineral titles in British Columbia. The
Mineral Tenure Act also governs the issuance of leases which are long term
entitlements to minerals, designed as production tenures. The Mineral Tenure
Act does not apply to minerals held by crown grant or by freehold tenure.
All mineral exploration activities carried out on a mineral claim or mining
lease in British Columbia must be in compliance with the Mines Act. The Mines
Act applies to all mines during exploration, development, construction,
production, closure, reclamation and abandonment. It outlines the powers of the
Chief Inspector of Mines, to inspect mines, the procedures for obtaining permits
to commence work in, on or about a mine and other procedures to be observed at a
mine. Additionally, the provisions of the Health, Safety and Reclamation Code
for mines in British Columbia contain standards for employment, occupational
health and safety, accident investigation, work place conditions, protective
equipment, training programs, and site supervision. Also, the Mineral
Exploration Code contains standards for exploration activities including
construction and maintenance, site preparation, drilling, trenching and work in
and about a water body.
Additional approvals and authorizations may be required from other government
agencies, depending upon the nature and scope of the proposed exploration
program. If the exploration activities require the falling of timber, then
either a free use permit or a license to cut must be issued by the Ministry of
Forests. Items such as waste approvals may be required from the Ministry of
Environment, Lands and Parks if the proposed exploration activities are
significantly large enough to warrant them. Waste approvals refer to the
disposal of rock materials removed from the earth which must be reclaimed. An
environmental impact statement may be required.
We have not budgeted for regulatory compliance costs in the proposed work
program recommended by the geological report. British Columbia law requires
that a holder of title to mineral claims must spend at least CDN$100 per mineral
claim unit per year in order to keep the property in good standing, which we
have done. We will also have to sustain the cost of reclamation and
environmental remediation for all exploration work undertaken. Both reclamation
and environmental remediation refer to putting disturbed ground back as close to
its original state as possible. Other potential pollution or damage must be
cleaned-up and renewed along standard guidelines outlined in the usual permits.
Reclamation is the process of bringing the land back to its natural state after
completion of exploration activities. Environmental remediation refers to the
physical activity of taking steps to remediate, or remedy, any environmental
damage caused. The amount of these costs is not known at this time as we do not
know the extent of the exploration program that will be undertaken beyond
completion of the recommended work program. Because there is presently no
information on the size, tenor, or quality of any resource or reserve at this
time, it is impossible to assess the impact of any capital expenditures on
earnings, our competitive position or on us in the event a potentially economic
deposit is discovered.
Prior to undertaking mineral exploration activities, we must make application
under the British Columbia Mines Act for a permit, if we anticipate disturbing
land. A permit is issued within 45 days of a complete and satisfactory
application. We do not anticipate any difficulties in obtaining a permit, if
needed. Minimal disturbance to the land is part of routine exploration work and
thus we do not anticipate any difficulties in obtaining a permit.
COMPETITION
We are a mineral resource exploration and development company. We compete with
other mineral resource exploration and development companies for financing and
for the acquisition of new mineral properties. Many of the mineral resource
exploration and development companies with whom we compete have greater
financial and technical resources than us. Accordingly, these competitors may
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be able to spend greater amounts on acquisitions of mineral properties of merit,
on exploration of their mineral properties and on development of their mineral
properties. In addition, they may be able to afford greater geological
expertise in the targeting and exploration of mineral properties. This
competition could result in competitors having mineral properties of greater
quality and interest to prospective investors who may finance additional
exploration and development. This competition could adversely impact on our
ability to finance further exploration and to achieve the financing necessary
for us to develop our mineral properties.
EMPLOYEES
We have no employees as of the date of this Annual Report other than our sole
officer, Randy White. We conduct our business largely through agreements with
consultants and arms-length third parties.
RESEARCH AND DEVELOPMENT EXPENDITURES
We have not incurred any research or development expenditures since our
incorporation.
SUBSIDIARIES
We have one wholly owned British Columbia subsidiary, named Iguana Explorations
Inc.
PATENTS AND TRADEMARKS
We do not own, either legally or beneficially, any patent or trademark.
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below and the other information in this
Annual Report before investing in our common stock. If any of the following
risks occur, our business, operating results and financial condition could be
seriously harmed. The trading price of our common stock could decline due to any
of these risks, and you may lose all or part of your investment.
RISKS RELATED TO OUR FINANCIAL CONDITION AND BUSINESS MODEL
BECAUSE OUR SOLE EXECUTIVE OFFICER DOES NOT HAVE FORMAL TRAINING SPECIFIC TO THE
TECHNICALITIES OF MINERAL EXPLORATION, THERE IS A HIGHER RISK OUR BUSINESS WILL
FAIL
Mr. Randy White, our sole officer and director, does not have any formal
training as a geologist or in the technical aspects of management of a mineral
exploration company. Our management lacks technical training and experience
with exploring for, starting, and operating a mine. With no direct training or
experience in these areas, our management may not be fully aware of the specific
requirements related to working within this industry. Our management's
decisions and choices may not take into account standard engineering or
managerial approaches mineral exploration companies commonly use. Consequently,
our operations, earnings, and ultimate financial success could suffer
irreparable harm due to management's lack of experience in this industry.
WE HAVE YET TO ATTAIN PROFITABLE OPERATIONS AND BECAUSE WE WILL NEED ADDITIONAL
FINANCING TO FUND OUR EXTENSIVE EXPLORATION ACTIVITIES, OUR ACCOUNTANTS BELIEVE
THERE IS SUBSTANTIAL DOUBT ABOUT THE COMPANY'S ABILITY TO CONTINUE AS A GOING
CONCERN
We have incurred a net loss of $828,348 for the period from April 12, 2002
(inception) to August 31, 2005, and have no revenue to date. Our future is
dependent upon our ability to obtain financing and upon future profitable
operations from the development of its mineral claims. These factors raise
substantial doubt that we will be able to continue as a going concern.
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IF WE DO NOT OBTAIN ADDITIONAL FINANCING, OUR BUSINESS WILL FAIL
Our current operating funds are insufficient to complete the full exploration of
the mineral claims and begin mining efforts should the mineral claims prove
commercially viable. Therefore, we will need to obtain additional financing in
order to complete our full business plan. As of August 31, 2005, we had cash
on hand of $1,260. We currently do not have any operations and we have no
income. Our business plan calls for significant expenses in connection with the
exploration of our mineral claims. We will need additional financing to proceed
past stage two of our exploration program. We will also require additional
financing if the costs of the exploration of our mineral claims are greater than
anticipated. We will also require additional financing to sustain our business
operations if we are not successful in earning revenues. We currently do not
have any arrangements for financing and we may not be able to obtain financing
when required. Obtaining additional financing would be subject to a number of
factors, including the market prices for the mineral property and gold, silver
and copper. These factors may make the timing, amount, terms or conditions of
additional financing unavailable to us.
SINCE THIS IS AN EXPLORATION PROJECT, WE FACE A HIGH RISK OF BUSINESS FAILURE
DUE TO OUR INABILITY TO PREDICT THE SUCCESS OF OUR BUSINESS
We have just begun the initial stages of exploration of our mineral claims, and
thus have no way to evaluate the likelihood that we will be able to operate the
business successfully. We were incorporated on April 12, 2002 and to date have
been involved primarily in organizational activities, the acquisition of the
mineral claims, obtaining a summary geological report and performing certain
limited work on our mineral claims. We have not earned any revenues to date.
BECAUSE OF THE UNIQUE DIFFICULTIES AND UNCERTAINTIES INHERENT IN MINERAL
EXPLORATION VENTURES, WE FACE A HIGH RISK OF BUSINESS FAILURE
You should be aware of the difficulties normally encountered by new mineral
exploration companies and the high rate of failure of such enterprises. The
likelihood of success must be considered in light of the problems, expenses,
difficulties, complications and delays encountered in connection with the
exploration of the mineral properties that we plan to undertake. These potential
problems include, but are not limited to, unanticipated problems relating to
exploration, and additional costs and expenses that may exceed current
estimates. The expenditures to be made by us in the exploration of the mineral
claims may not result in the discovery of mineral deposits. Problems such as
unusual or unexpected formations and other conditions are involved in mineral
exploration and often result in unsuccessful exploration efforts. The
acquisition of additional claims will be dependent upon us possessing capital
resources at the time in order to purchase such claims. If no funding is
available, we may be forced to abandon our operations.
BECAUSE WE ANTICIPATE OUR OPERATING EXPENSES WILL INCREASE PRIOR TO OUR EARNING
REVENUES, WE MAY NEVER ACHIEVE PROFITABILITY
Prior to completion of our exploration stage, we anticipate that we will incur
increased operating expenses without realizing any revenues. We therefore
expect to incur significant losses into the foreseeable future. We recognize
that if we are unable to generate significant revenues from the exploration of
our mineral claims, we will not be able to earn profits or continue operations.
There is no history upon which to base any assumption as to the likelihood that
we will prove successful, and we can provide no assurance that we will generate
any revenues or ever achieve profitability. If we are unsuccessful in
addressing these risks, our business will most likely fail.
BECAUSE OF THE INHERENT DANGERS INVOLVED IN MINERAL EXPLORATION, THERE IS A RISK
THAT WE MAY INCUR LIABILITY OR DAMAGES AS WE CONDUCT OUR BUSINESS
The search for valuable minerals involves numerous hazards. As a result, we may
become subject to liability for such hazards, including pollution, cave-ins and
other hazards against which we cannot insure or against which we may elect not
to insure. At the present time we have no coverage to insure against these
hazards. The payment of such liabilities may have a material adverse effect on
our financial position.
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BECAUSE ACCESS TO OUR MINERAL CLAIMS MAY BE RESTRICTED BY INCLEMENT WEATHER, WE
MAY BE DELAYED IN OUR EXPLORATION
Access to the Saucy and Salsa mineral claims may be restricted through some of
the year due to weather in the area. As a result, any attempt to test or
explore the property is largely limited to the times when weather permits such
activities. These limitations can result in significant delays in exploration
efforts. Such delays can have a significant negative effect on our exploration
efforts
The mineral claims are in an essentially undeveloped area in British Columbia.
The area consists of many mountains and lakes with heavy forestation. An
unpaved logging road is the only access. Winters are often severe with rain,
freezing rain, wind, and snow common between November and March, making the
logging road often unsafe and impassable for travel.
BECAUSE OUR PRESIDENT HAS ONLY AGREED TO PROVIDE HIS SERVICES ON A PART-TIME
BASIS, HE MAY NOT BE ABLE OR WILLING TO DEVOTE A SUFFICIENT AMOUNT OF TIME TO
OUR BUSINESS OPERATIONS, CAUSING OUR BUSINESS TO FAIL
Mr. Randy White, our president, provides his management services to us on a
part-time basis. Because we are in the early stages of our business, Mr. White
will not be spending a significant amount of time on our business. Mr. White
expects to expend approximately ten hours per week on our business. Competing
demands on Mr. White's time may lead to a divergence between his interests and
the interests of other shareholders.
RISKS RELATED TO LEGAL UNCERTAINTY AND REGULATIONS
As we undertake exploration of our mineral claims, we will be subject to
compliance with government regulation that may increase the anticipated cost of
our exploration program
There are several governmental regulations that materially restrict mineral
exploration. We will be subject to the laws of the Province of British Columbia
as we carry out our exploration program. We may be required to obtain work
permits, post bonds and perform remediation work for any physical disturbance to
the land in order to comply with these laws. While our planned exploration
program budgets for regulatory compliance, there is a risk that new regulations
could increase our costs of doing business and prevent us from carrying out our
exploration program.
RISKS RELATED TO THE MARKET FOR OUR COMMON STOCK
OUR COMMON STOCK WILL BE "PENNY STOCK", WITH THE RESULT THAT TRADING OF OUR
COMMON STOCK IN ANY SECONDARY MARKET MAY BE IMPEDED.
The SEC has adopted rules that regulate broker-dealer practices in connection
with transactions in penny stocks. Penny stocks are generally equity securities
with a price of less than $5.00, other than securities registered on certain
national securities exchanges or quoted on the Nasdaq system, provided that
current price and volume information with respect to transactions in such
securities is provided by the exchange or system. The penny stock rules require
a broker-dealer, prior to a transaction in a penny stock, to deliver a
standardized risk disclosure document prepared by the Commission, that: (a)
contains a description of the nature and level of risk in the market for penny
stocks in both public offerings and secondary trading; (b) contains a
description of the broker's or dealer's duties to the customer and of the rights
and remedies available to the customer with respect to a violation to such
duties or other requirements of Securities' laws; (c) contains a brief, clear,
narrative description of a dealer market, including bid and ask prices for penny
stocks and the significance of the spread between the bid and ask price; (d)
contains a toll-free telephone number for inquiries on disciplinary actions; (e)
defines significant terms in the disclosure document or in the conduct of
trading in penny stocks; and (f) contains such other information and is in such
form, including language, type, size and format, as the Commission shall
require by rule or regulation. The broker-dealer also must provide, prior to
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effecting any transaction in a penny stock, the customer with: (a) bid and offer
quotations for the penny stock; (b) the compensation of the broker-dealer and
its salesperson in the transaction; (c) the number of shares to which such bid
and ask prices apply, or other comparable information relating to the depth and
liquidity of the market for such stock; and (d) a 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 those 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 acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading
activity in the secondary market for our stock if it becomes subject to these
penny stock rules. Therefore, if our common stock becomes subject to the penny
stock rules, stockholders may have difficulty selling those securities.
ITEM 2. DESCRIPTION OF PROPERTY.
We own, through our subsidiary, a 100% interest in the Saucy and Salsa mineral
claims, which provides us with the right to explore for and extract minerals.
We do not own any real property rights in the Saucy or Salsa mineral claims or
in any other property.
ITEM 3. LEGAL PROCEEDINGS.
We are not a party to any material legal proceedings and to our knowledge, no
such proceedings are threatened or contemplated.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to our security holders for a vote during the fourth
quarter of our fiscal year ending August 31, 2005.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Our common stock is currently listed on the National Quotation Bureau's Pink
Sheets under the symbol "ISTG".
Our shares of common stock originally traded on the OTC Bulletin Board
commencing on March 8, 2004 under the symbol "IGVL". At that time, our
corporate name was "Iguana Ventures, Ltd." On June 14, 2004, we changed our
name from Iguana Ventures, Ltd. to Integrated Security Technologies, Inc. and
concurrently changed our stock symbol to "ISTG". On November 19, 2004, our
common shares ceased quotation on the OTC Bulletin Board and commenced quotation
on the National Quotation Bureau's Pink Sheets.
The OTC Bulletin Board and the National Quotation Bureau's Pink Sheets are
networks of security dealers who buy and sell stock. A computer network that
provides information on current "bids" and "asks", as well as volume
information, connects the dealers. The following table sets forth the high and
low closing prices of our common shares traded on the OTC Bulletin Board and
Pink Sheets:
Period High Low
- -------------------------------------- ---------- -----
March 8, 2004 to May 31, 2004 $3.00 $0.04
June 1, 2004 to August 31, 2004 $1.25 $0.55
September 1, 2004 to November 30, 2004 $1.01 $1.01
December 1, 2004 to February 28, 2005 $0.51 $0.30
March 1, 2005 to May 31, 2005 no trades
June 1, 2005 to August 31, 2005 $0.30 $0.30
11
The above quotations are taken from information provided by Canada Stockwatch
and reflect inter-dealer prices, without retail mark-up, mark-down or commission
and may not represent actual transactions.
HOLDERS OF OUR COMMON STOCK
As of March 23, 2005, we had 29 registered stockholders holding 18,475,551
shares of our common stock.
DIVIDENDS
We have neither declared nor paid any cash dividends on our capital stock and do
not anticipate paying cash dividends in the foreseeable future. Our current
policy is to retain any earnings in order to finance the expansion of our
operations. Our board of directors will determine future declaration and payment
of dividends, if any, in light of the then-current conditions they deem relevant
and in accordance with the Nevada Revised Statutes.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
PLAN OF OPERATIONS
Our business plan is to follow the recommendations of our consulting geologist
and proceed with completion of the work program recommended for the Salsa
mineral claims at an estimated cost of $7,000.
We anticipate that we will incur $15,000 in operating expenses over the next
twelve months. Operating expenses will include mineral claims renewal and
professional legal and accounting expenses associated with being a reporting
issuer under the Securities Exchange Act of 1934.
Our total expenditures over the next twelve months are anticipated to be
approximately $22,000. Our present cash reserves are not sufficient for us to
carry out our plan of operations without additional financing. Our sole
director, Randy White, has made an oral commitment to loan us the necessary
funds to complete our business plan, however he is under no obligation to do so.
We do not have any other financing arrangements in place and there is no
assurance that we will be able to secure the necessary financing.
In the next twelve months, we do not plan to make any purchases or sales of
significant equipment, nor do we plan to make any significant changes in our
number of employees.
LIMITED OPERATING HISTORY; NEED FOR ADDITIONAL CAPITAL
There is no historical financial information about us upon which to base an
evaluation of our performance. We are an exploration stage corporation and have
not generated any revenues from operations. We cannot guarantee we will be
successful in our business operations. Our business is subject to risks inherent
in the establishment of a new business enterprise, including limited capital
resources, possible delays in the exploration of our properties, and possible
cost overruns due to price and cost increases in services.
To become profitable and competitive, we must conduct research and exploration
of our properties before we start production of any minerals we may find. We are
seeking equity financing to provide for the capital required to implement our
research and exploration phases.
12
We have no assurance that future financing will be available to us on acceptable
terms. If financing is not available on satisfactory terms, we may be unable to
continue, develop or expand our operations. Equity financing could result in
additional dilution to existing shareholders.
RESULTS OF OPERATIONS FOR THE PERIOD ENDED AUGUST 31, 2005
We have not earned any revenues to date. We do not anticipate earning revenues
until such time as we enter into commercial production of our mineral
properties. We are presently in the exploration stage of our business and we
can provide no assurance that we will discover commercially exploitable levels
of mineral resources on our properties, or if such deposits are discovered, that
we will enter into further substantial exploration programs.
We incurred operating expenses of $828,348 for the period from inception on
April 12, 2002 to August 31, 2005. The expenses consisted of $392,483 in general
and administrative expenses, interest expense of $973 and other comprehensive
loss of $16 and a $434,876 loss on impairment. The loss of impairment relates
to the following transaction:
On May 27, 2004, Integrated acquired 100% of the issued and outstanding shares
of Integrated Security Technologies, Inc., a private New Jersey company
("ISTI-NJ") in exchange for 15,258,797 shares of our common stock. In a
separate agreement, the majority shareholder of ISTI-NJ purchased 19,800,000
shares of our common stock from Michael Young, our majority shareholder at the
time. The total company shares owned by ISTI-NJ shareholders immediately
following the merger was 35,058,797. The acquisition was considered a reverse
merger. In April 2005, most parties involved agreed to unwind the May 27, 2004
transaction as if it never occurred. 33,914,387 of our shares issued to ISTI-NJ
and its Officers were returned to treasury and canceled and the ISTI-NJ shares,
except for 7.5%, were returned to the ISTI-NJ shareholders. The statement of
stockholders equity reflects the cancellation of the 19,800,000, but treats the
15,258,797 as if it were never issued. We hold 7.5% of ISTI-NJ and the ISTI-NJ
officer still holds 1,144,410 shares of our common stock. The 7.5% of ISTI-NJ
was valued using the fair value of the 1,144,410 shares of our common stock.
The value of the investment in ISTI-NJ was $434,876. Our management determined
the investment in ISTI-NJ was impaired as of the date they took ownership in
ISTI-NJ due to ISTI-NJ's inability to produce historical financial statements.
NET LOSS
We incurred a loss in the amount of $828,348 for the period from inception to
August 31, 2005. Our loss was attributable entirely to operating expenses.
LIQUIDITY AND FINANCIAL CONDITION
We have cash on hand of $0 as of August 31, 2005. We estimate that our expenses
over the next twelve months will total $22,000. Our working capital is
insufficient to pay for the costs of our exploration programs and anticipated
administrative expenses. Our sole director, Randy White, has made an oral
commitment to provide adequate funding to enable us to complete the exploration
programs. However, he is under no legal obligation to do so.
We have not attained profitable operations and are dependent upon obtaining
financing to pursue any extensive exploration activities. For these reasons our
auditors stated in their report that they have substantial doubt we will be able
to continue as a going concern.
The financial statements accompanying this annual report contemplate our
continuation as a going concern. However, we have sustained substantial losses
and are still in the development stage. Additional funding will be necessary to
continue development and marketing of our product.
13
OFF-BALANCE SHEET ARRANGEMENTS
We have no significant 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
stockholders.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with United States
generally accepted accounting principles requires our management to make
estimates and assumptions that affect the reported amount 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.
Our management routinely makes judgments and estimates about the effects of
matters that are inherently uncertain.
We have identified certain accounting policies, described below, that are most
important to the portrayal of our current financial condition and results of
operations.
Mineral Claim Payments and Exploration Costs
We expense all costs related to the acquisition, maintenance and exploration of
mineral claims in which we have secured exploration rights prior to
establishment of proven and probable reserves. To date, we have not established
the commercial feasibility of our exploration prospects, therefore, all costs
are being expensed.
Foreign Currency Translation
Our functional currency is the U.S. dollar. Transactions in foreign currency
are translated into U.S. dollars as follows:
1. Monetary items at the rate prevailing at the balance sheet date;
2. Non-monetary items at the historical exchange rate; and
3. Revenue and expense at the average rate in effect during the applicable
accounting period.
Income Taxes
We have adopted Statement of Financial Accounting Standards No. 109 -
"Accounting for Income taxes" (SFAS 109). This standard requires the use of an
asset and liability approach for financial accounting, and reporting on income
taxes. If it is more likely than not that some portion or all of a deferred tax
asset will not be realized, a valuation allowance is recognized.
14
ITEM 7. FINANCIAL STATEMENTS.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Integrated Security Technologies, Inc.
(formerly Iguana Ventures, Ltd.)
(an exploration stage company)
We have audited the accompanying consolidated balance sheet of Integrated
Security Technologies, Inc. ("Integrated") as of August 31, 2005, and the
related consolidated statements of expenses, changes in stockholders' deficit,
and cash flows for the two years then ended and the period from April 12, 2002
(Inception) through August 31, 2005. These financial statements are the
responsibility of Integrated's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Integrated, as of August 31, 2005, and the results of its consolidated
operations and its cash flows for the periods described in conformity with
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that
Integrated will continue as a going concern. As discussed in Note 2 to the
financial statements, Integrated suffered recurring losses from operations and
has negative working capital, which raises substantial doubt about its ability
to continue as a going concern. Management's plans regarding those matters are
described in Note 2. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
As discussed in Note 7 to the consolidated financial statements, an error
related to fiscal 2004 resulting in understatements of expense, common stock and
paid in capital was discovered by management in 2005. Accordingly, adjustments
were made as of August 31, 2004 to correct the error.
MALONE & BAILEY, PC
www.malone-bailey.com
Houston, Texas
September 30, 2005
15
INTEGRATED SECURITY TECHNOLOGIES, INC.
(formerly Iguana Ventures, Ltd.)
(an exploration stage company)
CONSOLIDATED BALANCE SHEET
August 31, 2005
ASSETS
Prepaid expense $ 1,260
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable and accrued liabilities $ 5,633
Due to shareholder 40,435
-----------
Total current liabilities 46,068
-----------
Commitments -
Stockholders' Deficit
Common Stock, $0.001 par value, 200,000,000 shares
authorized, 18,475,551 shares issued and outstanding 18,475
Additional paid-in capital 765,065
Accumulated other comprehensive loss:
Foreign currency translation (16)
Deficit accumulated during the exploration stage (828,332)
-----------
Total Stockholders' Deficit (44,808)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,260
===========
See accompanying summary of accounting policies
and notes to financial statements.
16
INTEGRATED SECURITY TECHNOLOGIES, INC.
(formerly Iguana Ventures, Ltd.)
(an exploration stage company)
CONSOLIDATED STATEMENTS OF EXPENSES
Years Ended August 31, 2005, and 2004, and
the Period from April 12, 2002 (Inception) Through August 31, 2005
Inception
2004 Through
2005 (Restated) 2005
------------- ------------- -------------
General & Administrative Expenses $ 44,808 $ 282,496 $ 392,483
Loss on impairment - 434,876 434,876
Interest Expense 973 - 973
------------- ------------- -------------
Net Loss (45,781) (717,372) (828,332)
Other Comprehensive Loss - (16) (16)
------------- ------------- -------------
Total Comprehensive Loss $ (45,781) $ (717,388) $ (828,348)
============= ============= =============
Net loss per share
Basic and diluted $ (0.00) $ (0.02)
============= =============
Weighted average shares outstanding
Basic and diluted 18,475,551 30,538,788
============= =============
See accompanying summary of accounting policies
and notes to financial statements.
17
INTEGRATED SECURITY TECHNOLOGIES, INC.
(formerly Iguana Ventures, Ltd.)
(an exploration stage company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
Period from April 12, 2002 (Inception) Through August 31, 2005
Deficit
accumulated
Additional during Other
Common Stock paid-in exploration comprehensive
Shares $ capital stage loss Total
----------- -------- -------- ----------- ----------- ----------
Balances at August
12, 2000 (Inception) - $ - $ - $ - $ - $ -
Shares issued for
cash 34,828,200 34,828 18,872 - - 53,700
Net Loss - - - (65,179) - (65,179)
----------- -------- -------- ----------- ----------- ----------
Balances at
August 31, 2003 34,828,200 34,828 18,872 (65,179) - (11,479)
Shares cancelled (19,800,000) (19,800) 19,800 - - -
Shares issued for
investment in
ISTI-NJ 1,144,410 1,144 433,732 - - 434,876
Shares issued for
for offering costs 1,752,941 1,753 (1,753) - - -
Shares issued for
cash 550,000 550 274,450 - - 275,000
Contributions to
paid in capital - - 18,991 - - 18,991
Other comprehensive
loss - - - - (16) (16)
Net Loss - - - (717,372) - (717,372)
----------- -------- -------- ----------- ----------- ----------
Balances at
August 31, 2004
(Restated) 18,475,551 18,475 764,092 (782,551) (16) -
Imputed interest - - 973 - - 973
Net loss - - - (45,781) - (45,781)
----------- -------- -------- ----------- ----------- ----------
Balances at
August 31, 2005 18,475,551 $ 18,475 $765,065 (828,332) $ (16) $ (44,808)
=========== ======== ======== =========== =========== ==========
See accompanying summary of accounting policies
and notes to financial statements.
18
INTEGRATED SECURITY TECHNOLOGIES, INC.
(formerly Iguana Ventures, Ltd.)
(an exploration stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended August 31, 2005, and 2004, and
the Period from April 12, 2002 (Inception) Through August 31, 2005
Inception
2004 Through
2005 (Restated) 2005
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (45,781) $ (717,372) $ (828,332)
Adjustments to reconcile net loss to
cash used in operating activities:
Loss on impairment of investment - 434,876 434,876
Changes in:
Prepaid expenses (1,260) - (1,260)
Accounts payable & accrued expenses 5,633 (9,116) 5,633
Imputed interest 973 - 973
------------ ------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (40,435) (291,612) (388,110)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sales of common stock - 275,000 328,700
Net change in due to shareholder 40,435 15,614 59,426
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 40,435 290,614 388,126
------------ ------------ ------------
EFFECT OF EXCHANGE RATE ON CASH - (16) (16)
NET CHANGE IN CASH - (1,014) -
CASH AT BEGINNING OF PERIOD - 1,014 -
------------ ------------ ------------
CASH AT END OF PERIOD $ - $ - $ -
============ ============ ============
Cash paid for:
Interest $ - $ - $ -
Income tax - - -
Non-cash transactions:
Forgiveness of debt by shareholder - 18,991 18,991
See accompanying summary of accounting policies
and notes to financial statements.
19
INTEGRATED SECURITY TECHNOLOGIES, INC.
(formerly Iguana Ventures, Ltd.)
(an exploration stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of business. Integrated Security Technologies, Inc. ("Integrated") was
incorporated in the State of Nevada, on April 12, 2002.
Integrated has been in the exploration stage since its formation and has not yet
realized any revenues from its planned operations. It is primarily engaged in
the acquisition and exploration of mining claims. Upon location of a commercial
mining reserve, Integrated expects to actively prepare the site for its
extraction and enter an exploration stage.
Integrated's fiscal year end is August 31st.
Basis of presentation. The consolidated financial statements include the
accounts of Integrated and its wholly owned Canadian subsidiary, Iguana
Explorations, Inc. Significant inter-company accounts and transactions have been
eliminated.
Restatements of fiscal 2004 were made. See note 7 for details.
Reclassifications. Certain prior year amounts have been reclassified to conform
to the current year presentation.
Use of Estimates. The preparation of consolidated financial statements in
conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes. Actual
results could differ from those estimates.
Cash and Cash Equivalents. For purposes of the consolidated statement of cash
flows, Integrated considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Revenue Recognition. From inception, Integrated has been engaged in acquisition
and exploration of mining properties activities and has not recognized any
revenues.
Foreign Currency Transactions. Iguana Explorations' functional currency is the
Canadian dollar. Management has adopted SFAS No. 52, "Foreign Currency
Translation". Monetary assets and liabilities denominated in foreign currencies
are translated into United States dollars at rates of exchange in effect at the
balance sheet date. Non-monetary assets, liabilities and items recorded in
income arising from transactions denominated in foreign currencies are
translated at rates of exchange in effect at the date of the transaction.
Income taxes. Integrated recognizes deferred tax assets and liabilities based on
differences between the financial reporting and tax bases of assets and
liabilities using the enacted tax rates and laws that are expected to be in
effect when the differences are expected to be recovered. Integrated provides a
valuation allowance for deferred tax assets for which it does not consider
realization of such assets to be more likely than not. Since Integrated has had
recurring operating losses since inception and there is no assurance of future
taxable income, a valuation allowance has been established to fully offset the
deferred tax assets.
20
Basic and diluted net loss per share. Basic and diluted net loss per share
calculations are presented in accordance with Financial Accounting Standards
Statement 128, and are calculated on the basis of the weighted average number of
common shares outstanding during the year. They include the dilutive effect of
common stock equivalents in years with net income. Basic and diluted loss per
share is the same due to the absence of common stock equivalents.
Recently issued accounting pronouncements. In December 2004, the FASB issued
SFAS No. 123R, "Accounting for Stock-Based Compensation" SFAS No. 123R
establishes standards for the accounting for transactions in which an entity
exchanges its equity instruments for goods or services. This Statement focuses
primarily on accounting for transactions in which an entity obtains employee
services in share-based payment transactions. SFAS No. 123R requires that the
fair value of such equity instruments be recognized as expense in the historical
financial statements as services are performed. Prior to SFAS No. 123R, only
certain pro forma disclosures of fair value were required. SFAS No. 123R shall
be effective for small business issuers as of the beginning of the first interim
or annual reporting period that begins after December 15, 2005. The adoption of
this new accounting pronouncement is not expected to have a material impact on
the financial statements of Integrated.
Integrated does not expect the adoption of any other recently issued accounting
pronouncements to have a significant impact on Integrated results of operations,
financial position or cash flow.
NOTE 2 - GOING CONCERN
As shown in the accompanying financial statements, Integrated incurred recurring
net losses of $45,781, and $717,372 in fiscal 2005 and 2004 respectively, has an
accumulated deficit of $828,332 as of August 31, 2005. These conditions raise
substantial doubt as to Integrated's ability to continue as a going concern.
Management is trying to raise additional capital through sales of stock. The
consolidated financial statements do not include any adjustments that might be
necessary if Integrated is unable to continue as a going concern.
NOTE 3 - MINERAL CLAIM INTERESTS
On June 1, 2002, Integrated acquired, by staking, a 100% interest in the Saucy
#1 through #4 mineral claims located in British Columbia, Canada for cash
consideration of $3,258.
In January 2004, Integrated acquired a 100% interest in the Salsa #1 through #6
mineral claims for cash consideration of $400.
Since Integrated has not established the commercial feasibility of the mineral
claims, the acquisition costs have been expensed.
Note 4 - RELATED PARTY TRANSACTIONS
In fiscal 2004 a shareholder paid $18,991 of expenses on behalf of the company.
The debt was forgiven by the shareholder.
21
During fiscal 2005, a director of Integrated loaned Integrated $40,435. The loan
is unsecured, due on demand, and bears no interest. Interest of 8% is being
expensed and charged against paid in capital.
The president of Integrated provides office space to Integrated under a verbal
agreement on a month to month rent free basis.
Note 5 - COMMON STOCK
Effective June 14, 2004, Integrated effected a 3.3:1 forward stock split,
increased the amount of authorized shares to two hundred million (200,000,000),
and reauthorized the par value of $.001 per share of common stock. All share and
per share amounts reflected in these consolidated financial statements have been
adjusted as if the split were effective on the first day of the first period
presented.
During fiscal 2002, Integrated sold 34,828,200 shares of common stock to
investors for $53,700 of cash.
On May 27, 2004, Integrated acquired 100% of the issued and outstanding shares
of Integrated Security Technologies, Inc. (a New Jersey company) ("ISTI-NJ") in
exchange for 15,258,797 shares of Integrated's common stock. In a separate
agreement, the majority shareholder of ISTI-NJ purchased 19,800,000 shares of
Integrated from Integrated's then majority shareholder. The total Integrated
shares owned by ISTI-NJ shareholders immediately following the merger was
35,058,797. The acquisition was considered a reverse merger. In April 2005, most
parties involved agreed to unwind the May 27, 2004 transaction as if it never
occurred. 33,914,387 Integrated shares issued to ISTI-NJ and its Officers were
returned to Integrated and canceled and the ISTI-NJ shares except for 7.5% were
returned to the ISTI shareholders. The statement of stockholders equity reflects
the cancellation of the 19,800,000, but treats the 15,258,797 as if it were
never issued. Integrated holds 7.5% of ISTI-NJ and the ISTI-NJ officer still
holds 1,144,410 shares of Integrated. The 7.5% of ISTI-NJ was valued using the
fair value of the 1,144,410 Integrated shares. The value of the investment in
ISTI-NJ was $434,876. Integrated's management determined the investment in
ISTI-NJ was impaired as of the date they took ownership in ISTI-NJ due to
ISTI-NJ's inability to produce historical financial statements.
During fiscal 2004, Integrated sold 550,000 shares of common stock for $275,000.
In connection with the sale, Integrated issued 1,752,941 shares of common stock
to the placement agent for fees associated with the stock sale.
During fiscal 2004, Integrated's majority shareholder agreed to contribute
$18,991 owed to them to Integrated's paid in capital.
NOTE 6 - INCOME TAXES
Integrated uses the liability method, where deferred tax assets and liabilities
are determined based on the expected future tax consequences of temporary
differences between the carrying amounts of assets and liabilities for financial
and income tax reporting purposes. During fiscal 2005, Integrated incurred net
losses and, therefore, has no tax liability. The net deferred tax asset
generated by the loss carry-forward has been fully reserved. The cumulative net
22
operating loss carry-forward is $394,000 at August 31, 2005, and will expire in
the years 2022 to 2025.
At August 31, 2005, deferred tax assets consisted of the following:
Deferred tax assets $ 133,775
Less: valuation allowance (133,775)
-------------
Net deferred tax asset $ -
=============
NOTE 7 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
In October 2005, Integrated management discovered that shares of common stock
previously accounted for as never issued were in fact issued and outstanding. As
part of the unwind of the ISTI-NJ acquisition (See note 5 for details),
Integrated management considered all shares issued in the transaction canceled.
In October 2005, Integrated management discovered that an officer of ISTI-NJ who
received 1,144,410 shares of Integrated for 7.5% of ISTI-NJ was not party to the
unwind agreement. Therefore, Integrated holds 7.5% of ISTI-NJ and the ISTI-NJ
officer still holds 1,144,410 shares of Integrated. The 7.5% of ISTI-NJ was
valued using the fair value of the 1,144,410 Integrated shares. The value of the
investment in ISTI-NJ was $434,876. Integrated's management determined the
investment in ISTI-NJ was impaired as of the date they took ownership in ISTI-NJ
due to ISTI-NJ's inability to produce historical financial statements. This
resulted in impairment expense of $434,876. For the year ending August 31, 2004,
this caused deficit accumulated during the development stage and net loss to be
understated by $434,876, common stock to be understated by $1,144 and paid in
capital to be understated by $433,732.
23
ITEM 8A. CONTROLS AND PROCEDURES
As required by Rule 13a-15 under the Exchange Act, we carried out an evaluation
of the effectiveness of the design and operation of our disclosure controls and
procedures as of August 31, 2005. This evaluation was carried out under the
supervision and with the participation of our Chief Executive Officer and our
Chief Financial Officer. Based upon that evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and
procedures are not effective in timely alerting management to material
information relating to us required to be included in our periodic SEC filings.
There have been no significant changes in our internal controls or in other
factors that could significantly affect internal controls subsequent to the date
we carried out our evaluation.
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed our reports filed
or submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in our reports filed under the Exchange Act is
accumulated and communicated to management, including our Chief Executive
Officer and Chief Financial Officer, to allow timely decisions regarding
required disclosure.
During our fiscal year ended August 31, 2005, there were no changes in our
internal control over financial reporting that have materially affected, or are
reasonably likely to affect, our internal control over financial reporting.
24
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
Our executive officers and directors and their respective ages as of April 13,
2005 are as follows:
DIRECTORS:
Name of Director Age
- ---------------------- -----
Randy White 37
EXECUTIVE OFFICERS:
Name of Officer Age Office
- -------------------- ----- -------
Randy White 37 President, Chief Executive Officer,
Secretary and Treasurer
Set forth below is a brief description of the background and business experience
of each of our executive officers and directors for the past five years.
RANDY WHITE has acted as our President, Chief Executive Officer, Secretary,
Treasurer and as a director since May 31, 2005. Currently Mr. White commits
approximately 10 hours per week to our operations. Mr. White is a real estate
property developer and financial investor. His background is in residential and
commercial real estate development and enterprise management. Mr. White has over
fifteen years experience developing commercial and residential real estate. From
1995 to 1998 Mr. White was a co-owner of Ocean Pacific Developments, Inc.,
Vancouver BC. Mr. White was responsible for the financing of development
projects and the management of such developments from conception to completion.
Ocean Pacific Developments, Inc. developed residential and commercial real
estate in the Greater Vancouver area. His expertise in property development and
financing has lead to the establishment of his own investment enterprise -
Stratus Investments Group, Inc.
As founder and President of Stratus Investments Group in 1999, a private
investment enterprise, Mr. White has successfully managed an array of investment
activities including: all types of mortgage financing, bridge financing in real
estate development and corporate finance for public companies. Mr. White is
currently the President of Stratus Investments Group, Inc. and the company
continues to operate in the same capacity since the date of incorporation.
Mr. Randy White does not have any formal training as a geologist or in the
technical aspects of management of a mineral exploration company. He lacks
technical training and experience with exploring for, starting, and operating a
mine. With no direct training or experience in these areas, Mr. White may not
be fully aware of the specific requirements related to working within this
industry. His decisions and choices may not take into account standard
engineering or managerial approaches mineral exploration companies commonly use.
TERM OF OFFICE
Our directors are appointed for a one-year term to hold office until the next
annual general meeting of our shareholders or until removed from office in
accordance with our bylaws. Our officers are appointed by our board of
directors and hold office until removed by the board.
25
SIGNIFICANT EMPLOYEES
We have no significant employees other than Randy White, our sole officer and
director. We conduct our business through agreements with consultants and
arms-length third parties.
COMMITTEES OF THE BOARD OF DIRECTORS
We presently do not have an audit committee, compensation committee, nominating
committee, an executive committee of our board of directors, stock plan
committee or any other committees.
AUDIT COMMITTEE FINANCIAL EXPERT
We have no financial expert. We believe the cost related to retaining a
financial expert at this time is prohibitive. Further, because of our start-up
operations, we believe the services of a financial expert are not warranted.
CODE OF ETHICS
We have not yet adopted a corporate code of ethics. Our board of directors is
considering, over the next year, establishing a code of ethics to deter
wrongdoing and promote honest and ethical conduct; provide full, fair, accurate,
timely and understandable disclosure in public reports; comply with applicable
laws; ensure prompt internal reporting of code violations; and provide
accountability for adherence to the code.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Exchange Act requires our executive officers and directors,
and persons who own more than 10% of a registered class of our equity securities
("Reporting Persons"), to file reports of ownership and changes in ownership
with the SEC. Reporting Persons are required by SEC regulations to furnish us
with copies of all forms they file pursuant to Section 16(a). Based solely on
our review of the copies of such reports received by it, and written
representations from certain Reporting Persons that no other reports were
required for those persons, we believe that, during the year ended August 31,
2005, the Reporting Persons complied with all Section 16(a) filing requirements
applicable to them.
ITEM 10. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The table below summarizes all compensation awarded to, earned by, or paid to
our executive officers by any person for all services rendered in all capacities
to us for the period from our inception through August 31, 2004.
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
LTIP
RESTRICTED PAYOUTS
OTHER ANNUAL STOCK OPTIONS/* ------- ALL OTHER
NAME TITLE YEAR SALARY BONUS COMPENSATION AWARDED SARS (#) ($) COMPENSATION
- ------------ ------------ ----- ------- ----- ------------ ------- -------- --- ------------
Randy White President,
Secretary, 2005 $ 0 0 0 0 0 0 0
Treasurer 2004 $ 0 0 0 0 0 0 0
and Director 2003 $ 0 0 0 0 0 0 0
STOCK OPTION GRANTS
We did not grant any stock options to the executive officers or directors from
inception through August 31, 2005. We have also not granted any stock options
to the executive officers since our inception.
26
EXERCISES OF STOCK OPTIONS AND YEAR-END OPTION VALUES
No stock options were exercised by our officers, directors or employees during
the financial year ended August 31, 2005. No stock options have been exercised
since August 31, 2005.
OUTSTANDING STOCK OPTIONS
We do not have any stock options outstanding.
COMPENSATION ARRANGEMENTS
We do not pay to our directors or officers any salary or consulting fee. We
anticipate that compensation may be paid to officers in the event that we decide
to proceed with additional exploration programs beyond the second stage program.
We do not pay to our directors any compensation for each director serving as a
director on our board of directors.
We conduct our business through agreements with consultants and arms-length
third parties. Currently, we have no formal agreements. Our verbal agreement
with our geologist includes his reviewing all of the results from the
exploratory work performed upon the site and making recommendations based on
those results in exchange for payments equal to the usual and customary rates
received by geologists performing similar consulting services.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The following table sets forth certain information concerning the number of
shares of our common stock owned beneficially as of August 31, 2005 by: (i) each
person (including any group) known to us to own more than five percent (5%) of
any class of our voting securities, (ii) each of our directors, (iii) each of
our named executive officers; and (iv) officers and directors as a group. Unless
otherwise indicated, the shareholders listed possess sole voting and investment
power with respect to the shares shown.
Name and address Number of Shares Percentage of
Title of class of beneficial owner of Common Stock Common Stock (1)
DIRECTORS AND EXECUTIVE OFFICERS
Common Stock Randy White 0 shares 0%
President, Secretary,
Treasurer and Director
502 499 Drake St. Vancouver BC
V6B 1B1
Common Stock All Officers and Directors 0 shares 0%
as a group (2 persons)
(1) Based on 18,475,551 shares of our common stock issued and outstanding as
of August 31, 2005. Under Rule 13d-3, certain shares may be deemed to be
beneficially owned by more than one person (if, for example, persons share the
power to vote or the power to dispose of the shares). In addition, shares are
deemed to be beneficially owned by a person if the person has the right to
acquire the shares (for example, upon exercise of an option) within 60 days of
the date as of which the information is provided. In computing the percentage
27
ownership of any person, the amount of shares outstanding is deemed to include
the amount of shares beneficially owned by such person (and only such person) by
reason of these acquisition rights. As a result, the percentage of outstanding
shares of any person as shown in this table does not necessarily reflect the
person's actual ownership or voting power with respect to the number of shares
of common stock actually outstanding on August 31, 2005.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table sets forth certain information concerning all equity
compensation plans previously approved by stockholders and all previous equity
compensation plans not previously approved by stockholders, as of the most
recently completed fiscal year.
- --------------------------------------------------------------------------------------------------
EQUITY COMPENSATION PLANS
- --------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE NUMBER OF SECURITIES REMAINING
ISSUED UPON EXERCISE OF EXERCISE PRICE OF AVAILABLE FOR ISSUANCE UNDER
OUTSTANDING OPTIONS, OUTSTANDING EQUITY COMPENSATION PLANS
WARRANTS AND RIGHTS OPTIONS, WARRANTS (EXCLUDING SECURITIES REFLECTED IN
AND RIGHTS COLUMN (A))
PLAN CATEGORY (A) (B) (C)
- --------------------------------------------------------------------------------------------------
Equity
Compensation
Plans approved by
security holders N/A N/A N/A
- --------------------------------------------------------------------------------------------------
Equity
Compensation
Plans not
approved by
security holders N/A N/A N/A
- --------------------------------------------------------------------------------------------------
Total - - -
- --------------------------------------------------------------------------------------------------
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Except as described below, none of the following parties has, since our date of
incorporation, had any material interest, direct or indirect, in any transaction
with us or in any presently proposed transaction that has or will materially
affect us, other than noted in this section:
- - Any of our directors or officers;
- - Any person proposed as a nominee for election as a director;
- - Any person who beneficially owns, directly or indirectly, shares carrying
more than 10% of the voting rights attached to our outstanding shares of
common stock;
- - our sole promoter, Randy White; and
- - Any relative or spouse of any of the foregoing persons who has the same
house as such person.
Mr. Michael L. Young, our former president, chief executive officer, and
director, acquired 6,000,000 shares of our common stock in his own name at a
price of $0.001 per share on May 30, 2002. Mr. Young paid a total purchase
price of $6,000 for these shares. These shares were issued pursuant to Section
4(2) of the Securities Act and are restricted shares as defined in the Act.
This issuance was made to Mr. Young who is a sophisticated individual and, by
way of his positions as president and chief executive officer, is in a position
of access to relevant and material information regarding our operations.
28
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS AND INDEX OF EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
- -------------- ----------------------
3.1 Articles of Incorporation(1)
3.2 Bylaws, as amended(1)
10.1 Mining Claim Bill of Sale dated July 15, 2002 between
Iguana Explorations Inc. and Larry R.W. Sostad(1)
31.1 Certification of Chief Executive Officer as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
(1) Previously filed with the SEC as an exhibit to our Form SB-2
Registration Statement originally filed on November 29, 2002, as amended.
(B) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the last quarter of our fiscal year
ended August 31, 2005.
No reports on Form 8-K have been filed since August 31, 2005.
29
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
AUDIT FEES
The aggregate fees billed for the fiscal years ended August 31, 2005 and August
31, 2004 for professional services rendered by the principal accountant for the
audit of our annual financial statements and review of the financial statements
included in our Form 10-KSB or services that are normally provided by the
accountant in connection with statutory and regulatory filings or engagements
for these fiscal periods were estimated at $5,995 and $4,955, respectively.
AUDIT RELATED FEES
None.
TAX FEES
None.
ALL OTHER FEES
None.
30
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
INTEGRATED SECURITY TECHNOLOGIES, INC.
By: /s/ Randy White
-----------------
Randy White, Director and Chief Executive Officer
Date: November 4, 2005
31
Exhibit 31.1
CERTIFICATION
-------------
I, Randy White, C.E.O. of Integrated Security Technologies, Inc., certify that:
1. I have reviewed this annual report on Form 10-KSB of Integrated
Security Technologies, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material weaknesses
in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 4, 2005
----------------------
/s/ Randy White
----------------------
Name: Randy White
Title: Director and Chief Executive Officer
Exhibit 31.2
CERTIFICATION
-------------
I, Randy White, chief financial officer of Integrated Security Technologies,
Inc., certify that:
1. I have reviewed this annual report on Form 10-KSB of Integrated
Security Technologies, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material weaknesses
in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 4, 2005
----------------------
/s/ Randy White
----------------------
Name: Randy White
Title: President, Director and Chief Financial Officer
Exhibit 32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Integrated Security Technologies, Inc.
(the "Company") on Form 10-KSB for the period ending August 31, 2004 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
Randy White, Chief Executive Officer of the Company, and Chief Financial Officer
of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Dated: November 4, 2005 Integrated Security Technologies, Inc.
/s/ Randy White
---------------
Randy White
Chief Executive Officer
Chief Financial Officer
