UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT FOR SMALL BUSINESS ISSUERS SUBJECT TO THE 1934
ACT REPORTING REQUIREMENTS
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2000 Commission File No.
000-25157
2
INFOTOPIA, INC.
(Exact name of registrant as specified in its charter)
Nevada 95-4685068
(State of organization) (I.R.S. Employer Identification No.)
43 Taunton Green, Suite 5, P.O. Box 391, Taunton, MA 02780
(Address of principal executive offices)
Registrant's telephone number, including area code (508) 884-8173
Check whether the issuer (1) filed all reports required to be
file by Section 13 or 15(d) of the Exchange Act during the past
12 months and (2) has been subject to such filing requirements
for the past 90 days. Yes X
As of July 14, 2000, there were 34,385,402 shares of common stock
outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Unaudited financial statements as of May 31, 2000, and for the
three-month period then ended.
INFOTOPIA, INC.
BALANCE SHEETS
UNAUDITED
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For the For the
Period Period Ended
Ended
May 31, February 29,
2000 2000
----------- -------------
----- ----
Cash and cash equivalents $ 4,556 $ 4,579
Accounts receivable, net of
allowance for
doubtful accounts of $27,000 and 142,153 82,585
$15,000
Inventory 482,559 195,531
Prepaid expenses and other current 1,527,633 724,231
assets
---------- -------------
----
Total current assets 2,156,901 1,006,926
accumulated depreciation and
amortization of
$199,490 and $182,154 340,094 204,430
amortization of $50,141 and 688,933 690,235
$21,668
Licenses and other intangibles, less
accumulated
amortization of $477,678 and 1,246,595 1,320,453
$403,820
Investment 375,000 375,000
---------- -------------
---
TOTAL ASSETS $ 4,807,523 $ 3,597,044
======== ========
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INFOTOPIA, INC.
BALANCE SHEETS
UNAUDITED
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For the Period For the Period
Ended Ended
LIABILITIES AND STOCKHOLDERS' EQUITY May 31, 2000 February 29,
2000
CURRENT LIABILITIES --------------- ----------------
-
Due to related party $ - $ 9,249,296
Accounts payable and accrued expenses 2,755,605 2,125,310
Current maturities of long-term debt 218,000 216,918
Current maturities of notes payable to stockholders and 120,627 120,627
affiliates
Deferred revenue, current portion 81,301 631,301
-------------- ---------------
Total current liabilities 3,175,533 12,343,452
LONG-TERM LIABILITIES
Long-term debt, less current portion 734,536 867,672
------------- ---------------
TOTAL LIABILITIES 3,910,069 13,211,124
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 40,000,000
shares authorized; 20,260,902 shares issued and 20,260 -
outstanding
Additional paid-in capital 11,616,859 -
Accumulated deficit (10,739,665) (9,614,080)
---------------- ---------------
-
Total stockholders' equity 897,454 (9,614,080)
------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,807,523 $ 3,597,044
======== ========
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INFOTOPIA, INC.
STATEMENT OF OPERATION
UNAUDITED
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For the Period For the Period
Ended Ended
May 31, 2000 May 31, 1999
REVENUE --------------- ----------------
Sales, net of returns and
allowances
of $64,986 and $103,200 $ 871,268 $ 1,187,684
COST OF SALES 372,952 369,347
------------ -------------
GROSS PROFIT 498,316 818,337
------------ -------------
OPERATING EXPENSES
General and administrative 1,335,994 1,103,362
Selling and marketing 341,861 1,383,399
Depreciation and amortization 156,905 78,576
-------------- -------------
Total operating expenses 1,834,760 2,565,337
--------------- ---------------
LOSS FROM OPERATIONS (1,336,444) (1,747,000)
OTHER INCOME (EXPENSE)
Interest expense 198,188 45,903
---------------- ---------------
LOSS FROM OPERATIONS BEFORE INCOME (1,534,633) (1,792,903)
TAXES
INCOME TAXES - -
--------------- ---------------
NET LOSS $ (1,534,633) $ (1,792,903)
========= =========
Basic and diluted loss per share (0.10) (0.14)
Weighted average shares 14,675,627 12,841,353
outstanding
</TABLE>
INFOTOPIA, INC.
STATEMENT OF CASH FLOWS
For the Quarter Ended May 31, 2000
UNAUDITED
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CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (1,534,633)
Adjustments to reconcile net (loss) to net
cash
provided by (used in) operating activities
Depreciation and amortization 156,905
Changes in assets and liabilities
Accounts receivable - trade (71,568)
Inventory (287,028)
Prepaid expenses 680,302
Other changes 409,048
Accounts payable and accrued expenses 630,295
Customer deposits (550,000)
-----------
--
Net cash provided by operating activities (566,679)
-----------
--
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (153,000)
Capitalized production cost (27,171)
Licenses and other intangibles 0
-----------
-
Net cash used in investing activities (180,171)
-----------
--
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of debt 51,689
Payments on debt (9,863)
Proceeds from stock subscriptions 705,000
-----------
Net cash provided (used in) financing activities 746,827
-----------
NET INCREASE (DECREASE) IN CASH AND CASH (24)
EQUIVALENTS
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 4,579
-----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 4,556
======
SUPPLEMENTAL INFORMATION:
Interest paid $ 6,910
Income taxes paid $ 0
</TABLE>
Infotopia, Inc.
Notes to Financial Statements
For the Three Month Period Ended May 31, 2000
(Unaudited)
NOTE 1 - Summary of significant accounting policies
a) Organization and Basis for 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 National Boston Medical, Inc. (NV) in a share exchange
agreement executed on November 21, 1998. The Company was
spun-off in a share exchange agreement between National
Boston Medical, Inc. and Dr. Abravanel's Formulas, Inc.
(DABV) in which 100% of the outstanding stock of
Infotopia, Inc. would be exchanged for common stock of
DABV. As a result of the plan of the exchange, Dr.
Abravanel's Formulas, Inc. changed its name to Infotopia,
Inc. (IFTP).
b) Business Operations
The Company engages in the development, marketing,
advertising and selling of innovative wellness products
through direct marketing and response efforts.
c) 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 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.
d) Revenue Recognition
Infotopia recognizes product revenues upon shipment to
the customer. 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.
e) Cash and Cash Equivalents
The Company considers all highly liquid investments
purchased with original maturities of three months or
less to be cash equivalents.
f) 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 period.
g) 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.
h) Inventory
Inventories consisted primarily of component parts and
finished goods, which are valued at the lower of cost or
market on the first-in, first-out (FIFO) basis.
i) 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 of five to seven years.
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.
j) Capitalized Production Costs
SFAS No. 53 "Financial Reporting by Producers and
Distributors of Motion Picture Films" requires
capitalization of production costs and is to be amortized
over the useful life of the program.
k) Intangibles
Intangibles consist of goodwill, formula and license
costs. Goodwill represent costs in excess of net assets
acquired in connection with businesses acquired.
Goodwill is being amortized to operations over 15 years.
License acquisition costs are being amortized over their
expected useful lives or 3 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.
l) 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 basis.
m) 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.
n) 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 May 31, 2000.
o) Long-lived Assets
Long-lived assets to be held and used are reviewed for
impairment whenever events or changes in circumstances
indicate the 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.
p) 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.
q) 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 of 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 - INVESTMENTS
In June 1998, the Parent acquired ten percent of
Dermaguard's Common Stock. The Investment is carried at
lower of cost or market.
NOTE 3 - PREPAID EXPENSES
Prepaid expenses are summarized as follows:
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Legal and professional services paid $1,341,757
in stock
Capital development fee 70,77
2
Employee compensation 41,104
Royalties 60,000
Inventory 14,000
-------------
Total prepaid expenses $1,527,633
========
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NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows:
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Warehouse equipment and molds $320,789
Computer equipment and software 152,06
8
Furniture and office equipment 41,726
Leasehold improvements 11,360
Vehicles 13,641
-----------
$539,584
Less: accumulated depreciation and 199,490
amortization
-----------
Property and equipment, net $340,094
=======
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Depreciation expense for the quarter ended May 31, 2000 was
$54,574.
NOTE 5 - CAPITALIZED PRODUCTION COSTS
Capitalized production costs are summarized as follows:
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Cactus Jack production $292,424
Dean Tornabene (DTCP) production 446,65
0
----------
739,074
Less: accumulated amortization 50,141
-----------
Capitalized production costs - net $688,933
=======
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Production cost amortization for the period was $28,473.
NOTE 6 - INTANGIBLES
Intangibles are summarized as follows:
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Goodwill $880,277
Safeshield formula 343,99
6
Cactus Jack products 330,000
DTCP products 170,000
------------
1,724,273
Less: accumulated amortization 477,678
------------
Total intangibles - net $1,246,595
========
</TABLE>
Amortization expense for the period was $73,858.
NOTE 7 - LONG-TERM DEBT
Long-term debt consists of the following:
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Flex Marketing Inc. Notes Payable $600,763
Virasept Note Payable 37,00
0
Triad Note Payable 150,000
Frederickson Television 93,911
Other Notes Payable 191,489
------------
1,073,163
Less: Current Portion 338,627
--------------
Total Long-term debt - net $734,536
========
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NOTE 8 - NOTES PAYABLE TO STOCKHOLDERS AND AFFILIATES
The Company has in aggregate $120,627 due to stockholder
loans which arose from the parent's acquisition of
various entities.
NOTE 9 - ACCOUNTS PAYABLE
Accounts payable and accrued expenses consist of the
following:
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Accounts payable $2,396,621
Accrued liabilities 358,98
4
-------------
$2,755,605
========
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NOTE 10 - DEFERRED REVENUE
Unfulfilled sales orders at May 31, 2000 amounted to
$81,301.
NOTE 11 - INCOME TAXES
At May 31, 2000, the Company had net carry-forward losses
of approximately $11,100,000. 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.
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
asset and liabilities are as follows:
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Deferred Tax Assets
Loss Carry-forwards $11,148,71
3
Less: Valuation allowance (11,148,713 )
----------------
Net Deferred Tax Assets $ -
=========
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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 12 - CAPITAL STOCK TRANSACTIONS
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.
was exchanged for common stock of DABV. Of the
12,841,353 initial DABV shares, 9,388,223 shares were
canceled per the exchange agreement and the Parent
received 8,167,387 shares. Through the quarter ended May
31, 2000, 7,629,285 shares were issued for legal and
consulting services. At the end of the period there were
19,555,402 shares issued and outstanding.
The exchange agreement specified that the Parent receive
8,167,387 shares. At the end of the period, the Parent
received 7,949,999 shares and 217,388 shares were due to
the Parent. On April 26, 2000 an engagement letter for
Corinthians Ltd. was executed related to stock
subscriptions at $1.00 per share. The related equivalent
common stock (705,000) was reflected as issued and
outstanding at quarter end.
NOTE 13 - GOING CONCERN
The accompanying financial statements have been prepared
assuming the Company will continue as a going concern.
As of May 31, 2000, the Company has a working capital
deficit of $643,632 and an accumulated deficit of
$10,739,664. 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 14 - SUBSEQUENT EVENTS
On June 26, 2000, the Company entered into a License
Agreement with Torso Tiger, Inc. ("TT"). Under the terms
of the agreement, TT grants and licenses to the Company
the exclusive worldwide rights to advertise, promote,
market, sell, distribute and exploit the fitness product
currently known as "Torso Tiger". In consideration of
the license, the Company will compensate TT common stock
equal to $500,000; a weekly royalty of 5% of Gross Sales
Revenues (GSR) of the Product and its upsells in the non-
retail markets; a weekly royalty of 17% of GSR from
worldwide retail and additional contingent bonuses based
on meeting or exceeding sales quotas.
On June 12, 2000, the Company entered into a Mutual
Release and Settlement Agreement ("Release") with
Greenwood & Hall to settle a debt of $131,500.
On July 11, 2000, the Company entered into a Settlement
Agreement and Full Release with David Vitko, D.V. Back
Products, Inc. for a settlement of debt of $368,434 over
a 4 month period and Infotopia retains all rights to the
Backstroke Back Massager.
The Company entered into a Settlement Agreement and Full
Release with Remon Hayek pertaining to the Backstroke
Back Massager for a settlement of debt of $125,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
NOTE REGARDING PROJECTIONS AND FORWARD LOOKING STATEMENTS
This statement includes projections of future results and
"forward-looking statements" as that term is defined in Section
27A of the Securities Act of 1933 as amended (the "Securities
Act"), and Section 21E of the Securities Exchange Act of 1934 as
amended (the "Exchange Act"). All statements that are included in
this Registration Statement, other than statements of historical
fact, are forward-looking statements. Although Management
believes that the expectations reflected in these forward-looking
statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors
that could cause actual results to differ materially from the
expectations are disclosed in this Statement, including, without
limitation, those expectations reflected in forward-looking
statements contained in this Statement.
THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND RESULTS
OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND RELATED NOTES TO THE FINANCIAL STATEMENTS INCLUDE
ELSEWHERE HEREIN. THIS DISCUSSION CONTAINS FORWARD-LOOKING
STATEMENTS THAT RELATE TO FUTURE EVENTS OR THE COMPANY'S FUTURE
FINANCIAL PERFORMANCE AND INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE THE COMPANY'S OR
THE INDUSTRY'S ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR
ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS,
LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR
IMPLIED BY THESE FORWARD-LOOKING STATEMENTS.
Plan of Operation
Infotopia Inc. is in the Direct Marketing business that
encompasses commercials, infomercials, print media, radio and the
World Wide Web. In order for the Company to increase revenues
significantly, it may be necessary to seek additional capital to
accomplish its business plan. Over the next twelve months the
Company will require approximately $5,000,000 to fully execute
its business plan. This will be sufficient to continue ongoing
operations including existing and future projects. The Company
expects to fund a portion of these funds from cash flow received
from product sales, with the balance coming from additional
finance. The Company is currently reviewing several financing
opportunities and will announce any developments as they occur.
The Company realizes that the life-blood of Direct to Retail
Marketing is new products. Therefore the Company's product
research and development/marketing department is one of the
utmost importance to the Company's future. New product ideas
come from a variety of sources, including inventors, suppliers,
trade shows, industry conferences, strategic alliances with
manufacturing and consumer product companies. The Company has
approximately 6 new products in various stages of development,
all suitable for the Direct to Retail Marketing.
After extensive research and market evaluation of each product it
is determined that it may be suited for direct response
television and subsequent marketing through non-infomercial
distribution. Upon final acceptance of the product, the Company
obtains the rights to the products created by third parties
through various licensing arrangements generally involving
royalties related to sales of the product. The Company also
obtains rights to sell products, which have already been
developed, manufactured and marketed through infomercials
produced by other companies. The Company generally seeks
exclusive worldwide rights to all products in all means of
distribution. These include the successful Backstroke Back
Massager that was launched in November of 1998 and has been sold
in both domestic and international markets.
On June 26, 2000 Infotopia acquired exclusive rights to market
the Torso Tiger Ab machine. The Torso Tiger has continued to
produce between $800,000 to $1,000,000 per week in gross sales
revenue since February 2000. The Torso Tiger infomercial was
rated the sixth most successful infomercial running during month
of April by Infomercial Monitoring, Inc. based on the frequency
of airings in the United States. Infotopia is completing final
edits of the Body Rocker total body work out machine. The edits
are expected to be completed by August 20, 2000. In addition
Infotopia is completing a new diet show that will be completed by
mid September 2000. We are projecting these new products and
additional projected launches in the coming year to help achieve
our goal of $54,000,000 in sales revenue for the end of fiscal
2001.
The Company plans to hire 5 new employees within next 12 months.
Any significant increase in demand for customer support and sales
may require adding further employees.
Infotopia's goal is to become a leader in Electronic Retailing,
specializing in Direct Response Television (DRTV). Electronic
Retailing is the use of any electronic media to present products
to the consumer and provide a means of purchasing. There are
four characteristics of electronic retailing:
Electronic media includes television, radio and the Internet.
The message contains all information that the consumer needs
to make a buying decision.
There is a specific offer made to the consumer.
There is an appeal to the consumer to make an immediate buying
decision.
There are Five Steps in developing an effective Electronic
Retailing campaign.
Product development is the process of selecting and
positioning a product for an electronic retailing campaign.
Production is the creation of the script or copy and the
development of the creative content of the campaign.
Media placement is the selection and booking of the actual
airtime for broadcasting the campaign.
Telemarketing & Fulfillment, also known as the "back end," is
the system for receiving calls generated by broadcast
campaigns, filling orders, shipping them and processing
returns, if necessary.
Supplemental distribution is the exploitation of other
marketing channels, either while the ER campaign is running or
after the campaign has run its course.
The success of the Backstroke was the result of trial and error
and a fast learning curve on the part of INFOTOPIA management.
Deciding that it is better to learn from the mistakes of others,
INFOTOPIA undertook extensive research into the electronic
retailing industry. INFOTOPIA analyzed the competition for their
strengths and weaknesses. "Why do some products succeed while
others fail?" "Why do some companies succeed while others fail?"
INFOTOPIA learned that the companies or products that failed all
shared some common traits:
Lack of new products
Inability to attract inventors
Poorly designed products
Insufficient cost containment
INFOTOPIA realized that the current Direct Marketing paradigms
needed to be challenged and reinvented with the emphasis placed
on the inventor. The inventor is supported by a streamlined
organization that is capable of marshalling the skills and
resources best suited to a particular inventor and product.
Infotopia's streamlined organization provides this new paradigm.
Through strategic industry alliances, INFOTOPIA is able to offer
a broad range of talent and expertise that would be extremely
expensive to offer "in-house."
INFOTOPIA's management has chosen to outsource specialty
functions to companies with experience and expertise in various
areas of "Direct Response to Retail Marketing." Through
outsourcing, INFOTOPIA is able to multiply the company's ability
to recruit inventors, attract new products, and successfully
launch multiple products. Outsourcing offers the following
benefits:
Streamlined Organization - Reduced manpower and overhead
Streamlined Decision-Making Process - Rapid Market Response
Increased Efficiency- Reduced cost to manufacturer
Improved Cash-flow - Reducing the need for long term Financing
Improved Profitability- Increase the Value to Shareholders
Product Line
Infotopia is a product development company that specializes in
the flexible marketing, advertising, and direct response sales of
innovative consumer products. Infotopia has developed or
obtained the marketing rights to several products in growth
industries, including, healthcare, fitness, and recreation.
Independent research projects have shown that these industries
have tremendous marketing and sales potential. INFOTOPIA is
currently direct marketing the Backstroker, which has been highly
successful among consumers and healthcare professionals
throughout the U.S. and abroad. Additional contracts and
agreements have been made with Designs by Dean and Torso Tiger,
Inc. Based on the particular product and profit potential,
INFOTOPIA will outsource portions of a product launch or the
entire product to other media production companies.
The Company currently has two products that it is marketing
through infomercial marketing, known in the industry as Direct
Response Television (DRTV). INFOTOPIA is promoting the highly
successful Backstroke Back Massager and the company is also
completing several products by Dean Tornabene for launch in the
third quarter of 2000: the Body Rocker and Fat Fighter System.
INFOTOPIA is actively pursuing and reviewing additional products
that may lend themselves well to this form of marketing.
Competitive Advantage
The management of INFOTOPIA believes that the company has a
sustainable competitive advantage in the DRTV industry based on
the structure and products of the Infotopia division.
Efficient and responsive corporate structure
Focus on the inventor
High potential quality products
Quality of outsource partners and strategic alliances
Backstroke Back Massager
The Backstroke is a body massager and health care device designed
by a chiropractic physician. The Backstroke provides valuable
muscle stimulation, enhanced circulation, and therapeutic
acupressure throughout the neck, back and torso. Users benefit
from the specially designed massage elements mounted on a frame
that is placed horizontally on the floor. The elements are
placed in a specific pattern, vary in size and firmness to
provide the correct stimulation and acupressure throughout the
entire back. The unit includes an adjustable neck support roller
and video instruction tape.
The Backstroke won a Silver Medal Award at INPEX XIII, America's
largest invention trade show, held May 15 - 18, 1997 in
Pittsburgh, Pennsylvania. The INPEX XIII trade show featured
over 1,500 different products and 30 different countries were
represented.
Market Research
The consumer market for massagers and related products has
consistently grown during the last 20 years. Consumers have
supported the industry by purchasing electric massage wands,
chairs, and manual devices. Furthermore, the overall growth of
the health care and physical fitness industry have complimented
the sales of massage related devices. Industries that provide
products that enhance the body or provide a feeling of well being
have grown significantly due to an increase in consumer demand
for products that enhance the body and level of physical
fitness/appearance.
The growth and improvement of direct response marketing and sales
via infomercials, home shopping networks and commercials has had
a positive impact on the massager industry. Manufacturers and
retailers are utilizing alternative forms of retailing; such as,
television shopping and infomercials, merchandising massagers
with other home comfort items and promoting the products as a
year-round category. Unit sales, estimated at 4.6 million, are
predicted to rise 4 - 10% throughout the entire category. While
sales of body mats, massage chairs, and other higher ticket
massagers are expected to grow 4-5 times faster than the entire
category, which is the fastest growth that the category has
experienced in years.
Currently in the US, more than 60% of all infomercials feature
products from the physical fitness, health care, or body care
industries. These products range from exercise devices to diet
plans and self-improvement programs. Consumers are increasingly
more interested in improving their quality of life by enhancing
physical appearance and overall well being. Manufacturers and
retailers have responded to this surge in interest and demand by
offering more products in these industries at various price
points. Traditionally, consumers had fewer choices in health
care and body care devices; furthermore, the products were
offered at relatively high price points. Prior to the mid 80's,
the products were marketed to high income individuals as
"specialty" or "exclusive" items only distributed in specific
retail stores or catalogs.
According to recent market studies, the Backstroker, retailing at
$59.90 (plus $19.95 shipping and handling), is being marketed at
an ideal price point for back massage units. Traditionally,
consumers have paid as much as $500 for back massage/therapy
products that offer similar benefits as the Backstroker. Back
massage products that provide therapeutic massage and safe spinal
traction are currently being sold at prices of $200 - $500 per
unit. These products are usually sold in exclusive retail stores
and catalogs.
Dean Tornabene
Background
For over fifteen years, Dean Tornabene has pioneered the
philosophy of "balance through herbs and nutrition." A former Mr.
America, renowned celebrity nutritionist and inventor, Dean has
the knowledge and practical experience to be considered an
authority on health and nutrition. His national television
programs on health and nutrition and his magazine columns are
followed by millions of people. As the inventor of the Fat
Fighting Systemr, Metasystemr, Bun and Thigh Sculptor, Ab Rocker
and numerous fitness and lifestyle products, Dean's name appears
on his products as a symbol of quality, confidence and
authenticity. Major Fortune 500 companies have consulted with
Dean, and he has been instrumental in the development of the
technology used in their health and fitness products.
Tornabene and Infotopia
Infotopia has signed an exclusive sales and marketing agreement
with Dean Tornabene and Charles Perez to produce a minimum of 12
new infomercial products for the next four years and the right of
first refusal on all new inventions.
Dean Tornabene and Charles Perez are the co-inventors of the Bunn
and Thigh Sculptor, the Ab Rocker and several other inventions
that have been utilized in Direct Response to Retail Marketing.
These inventions have produced over 300 million dollars in sales
during the past four years and continue to produce at a very high
level.
Dean and Charles have ready for market, a new piece of fitness
equipment presently called the ``Body Rocker.'' Dean states, ``I
believe that the Body Rocker is the greatest fitness invention
since the barbell and will revolutionize personal home fitness
equipment.'' Production on an infomercial has already begun by
Promoseltzer Productions, and is scheduled for release in the
thrid quarter of 2000.
Daniel Hoyng, CEO of Infotopia states, ``An opportunity to land
inventors of the quality of Dean and Charles is part of the
Infotopia strategy to provide an exclusive home to inventors of
previously successful infomercial products. The Body Rocker has
the potential in an eighteen-month period to match the revenue of
all of Dean and Charles previous products combined. The signing
of Dean and Charles should clearly indicate to our shareholders
and competitors that we are in the Direct Response to Retail
segment to stay and intend to become a new industry leader.''
Upcoming Products by Dean
Body Rocker
The Body Rocker has enormous marketing potential. The Body
Rocker is a "total body" fitness machine that will provide a no-
impact workout at all fitness levels. The BODY ROCKER is
designed to have mass appeal for beginners through serious
fitness enthusiasts. Sales are projected in excess of 1 million
units.
Dean Tornabene Fat Fighting System
Dean Tornabene is a recognized expert in the field of nutrition.
The Fat Fighting System is an all-natural dietary supplement that
safely and effectively enhances the body's ability to burn off
calories and unwanted fat. The product is scheduled for launch
in September 2000.
Management's Discussion and Analysis of Financial Condition
During the quarter ended May 31, 2000, the Company's net sales
were only $871,000 compared to the previous year's quarter (1999)
net sales of approximately $1,188,000. This decrease in volume
was primarily due to: (1) the Company's main direct to sales
product, the Backstroke Back Massager, had matured and has
subsequently been remarketed to retail sales outlets and the
international trade; (2) the Company was in a state of transition
in this quarter whereby new products produced by Cactus Jack and
Dean Tornabene (DTCP) were being manufactured and commercial
production prepared for their roll-outs beginning July, 2000; (3)
the Company greatly reduced its sales and marketing expenses for
the quarter which has a direct effect on sales. The sales from
the quarter were predominantly from previously recorded deferred
sales as well as some new sales associated with the retail
markets.
Cost of sales for the quarter was 49% compared to 31% in the
previous year's quarter due to the change in product mix and
pricing arrangements. The prior year's sales were predominantly
Backstroke Back Massager units sold via infomercials and had a
much higher profit margin. The current quarter sales reflects
sales of lower-priced products (Cactus Jack One-Shot Lures and
DTCP Fat Fighter System) as well as products sold to the retail
market at a lower price to attempt to gain future market share.
Management expects revenues will begin to grow as the Torso Tiger
comes online and the rollout of the Body Rocker and Fat Fighting
System. To achieve this expected growth, the Company's
advertising, promotional and production expenses will increase
significantly in the coming quarters. As noted by the statement
of operation for this quarter, selling and marketing expenses
were $341,000 compared to the previous year's quarter of
$1,383,000 due to management's decision not to use the
infomercial marketing channel.
General and administrative expenses were 21% higher ($233,000)
than the previous year's quarter due to the realization of costs
associated with stock issued for legal and professional services.
For the quarter just ended, costs amortized associated with stock
issued for services related to shell acquisition was
approximately $240,000. Depreciation and amortization increased
significantly as a percentage of net sales due to the
capitalization and related amortization of licenses and
production costs associated with Cactus Jack and DTCP product
lines.
For the quarter ended May 31, 2000, the Company received equity
financing from stock subscriptions ($705,000) to provide working
capital during its stage of transition into its new product
lines. For the period, the company's loss was $1,534,633 and its
net cash provided from operations was a deficit of $566,679.
Cash from operations was impacted by an increase in inventories
($287,000) due to the expected release of its new product lines
offset by an increase to accounts payable ($630,000) as a means
to temporarily finance operations. During the period, the
Company increased its investment in property, equipment and
production costs by $180,000.
As of May 31, 2000, the Company has a working capital deficit of
$643,632 and an accumulated deficit of $10,739,664. 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.
Since management expects improvements in revenue streams
throughout 2000, certain expenses such as production and media
costs would increase in proportion to revenues. Other expenses
related to general and administrative expenses are not expected
to rise proportionally as project increase and revenues improve.
The Company is able to generate increasing revenues without
significantly increasing employee counts or general and
administrative expenses as certain marketing activities
(fulfillment and production) are generally outsourced. While
management believes that revenues and growth will increase in
future periods, the upside potential from successful infomercial
marketing is great but the risk of failure is always present.
Therefore, while management's operating plan is predicated on the
successful launch of new products, there can be no assurances
that profitability will be realized if one or more of the
products fail. This risk leads to the conclusion that the
Company will require supplemental capital to maintain and to
increase its stable of products, to fund operations and to
improve profitability.
Cash Requirements And Needs For Additional Funds
We are a Direct Marketing development stage company with
operations and revenues. We should reach marginal profitability
in our third quarter this fiscal year, but have only limited
capital resources. While it is anticipated revenues will be
increasing as per projections, it may be necessary for the
Company to seek additional capital over time to optimize the
accomplishment of its business plan. The following disclosure
treats describes all funding since Dr.Abravanel's Formulas Inc.
acquired Infotopia, Inc. on April 26, 2000 and plans and
arrangements for the future funding. We believe it to be
important to the development of the company to continually review
and develop new projects for all our marketing channels, and we
have determined that new funds are highly desirable, and possibly
necessary to aggressively approach operations in the year 2000.
The registrant has entered into three separate agreements to
raise a minimum of $3,5000,000 and a maximum of $6,000,000. As
of this filing the Company has completed $2,130,369 of this
funding.
First, an engagement letter for Corinthians Ltd. was
executed on April 26, 2000 to purchase a minimum of $750,000
and a maximum of $2,000,000 (to be in reliance on Regulation D,
Rule 506, and section 4 (2) of the Securities Act of 1933) worth
of restricted common stock of Infotopia, Inc. for $1.00 per
share, between April 26, 2000 and August 31, 2000. As of this
filing $880,000 of this funding has been completed.
Second, an engagement letters for JB Marc and Associates,
Inc. was executed on April 26, 2000 to purchase a minimum of
$750,000 and a maximum of $2,000,000 (to be in reliance on
Regulation D, Rule 506, and section 4 (2) of the Securities Act
of 1933) worth of restricted common stock of Infotopia, Inc. for
$1.00 per share, between April 26, 2000 and August 31, 2000. As
of this filing $858,369 of this funding has been completed.
Third, an engagement letter for First Equity Capital, Inc.,
was executed on July 5, 2000 to raise a minimum of $2,0000,000
worth of promissory notes to be sold in units of a minimum of
$50,000 (see Exhibit 10.7). The note holder will receive 10%
interest and warrants to purchase 100,000 shares of common stock
of Infotopia, Inc. for $0.15 per share and 100,000 shares at
$0.25 per share. As of this filing the company as executed
$400,000 worth of promissory notes. First Equity Capital, Inc.,
will receive 600,000 shares of restricted common stock for each
$500,000 raised. A bonus of 200,000 shares of restricted common
stock will be issued for each $500,000 raised provided the
$500,000 increments are received each 15 days. In addition for
each $100,000 raised First Equity Capital, Inc. will receive
50,000 warrants at $0.15 per share and 50,000 warrants at $0.25
per share.
As of this filing the Company is finalizing negotiations to raise
an additional $5,000,000. The Company believes that its present
arrangements will provide sufficient working capital to continue
operations for the next twelve months. There can be no guaranty
that unrealized funding will be realized.
Current Developments
On April 19, 2000, the Company filed a Form 8-K stating that the
Company had changed accountants. That Form 8-K is hereby
incorporated by reference.
On May 12, 2000, the Company filed a Form 8-K and subsequent
amended Form 8-K stating that the Company had acquired Infotopia,
Inc. and had changed its name to Infotopia, Inc. These Forms 8-K
are incorporated by reference. (See Exhibit 10.1 to this 10-QSB)
Subsequent Events
License Agreement
On June 26, 2000, the Company entered into a License Agreement
with Torso Tiger, Inc. ("TT") (see Exhibit 10.2). Under the terms
of the Agreement, TT grants and licenses to the Company the
exclusive worldwide rights to advertise, promote, market, sell,
distribute and exploit the abdominal fitness product currently
known as "Torso Tiger" and all improvements and modifications
(the "Products") and related upsells by any manner and in any and
all media and markets now know or hereafter devised, including,
without limitation, airing the Infomercial, commercial and
promotional spots on broadcast, cable, satellite and all other
forms of television transmission now existing or hereafter
developed, television shopping programs such as QVC and HSN,
radio, internet, all print media, direct mail solicitation,
inbound and outbound telemarketing, catalog sales, continuity
program, retail sales and all other channels or means of
distribution now existing or developed.
The Company will manage and oversee all operations relating to
the advertising, promotion, manufacturing, sale, marketing,
distribution and exploitation of the Product and related Upsells,
including:
(i) coordination of advertising and promotion for the
Product and Upsells;
(ii) coordination of telemarketing services;
(iii) coordination of television media buying;
(iv) coordination of fulfillment;
(v) implementation of continuity program;
(vi) coordination of the manufacturing of the Product and
Upsells;
(vii) implementation of non-television distribution
channels for the Product and Upsells;
(viii) coordination of customer service regarding the
Product and Upsells;
(ix) oversee all transactional, financial, business and
contractual matters relating to the marketing of the
Product, including the negotiation of contracts (in
consultation with the Company) for all of the above
services ; and
(x) providing general management, administrative and
bookkeeping services with respect to the day-to-day
operations of the marketing and distribution of the
Product, including generating monthly statements and
computing and disbursing "Adjusted Gross Revenues" to
the Company and royalties to TT.
In consideration of the license by Torso Tiger, the Company shall
compensate TT as follows:
(a) Infotopia shall issue to TT or its designees, in accordance
with all applicable securities laws, shares of its restricted
common stock, validly issued, fully paid and non-assessable,
equal to Five Hundred Thousand Dollars ($500,000) at the price of
fifteen cents ($0.15) per share. Such shares shall be Rule 144
restricted shares. In the event such shares are not valued at
Five Hundred Thousand Dollars ($500,000) at the time such shares
become free trading, Infotopia shall, at TT's election, either
pay to TT or its designees the difference in cash between the
value of such shares at such time and Five Hundred Thousand
Dollars ($500,000) or issue to TT or its designees additional
shares of Infotopia common stock or warrants or stock options to
purchase shares of Infotopia common stock, in either case
necessary to achieve an aggregate value of Five Hundred Thousand
Dollars ($500,000). If at any time Infotopia ceases to be a
publicly traded company and TT or its designees have not sold
such shares prior to such time, Infotopia shall pay TT or its
designees an amount equal to Five Hundred Thousand Dollars
($500,000).
(b) Infotopia shall be obligated to register some of its
securities for sale for its own account or for the account of
other persons within six (6) months of the date hereof. Infotopia
shall at such time give written notice ("Infotopia's Notice"), at
its expense, to TT of its intention to do so at least thirty (30)
days prior to the filing of a registration statement with respect
to such registration with the Securities and Exchange Commission.
Unless Infotopia receives notice from TT to the contrary within
ten (10) business days after Infotopia's Notice is received by
TT, Infotopia shall cause all of TT's shares to be registered
under the Securities Act in connection with Infotopia's
registration so as to permit the sale by TT of TT's shares. All
expenses incurred in effecting any registration pursuant to this
subparagraph, including, without limitation, all registration and
filing fees, printing expenses, expenses of compliance with blue
sky laws and fees and disbursements of counsel for Infotopia,
shall be borne by Infotopia. The foregoing registration rights
shall apply to TT's designees if the Infotopia shares were issued
to said designees.
(c) Infotopia represents, warrants and covenants that it will
comply with Rule 144 in all respects, including, without
limitation, Rule 144(c) (1) and (2). If Infotopia fails to
register such restricted shares as set forth in Paragraph 4(b)
above, Infotopia shall issue to TT or its designees, in
accordance with all applicable securities laws, at TT's election,
shares of its common stock, validly issued, fully paid and non-
assessable, or warrants or stock options to purchase shares of
Infotopia common stock at an exercise price of fifteen cents
($0.15) per share, equal in market value to One Hundred Thousand
Dollars ($100,000). The parties hereto agree that such issuance
is not intended to be in full or complete satisfaction of any dam
ages arising out of such default or breach by Infotopia and that
such issuance shall not preclude any action or remedy available
to TT with respect to such default or breach by Infotopia.
Moreover, in such event, TT or its designees shall be entitled to
exercise a "put" right to Infotopia upon written notice to
Infotopia, pursuant to which Infotopia shall be obligated to
purchase such restricted shares from TT or its designees at a
purchase price equal to the value of such shares at the time of
such written notice, but in no event less than Five Hundred
Thousand Dollars ($500,000) regardless of the value of such
shares at such time.
Compensation to TT for Services. In consideration of the services
to be rendered by TT as set forth herein, Infotopia shall
compensate TT during the Term as follows:
(a) TT shall receive a weekly royalty of five percent (5%) of
one hundred percent (100%) of Gross Sales Revenues of the Product
and Upsells from worldwide sales and exploitation of the Product
and Upsells by any means and media other than retail. "Gross
Sales Revenues" shall mean all gross revenues actually received
by TT or its designees on behalf of Infotopia in respect of sales
and exploitation of the Product and Upsells by any means and
media other than retail, excluding (i) sales, excise, use or any
other taxes, and (ii) actual returns, actual refunds and actual
chargebacks.
(b) TT shall receive a weekly royalty of seventeen percent (17%)
of one hundred percent (100%) of the "Wholesale Selling Price" of
the Product and Upsells from worldwide retail sales and
exploitation of the Product and Upsells, including, without
limitation, internet sales through torsotiger.com and third party
internet sales. "Wholesale Selling Price" shall mean the gross
amount invoiced by TT or its designee on behalf of Infotopia to
retailers and/or distributors for resale to consumers and
actually received by TT or its designees on behalf of Infotopia
in respect of worldwide retail sales and exploitation of the
Product and Upsells, excluding (i) sales, excise, use or any
other taxes, and (ii) actual returns, actual refunds and actual
chargebacks.
(c) TT shall receive an additional contingent cash bonus equal
to Two Hundred Fifty Thousand Dollars ($250,000), payable within
fifteen (15) business days following the achievement by TT on
behalf of Infotopia of Gross Sales Revenues and the Wholesale
Selling Price from worldwide sales and exploitation of the
Product and Upsells by any means and media of Ten Million Dollars
($10,000,000) or One Million Dollars ($1,000,000) in Adjusted
Gross Revenues (as defined below) before taxes and excluding the
reserve against returns and the reserve for working capital set
forth in Paragraph 6 hereof.
(d) TT shall receive an additional contingent cash bonus equal
to One Hundred Thousand Dollars ($100,000), payable within
fifteen (15) business days following any month in the calendar
year 2000 during which a minimum of Eight Hundred Thousand
Dollars ($800,000) in media is aired resulting in a ratio of
Gross Television Sales Revenues to Costs Per Order of 2.5/1 or
greater for such month, up to a maximum bonus of Three Hundred
Thousand Dollars ($300,000).
(e) Notwithstanding anything to the contrary contained herein,
"Gross Sales Revenues" and "Wholesale Selling Price" shall not
include any gross revenues received by TT in respect of sales and
exploitation of the Product and Upsells by any means and media
after the effectiveness of this Agreement (i.e., the satisfaction
of the conditions precedent set forth in Paragraph 5(a) and 3(b)
hereof) to the extent such gross revenues are realized from sales
made, or purchase orders for units of the Product and Upsells
placed, prior to the effectiveness of this Agreement.
Pursuant to the terms of the licensing agreement described above,
on July 13, 2000, Torso Tiger was issued 3,334,334 shares of
common stock on which was exempt from registration in reliance
upon Section 4(2) of the Securities Act of 1933, as amended. The
Company agreed to retain Mark Levine and David Richmond to act as
consultants to the Company regarding the management and operation
of the Torso Tiger product as long as the License Agreement
remains in full force and effect.
Settlement Agreement
On June 12, 2000, the Company entered into a Mutual Release and
Settlement Agreement ("Release") with Greenwood & Hall, a
division of PCS Link, Inc. (see Exhibit 10.3). Under the terms of
the Release, the Company paid Greenwood & Hall the sum of
$131,500 as full and final payment.In consideration of Greenwood
& Hall's decision to settle the matter for significantly less
that contract value and actual damages they incurred, the Company
will not be entitled to any service credits and/or refunds for
services that no longer need to be rendered due to order
cancellations and/or customer initiated chargebacks.
Change in Officers and Directors
On July 3, 2000, the Company decided to increase the members of
the Board of Directors to 5 members and appointed C. Anthony
Ferracone and James Kosta as newly appointed members of the
board. Also on July 3, 2000, the Company accepted Mr. Marek
Lozowicki's resignation as Treasurer of the Company, effective
immediately. Mr. C. Anthony Ferracone was appointed as Chief
Financial Officer and as well as Treasurer of the Company.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
1. Greenwood and Hall vs. Infotopia, Inc. and National
Boston Medical, Inc. were settled July 14, 2000 and the case was
dismissed with prejudice. Greenwood and Hall received $131,500
as payment in full. (see Exhibit 10.3)
2. Settlement Agreement and Full Release with David M.
Vitko, D.V. Back Products, Inc. General Partner, Backstroke,
LTD., and Infotopia, Inc. Dated July 11, 2000. Infotopia retains
all rights to the Backstroke Back Massager and David M. Vitko,
D.V. Back Products, Inc. General Partner, Backstroke, LTD will
receive $368,434.14 over a 4 month period. (see Exhibit 10.4)
3. The Company is still in negotiations to enter into a
Settlement Agreement and Full Release with Remon Hayek and
Infotopia, Inc. pertaining to the Backstroke Back Massager. Hayek
will receive $125,000.00 over 4 months for past obligations due
Hayek.
4. On July 10, 2000 Infotopia, Inc. executed with DTCP (Dean
Tornabene) an Addendum to their Manufacturing, Marketing and
Distribution Agreement for future products. This addendum gives
Infotopia the rights to three new product per year and language
that will continues to allow Infotopia Inc. to market their
current products the BodyRocker, Fat Fighting System and the Bunn
Rocker. (see Exhibit 10.5)
5. On July 12, 2000 Infotopia, Inc. entered into an
agreement with Cactus Jack's Marketing Corp. to discontinue
marketing the Cactus Jack product line. Cactus Jack received a
cash settlement of $125,000. Cactus Jack gave to Infotopia, Inc.
1,000,000 shares of NMBX stock and a complete and full release.
(see Exhibit 10.6)
ITEM 5. OTHER INFORMATION
1. i. The Company's principal accountant was
dismissed on April 25, 2000
ii. The principal accountant's report on the financial
statements for the past two years was modified as to uncertainty
that the Company will continue as a going concern.
iii. The Company decided to retain the auditors of Infotopia,
Inc., the surviving company. The decision to change accountants
was approved by the board of directors.
iv. A. There were no disagreements with the former
accountant on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure,
which, if not resolved to the former accountants satisfaction,
would have caused it to make reference to the subject matter of
the disagreement(s) in connection with its report.
2. A new accountant has been engaged as the principal
accountant to audit the issuer's financial statements. The new
accountant is Merdinger, Fruchter, Rosen & Corso, P.C. and was
engaged as of April 25, 2000. Neither the Company nor anyone
acting on its behalf consulted the new accountant regarding:
ii. the application of accounting principles to a specific
completed or contemplated transaction, or the type of audit
opinion that might be rendered on the small business issuer's
financial statements, as part of the process of deciding as to
the accounting, auditing or financial reporting issue, or
iii. any matter that was the subject of a disagreement or event
identified in response to paragraph 1(iv) of this Item.
3. The Company has provided the former accountant with a copy
of the disclosures it is making in response to this Item. The
Company has requested the former accountant to furnish a letter
addressed to the Commission stating that it agrees with the
statements made by the Company. The Company has filed the letter
as an exhibit to the registration statement containing this
disclosure.
Registration of Stock
During April and May 2000, the Company filed Forms S-8 to
register shares to be issued to various individuals as
consultants to the Company. As of May 31, 2000, the Company has
issued 5,129,285 shares of stock pursuant to the filing of the
Forms S-8.
Subsequently, the Company has issued 14,830,000 shares of its
common stock pursuant to the filing of Forms S-8 during June 2000
and on July 7, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
EXHIBITS
3.1 The Company's Articles of Incorporation are attached to the
Company's Amended Form 10-SB, filed on April 30, 1999. These
exhibits are incorporated by reference to that Form.
3.2 The Company's Bylaws are attached to the Company's Amended
Form 10-SB, filed on April 30, 1999. These exhibits are
incorporated by reference to that Form.
10.1 Acquisition Agreement
10.2 License Agreement
10.3 Mutual Release and Settlement Agreement with Greenwood &
Hall
10.4 Settlement Agreement and Full Release with David M. Vitko,
D.V. Back Products, Inc. General Partner, Backstroke, LTD.
10.5 Addendum to their Manufacturing, Marketing and Distribution
Agreement with Dean Tornabene
10.6 Settlement Agreement and Full Release with Cactus Jack.
10.7 Letter of Understanding with First Equity Capital
16 Letter on Change in Certifying Accountant
27 Financial Data Schedule
Reports on Form 8-K:
On April 19, 2000, the Company filed a Form 8-K stating that the
Company had changed accountants. That Form is hereby incorporated
by reference.
On May 12, 2000, the Company filed a Form 8-K and subsequent
amended Form 8-K stating that the Company had acquired Infotopia,
Inc. and had changed its name to Infotopia, Inc. These Forms are
incorporated by reference.
