<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) (APRIL 25, 2000)
INFOTOPIA, INC.
(FORMERLY DR. ABRAVANEL'S FORMULAS, INC.)
(Exact name of registrant as specified in its charter)
Nevada 000-25157 95-4685068
(State of (Commission (I.R.S. Employer
organization) File Number) Identification No.)
43 Taunton Green, 3rd Floor, Taunton, MA 02780
(Address of principal executive offices)
Registrant's telephone number, including area code (508) 884-8173
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On April 25, 2000, the Board of Directors of Dr. Abravanel's Formulas,
Inc. (DABV) approved a Plan of Exchange by which the Company would acquire 100%
of the outstanding stock in Infotopia, Inc., in exchange for common stock of
DABV. The exchange was also approved by the Board of Directors and shareholders
of Infotopia, Inc. on the same day. Infotopia was, at that time, presently a
wholly-owned subsidiary of National Boston Medical, Inc. ("NBMX"), a Nevada
corporation. NBMX, as the shareholder of Infotopia, Inc., shall receive a total
of 8,167,387 shares of DABV's common stock for the 100 shares of Infotopia, Inc.
common stock that it held, representing 100% of the authorized common stock of
Infotopia. The Plan of Exchange was submitted and approved by the Board of
Directors of Infotopia and to the Board of Directors of NBMX, as shareholders of
the common stock of Infotopia, on the same day.
ITEM 5. OTHER EVENTS
On April 26, 2000, as a result of the Plan of Exchange, the Company
changed its name to Infotopia, Inc.
ITEM 6. RESIGNATIONS OF REGISTRANTS' DIRECTORS
On April 25, 2000, the Company accepted the resignation of Dr.
Abravanel as a member of the board of directors and as President of the Company.
Mr. Dan Hoyng was appointed to fill the vacancy left by Mr. Abravanel's
resignation.
On April 25, 2000, the Company also accepted the resignation of Mr.
Mark Delott as a member of the board of the directors and as an officer of the
Company. The remaining board member appointed Mr. Ernie Zavoral to fill the
vacancy left by Mr. Delott.
On April 25, 2000, the Company's Board decided to increase the Board to
three members and appointed Clinton Smith to fill the vacancy created by the
increase to three members.
On April 25, 2000, Mr. Dan Hoyng was appointed as Chief Executive
Officer, Mr. Ernie Zavoral was appointed as President, and Mr. Marek Lozowicki
was appointed as Secretary and Treasurer.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
a) Financial Statements of Dr. Abravanel's Formulas, Inc. for the
year ended February 29, 2000 are included herein.
<PAGE> 3
Dr. Abravanel's Formulas, Inc.
(A Development Stage Company)
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
February 29,
2000
<S> <C>
Current Assets
Cash $ 2,838
Officer receivable 525
Samples and supplies 11,745
Total current assets 15,108
Other Assets
Deferred taxes receivable 9,810
Valuation allowance - Deferred taxes (9,810)
Total other assets --
Total Assets $ 15,108
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ --
Total current liabilities --
Shareholders' equity (note 3)
Common Stock, $.001 Par Value
authorized 40,000,000 share; 12,841,353
shares issued and outstanding 12,841
Paid in Capital 38,333
Accumulated deficit (36,066)
Total Equity 15,108
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 15,108
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
Dr. Abravanel's Formulas, Inc.
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the Year Ended February 29, 2000
and the Period from Inception (April 28, 1998) to February 29, 2000
<TABLE>
<CAPTION>
Period from Period from
Inception Inception
Year (April 28, 1998) (April 28, 1998)
Ended to to
February 29, February 28, February 29,
2000 1999 2000
<S> <C> <C> <C>
Sales $ -- $ --
Cost of sales -- --
Gross profit -- --
Costs and Expenses:
General administrative 8,307 26,714 22,231
Sample costs/product 1,045 -- 13,835
Total Expenses 9,352 26,714 36,066
Net Loss (9,352) (36,066)
Income Tax Provision:
Deferred tax benefit (4,200) (5,610) --
Income tax benefit - 9,810 -- --
reversal - allowance
Total income tax expense 5,610 (5,610) --
(benefit)
Net Loss $(14,962) $(21,104) $(36,066)
Net loss before income
taxes per share
(note 1) $ (0.01) $ (0.01)
Net loss per share (note 1) $ (0.01) $ (0.01)
Weighted average common
shares
(in thousands) (note 1) 12,841 10,374
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
Dr. Abravanel's Formulas, Inc.
(A Development Stage Company)
STATEMENT OF SHAREHOLDER'S EQUITY
For the Year Ended February 29, 2000
and the Period from Inception (April 28, 1998) to February 29, 2000
<TABLE>
<CAPTION>
Twelve Month Period from Inception
Period Ended (April 28,1998) to
February 29, 2000 February 29, 2000
<S> <C> <C>
Beginning Balance 62,107 --
Issuance of common stock:
10,000,000 shares on 4/28/98 (issued as
partial consideration for product
formulas; valued at stock par value) 10,000
25,000 shares on 6/15/98 250
53,500 shares on 6/15/98 8,025
100,000 shares on 7/10/98 15,000
10,000 shares on 7/16/98 100
40,000 shares on 7/16/98 6,000
135,000 shares on 7/23/98 1,350
233,461 shares on 7/23/98 35,019
27,500 shares on 7/30/98 275
33,500 shares on 7/30/98 5,025
25,000 shares on 8/18/98 250
81,667 shares on 8/18/98 12,250
750,000 shares on 8/20/98 750
60,600 shares on 8/21/98 9,090
100,000 shares on 8/21/98 1,000
137,500 shares on 8/25/98 1,375
173,000 shares on 8/25/98 25,950
750,000 shares on 8/26/98 750
40,000 shares on 8/31/98 400
10,000 shares on 9/4/98 1,500
55,625 shares on 9/18/98 10,500
Special distribution (19,475) (60,000)
Common stock offering costs (12,562) (33,685)
Net loss (14,962) (36,066)
Balance at February 29, 2000 15,108 15,108
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
Dr. Abravanel's Formulas, Inc.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
Year Ended February 29, 2000
and the Period from Inception (April 28, 1998) to February 29, 2000
<TABLE>
<CAPTION>
Period from Period from
Inception Inception
Year Ended (April 28, 1998) to (April 28, 1998) to
February 29, 2000 February 29, 2000 February 29, 2000
<S> <C> <C> <C>
Cash Flows used in Operating Activities:
Net loss $ (14,962) $ (21,140) $ (36,066)
Adjustments to reconcile net loss to net cash used in
operating activities:
Valuation allowance to eliminate deferred tax asset 5,610 (5,610) --
Net cash used by operating activities (9,352) (26,750) (36,066)
Changes in Assets and Liabilities:
Advance to officer (525) (525)
Increase (decrease) in prepaid supplies 1,045 (12,790) (11,745)
Net cash used by operations (8,832) (12,790) (48,336)
Cash Flows from Financing Activities:
Issuance of common stock -- 134,859 134,859
Common stock offering costs (12,562) (21,123) (33,685)
Return of capital to founders (19,475) (30,525) (50,000)
Net cash (used) from financing activities (32,037) 83,211 51,174
Net (decrease) increase in cash (40,869) 83,211 2,838
Cash, at Beginning of Period 43,707 -- --
Cash, at End of Period $ 2,838 $ 43,707 $ 2,838
Supplemental Cash Flow Disclosures:
Interest paid $ -- $ -- $ --
Income taxes paid $ -- $ -- $ --
Non Cash Transactions:
On April 28, 1998, 10,000,000 shares of common stock
were issued to founders for formulas contributed to
the Company $ 10,000
</TABLE>
See accompanying notes to financial statements.
<PAGE> 7
Dr. Abravanel's Formulas, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
Note 1 - Nature of business and summary of significant accounting policies
Nature of business - Dr. Abravanel's Formulas, Inc. was incorporated on
April 28, 1998, in the state of Nevada. The Company was formed as a nutritional
supplement development and marketing corporation. The Company has developed
products specifically for the reduction or elimination of cravings in people.
As a development stage company, management's efforts have been in
product development and marketing strategies.
Basis of presentation - The financial statements have been prepared in
conformity with generally accepted accounting principals.
Inventories - Inventories, which at February 29, 2000, consisted
primarily of production supplies, are stated at the lower of cost or market
determined on the first-in, first-out (FIFO) basis.
Intangibles - Start-up costs, research and development costs and
formula costs are charged to the expense in the period incurred.
Income taxes - The Company accounts for income taxes under the
provisions of SFAS No. 109, Accounting for Income Taxes (SFAS No. 109). Under
the asset and liability method of SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual amounts could differ from those
estimates.
Per share information - Per share information has been computed using
the weighted average number of common shares outstanding during the period.
Note 2 - Contract payable
Effective on April 28, 1998, the Company agreed to give 10,000,000
shares of common stock, with a par value of $10,000, and $50,000 in cash. The
stock was issued on April 28, 1998, and the cash was paid in installments of
$30,525 in 1998 and $19,475 in March 1999.
Note 3 - Shareholders equity
Voting rights and powers - Common stock shall be entitled to cast
thereon one (1) vote in person or by proxy for each share of the common stock
standing in his name.
Dividends and distributions -
a) Cash dividends - subject to the rights of holders of
preferred stock, holders of common stock shall be entitled
<PAGE> 8
to receive such cash dividends as may be declared thereon by the board
of directors from time to time out of assets or funds of the
Corporation legally available thereof;
b) Other dividends and distributions - The board of directors
may issue shares of the common stock in the form of a distribution or
distributions pursuant to a stock dividend or split-up of the shares of
the common stock;
c) Other rights - Except as otherwise required by the Nevada
Revised Statutes and as may otherwise be provided in these Amended
Articles of Incorporation, each share of the common stock shall have
identical powers, preferences and rights, including rights in
liquidation;
Preferred stock - The powers, preferences, rights, qualifications,
terms, limitations and restrictions pertaining to the preferred stock, or any
series thereof, shall be such as may be fixed, from time to time, by the board
of directors in its sole discretion, authority to do so being hereby expressly
vested in the board.
Transfer restrictions - No sale, offer to sell, or transfer of any
common stock issued shall be made unless a registration statement under the
Federal Securities Act of 1933, as amended with respect to such shares is then
in effect or an exemption from the registration requirements of said act is then
in fact applicable to said shares. In addition, all common stock issued at $.01
(500,000 shares) may not be sold, offered for sale, or transferred unless
approved and authorized in writing by the Company's board of directors.
Note 4 - Income Taxes
As of February 29, 2000, the company has available net operating loss
carryforwards of approximately $39,000. These carryforwards will expire in the
years 2014 and 2015. As of February 29, 2000, the Company recognized a deferred
tax asset amounting to $8,260 from its loss carryovers.
Note 5 - Contingencies
The Company is dependent on Dr. Elliot Abravanel for the development
and marketing of the Company's product line.
Note 6 - Private placement memorandum and filings with the SEC
As of February 29, 2000, 1,341,353 shares of common stock have been
issued through the Company's private placement offerings. The Company has
applied for and received the CUSIP number for the or the Company's publicly
traded shares. The Company, through its sponsoring market maker Equitrade
Securities, Inc., filed Form 211 on July 21, 1999, for listing its shares on the
OTC Electronic Bulletin Board. The Company has received two sets of comments
from OTC Bulletin Board examiners and responded to them. The Company filed with
SEC on December 10, 1998, and this filing
<PAGE> 9
became effective February 8, 1999. The SEC has notified the Company that all
questions and comments have been cleared.
Note 7 - Equity Funding
The Company anticipates the need for additional capital to launch its
product line. Management may elect to sell additional equity, debt or enter into
partnerships to fund its financial needs. Currently, the Company has developed
its first product, ?Replen 100 for Vibrant Health", and has a limited inventory
of this product.
b) Financial Statements of Infotopia, Inc. will be filed by amendment
on or before July 9, 2000
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
Infotopia, Inc.
By: /s/ Dan Hoyng
Dan Hoyng, Chief Executive Officer
Date: October 5, 2000
<PAGE> 11
INFOTOPIA, INC.
(A DIVISION OF NATIONAL BOSTON MEDICAL, INC.)
FINANCIAL STATEMENTS
MARCH 31, 2000
<PAGE> 12
INFOTOPIA, INC.
(A DIVISION OF NATIONAL BOSTON MEDICAL, INC.)
FINANCIAL STATEMENTS
MARCH 31, 2000
C O N T E N T S
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITORS' REPORT 1
BALANCE SHEETS 2 - 3
STATEMENTS OF OPERATIONS 4
STATEMENTS OF CASH FLOWS 5-6
NOTES TO FINANCIAL STATEMENTS 7 - 22
</TABLE>
<PAGE> 13
INDEPENDENT AUDITORS' REPORT
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF
INFOTOPIA, INC.
We have audited the accompanying balance sheet of Infotopia, Inc.(a Division of
National Boston Medical, Inc.) as of March 31, 2000 and the related statements
of operations and cash flows for the year ended June 30, 1999 and the nine
months ended March 31, 2000. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
On July 9, 2000, we originally reported on the financial statements referred to
above. As described in Note 1 to the financial statements, certain assets
originally reported as Infotopia Division assets have been removed and certain
liabilities assumed by the division have been added. The operations related to
these assets and liabilities have also been restated.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Infotopia, Inc. as of March 31,
2000, and the results of its operations and cash flows for the year ended June
30, 1999 and the nine months ended March 31, 2000, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 15 to the
financial statements, the Company has suffered recurring losses from operations
and its limited capital resources 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 15. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
MERDINGER, FRUCHTER, ROSEN & CORSO, P.C.
Certified Public Accountants
New York, New York
October 3, 2000
<PAGE> 14
INFOTOPIA, INC.
(A DIVISION OF NATIONAL BOSTON MEDICAL, INC.)
BALANCE SHEETS
MARCH 31, 2000
<TABLE>
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $ 4,579
Accounts receivable, net of allowance for
doubtful accounts of $15,000 30,790
Inventory 195,531
Prepaid expenses and other current assets 724,231
----------
Total current assets 955,131
PROPERTY AND EQUIPMENT, less
accumulated depreciation and amortization of
$182,154 204,430
CAPITALIZED PRODUCTION COSTS, less accumulated
amortization of $21,668 690,235
OTHER ASSETS
Licenses and Other Intangibles, less accumulated amortization of
$285,775 1,094,602
----------
TOTAL ASSETS $2,944,298
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 2 -
<PAGE> 15
INFOTOPIA, INC.
(A DIVISION OF NATIONAL BOSTON MEDICAL, INC.)
BALANCE SHEETS
MARCH 31, 2000
<TABLE>
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Due to Related Party $ 9,034,734
Accounts payable and accrued expenses 3,386,836
Current maturities of long-term debt 216,918
Current maturities of notes payable to stockholders and affiliates 59,952
Deferred revenue, current portion 631,301
------------
Total current liabilities 13,329,741
LONG-TERM LIABILITIES
Long-term debt, less current maturities 869,789
------------
TOTAL LIABILITIES 1,419,950
COMMITMENTS AND CONTINGENCIES --
STOCKHOLDERS' EQUITY
Accumulated deficit (11,255,232)
------------
Total Stockholders' Equity (11,255,232)
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,944,298
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 3 -
<PAGE> 16
INFOTOPIA, INC.
(A DIVISION OF NATIONAL BOSTON MEDICAL, INC.)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the For the
Year Ended Nine Months Ended
June 30, 1999 March 31, 2000
------------- --------------
<S> <C> <C>
REVENUE
Sales, net of returns and allowances
of $185,715 and $345,205 $ 2,258,910 $ 2,366,017
COST OF SALES 759,842 1,182,805
----------- -----------
GROSS PROFIT 1,499,068 1,183,212
----------- -----------
OPERATING EXPENSES
General and administrative 3,770,632 5,018,540
Selling and marketing 2,402,304 1,923,185
Depreciation and amortization 235,728 251,160
----------- -----------
Total operating expenses 6,408,664 7,192,885
----------- -----------
LOSS FROM OPERATIONS (4,909,596) (6,009,673)
OTHER INCOME (EXPENSE)
Interest expense (106,240) (229,723)
----------- -----------
LOSS FROM OPERATIONS BEFORE INCOME TAXES (5,015,836) (6,239,396)
INCOME TAXES -- --
----------- -----------
NET LOSS $(5,015,836) $(6,239,396)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 4 -
<PAGE> 17
INFOTOPIA, INC.
(A DIVISION OF NATIONAL BOSTON MEDICAL, INC.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the
For the Year Ended Nine Months Ended
June 30, 1999 March 31, 2000
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $(5,015,836) $(6,239,396)
Adjustments to reconcile net (loss) to net cash
provided by (used in) operating activities
Depreciation and amortization 235,728 251,160
Changes in assets and liabilities
Accounts receivable - trade -- (30,790)
Due to related party 5,015,836 4,018,898
Inventory -- (195,530)
Prepaid expenses -- (724,231)
Other assets -- --
Accounts payable and accrued expenses -- 3,386,836
Customer deposits -- 631,301
----------- -----------
Net cash provided by operating activities 235,728 1,098,248
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (91,020) (295,564)
Capitalized Production Cost -- (711,903)
Licenses and other intangibles (144,708) (1,235,569)
----------- -----------
Net cash used in investing activities (235,728) (2,243,036)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes payable 1,292,735
Payments on notes payable -- (152,526)
----------- -----------
Net cash provided by (used in) financing activities -- 1,140,209
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS -- 4,579
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR -- --
----------- -----------
CASH AND CASH EQUIVALENTS - END OF YEAR $ -- $ 4,579
=========== ===========
SUPPLEMENTAL INFORMATION:
Interest paid $ 56,240 $ 88,526
=========== ===========
Income taxes paid $ -- $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 5 -
<PAGE> 18
INFOTOPIA, INC.
(A DIVISION OF NATIONAL BOSTON MEDICAL, INC.)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1999
AND NINE MONTHS ENDED MARCH 31 2000
SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES:
During the fiscal year June 30, 1999, the Parent:
- Issued stock to acquire businesses affiliated and exclusive licenses
that amounted to $248,000
- Issued stock towards the conversion of debt for $1,381,834
- Issued stock for services rendered that amounted to $892,353
During the nine months ending March 31, 2000, the Parent:
- Issued stock to acquire businesses, affiliates, exclusive licenses and
fixed assets in the amount of $1,617,375
- Issued stock to retire notes due for $753,288
- Issued stock to lenders for $2,786,175 as collateral
- Issued stock for services rendered totaling $2,833,296
The accompanying notes are an integral part of these financial statements.
- 6 -
<PAGE> 19
INFOTOPIA, INC.
(A DIVISION OF NATIONAL BOSTON MEDICAL, INC.)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Organization and Basis of Presentation
INFOTOPIA, INC. (Formerly Flex Marketing Inc.(OH)) (the
"Company" or "Infotopia") was incorporated under the laws of
Ohio in September 11, 1997. The Company was acquired by its
parent company, National Boston Medical, Inc.("Parent"), in a
share exchange agreement executed on November 21, 1998. The
Company is to be spun-off from its Parent in April 2000.
b) Restatement of Financial Information
The Company has restated its financial statements as of March
31, 2000 and for the nine months ended March 31, 2000 and the
year ended June 30, 1999. This action was taken as a result of
changes in assets and liabilities originally attributed to the
division and being spun off from the parent. The results of
operations and cash flows have also been restated to remove
the operations associated with those assets.
The effect of the restatement on the balance sheet is to
decrease current assets by approximately $52,000, decrease
Licenses and Other Intangibles by approximately $226,000,
decrease Investment by $375,000, and increase liabilities by
approximately $1,106,000. The effect on the statement of
operations for the nine months ended March 31, 2000 is to
increase operating expense by approximately $1,404,000,
increase interest expense by approximately $111,000 and
increase net loss by approximately $1,760,000.
c) Business Operations
The Company engages in the development, marketing, advertising
and selling of innovative new wellness products through direct
marketing and response efforts. Since its acquisition by the
Parent, the Company has expanded its line of products and is
also producing its own programming to promote its products.
d) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the
periods presented. Actual results could differ from those
estimates.
e) Revenue Recognition
Infotopia recognizes product revenues upon shipment to the
customer. Sales are taken on the phone with payments conducted
by credit cards and check. Products are often back-ordered and
are not shipped immediately. The Company recognizes these cash
receipts as customer deposits for sales that have yet to be
completed.
-7-
<PAGE> 20
INFOTOPIA, INC.
(A DIVISION OF NATIONAL BOSTON MEDICAL, INC.)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
f) Cash and Cash Equivalents
The Company considers all highly liquid investments purchased
with original maturities of three months or less to be cash
equivalents.
g) Concentration of Credit Risk
The Company places its cash in what it believes to be
credit-worthy financial institutions. However, cash balances
exceeded FDIC insured levels at various times during the year.
h) Accounts Receivable
For financial reporting purposes, the Company utilizes the
allowance method of accounting for doubtful accounts. The
Company performs ongoing credit evaluations of its customers
and maintains an allowance for potential credit losses. The
allowance is based on an experience factor and review of
current accounts receivable. Uncollectible accounts are
written off against the allowance accounts when deemed
uncollectible.
i) Inventory
Inventory consists primarily of component parts and finished
goods, which are valued at the lower of cost or market on a
first-in, first-out basis.
j) Property and Equipment
Property and equipment is stated at cost. Depreciation is
provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service
lives, primarily on a straight-line basis. The estimated
service lives used in determining depreciation are five to
seven years for computers, software, furniture and equipment.
Leasehold improvements are amortized over the shorter of the
useful life of the asset or the lease term.
Maintenance and repairs are charged to expense as incurred;
additions and betterments are capitalized. Upon retirement or
sale, the cost and related accumulated depreciation of the
disposed assets are removed and any resulting gain or loss is
credited or charged to operations.
k) Capitalized Production Costs
SFAS No. 53 "Financial Reporting by Producers and Distributors
of Motion Picture Films" requires the capitalization of
production costs and is to be amortized over the useful life
of the program.
- 8 -
<PAGE> 21
INFOTOPIA, INC.
(A DIVISION OF NATIONAL BOSTON MEDICAL, INC.)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
l) Intangibles
Intangibles consist of goodwill, covenants not to compete,
customer lists and license costs. Goodwill represents costs in
excess of net assets acquired in connection with businesses
acquired. Goodwill is being amortized to operations over 15
years. Customer lists are being amortized over a period of 2
to 7 years. License costs are amortized over 10 years.
Should events or circumstances occur subsequent to the
acquisition of a business which brings into question the
realizable value or impairment of the related goodwill, the
Company will evaluate the remaining useful life and balance of
goodwill and make adjustments, if required. The Company's
principal consideration in determining an impairment includes
the strategic benefit to the Company of the particular assets
as measured by undiscounted current and expected future
operating income of that specified groups of assets and
expected undiscounted future cash flows. Should an impairment
be identified, a loss would be reported to the extent that the
carrying value of the related goodwill exceeds the fair value
of that goodwill as determined by valuation techniques
available in the circumstances.
m) Income Taxes
Income taxes are provided for based on the liability method of
accounting pursuant to Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes". The
liability method requires the recognition of deferred tax
assets and liabilities for the expected future tax
consequences of temporary differences between the reported
amount of assets and liabilities and their tax bases.
n) Offering Costs
Offering costs consist primarily of professional fees. These
costs are charged against the proceeds of the sale of common
stock in the periods in which they occur.
p) Advertising Costs
Advertising costs are expensed as incurred and are included in
selling expenses. For the year ended June 30, 1999 and for the
nine months ended March 31, 2000, advertising expense amounted
to $2,402,304 and $1,709,676, respectively.
q) Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, accounts
receivable, notes receivable, accounts payable, accrued
expenses and income taxes payable approximate fair value due
to the relatively short maturity of these instruments. The
fair value of long-term borrowings was determined based upon
interest rates currently available to the Company for
borrowings with similar terms. The fair value of long-term
borrowings approximates the carrying amounts at March 31,
2000.
- 9 -
<PAGE> 22
INFOTOPIA, INC.
(A DIVISION OF NATIONAL BOSTON MEDICAL, INC.)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
r) Long-lived Assets
Long-lived assets to be held and used are reviewed for
impairment whenever events or changes in circumstances
indicate that the related carrying amount may not be
recoverable. When required, impairment losses on assets to be
held and used are recognized based on the fair value of the
assets and long-lived assets to be disposed of are reported at
the lower of carrying amount or fair value less cost to sell.
t) Stock-Based Compensation
The Company has adopted the intrinsic value method of
accounting for stock-based compensation in accordance with
Accounting Principles Board Opinion ("APB") No. 25,
"Accounting for Stock Issued to Employees" and related
interpretations.
v) Impact of Year 2000 Issue
During the year ended December 31, 1998, the Company conducted
an assessment of issues related to the Year 2000 and
determined that it was necessary to modify or replace portions
of its software in order to ensure that its computer systems
will properly utilize dates beyond December 31, 1999. The
Company completed Year 2000 systems modifications and
conversions in 1999. Costs associated with becoming Year 2000
compliant are not material. At this time, the Company cannot
determine the impact the Year 2000 will have on its key
customers or suppliers. If the Company's customers or
suppliers don't convert their systems to become Year 2000
compliant, the Company may be adversely impacted. The Company
is addressing these risks in order to reduce the impact on the
Company.
NOTE 2 - PREPAID EXPENSES
Prepaid expenses are summarized as follows:
<TABLE>
<CAPTION>
March 31, 2000
--------------
<S> <C>
Legal and professional services paid in stock $334,587
Capital development fee 212,331
Employee compensation 123,313
Royalties 40,000
Inventory 14,000
--------
Total prepaid expenses $724,231
========
</TABLE>
The Parent had issued stock in lieu of cash payments for
legal, professional fees and employee compensation.
- 10 -
<PAGE> 23
INFOTOPIA, INC.
(A DIVISION OF NATIONAL BOSTON MEDICAL, INC.)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows:
<TABLE>
<CAPTION>
March 31, 2000
--------------
<S> <C>
Warehouse equipment and molds $167,789
Computer equipment and software 152,068
Furniture and office equipment 41,726
Leasehold improvements 11,360
Vehicles 13,641
386,584
--------
Less: Accumulated depreciation and amortization
Property and equipment, net $204,430
========
</TABLE>
Depreciation expense for the year ended June 30, 1999 and for the nine
months ended March 31, 2000 was $91,020 and $85,647, respectively.
NOTE 4 - CAPITALIZED PRODUCTION COSTS
Capitalized production costs are summarized as follows:
<TABLE>
<CAPTION>
March 31, 2000
--------------
<S> <C>
Fat Fighter System production $106,280
Body Rocker production 323,199
Cactus Jack production 282,424
--------
711,903
Less: Accumulated Amortization 21,668
--------
Capitalized Production Costs - net $690,235
========
</TABLE>
NOTE 5 - INTANGIBLES
Intangibles are summarized as follows:
<TABLE>
<CAPTION>
March 31, 2000
--------------
<S> <C>
Goodwill $ 880,277
Cactus Jack products 330,000
DTCP products 170,000
----------
1,380,277
Less: Accumulated Amortization 285,775
----------
Total intangibles - net $1,094,502
==========
</TABLE>
NOTE 6 - NOTES PAYABLES TO RELATED PARTY
As of March 31, 2000, Infotopia has accumulated a due to balance to its
Parent, National Boston Medical, Inc., in the amount of $9,034,734.
- 11 -
<PAGE> 24
INFOTOPIA, INC.
(A DIVISION OF NATIONAL BOSTON MEDICAL, INC.)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 7 - LONG-TERM DEBT
On August 19, 1999, the Company executed a 10% convertible note in the
amount of $1,700,000 in favor of Thomson Kernaghan & Co., Ltd. ("TK")
in exchange for cash payable to the Company in the amounts of $700,000
on the execution date, $600,000 on or before November 2, 1999 and
$400,000 payable on or before November 29, 1999. Such notes and accrued
and unpaid interest is due November 1, 2000. Interest is payable, at
TK's election, in cash or in the Company's Common Stock. In the event
that all shares were converted and the floor price was the conversation
price, the Company would be obligated to deliver 8,500,000 shares of
its restricted Common Stock. NBM also issued warrants to purchase
2,500,000 shares of the Company's Common Stock at an exercise price of
$0.25 per share ("A" Warrant) and warrants to purchase 333,333 shares
of the Company's Common Stock at an exercise price of $0.30 per share
("B" Warrant. The "A" Warrant is exercisable from the issuance date
until the earlier of November 1, 2000 or thirty (30) days from the
effective date of a registration statement under the Securities Act of
1933 (the "Act"), as amended. The "B" Warrant is exercisable from the
issuance date until November 1, 2000. The note is convertible into
restricted shares of the Company's Common Stock and both the note and
the warrants have piggy-back registration rights. A total of 8,500,000
shares have been issued and are held in escrow pending conversion. Such
escrowed shares have been included in the calculation of shareholder
equity at par.
- 12 -
<PAGE> 25
INFOTOPIA, INC.
(A DIVISION OF NATIONAL BOSTON MEDICAL, INC.)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 7 - LONG-TERM DEBT (Continued)
In August 1999, the Company entered into a stock purchase agreement
with Product Sourcing, Ltd. ("PSL") whereby the Company agreed to pay
$750,000 and to issue 2,500,000 shares of the Company's Common Stock
valued at $750,000 for all of the issued and outstanding capital stock
of PSL. Of the $750,000, $100,000 was due at closing, another $100,000
was due ninety (90) days after closing and a Promissory Note in the
amount of $550,000 was executed for the remaining balance. The note is
for a term of two (2) years, payable in equal monthly installments and
bears interest at a rate of 5.3% per annum. Each installment payment
and accrued and unpaid interest is convertible, at the option of PSL,
into 76,389 shares of the common stock of NBM, which shares have been
issued but are held in escrow pending a closing and, if closed, notice
of conversion from PSL. Such escrowed shares (1,833,336) have been
included in the calculation of shareholder equity at par. Also as a
part of the Agreement, the Company signed an employment agreement with
Jeff Freedman to serve as the Executive Vice-President of Product
Development at an annual salary of $100,000. In connection with the
employment agreement, the Company is obligated to pay Mr. Freedman
quarterly cash bonuses, to issue Mr. Freedman 100,000 shares of the
Company's Common Stock annually (the first of which issuance has been
made and was valued at $30,000) and to grant Mr. Freedman an annual
option to purchase 150,000 shares of the Company's Common Stock at a
price equivalent to 75% of the average annual trading price of the
Company's stock per share. Such options have no expiration date. The
term of the employment agreement is for a period of three (3) years.
Although the agreements were signed in August, an audit of PSL is
required before a closing can take place. [This agreement was modified
by a settlement agreement in April 2000].
In August 1999, the Company entered into a settlement agreement with
Ernest Zavoral, who currently serves as a Director and the Company's
Manager of the Infotopia Division f/k/a the Flex Marketing Division. As
a part of that agreement, the Company issued 487,040 shares of its
Common Stock to Mr. Zavoral in exchange for a release from debt in the
amount of $73,056.
In August 1999, the Company entered into a settlement agreement with
Raymond Volpe, who currently serves as the Company's Manager of the
Bontempi instruments Plus Division f/k/a the Medical Products Division.
As a part of that agreement, the Company issued 32,060 shares of its
Common Stock to Volpe in exchange for a release from debt in the amount
of $4,809.
- 13 -
<PAGE> 26
INFOTOPIA, INC.
(A DIVISION OF NATIONAL BOSTON MEDICAL, INC.)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 7 - LONG-TERM DEBT (Continued)
In August 1999, the Company entered into a settlement agreement with
Workhorse Computers, Inc. f/k/a Remote Information Systems, Inc.,
whereby the Company paid $11,000 and issued 74,982 shares of its Common
Stock valued at $11,274 to Workhorse in exchange for a release from
debt in the amount of $22,274.
In August 1999, the Company entered into a settlement agreement of
181,334 shares of its Common stock in exchange for release of debt with
Richard Alfieri ($27,200 for principal and interest).
In September 1999, as amended in November 1999, the Company entered
into a debenture purchase agreement with Oxford Capital Corporation
("Oxford"), whereby Oxford agreed to loan the Company up to $1,500,000
in the form of convertible notes bearing interest at the rate of 12%
per annum. As part of such transaction, the Company granted a warrant
to purchase 375,000 shares of the Company's restricted Common Stock,
exercisable on or before September 2, 2000, at an exercise price
determined by formula, but in no event less than $0.10 per share. The
notes are convertible into shares of Common Stock at a conversion price
determined by formula, but in no event for less than $0.10 per share. A
total of 10,000,000 shares have been issued and are held in escrow
pending conversion of which a portion are in the process of being
delivered pursuant to conversion notices. Such escrowed shares are
included in the calculation of shareholder equity at par. Of the
10,000,000 shares, 1,526,717 are unrestricted shares of the Company's
Common Stock and 8,473,283 are restricted shares of the Company's
Common Stock. To date, the Company has received $1,055,557 in proceeds
under the debenture purchase agreement, of which $591,130 plus interest
has been converted into 1,526,717 shares of unrestricted Common Stock
and 3,127,852 shares of restricted Common Stock.
In September 1999, the Company entered into a settlement agreement,
whereby the Company issued 103,180 shares of its Common Stock to
Patrick Lawless in exchange for a release from debt in the amount of
$15,477.
In September 1999, the Company entered into a settlement agreement with
American National Lithographers and Engravers, Inc. d/b/a American
National, Ltd., whereby the Company paid $10,000 and issued 92,735
shares of its Common Stock valued at $13,910 in exchange for the filing
of a Voluntary Dismissal with Prejudice.
In September 1999, the Company entered into a settlement agreement with
Michael Hodge, whereby the Company issued 80,000 shares of its Common
Stock in exchange for a release from debt in the amount of $18,000.
- 14 -
<PAGE> 27
INFOTOPIA, INC.
(A DIVISION OF NATIONAL BOSTON MEDICAL, INC.)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 7 - LONG-TERM DEBT (Continued)
In September 1999, the Company entered into a settlement agreement with
Joe Massa, whereby the Company issued 40,000 shares of its Common Stock
in exchange for a release from debt interest in the amount of $6,000.
In September 1999, the Company entered into a settlement agreement with
Doug Christopher, whereby the Company issued 190,000 shares of its
Common Stock in exchange for a release from debt in the amount of
$15,745.
In October 1999, the Company entered into a Settlement Agreement with
AfterMarket Company ("AfterMarket"), whereby the Company $34,193 to
AfterMarket and committed to pay an additional $2,000 per week until
the balance of $68,387 is paid in full. Additionally, the Company
issued 500,000 shares of its Common Stock valued at $93,750, of which
250,000 shares will be returned to the Company upon payment of the
balance in full.
In November 1999, the Parent entered into an exclusive discount and
rebate service for products offered by Member Services of America, LLC
(Triad Services). Also, the Parent signed promissory notes for $150,000
in temporary financing due on demand or no later than February 11,
2000.
In December 1999, the Parent placed 1,000,000 shares of its Common
stock into escrow related to maintaining a line of credit with British
Trade and Commerce Bank.
In January 2000, the Parent entered into a promissory note with Thomas
Kernaghan & Co. in the amount of $550,000 (10% due June 18, 2001).
Superceding the original agreement, the royalty payments were changed
to $5.00 per unit for the Body Rocker ($2.50 after the first year) and
assigned royalties due from Blitz Marketing. The total royalties due of
$7,000,000 would be subtracted from the indebtedness of the notes.
In January 2000, the Parent placed 894,058 shares of its Common stock
into escrow related to the outstanding debt with Cortland Bank of Ohio.
In March 2000, the Company received $215,000 from Thomas Kernaghan of
which no formal note was entered into between the two parties.
The aggregate carrying value of the long-term debt at March 31, 2000
approximates market value.
- 15 -
<PAGE> 28
INFOTOPIA, INC.
(A DIVISION OF NATIONAL BOSTON MEDICAL, INC.)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 8 - NOTES PAYABLE TO STOCKHOLDERS AND AFFILIATES
The Company has in aggregate $59,952 due to stockholder loans which
arose from the parent's acquisition of various entities.
NOTE 9 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following as of:
<TABLE>
<CAPTION>
March 31, 2000
--------------
<S> <C>
Accounts payable $2,920,293
Accrued liabilities 466,543
----------
$3,386,836
==========
</TABLE>
NOTE 10 - DEFERRED REVENUE
Unfulfilled sales orders at March 31, 2000 amounted to $631,301.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Employment Agreements
The Company has entered into various employment agreements as follows:
The Parent has an employment contract with Mr. Hoyng. Under this
contract, in July 1999, the Parent issued 250,000 shares of its
restricted common stock to Mr. Hoyng. Mr. Hoyng is entitled to receive
250,000 restricted shares of the common stock annually, has the ability
to purchase additional shares in the event of any offering of the
Parent's stock at 75% of the offering price to maintain his then
current percentage of the Parent's outstanding common stock, has an
option to purchase 2,000,000 shares of the restricted common stock of
the Parent over the next three (3) years for the average trading price
of the Parent's common stock for the last twelve (12) months or the
then current market price at the time the option is exercised, he may
convert one-third of his salary to shares of the Parent's restricted
common stock at the average trading price of the Parent's common stock
for the last twelve (12) months or the then current market price at the
time of the option is exercised and is entitled to a transition bonus
of 250,000 shares of the Parent's restricted common stock.
- 16 -
<PAGE> 29
INFOTOPIA, INC.
(A DIVISION OF NATIONAL BOSTON MEDICAL, INC.)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)
The Parent has an employment contract with Mr. Lozowicki. Mr Lozowicki
is entitled to receive 187,500 restricted shares of the common stock
annually, has the ability to purchase additional shares in the event of
any offering of the Parent's stock at 75% of the offering price to
maintain his then current percentage of the Parent's outstanding common
stock, has an option to purchase 400,000 shares of the restricted
common stock of the Parent over the next three (3) years for the
average trading price of the Parent's common stock for the last twelve
(12) months or the then current market price at the time the option is
exercised, he may convert one-third of his salary to shares of the
Parent's restricted common stock at the average trading price of the
Parent's common stock for the last twelve (12) months or the then
current market price at the time of the option is exercised and is
entitled to a signing bonus of 100,000 shares of the Parent's
restricted common stock.
The Parent has an employment contract with Mr. McFarland. Mr. McFarland
is entitled to receive 500,000 restricted shares of the common stock
annually, has the ability to purchase additional shares in the event of
any offering of the Parent's stock at 75% of the offering price to
maintain his then current percentage of the Parent's outstanding common
stock, has an option to purchase 500,000 shares of the restricted
common stock of the Parent over the next three (3) years for the
average trading price of the Parent's common stock for the last twelve
(12) months or the then current market price at the time the option is
exercised, he may convert one-third of his salary to shares of the
Parent's restricted common stock at the average trading price of the
Parent's common stock for the last twelve (12) months or the then
current market price at the time of the option is exercised and is
entitled to a signing bonus of 500,000 shares of the Parent's
restricted common stock.1
In August 1999, the Parent entered into an employment agreement with
Edward Galanif, who currently serves as the Parent's Controller. The
term of the agreement is for a period of one (1) year and is
automatically renewable. Mr. Galanif is entitled to minimum quarterly
cash bonuses and to participate in an annual incentive bonus plan,
should such plan be adopted by the Parent in the future. Mr. Galanif
was entitled to 200,000 shares of the Parent's Common Stock valued at
$60,000 and $10,000 upon execution of the agreement, although such
shares have not been issued to date, they have been included in the
shareholder equity calculation since they are a binding obligation of
the Parent. Mr. Galanif is to an additional 100,000 shares of the
Parent's Common Stock on each anniversary date of the agreement (for
which he is currently entitled to vote and receive dividends). Mr.
Galanif is also entitled, upon any subsequent issuance of shares of
stock by the Parent to any third party, to purchase from
- 17 -
<PAGE> 30
INFOTOPIA, INC.
(A DIVISION OF NATIONAL BOSTON MEDICAL, INC.)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)
the Parent additional shares of the Parent's Common Stock at a price
equivalent to seventy-five percent (75%) of the price offered to the
third party in an amount necessary to maintain Mr. Galanif's equity
percentage ownership of the Parent. Mr. Galanif has the option to
convert one-third (1/3) of his annual salary into shares of the
Parent's Common Stock at a price equal to the lower of the average
price of the Parent's Common Stock for the twelve (12) months prior to
conversion or the then current market price. All shares issued in
connection with the agreement have piggy-back registration rights.
In September 1999, the Parent entered into an employment agreement with
Michael Steinberg, who currently serves as the Parent's Investor
Relations Specialist, wherein the Parent agreed to pay an annual salary
of $72,000 and performance based bonuses consisting of shares of the
Parent's Common Stock, with a maximum of 200,000 shares per year. Mr.
Steinberg has the option to convert one-third (1/3) of his annual
salary into shares of the Parent's Common Stock at a price of the lower
of the average price of the Parent's Common Stock for the twelve (12)
months prior to conversion or the then current market price. Mr.
Steinberg also is entitled to a signing bonus of 300,000 shares of the
Parent's Common Stock valued at $79,500, and although such shares have
not been issued to date, they are included in the shareholder equity
calculation because they it is a binding obligation of the Parent. All
shares issued in connection with the employment agreement have
piggy-back registration rights. The term of the agreement is for a
period of one (1) year and is automatically renewable.
In September 1999, the Parent entered into an employment contract with
Raymond Volpe to serve as the Parent's Vice-President of OTC Products
at an annual salary of $75,000. The term of the agreement is for a
period of one (1) year and is automatically renewable. Mr. Volpe is
entitled to minimum quarterly bonuses and to participate in an annual
incentive bonus plan and stock option plan, should such plans be
adopted by the Parent in the future.
Royalties Agreements In September 1999, the Parent entered into a
manufacturing, marketing and distribution agreement with Cactus Jack's
Marketing Corp. ("Cactus Jack"). Pursuant to the agreement, the Parent
(i) issued 1,000,000 shares of its Common Stock valued at $330,000,
(ii) agreed to issue an additional 250,000 shares of its Common Stock
on each anniversary date of the agreement so long as the Agreement is
in force, (iii) granted royalties in the amount of fifty percent (50%)
of net profits on all sales of Cactus Jack products sold by the Parent,
(iv) agreed to establish a division of its operations devoted to the
activities of manufacturing, marketing and distributing Cactus
- 18 -
<PAGE> 31
INFOTOPIA, INC.
(A DIVISION OF NATIONAL BOSTON MEDICAL, INC.)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)
Jack products and (v) to make certain minimum royalty payments per
quarter. In exchange, Cactus Jack granted the Parent the exclusive
right to manufacture, use, distribute, sell, advertise, promote and
otherwise exploit certain Cactus Jack products, which rights include
the use Cactus Jack patents, trademarks and artwork. The Parent also
has a right of first refusal on all future Cactus Jack products. The
term of the agreement is until such time as the Parent fails to make a
reasonable commercial effort to sell Cactus Jack products or to meet
the minimum royalty payments.
In September 1999, the Parent entered into a manufacturing, marketing
and distribution agreement with Dean Tornabene and Charles Perez
("DTCP"), whereby the Parent (i) gained the exclusive right to
manufacture, use, distribute, sell, advertise, create brand
recognition, promote and otherwise exploit certain products invented by
DTCP in exchange for 500,000 shares of the Parent's Common Stock valued
at $170,000, (ii) paid an initial payment of $50,000 upon execution of
the agreement, (iii) agreed to pay royalties of ten percent (10%) of
gross sales on all DTCP products including up-sells and (iv) also
agreed to establish a division of its operations which will be
responsible for the activities of manufacturing, marketing and
distributing DTCP products. The Parent also must issue additional
shares of its Common Stock on each anniversary date of the agreement at
which the agreement is still in force. The number of shares to be
issued is dependent upon the number of shares of the Parent then
outstanding.
In November 1999, the Parent entered into a supply, distribution and
trademark licensing agreement with Herbal Technologies for the Dean
Tornabene Fat Fighting System and related products. In consideration
for the grant of the license, the Parent shall pay royalties based on a
flat royalty rate of the base products and a percentage of adjusted
gross sales for licensed up-sale products. Included in this agreement
is a sub-agreement to pay royalties to Mali Utz for consultant work at
a flat royalty rate.
In November 1999, the Parent entered into a manufacturing, marketing
and distribution agreement for the Spudwizz product. The Parent shall
pay distributor a monthly royalty equal to 5% of adjusted gross sales
revenue plus $.10 per unit for each shipped unit. A non-refundable
prepayment for royalties of $10,000 was due upon execution. Also,
beginning with the second quarter of 2000, a minimum quarterly royalty
payment of $15,000 was in effect to keep the license.
In February 2000, the Parent entered into a consultant agreement with
Cort Howell & Associates for the Body Rocker script and as compensation
will receive $10,000 and a royalty of not less than .25% of adjusted
gross revenues and up to .5% depending on performance ratios.
- 19 -
<PAGE> 32
INFOTOPIA, INC.
(A DIVISION OF NATIONAL BOSTON MEDICAL, INC.)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 12 - RELATED PARTY TRANSACTIONS
In September 1999, the Parent issued 150,000 shares of its Common Stock
to Clinton Smith, who currently serves as a Director of the Parent. The
shares were issued as payment for legal services rendered by Mr. Smith
on behalf of the Parent valued at $37,500.
NOTE 13 - INCOME TAXES
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
For the
For the Year Ended Nine Months Ended
June 30, 1999 March 31, 2000
------------- --------------
<S> <C> <C>
Current Tax Expense
U.S. Federal $ -- $ --
State and Local -- --
--------- ---------
Total Current -- --
--------- ---------
Deferred Tax Expense
U.S. Federal -- --
State and Local -- --
--------- ---------
Total Deferred -- --
--------- ---------
Total Tax Provision (Benefit) from
Continuing Operations $ -- $ --
========= =========
</TABLE>
The reconciliation of the effective income tax rate to the Federal
statutory rate is as follows for the year ended March 31, 2000:
<TABLE>
<S> <C> <C>
Federal Income Tax Rate (34.0)% (34.0)%
Effect of Valuation Allowance 34.0% 34.0%
----- -----
Effective Income Tax Rate 0.0% 0.0%
==== ====
</TABLE>
At June 30, 1999 and March 31, 2000, the Company had net carry-forward
losses of approximately $5,015,000 and $9,600,000, respectively.
Because of the current uncertainty of realizing the benefit of the tax
carry-forwards, a valuation allowance equal to the tax benefit for
deferred taxes has been established. The full realization of the tax
benefit associated with the carry-forwards depends predominantly upon
the Company's ability to generate taxable income during the
carry-forward period.
- 20 -
<PAGE> 33
INFOTOPIA, INC.
(A DIVISION OF NATIONAL BOSTON MEDICAL, INC.)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 13 - INCOME TAXES (Continued)
Deferred tax assets and liabilities reflect the net tax effect of
temporary differences between the carrying amount of assets and
liabilities for financial reporting purposes and amounts used for
income tax purposes. Significant components of the Company's deferred
tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
For the Year Ended Nine Months Ended
June 30, 1999 March 31, 2000
------------- --------------
<S> <C> <C>
Deferred Tax Assets
Loss Carry-forwards $ 5,015,836 $ 11,255,232
Less: Valuation Allowance (5,015,836) (11,255,232)
------------ ------------
Net Deferred Tax Assets $ -- $ --
============ ============
</TABLE>
Net operating loss carry-forwards expire starting in 2007 through 2019.
Per year availability is subject to change of ownership limitations
under Internal Revenue Code Section 382
NOTE 14 - GOING CONCERN
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As of March 31, 2000, the
Company has a working capital deficit of $10,961,526 and an accumulated
deficit of $9,614,080. Based upon the Company's plan of operation, the
Company estimates that existing resources, together with funds
generated from operations, will not be sufficient to fund the Company's
working capital. The Company is actively seeking additional equity and
debt financing. There can be no assurances that sufficient financing
will be available on terms acceptable to the Company or at all. If the
Company is unable to obtain such financing, the Company will be forced
to scale back operations, which would have an adverse effect on the
Company's financial condition and results of operation.
NOTE 15 - SUBSEQUENT EVENTS
In April 2000, the Parent entered into a settlement agreement with Jeff
Freedman to rescind the previous stock purchase, employment, stock
pledge and non-compete agreements related to NBM purchasing Product
Sourcing Ltd. (PSL) during August, 1999. Of the original 2,500,000
shares issued to Freedman for PSL, he is to retain 2,000,000 shares
plus retention of all monies received to date including salary,
accounts receivable and note payments. Also, NBM will pay Freedman a
royalty on sales of the Body Rocker of $1.25 per unit and $.25 per unit
for the Cactus Jack fishing lure for a total of $400,000 with a minimum
payment due quarterly of $15,000 per month beginning May 5, 2000.
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<PAGE> 34
INFOTOPIA, INC.
(A DIVISION OF NATIONAL BOSTON MEDICAL, INC.)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 15 - SUBSEQUENT EVENTS (Continued)
On April 25, 2000, Dr. Abravanel's Formulas, Inc. (DABV) entered into
an exchange agreement with the Parent in which 100% of the outstanding
stock of Infotopia, Inc. would be exchanged for common stock of DABV.
The shareholders of Infotopia, Inc. received 7,949,999 shares for its
100 shares. As a result of the plan of exchange, Dr. Abravanel's
Formulas, Inc. changed its name to Infotopia, Inc. (IFTP).
On May 10, 2000, Infotopia, Inc. signed a letter of intent to acquire
the exclusive rights to the Torso Tiger.
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