<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ___________ to ____________.
Commission file number: 000-27821
2-INFINITY.COM, INC.
(Exact name of small business issuer as specified in its charter)
Colorado 58-1891761
---------------------------- -------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
4828 Loop Central Drive, Suite 150 Houston, Texas 77081
------------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (713) 838-8853
(Former name, former address and former fiscal year, if changes
since last report)
The number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
As of August 14, 2000, 86,576,339 shares of the issuer's common stock
were outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
<PAGE>
2-INFINITY.COM, INC.
FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 2000
INDEX
PAGE
-----
PART I. FINANCIAL INFORMATION..............................................3
ITEM 1. a) Consolidated Financial Statements...........................3
b) Consolidated Balance Sheet - June 30, 2000.........................3
c) Consolidated Statements of Operations -
Three and Six months ended June 30, 2000 and 1999..................5
d) Consolidated Statements of Cash Flows -
Six months ended June 30, 2000 and 1999............................6
e) Notes to Consolidated Financial Statements.........................8
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.....................15
PART II. OTHER INFORMATION.................................................18
ITEM 1. Legal Proceedings...............................................18
ITEM 2. Changes in Securities ..........................................18
ITEM 3. Defaults upon Senior Securities.................................22
ITEM 4. Submission of Matters to a Vote of Securities Holders...........22
ITEM 5. Other Information...............................................23
ITEM 6. Exhibits............................................................23
SIGNATURES..................................................................24
EXHIBIT INDEX...............................................................24
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
2-INFINITY.COM, INC.
Consolidated Balance Sheet
ASSETS
<TABLE>
<CAPTION>
June 30,
2000
-------------
<S> <C>
CURRENT ASSETS
Cash $ 242,604
Accounts receivable, net of allowance for doubtful accounts of $7,451 233,833
Accounts receivable - other 15,921
Accounts and notes receivable - employees 104,349
Prepaid expenses 20,254
Security deposit 15,959
-------------
Total Current Assets 632,920
-------------
PROPERTY AND EQUIPMENT
Leasehold Improvements 3,207
Furniture and fixtures 71,058
Equipment 232,579
Less: accumulated depreciation (35,083)
-------------
Total Property and Equipment 271,761
-------------
OTHER ASSETS
CLEC license 387,300
-------------
TOTAL ASSETS $ 1,291,981
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
2-INFINITY.COM, INC.
Consolidated Balance Sheet (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30,
2000
--------------
<S> <C>
CURRENT LIABILITIES
Accounts payable $ 689,951
Notes payable 76,000
Accrued expenses 224,867
Other Liabilities 43,127
--------------
Total Current Liabilities 1,033,945
--------------
STOCKHOLDERS' EQUITY
Preferred stock 25,000,000 shares authorized,
no par value; no shares outstanding -
Common stock 300,000,000 shares authorized, no par
value; 84,816,339 shares issued and outstanding -
Additional Paid in Capital - Common stock 13,404,348
Accumulated Deficit (13,146,312)
--------------
Total Stockholders' Equity 258,036
--------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 1,291,981
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
2-INFINITY.COM, INC.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
---------------------------------- ----------------------------------
2000 1999 2000 1999
---------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
REVENUES $ 624,886 $ 53,996 $ 1,434,362 $ 118,726
COST OF SALES 520,644 36,310 1,143,953 88,742
---------------- -------------- ---------------- --------------
GROSS MARGIN 104,242 17,686 290,409 29,984
---------------- -------------- ---------------- --------------
EXPENSES
Depreciation expense 16,587 5,245 22,820 5,545
Amortization expense - 2,159,720 503,200 2,160,440
Loss from oil and gas activities - 214,076 109,467 235,491
General and administrative 871,017 263,032 2,768,587 370,271
---------------- -------------- ---------------- --------------
Total Expenses 887,604 2,642,073 3,404,074 2,771,747
---------------- -------------- ---------------- --------------
Loss from Operations (783,362) (2,624,387) (3,113,665) (2,741,763)
---------------- -------------- ---------------- --------------
OTHER INCOME (EXPENSE)
Interest expense (9,640) (12,187) -
Interest income 465 384 2,656 614
Loss on disposal of oil and gas assets (273) (31,273) -
---------------- -------------- ---------------- --------------
Total Other Income (Expense) (9,448) 384 (40,804) 614
---------------- -------------- ---------------- --------------
Loss before Cancellation of Stock (792,810) (2,624,003) (3,154,469) (2,741,149)
Income (expense) from cancellation of stock 4,141,960 (591,708) 4,141,960 (591,708)
---------------- -------------- ---------------- --------------
NET INCOME (LOSS) 3,349,150 (3,215,711) 987,491 (3,332,857)
================ ============== ================ ==============
INCOME (LOSS) PER SHARE
Basic $ 0.04 $ (0.10) $ 0.01 $ (0.12)
Diluted $ 0.04 $ (0.10) $ 0.01 $ (0.12)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING:
Basic 75,642,603 32,227,425 66,350,427 27,354,022
Diluted 80,121,865 32,227,425 70,829,689 27,354,022
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
2-INFINITY.COM, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six Months
Ended June 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 987,491 (3,332,857)
Adjustments to reconcile net income (loss) to net cash used by
operating activities:
Depreciation expense 22,820 7,945
Loss on disposal of oil and gas assets 31,273 -
Amortization expense 503,200 2,160,440
Common stock issued (cancelled) for services, net (3,751,924) 111,852
Changes in operating assets and liabilities:
Increase in accounts and other receivable (323,557) (63,753)
Increase (decrease) in accounts payable 579,156 12,318
Increase in accrued expense and other liabilities 108,120 608,921
Decrease in prepaid expense and assets 9,212 -
------------ ------------
Net Cash Used by Operating Activities (1,834,209) (495,134)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of CLEC license 217,000 -
Purchase of property and equipment (222,753) (103,701)
------------ ------------
Net Cash Used by Investing Activities (439,753) (103,701)
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
2-INFINITY.COM, INC.
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
----------------------------
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of notes payable (20,645) -
Proceeds from notes payable and debentures - 100,800
Proceeds from issuance of common stock and warrants 2,439,000 562,091
----------- -----------
Net Cash Provided by Financing Activities 2,418,355 662,891
----------- -----------
NET INCREASE IN CASH 144,393 64,056
CASH AT BEGINNING OF PERIOD 98,211 116,569
----------- -----------
CASH AT END OF PERIOD $ 242,604 $ 180,625
=========== ===========
CASH PAID DURING THE PERIOD FOR:
Interest $ 12,187 -
NON-CASH TRANSACTIONS
Common stock and debt issued for services 331,880 111,852
Cancellation of stock issued to employees (4,141,960) 591,708
Common stock issued to acquire CLEC license 170,300 -
Common stock issued for business acquisition 513,200 2,170,000
Common stock issued for debt and interest 919,500 -
----------- -----------
Total Non-cash Transactions $(2,207,080) $ 2,873,560
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
2-INFINITY.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements included herein have been prepared by
2-Infinity.com, Inc. (formerly Lakota Technologies, Inc.), which, together
with its wholly owned subsidiaries, is referred to herein as the "Company,"
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of the Company, all adjustments,
consisting of normal recurring adjustments and a one-time adjustment as a
result of the cancellation of shares (see Note 10 below), are necessary to
present fairly the financial position of the Company as of June 30, 2000, the
results of its operations for the three and six months ended June 30, 2000
and 1999, and its cash flows for the six months ended June 30, 2000 and 1999.
Certain information in footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles has been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate
to make the information presented not misleading. These consolidated
financial statements should be read in conjunction with the financial
statements for the year ended December 31, 1999, and the footnotes thereto,
included in the Company's Annual Report on Form 10-KSB and as amended on Form
10-KSB/A, filed with the Securities and Exchange Commission. The revenues
from operations for the three and six months ended June 30, 2000 are not
necessarily indicative of the results to be expected for the full year.
1. Basis of Presentation:
Principles of consolidation - The consolidated financial statements include the
accounts of 2-Infinity.com, Inc. and its wholly owned subsidiaries. All
inter-company balances and transactions have been eliminated in the
consolidation.
Change of name - On April 12, 2000, the shareholders of the Company approved an
amendment to the Company's Articles of Incorporation that changed the Company's
name from Lakota Technologies, Inc. to 2-Infinity.com, Inc.
2. Revenue Recognition:
The Company has historically recorded revenues from its 2-I Voice Solutions
products, which include business telephone and voice mail systems products
and services. Revenues for the three and six months ended June 30, 2000 and
1999 also include revenues from the Company's newly-acquired subsidiary, a
network hardware and service provider, Maximum Return and Development, Inc.
("Maximum Return"), as if the Company had owned Maximum Return since
inception. The acquisition was accounted for as a pooling of interest. See
Note 6.
Revenue from business telephone and voice mail systems and network hardware
products are recorded when shipped to the customer, and revenue from any related
services are recorded when the services are rendered to the customer.
3. Basic and Diluted Income (Loss) Per Share:
Basic income (loss) per share excludes dilution and was computed by dividing
net income (loss) by the weighted average number of shares of common stock
outstanding during the period. Dilutive income (loss) per share reflects the
potential dilution that could occur if securities or other obligations to
issue common stock were exercised or converted into common stock or resulted
in the issuance of common stock that shared in the earnings or losses of the
Company. For the three and six months ended June 30, 2000, dilutive income
per share includes 4,479,262 warrants to acquire shares of common stock.
8
<PAGE>
For the three and six months ended June 30, 1999, basic and diluted loss per
share were equal, as the inclusion of dilutive securities would be
anti-dilutive. Total warrants and options outstanding at June 30, 2000 and
1999 were 38,447,800 and 8,000,000, respectively.
4. 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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
5. Goodwill:
The Company assesses long-lived assets for impairment under FASB Statement
No. 121, Accounting for the Impairment of Long-Lived Assets. Under those
rules, goodwill associated with assets acquired in a purchase business
combination where determined to be impaired because circumstances exist that
indicate the carrying amount of those assets may not be recoverable. The
total goodwill of $2,662,200 has been amortized because of the impairment,
$2,159,000 of which was amortized in 1999 relating to the AirNexus and
2-Infinity.com, Inc., a Texas corporation ("2-Infinity-Texas"), acquisitions
and $503,200 of which was amortized for the period ending June 30, 2000
relating to the AGM, Inc. acquisition.
6. Business Combinations:
POOLING OF INTERESTS
On June 28, 2000, the board of directors of the Company and the shareholders
of Maximum Return, a network hardware and service provider, completed the
acquisition of Maximum Return by the Company, which resulted in Maximum
Return becoming a wholly owned subsidiary of the Company. Under the terms of
the agreement, the Company received all of the outstanding common shares of
Maximum Return for 900,000 shares of the Company's common stock, of which
200,000 shares are held in escrow. Under the terms of the escrow agreement,
if Maximum Return's net assets are not equal to or greater than $47,500 as of
May 31, 2000, then the Company is entitled to receive the number of escrowed
shares equal to two multiplied by the difference between the net asset amount
and $50,000. The acquisition was accounted for as a pooling of interests.
Accordingly, the Company's financial statements have been restated to include
the results of Maximum Return for all periods presented. In connection with
the acquisition, the Company recorded transaction costs, primarily professional
fees, in the amount of $6,849. Maximum Return has two customers which account
for 22.33% and 11.15% of its sales.
Combined and separate results of the Company and Maximum Return for the six
months ended June 30, 2000 were as follows:
<TABLE>
<CAPTION>
2-Infinity Maximum Combined
Return
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Net revenues $278,530 $1,155,832 $1,434,362
Net income (loss) $977,184 $ 10,307 $ 987,491
--------------------------------------------------------------------------------
</TABLE>
In 1999, the revenues and operations from Maximum Return were not significant.
9
<PAGE>
PURCHASE ACQUISITIONS
On May 28, 1999, the Company acquired all of the outstanding shares of
2-Infinity-Texas, a provider of high-speed Internet access products and
services, for 3,000,000 shares of the Company's common stock.
2-Infinity-Texas had only been in existence for a short period of time and
had minimal prior operations. The acquisition has been accounted for as a
purchase. The agreement previously provided for additional consideration of
up to 6,000,000 shares to be issued upon achieving certain revenue
performance goals. In January 2000, the former owner of 2-Infinity-Texas
waived his right to receive any additional consideration.
On June 9, 1999, the Company acquired all of the outstanding shares of
AirNexus, a retail provider of commercial voice and data products and
services. The Company issued 3,000,000 shares of common stock in exchange for
all of the outstanding shares of Air Nexus. The acquisition has been
accounted for as a purchase. The agreement previously provided for additional
consideration of up to 3,000,000 shares to be issued upon achieving certain
revenue performance goals. In January 2000, the former owners of AirNexus
waived their rights to receive any additional consideration.
In January 2000, the Company acquired all of the outstanding shares of AGM,
Inc. (AGM), a Nevada corporation, a reporting public company with no prior
operations. The Company elected successor issuer status to become a reporting
public entity upon the acquisition of AGM. The purchase price was 2,200,000
shares of the Company's common stock at a fair market value of $.136 per share.
The acquisition has been accounted for as a purchase. In connection with this
transaction, the Company also issued 1,500,000 shares of common stock, also at a
fair market value of $.136 per share, and $50,000 for consulting services to
another corporation that assisted in the negotiation and completion of the
transaction.
Allocation of the purchase price for the acquisitions is as follows:
<TABLE>
<CAPTION>
2-Infinity-
Texas AirNexus AGM
------------ ----------- -----------
<S> <C> <C> <C>
Goodwill $ 1,139,000 $ 1,020,000 $ 503,200
Cash 104,479 515 -
Property and equipment 5,731 - -
Other assets 1,669 9,238 -
Liabilities assumed (50,879) (129,753) -
----------- ----------- -----------
Total Purchase Price $ 1,200,000 $ 900,000 $ 503,200
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
As discussed in notes above, goodwill was fully amortized as of June 30, 2000.
The following pro forma financial information gives effect to the Maximum
Return, 2-Infinity-Texas, AirNexus, and AGM acquisitions as if they had been
acquired at January 1, 1999. The pro forma results were prepared for
comparative purposes only and are not indicative of the results of operations
which actually would result had the acquisitions occurred on the date
indicated, or which may result in the future:
10
<PAGE>
<TABLE>
<CAPTION>
For the six months ended June 30,
-------------------------------------
2000 1999
---------------- -------------------
<S> <C> <C>
Revenues $ 1,434,362 $ 207,380
Loss from operations $ (3,113,665) $ (2,735,504)
Net Income (loss) $ 987,491 $ (3,326,562)
Basic income (loss) per share $ .01 $ (.12)
Diluted income (loss) per share $ .01 $ (.12)
Basic weighted average
common shares outstanding 66,350,427 27,354,022
Diluted weighted average
common shares outstanding 70,829,689 27,354,022
</TABLE>
7. Loss on sale of oil and gas assets:
On April 18, 2000, the Company approved a plan to sell all remaining assets
relating to the oil and gas exploration projects and where necessary, to plug
and abandon all other non-producing wells that cannot be sold. The Company
has sold its interest in the Union Central Life Insurance Co. Well No. 1,
receiving cash proceeds of $54,000. All other non-producing wells are to be
plugged and abandoned. The Company expects to complete this process by
year-end. The Company has recorded a provision for estimated losses to be
incurred on the sale and disposal of the assets of ($31,000). The amounts the
Company will ultimately realize, if any, could differ from the amounts
assumed in arriving at the loss anticipated on disposal of the oil and gas
assets.
There were no revenues included in loss from oil and gas activities for the six
months ended June 30, 2000 and 1999. All costs associated with oil and gas
activities have been included in "Loss from Oil and Gas Activities" for all
periods presented.
8. Going Concern:
Since inception through May 1999, the Company devoted substantially all of
its efforts to invest with joint partners in oil and gas exploration
projects. However, as a result of minimal revenue and continued losses from
these ventures, the Company decided to diversify into other markets,
primarily technology and the Internet. The acquisition of 2-Infinity-Texas
and AirNexus provided the Company with the ability to enter into the
telecommunications and Internet markets. The acquisition of Maximum Return
provided the Company with additional revenues, customers, and technical staff
in order to continue the growth of the Company's business model and provide
networking infrastructure for the Company's voice and data service offerings.
As a result of the continued revenue growth, the Company is no longer
considered in the development stage. Despite the Company's achievements, the
Company has not operated profitably to date and there are no assurances that
future operations will be profitable.
The Company incurred net losses from operations of ($3,113,665) and ($2,741,763)
for the six months ended June 30, 2000 and 1999, respectively. The Company's
ability to operate as a going concern is contingent upon its ability to obtain
additional equity financing until positive cash flows are achieved. The
aforementioned factors raise substantial doubt about the Company's ability to
continue as a going concern.
In January 2000, new board members and senior management were appointed in
11
<PAGE>
order to enhance operations and raise additional capital through equity
transactions (Note 14). The new management adopted new strategies for the
Company and developed a plan of action as follows:
- The Company is completing it's plan to sell all remaining assets
related to previous oil and gas exploration projects, and where
necessary, to plug and abandon all other non-producing wells that
cannot be sold.
- The Company is building its operational infrastructure and pursuing
additional strategic alliances to expand the development and marketing
of its core telecommunications products and services.
- The Company is implementing a sales and marketing program,
targeting commercial customers, in order to sell Voice-over-IP
("Internet Protocol") solutions, DSL ("Digital Subscriber Line")
services with high-speed Internet access, Virtual Private Networking
("VPN") services, and other related products and services.
- The Company is obtaining additional equity funding to cover the
aforementioned operational and marketing initiatives in order to
acquire and maintain anticipated revenue streams.
Management believes the successful completion of its plans will produce
increased revenues and cash flows. However, no assurance can be given that the
Company will be successful in the implementation of its plans or that the
Company will be able to raise additional funds. In the event the Company's
activities do not result in increased revenues and cash flows and the Company is
not able to raise additional financing to meet its operating needs, the Company
may no longer be able to continue as a going concern. The financial statements
do not include any adjustments that might be necessary should the Company be
unable to continue as a going concern.
9. Related Party Transactions:
In February 1999, the Company issued 1,000,000 shares of restricted common stock
to an entity controlled by the President of Lakota Oil, as consideration for
services valued at $100,000 related to the negotiation and consummation of a
transaction with an oil and gas project.
In January and February 2000, the Company mutually separated from three officers
and directors, its CEO, CFO and the President of Lakota Oil. Included in the
settlement agreements with the former CEO, the Company issued 4,000,000 shares
and $100,000 to compensate him for past service and the Company paid $40,000 for
execution of the settlement agreement and consulting services during the
transition to new management. Each party mutually discharged any indebtedness
owed to the other and Cam Am Resources, Inc, a related party of the CEO. As a
result, the Company had accrued at December 31, 1999, $500,000 for compensation
of past services at the fair market value of the shares and cash issued as a
result of this agreement. In addition, included in the settlement agreements
with the former CFO and the former President of Lakota Oil, the Company issued
an aggregate of 5,500,000 shares and $100,000 to compensate them for past
services and the Company paid an aggregate of $65,000 for the execution of the
agreements and consulting services during the transition to new management. As a
result, the Company accrued at December 31, 1999, $2,760,500 of compensation
expense at the fair market value of the shares and cash issued as a result of
these agreements.
Effective August 1, 1999, the Company approved and implemented an Omnibus
Stock Option Plan ("the Plan") and the board of directors granted 2,000,000
options to purchase the Company's common stock under the plan. In January
12
<PAGE>
2000, the options granted under the plan were cancelled as part of the
settlement and separation agreements with the option holders and the Plan was
terminated.
10. Cancellation of Stock:
In April 2000, the board of directors approved the issuance of 4,240,000
common shares to employees, officers and directors of the Company as
compensation for services performed from June 1999 through January 2000. The
shares were valued at fair market value on the date the board was authorized
to grant the shares, which was $1.156. In August, as a result of the
volatility in the stock price, with the current market price valued
materially below the valuation determined for payroll taxes, the employees
and directors cancelled the stock compensation agreements with the Company
and cancelled and returned all shares. The Company has no further obligation
to the employees. The effect of the cancellation of stock in the accompanying
financial statements resulted in a one-time adjustment to increase income of
$4,141,960 for the compensation that was recorded in 1999. All amounts
recorded in the first quarter of 2000 have been reversed.
11. Notes Payable:
Notes payable consisted of the following:
<TABLE>
<CAPTION>
June 30, 2000
----------------
<S> <C>
Line of Credit with bank, interest at prime plus 1%,
Interest payable monthly, principal due
March 2001, guaranteed by an employee $ 36,000
Notes payable to individuals; convertible to stock
at the option of the holder within one to three
years; interest at 9.75%, paid quarterly until
converted; unsecured. 40,000
----------------
Total notes payable $ 76,000
================
</TABLE>
12. Convertible Debentures:
In August 1999, the Company issued $750,000 of 8% convertible debentures
exercisable at 75% of fair market value of the Company's common stock on the
date of conversion. In addition, the Company issued 5,000,000 warrants at an
exercise price of 50% of the fair market value of the Company's stock on the
date of exercise. The Company incurred a fee of $40,000 for the transaction. In
addition, $250,000 of the $750,000 was held in escrow until all requirements
under the agreements were met, including obtaining an effective registration
statement for the resale of underlying shares of common stock, which the Company
defaulted as of January 1, 2000. Effective January 18, 2000, the Company
completed a settlement with the debenture holders, canceling all previous
agreements in exchange for 1,500,000 shares of the Company's common stock and
$324,750 of 8% convertible debentures exercisable at 50% of the fair market
value of the Company's stock. The debentures were subsequently converted into
3,392,857 shares. Total cash received, net of the original $40,000 fee, was
$460,000 relating to the transaction. The Company recorded the transaction as if
the settlement occurred prior to December 31, 1999. The convertible debentures
of $500,000 and accrued interest of $419,500 were
13
<PAGE>
recorded as equity at June 30, 2000 as a result of the conversion to common
stock.
13. Options and Warrants:
On June 7, 2000, the board of directors approved the "2000 Long-term Incentive
Plan" reserving 30,000,000 shares of common stock for issuance under the plan.
The plan is subject to approval by the Company's shareholders at the annual
shareholder meeting to be held on August 25, 2000. Under the plan, the board of
directors may grant incentive stock options, options which do not constitute
incentive stock options, stock appreciation rights, restricted stock awards,
performance share awards, stock value equivalent awards, or any combination of
the foregoing to eligible employees and consultants. All incentive stock options
must be granted at a price of not less than the fair market value at the time of
the grant. Total options granted to eligible employees under the plan are
24,960,000, subject to approval by the Company's shareholders, at exercise
prices ranging from $.41 to $.48. The weighted average exercise price of the
outstanding options is $.42.
A summary of the status of the Company's warrants as of June 30, 2000 and
changes during the six months ending June 30, 2000:
<TABLE>
<CAPTION>
Average
Shares Exercise
Price
------------ -------------
<S> <C> <C>
Outstanding at December 31, 1999 5,002,800 $ 0.25
Granted 10,550,000 0.48
Expired (995,000) (0.37)
Exercised (1,070,000) 0.14
------------ -------------
Outstanding at June 30, 2000 13,487,800 $ 0.44
Exercisable at June 30, 2000 13,487,800 $ 0.44
</TABLE>
14. Common Stock Transactions:
In January 2000, the Company sold to an accredited investor 750,000 shares of
common stock at $.067 per share, together with a warrant to purchase 500,000
shares of common stock at an exercise price of $.125 per share for a period of
one year.
In January 2000, the Company issued in exchange for prior services an aggregate
of 775,000 shares of common stock to four professionals and consultants. The
aggregate amount of $206,150, representing the fair market value of the stock on
the date of issuance, was expensed in the six months ended June 30, 2000. In
addition, the Company issued 605,000 shares of common stock to a professional
for legal services performed in 1999 and 2000. The total amount of $160,930,
representing the fair market value of the stock on the date of issuance, was
expensed half in 1999 and the remainder in the first quarter of 2000.
In the first quarter of 2000, the Company completed a private placement raising
$2,000,000 by offering 20,000,000 shares of the Company's common stock at $.10
per share. The offering also includes for every two shares purchased, a warrant
to acquire an additional share of common stock at $.50, exercisable for a period
of one year from the date of issuance.
14
<PAGE>
On March 22, 2000, the Company acquired a CLEC license, a contract that
entitles the Company to resell Southwestern Bell Telephone Company products
and services at a 32% discount, for $217,000 and 100,000 shares of common
stock. The Company is currently in the process of obtaining an approval from
the Texas Public Utilities Commission to transfer the CLEC license to the
Company.
In April 2000, the Company sold to accredited investors, 100,000 shares of
common stock valued at $.40 per share. Additionally, the Company issued 200,000
shares to an individual for consulting services valued at $.69 per share,
representing the fair market value of the stock on the date of issuance.
In May 2000, the Company issued 355,000 shares of common stock valued at $.23
per share for public relations services performed by a services firm. On May 2,
2000, the Company gave its 30-day notice to terminate the contract in accordance
with the agreement.
In June 2000, the Company sold to accredited investors, 890,000 shares of common
stock valued at $.25 per share.
15. Income Taxes:
At the present time, the Company does not anticipate adjustments relating to
income taxes.
16. Subsequent Events:
On August 14, 2000, an investment banker placed into escrow, on behalf of a
potential investor, $1,000,000 relating to a financing arrangement whereby
the Company would issue 8% Series A Convertible Preferred Stock raising a
minimum of $1,000,000, and up to $3,000,000. The preferred stock is
convertible into common stock based on a conversion price per share equal to
the lesser of $.50 or a 25% discount to the five-day average closing bid
price at the time of conversion. For each $100,000 invested, the Company will
issue to the preferred stockholder five-year warrants to acquire 20,000
shares of common stock with an exercise price per share equal to the closing
bid price of the common stock on the date of purchase. The Company agreed to
pay a 10% placement fee, five-year warrants to acquire 200,000 shares of
common stock for every $1,000,000 raised in the convertible preferred stock
offering. The Company has agreed to file a registration statement covering
the shares of the common stock underlying the foregoing warrants and
convertible preferred stock. The Company has certain rights to redeem the
convertible preferred stock prior to its conversion. On August 14, 2000, the
Company placed into escrow 1,000 shares of 8% Series A Preferred Stock and
warrants to acquire 400,000 shares of common stock, pending satisfaction of
certain closing conditions.
Item 2. Management's Discussion and Analysis or Plan of Operation.
2-INFINITY.COM, INC. AND SUBSIDIARIES
IN ACCORDANCE WITH THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995, THE COMPANY NOTES THAT CERTAIN STATEMENTS IN THIS
FORM 10-QSB WHICH ARE FORWARD-LOOKING AND WHICH PROVIDE OTHER THAN HISTORICAL
INFORMATION, INVOLVE RISKS AND UNCERTAINTIES THAT MAY IMPACT THE COMPANY'S
RESULTS OF OPERATIONS. THESE FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHERS,
STATEMENTS CONCERNING THE COMPANY'S GENERAL BUSINESS STRATEGIES, FINANCING
DECISIONS, AND EXPECTATIONS FOR FUNDING CAPITAL EXPENDITURES AND OPERATIONS IN
THE FUTURE. WHEN USED HEREIN, THE WORDS "BELIEVE," "PLAN," "CONTINUE," "HOPE,"
"ESTIMATE," "PROJECT," "INTEND," "EXPECT," AND SIMILAR
15
<PAGE>
EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. ALTHOUGH
THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING
STATEMENTS ARE BASED ON REASONABLE ASSUMPTIONS, NO STATEMENTS CONTAINED IN THIS
FORM 10-QSB SHOULD BE RELIED UPON AS PREDICTIONS OF FUTURE EVENTS. SUCH
STATEMENTS ARE NECESSARILY DEPENDENT ON ASSUMPTIONS, DATA OR METHODS THAT MAY BE
INCORRECT OR IMPRECISE AND MAY BE INCAPABLE OF BEING REALIZED. THE RISKS AND
UNCERTAINTIES INHERENT IN THESE FORWARD-LOOKING STATEMENTS COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN OR IMPLIED BY THESE
STATEMENTS.
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE FORWARD-LOOKING
STATEMENTS CONTAINED HEREIN, WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE
INFORMATION CONTAINED IN THIS FORM 10-QSB IS BELIEVED BY THE COMPANY TO BE
ACCURATE AS OF THE DATE HEREOF. CHANGES MAY OCCUR AFTER THAT DATE, AND THE
COMPANY WILL NOT UPDATE THAT INFORMATION EXCEPT AS REQUIRED BY LAW IN THE NORMAL
COURSE OF ITS PUBLIC DISCLOSURE PRACTICES.
IMPORTANT RISK FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THE EXPECTATIONS REFLECTED IN ANY FORWARD-LOOKING STATEMENT HEREIN INCLUDE AMONG
OTHER THINGS: (1) THE ABILITY OF THE COMPANY TO QUICKLY PENETRATE THE MARKET
WITH ITS CURRENT METHOD OF TECHNOLOGY AGAINST LARGER, WELL-FINANCED COMPETITORS
WITHIN THE MARKETPLACE; (2) THE ABILITY OF THE COMPANY TO GENERATE REVENUES IS
SUBSTANTIALLY DEPENDENT UPON CONTINUED GROWTH IN THE USE OF THE INTERNET AND THE
INFRASTRUCTURE FOR PROVIDING INTERNET ACCESS AND CARRYING INTERNET TRAFFIC; (3)
THE ABILITY OF THE COMPANY TO ATTRACT AND RETAIN KEY OFFICERS, KNOWLEDGEABLE
SALES AND MARKETING PERSONNEL AND HIGHLY TRAINED TECHNICAL PERSONNEL; (4) TO THE
EXTENT THAT OUR ACTIVITIES OR THIRD-PARTY CONTRACTORS INVOLVE THE STORAGE AND
TRANSMISSION OF PROPRIETARY INFORMATION, SUCH AS CREDIT CARD NUMBERS, OR
PERSONAL DATA INFORMATION, THE ABILITY OF THE COMPANY TO REDUCE EXPOSURE TO A
RISK OF LOSS OR LITIGATION AND POSSIBLE LIABILITY; (5) THE ABILITY OF THE
COMPANY TO MINIMIZE EXPENSES AND EXPOSURES RELATED TO OIL AND GAS PROPERTIES IN
WHICH OTHER COMPANIES HAVE CONTROL OVER THE MANNER IN WHICH OPERATIONS ARE
CONDUCTED ON SUCH PROPERTIES, INCLUDING COMPLIANCE WITH SAFETY AND ENVIRONMENTAL
STANDARDS; (6) THE ABILITY OF THE COMPANY TO OBTAIN ADDITIONAL FINANCING FROM
PUBLIC AND PRIVATE EQUITY MARKETS TO FUND OPERATIONS AND FUTURE GROWTH; AND (7)
THE ABILITY OF THE COMPANY TO GENERATE REVENUES TO COVER OPERATING LOSSES AND
POSITION THE COMPANY TO ACHIEVE POSITIVE CASH FLOW.
General
Since inception through May 1999, the Company devoted substantially all of
its efforts to invest with joint partners in oil and gas exploration
projects. However, as a result of minimal revenue and continued losses from
these ventures, the Company decided to diversify into other markets,
primarily technology and the Internet. The Company's acquisition of
2-Infinity-Texas and AirNexus provided the ability to enter into the
technology and Internet markets. The merger with Maximum Return provided the
Company with additional revenues, customers, and technical staff in order to
continue the growth of the Company's business model and provide networking
infrastructure for the Company's voice and data service offerings. On April
18, 2000, the Company approved a plan to dispose of all remaining assets
relating to the oil and gas exploration projects and where necessary, to plug
and abandon all other non-producing wells that cannot be sold.
In January 2000, new board members and senior management were appointed in
connection with running operations and raising additional capital. The new
management adopted new strategies for the Company and developed a plan of action
as follows:
16
<PAGE>
- The Company is completing it's plan to sell all remaining assets
related to previous oil and gas exploration projects, and where
necessary, to plug and abandon all other non-producing wells that
cannot be sold.
- The Company is building its operational infrastructure and pursuing
additional strategic alliances to expand the development and marketing
of its core telecommunications products and services.
- The Company is implementing a sales and marketing and program,
targeting commercial customers, in order to sell Voice-over-IP
("Internet Protocol") solutions, DSL ("Digital Subscriber Line")
services with high-speed Internet access, Virtual Private Networking
("VPN") services, and other related products and services.
- The Company is obtaining additional equity funding to cover the
aforementioned operational and marketing initiatives in order to
acquire and maintain anticipated revenue streams.
Management believes the successful completion of its plans will produce
increased revenues and cash flows. However, no assurance can be given that the
Company will be successful in the implementation of its plans or that the
Company will be able to raise additional funds.
Results of Operations:
COMPARISON OF QUARTER ENDED JUNE 30, 2000 AND JUNE 30, 1999
Revenues for the three months ended June 30, 2000 increased $570,890 or
1,057% to $624,886 from $53,996 revenues reported for the three months ended
June 30, 1999. The increase was due to the acquisition of Maximum Return, as
well as sales of commercial voice and data products and services.
Cost of sales for the three months ended June 30, 2000 increased $484,334 or
1334% to $520,644 from $36,310 reported for the three months ended June 30,
1999. This increase was due to the acquisition of Maximum Return, as well as
the cost of the commercial voice and data products sold by the Company.
The company has no amortization expense for the three months ended June 30,
2000 in comparison to $2,159,720 reported for the three months ended June 30,
1999. The amount recorded in 1999 represents the goodwill written off
relating to the AirNexus and 2-Infinity-Texas acquisitions. The goodwill was
determined to be impaired because the carrying amount of the assets acquired
may not be recoverable. The total goodwill was amortized because of the
impairment.
There was no loss from oil and gas activities for the three months ended June
30, 2000. The company recorded a loss from oil and gas activities in its first
quarter of 2000 in addition to the write-off of net oil and gas assets.
General and administrative expenses for the three months ended June 30, 2000
increased $607,985 or 231% to $871,017 from $263,032 reported for the three
months ended June 30, 1999. The increase was primarily due to the acquisition of
Maximum Return, as well as the general growth of the company.
Other expense for the three months ended June 30, 2000 increased $9,832 to
$9,448 from other income of $384 reported for the three months ended June 30,
1999. This increase was due to interest expense.
Net income for the three months ended June 30, 2000 increased $6,564,861 to
$3,349,150 from a net loss of ($3,215,711) reported for the three months ended
June 30, 1999. This increase in reported income is due to a one-time adjustment
of $4,141,960 related to the cancellation of stock to employees, officers, and
directors. The net loss from operations for the three months ended June 30, 2000
equals ($783,362). The Company expects to incur additional losses until its
revised business strategy results in sufficient revenues to offset operating
expenses and infrastructure costs.
COMPARISON OF SIX MONTH PERIODS ENDED JUNE 30, 2000 AND JUNE 30, 1999
Revenues for the six months ended June 30, 2000 increased $1,315,636 or
1,108% to $1,434,362 from $118,726 revenues reported for the six months ended
June 30, 1999. This increase was due to the acquisition of Maximum Return, as
well as sales of commercial voice and data products and services.
Cost of Sales for the six months ended June 30, 2000 increased $1,055,211 or
1189% to $1,143,953 from $88,742 reported for the six months ended June 30,
1999. This increase was due to the acquisition of Maximum Return, as well as
the cost of the commercial voice and data products sold by the Company.
Amortization expense for the six months ended June 30, 2000 decreased
$1,657,240 or 77% to $503,200 from $2,160,440 reported for the six months
ended June 30, 1999. This decrease represents the difference between the
goodwill written off in 1999 relating to the AirNexus and 2-Infinity-Texas
acquisitions and the goodwill written-off in 2000 relating to the AGM
acquisition. The goodwill was determined to be impaired because the carrying
amount of the assets acquired may not be recoverable. The total goodwill was
amortized because of the impairment.
Loss from oil and gas activities for the six months ended June 30, 2000
decreased $126,024 or 54% to $109,467 from $235,491 in the six months ended
June 30, 1999. This decrease is due to the Company's focus on technology and the
decision to discontinue oil and gas activities. Costs include management and
consulting fees to the former management.
General and administrative expenses for the six months ended June 30, 2000
increased $2,398,316 or 6,477% to $2,768,587 from $370,271 reported for the six
months ended June 30, 1999. The increase is due to the acquisition of
2-Infinity, AirNexus, AGM, and Maximum Return, as well as the general growth of
the company.
Other expense for the six months ended June 30, 2000 increased $41,418 to
$40,804 from other income of $614 reported for the six months ended June 30,
1999. The increase is primarily due to interest expense and estimated loss on
17
<PAGE>
the disposal of oil and gas assets.
Net income for the six months ended June 30, 2000 increased $4,320,348 to
$987,491 from a net loss of ($3,332,857) reported for the six months ended
June 30, 1999. This increase in reported income is due to a one-time
adjustment related to the cancellation of stock to employees, officers, and
directors. The net loss from operations for the six months ended June 30,
2000 equals ($3,113,665). This net loss before the cancellation of stock is
the result of the ongoing growth strategy of the company, including the
recruitment of key personnel and investment in operational infrastructure.
The Company expects to incur additional losses until its revised business
strategy results in sufficient revenues to offset operating expenses and
infrastructure costs.
Liquidity and Capital Resources
In the six months ended June 30, 2000, the Company raised $2,252,500 in private
placement transactions. In addition, the Company raised $186,500 from the
exercise of common stock warrants.
The Company is currently operating at a loss and expects to continue to depend
on cash generated from the sale of debt and equity securities to fund its
operating deficit. There can be no assurance that the Company will be able to
generate sufficient revenues to meet its operating cash and growth needs or that
any equity or debt funding will be available or at terms acceptable to the
Company in the future to enable it to continue operating in its current form.
The Company's operating loss for the fiscal six months ended June 30, 2000 was
($3,113,665). The Company expects to incur losses for the foreseeable future due
to the ongoing activities of the Company to develop operational infrastructure.
The Company believes that this strategy, while initially requiring additional
cash outlays, will result in increased revenues and future profitability. The
Company expects its existing operations to continue to result in negative cash
flow and working capital deficiencies that will require the Company to continue
to obtain additional capital. There can be no assurance that the necessary
financing will be available to the Company or, if available, that the same will
be on terms satisfactory or favorable to it. It is possible that additional
equity financing will be highly dilutive to existing shareholders.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company filed a complaint in December 1999 in the 80th District Court of
Harris County, Texas against Tiger Petroleum, Inc. and Mr. Kenny Vincent. This
claim is based on a breach of a settlement agreement entered into by the Company
and the defendants on March 25, 1999. The Company is seeking the return of
300,000 shares of common stock, plus attorneys' fees and court costs. Discovery
has been commenced and it is anticipated that if this case is not resolved in
mediation, it will be docketed for trial in the last quarter of 2000.
Item 2. Changes in Securities.
In April 2000, the Company issued to the following accredited investors, an
aggregate of 100,000 shares of common stock at a purchase price of $.40 per
share, together with warrants to purchase 50,000 shares of common stock at a
purchase price of $.80 per share for a period of one year:
18
<PAGE>
Shares
------
Forrest E. Singletary 50,000
Billy J. Sonier 25,000
John R. Weaver 25,000
In May 2000, the Company issued an aggregate of 555,000 shares of common stock
for services provided to the Company as follows:
Shares
------
David Bodie 200,000
Merger Communications 355,000
In May 2000, the Company issued 100,000 shares to Mohammed Afaneh as part
consideration for the CLEC license.
In June 2000, the Company issued 900,000 shares of stock, 200,000 shares held in
escrow, to the shareholders Maximum Return in connection with the acquisition as
follows:
Alex Gonzalez 280,000
Grant Schanbacher 140,000
Laurie Schanbacher 140,000
Kevin Dwyer 70,000
Steve Holcomb 7,000
Ron Marosko 56,000
Firas Kadhum 7,000
Escrow shares:
Alex Gonzalez 80,000
Grant Schanbacher 40,000
Laurie Schanbacher 40,000
Kevin Dwyer 20,000
Steve Holcomb 2,000
Ron Marosko 16,000
Firas Kadhum 2,000
In June 2000, the Company issued to the following accredited investors, an
aggregate of 890,000 shares of common stock at a purchase price of $.25 per
share:
Al-Jumairi, Ahmed 400,000
Arrante, Joseph 54,000
Fancett, Gerald and Dorothy 100,000
Hurd, Mark A 210,000
Mangano, James Jr. 60,000
McCann, Francis Roger 16,000
Nispel, Jack and Jacqueline 10,000
Price, William L 20,000
Sottile, Thomas M 10,000
Withington, David 10,000
In the first six months of 2000, the Company completed a private placement
19
<PAGE>
raising $2,000,000 by offering 20,000,000 shares of the Company's common
stock at $.10 per share. The offering was exempt from registration provided
by section 4(2) and/or 3(b) of the 1933 Act, and Rule 506 under Regulation D.
The offering also includes, for every two shares purchased, a warrant to
acquire an additional share of common stock at $.50, exercisable for a period
of one year from the date of issuance. The Company paid an aggregate of
$48,000 in finders fees as follows: $8,000 to Mike Kelly and $40,000 to Rick
Methaney. The shares of common stock were issued to the following investors:
Accredited investors:
Kevin McCormack 1,313,000
Mustafa Jalali 2,251,000
Michael S. Webb 35,000
Yahya AG Solara 100,000
Jennifer Longbotham 80,000
Dipak N. Bhatt 1,300,000
Milton Smith 350,000
F. Thomas Siskron 65,000
Leo Paul Black 65,000
Fremont Binder 700,000
J. Michael Jaynes 50,000
Manzoor Hasan 300,000
Robert K. Gibbs 1,000,000
Patrizia Gentile 250,000
Dorothy Fancett 50,000
Naila Elkassas 50,000
Hazem F. Elkassas 50,000
Danny Duzich 300,000
David Drake 40,000
Mark Dodd 100,000
Sharon Boone 100,000
Narmadashaker Bhatt 500,000
Ahmad B Ben-Naji 20,000
Jeff Austin III 250,000
Ali Alsaad 215,000
Zubair A. Alqadi 100,000
Billy Scott 150,000
Thomas Schoeve 500,000
Ken Samford 150,000
Duane Carl Radtke 75,000
Walter Putnam 300,000
Daryll Parrott 20,000
Scott Nash 250,000
Lori Nash 100,000
Mohammad Naseem 50,000
Jim McCanna 100,000
Thomas Marano 50,000
Strother Timberlands 100,000
Lee Magness 150,000
Howard Loyd III 150,000
Linda M. Long 100,000
Richard Lewins 90,000
Stephen Kerns 100,000
David Jolly 50,000
John Goodman 20,000
Robert Sanz 200,000
Matthew Hensley 1,000,000
Brian Brinkman 200,000
Nazar Jamsheer 55,000
Mohamed Jamsheer 110,000
20
<PAGE>
Laura Landry 100,000
Jack Wilson 20,000
Yousef Yousri 50,000
Raymond Landry 100,000
David Michael Ballard 150,000
Ahmed Altwaijri 60,000
Diane Duzich 1,300,000
Eugene Lindsey 100,000
Glen Terrell 12,000
Jukka Tolonen 200,000
Jack Walker 100,000
AndreVan Walleghem 50,000
Scott Smith 250,000
Todd Smith 60,000
Salman Alhasan 20,000
Mohammed Y. Aldoseri 60,000
Robert D. Patman 10,000
Douglas Robertson 50,000
Steven Clark 50,000
Daniel Railey 50,000
Virgil McCall 50,000
James Rountree 300,000
Unaccredited investors:
Paul D. Pendergraft 50,000
Michael A. Kelly 70,000
Mitchell A. Weigand 100,000
Sohail Alam 100,000
Jill N. Boullion 100,000
David Michael Sanders 12,000
Dan J. Pulaski 10,000
Norma L. Mills 10,000
Paul J. Kolisch 60,000
Matthew B. Kock 50,000
Christine L. Hsing 100,000
Abe Hakim 50,000
George A. Dearing III 50,000
Richard Cash Cooper 200,000
Daren H. Collymore 170,000
Manaf Mannai 40,000
Dewayne L. Weatherford 50,000
Vernita J. Gonzales 1,000
Roy Shultz 15,000
Cheryl A. Mik 30,000
Jason Jobst 1,000
Christopher V. Bures 885,000
Byron B. Jones 120,000
Charles K. Ward 120,000
Sharon Garrett 300,000
Virgilio T. Virata 40,000
Mark Alfred Siebert 30,000
Khalid Nabi 40,000
Jason McCall 110,000
Otis Carlisle, Jr. 50,000
Lynn Laha 30,000
John M. Butler 30,000
Juan Valdez 100,000
Patrick Segosebe 30,000
21
<PAGE>
In May 2000, the Company issued 4,240,000 shares of common stock to employees,
officers and directors of the Company that were cancelled in August 2000:
<TABLE>
<CAPTION>
Shares Price per share
----- ----------------
<S> <C> <C>
Majed Jalali 1,500,000 1.15
Cody Morgan 1,500,000 1.15
Jason Miller 400,000 1.15
Charlie Downey 400,000 1.15
Kelly Nispel 100,000 1.15
Ahmed Alumran 100,000 1.15
Andrea Gonzales 50,000 1.15
Sherri Mercer 50,000 1.15
Candus Morgan 50,000 1.15
Nick Escobedo 30,000 1.15
David Marron 30,000 1.15
Mike Virata 30,000 1.15
</TABLE>
See Note 10 to the Notes to Financial Statements for a description of the
cancellation of the foregoing shares.
For all securities transactions discussed above, except where otherwise
indicated:
- No underwriter or placement agent was used in connection with any of
the above-referenced securities transactions, and no underwriting
commissions were paid.
- No means of general solicitation was used in offering the securities.
- The securities in each transaction were sold to a limited group of
accredited investors in private placement transactions, exempt from
registration under Section 4(2) of the Securities Act.
- All purchasers of the Company's securities were sophisticated investors
who qualified as accredited investors within the meaning of Rule 501(a)
of Regulation D under the Securities Act.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
On April 12, 2000, the Company held a Special Meeting of Shareholders in order
to allow the shareholders to vote to approve two proposed amendments to the
Company's Articles of Incorporation. In the first proposal, the Company sought
approval of an amendment to Section 1 of Article V of the Articles of
Incorporation in order to increase the authorized capital stock of the Company
from 100,000,000 shares to 300,000,000 shares of common stock. The proposed
amendment did not alter the number of authorized shares of preferred stock. In
the second proposal, the Company sought approval of an amendment to Article I of
its Articles of Incorporation in order to change the Company's name from Lakota
Technologies, Inc. to 2-Infinity.com, Inc.
On March 3, 2000, the record date for the Special Meeting of Shareholders held
on April 12, 2000, there were 63,501,339 shares of the Company's common stock
issued and outstanding. All outstanding shares were entitled to vote on the two
proposals. The first proposal was approved by the shareholders; with 47,949,544
shares voting "for," 2,608,680 shares voting "against," and with 123,845 shares
"abstaining." The second proposal was also approved by the shareholders; with
50,619,668 shares voting "for," 121,701 shares voting "against," and 53,875
shares "abstaining." Immediately after the Special
22
<PAGE>
Meeting of Shareholders, the Company submitted documentation to the Colorado
Secretary of State in order to effect the foregoing amendments to its Articles
of Incorporation.
In addition, the Company's ticker symbol on the Nasdaq Bulletin Board has been
changed to "TWIC."
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) EXHIBITS.
3.1 Articles of Incorporation of Chancellor Trading Group, Inc.
filed July 14, 1995 (incorporated herein by reference to
Exhibit 3.1 of the Company's Registration Statement on Form S-8
(File No. 333-95021), filed with the Commission on January 20,
2000 (the "Company's Form S-8").
3.2 Articles of Merger between Lakota Energy, Inc. and Chancellor
Trading Group, Inc. filed December 27, 1996 (incorporated
herein by reference to Exhibit 3.2 of the Company's Form S-8).
3.3 Articles of Amendment to the Articles of Incorporation of
Lakota Energy, Inc. filed August 4, 1999 (incorporated herein
by reference to Exhibit 3.3 of the Company's Form S-8).
3.4 Bylaws of Lakota Energy Inc.(incorporated herein by reference
to Exhibit 3.4 of the Company's Form S-8).
3.5 Articles of Amendment to the Articles of Incorporation of
Lakota Technologies, Inc. filed May 8, 2000 (incorporated
herein by reference to Exhibit 3.5 of the Company's Quarterly
Report on Form 10-QSB for the quarter ended March 31, 2000).
27 Financial Data Schedule
(b) Reports on Form 8-K.
The Company filed the following documents with the Securities
and Exchange Commission:
A report on Form 8-K was filed April 27, 2000 relating to the
approval by the Shareholders of two amendments to the Company's
Articles of Incorporation: (1) increasing the Company's
authorized common stock from 100,000,000 shares to 300,000,000
shares, and (2) changing the Company's name from
Lakota Technologies, Inc. to 2-Infinity.com, Inc. No financial
statements were required to be filed with this form.
A report on Form 8-K was filed May 10, 2000 relating to a
change in the Company's independent public accountants. No
financial statements were required to be filed with this
form.
A report on Form 8-K was filed July 11, 2000 relating to the
Acquisition of Maximum Return & Development, Inc. No financial
statements were required to be filed with this
23
<PAGE>
form.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
2-INFINITY.COM, INC.
Date: August 14, 2000 By: /s/ Majed Jalali
-------------------------
Name: Majed Jalali
Title: President and Chief Executive
Officer
Date: August 14, 2000 By: /s/ Kelly Nispel
-------------------------
Name: Kelly Nispel
Title: Chief Financial Officer and
Treasurer
EXHIBIT INDEX
3.1 Articles of Incorporation of Chancellor Trading Group, Inc.
filed July 14, 1995 (incorporated herein by reference to
Exhibit 3.1 of the Company's Registration Statement on Form S-8
(File No. 333-95021), filed with the Commission on January 20,
2000 (the "Company's Form S-8").
3.2 Articles of Merger between Lakota Energy, Inc. and Chancellor
Trading Group, Inc. filed December 27, 1996 (incorporated
herein by reference to Exhibit 3.2 of the Company's Form S-8).
3.3 Articles of Amendment to the Articles of Incorporation of
Lakota Energy, Inc. filed August 4, 1999 (incorporated herein
by reference to Exhibit 3.3 of the Company's Form S-8).
3.4 Bylaws of Lakota Energy Inc.(incorporated herein by reference
to Exhibit 3.4 of the Company's Form S-8).
3.5 Articles of Amendment to the Articles of Incorporation of
Lakota Technologies, Inc. (incorproated herein by reference
to Exhibit 3.5 of the Company's Quarterly Report on Form 10-QSB
for the quarter ended March 31, 2000).
27 Financial Data Schedule
24
