SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20509
FORM 8-K/A-1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
May 18, 1999
Date of Report
(Date of Earliest Event Reported)
CENTRAXX, INC.
(Exact Name of Registrant as Specified in its Charter)
Nevada 33-3358-NY 88-0224219
(State or other juris- (Commission File No.) (IRS Employer
diction of incorporation) I.D. No.)
2700 Argentia Road, Suite #1000
Mississauga, Ontario Canada L5N 5V4
(Address of Principal Executive Offices)
(905) 826-9988
Registrant's Telephone Number
Composite Design, Inc.
9005 Cobble Canyon Lane
Sandy, Utah 84093
(Former Address of Principal Executive Offices)
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
Centraxx Corp. audited financial statements for the year ended
December 31, 1998 (Canadian Dollars)
Auditors' Report
Balance Sheet
Statement of Operations and Deficit
Statement of Cash Flow
Notes to financial statement
(b) Pro Forma Financial Information.
Pro forma Balance Sheet as of May 18, 1999 (U.S. Dollars).
Notes to Proforma Balance Sheet.
(c) Exhibits.
None.
Item 8. Change in Fiscal Year.
None; not applicable.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned hereunto duly authorized.
CENTRAXX, INC.
Date: 8/13/99 By:/s/Mike Ivezic
--------- --------------------------------------
Mike Ivezic
President, Director
<TABLE>
CENTRAXX, INC
PROFORMA BALANCE SHEET
AS AT MAY 18,1999
<CAPTION>
(in US$ and US GAAP)
ASSETS May 18,1999 December 31, 1998
(notes 2a and 5a) (audited)
<S> <C> <C>
Current
Cash 125,758 142
Prepaid expenses 21,878 20,109
147,636 20,251
Capital assets (note 3) 251,512 263,362
Patent costs (note 2f) 16,734 15,401
268,246 278,764
TOTAL ASSETS 415,882 299,014
LIABILITIES
Current
Accounts payable and accrued costs 385,863 325,226
385,863 325,226
SHAREHOLDERS' EQUITY
Paid up Share Capital (note 5) 2,272,865 1,629,063
Deficit -2,242,845 -1,655,275
30,020 -26,212
415,883 299,014
</TABLE>
CENTRAXX, INC.
Notes to the proforma balance sheet
as at may 18, 1999
Note 1 Organization and Description of Business
The Company, incorporated as SRS Technical Inc. under the laws of the
State of Nevada on January 15, 1986, changed its name to Composite
Design Inc. following its purchase of Composite Design Corporation on
May 29, 1997. On May 18, 1999, the Company purchased all of the
outstanding shares of Centraxx Corp. through an exchange of one of its
shares for each share of Centraxx Corp. following which the Company
changed its name on May 19, 1999 to Centraxx, Inc.
Centraxx Corp., incorporated under the laws of the Province of Ontario
of Canada on August 8, 1997, is a wireless data communications company
specializing in providing location technology solutions. The Company has
developed a proprietary radio location two-way land-based system
utilizing single-point tracking ("UNI-POINT "technology) which can be
deployed to provide effective solutions for numerous safety, security
and location information needs in multiple network and stand-alone
applications.
Note 2 Significant Accounting Policies
These financial statements have been prepared in accordance with
generally accepted accounting principles in the United States.
Significant accounting policies are outlined below:
a) Basis of presentation
On May 18, 1999, the Company, formerly Composite Design Inc.
purchased all of the outstanding shares of Centraxx Corp.
through an exchange of one of its shares for each share of
Centraxx Corp. (the "Transaction"). As a result of the
Transaction, the shareholders of Centraxx Corp. owned
approximately 85% of the outstanding shares of the Company
and, accordingly, the purchase of Centraxx Corp. by the Company
is accounted for as a reverse takeover transaction under
generally accepted accounting principles.
Under the principles of reverse takeover accounting, the
consolidated financial statements of the Company, the legal
parent, are presented as a continuation of the financial
position and results from operations of Centraxx Corp., the
legal subsidiary. Application of reverse takeover accounting
results in the following:
(i) The consolidated financial statements of the combined
entity are issued under the name of the legal parent,
Centraxx Inc, but are considered a continuation of the
financial statements of the legal subsidiary, Centraxx
Corp.;
(ii) As Centraxx Corp. is deemed to be the acquirer for
accounting purposes, its assets and liabilities are
included in the consolidated financial statements at
their historical carrying values;
(iii)Any comparative numbers are those of Centraxx Corp.; and,
(iv) For purposes of the accounting for the Transaction,
control of the net assets and operations of the Company is
deemed to have been acquired by Centraxx Corp. effective
April 30,1999. Accordingly, the net asset value of the
Company in the amount of $12,024 plus $ 52,000 of
transaction costs has been applied to reduce the share
capital of the Company immediately prior to the
reverse takeover.
b) Capital assets
Capital assets are recorded at the lower of cost less
accumulated amortization and net recoverable amount. All
capital assets are amortized over 5 years on a straight-line
basis.
c) 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 financial
statements and reported amounts of expenses during the
reporting period. Actual results could differ from those
estimates.
d) Basic Loss Per Common Share
Basic loss per common share has been calculated based on the
weighted average number of common stock outstanding during
the period.
e) Research and Product Development Costs
Research and product development costs are expensed as they are
incurred.
f) Patent Costs
Costs incurred for filing for patents are being capitalized
and no amortization is taken until all steps necessary to
establish the patent have been taken.
g) Monetary Assets
Monetary assets and liabilities denominated in currencies
other than the US dollar are translated at the rate of
exchange in effect at the end of the period. Expense items
are translated at the rate of exchange in effect on the
dates they occur. Exchange gains and losses are reflected in
operations immediately.
h) Accounting for Leases
A lease that transfers substantially all the benefits and
risks incident to ownership of property is treated as a
capital lease, otherwise the lease is accounted for as an
operating lease.
Note 3 Capital Assets
Capital assets comprise the following:
Cost Accumulated Net Book Net Book
Amortization Value Value
May 18, December 31,
1999 1998
Research and Development $310,847 $92,114 $218,733 223,796
General Office 33,133 11,424 21,709 24,866
Other 17,684 6,614 11,070 12,755
$361,664 $110,152 $251,512 $261,416
Note 4 Commitments
The Company has the following commitments for equipment:
Operating
Leases
1999 44,442
2000 88,883
2001 73,011
2002 8,133
2003 0
Note 5 Share Capital
(a) Authorized and Issued Share Capital
Authorized common shares
$0.001 par value 200,000,000
Issued 1999 17,906,965
The number of issued and outstanding shares of the Company
prior to the Transaction (see note 2a) was 1,069,020, an
amount which had not changed since December 31, 1996. This
amount was increased, immediately preceding the closing of
the Transaction, on the basis of 2.5-for-one to 2,672,550
shares. A further 15,234,415 shares were then issued as part
of the Transaction, on a post-split basis, in exchange for
all of the outstanding securities of Centraxx Corp.,
resulting in an aggregate of 17,906,965 outstanding shares
of the Company.
(b) Stock Option Plan
The Company has provided a means for Directors and employees
to be granted Options to purchase common shares of the
Company or to receive a cash amount that is equivalent of
the opportunity to exercise an Option. The Stock Option Plan
provides that a maximum of 20% of the Company's issued
common shares can be granted unless approved by the
shareholders of the Company. Options may be exercised over a
period not to exceed 5 years from the date they are granted.
The price at which each Option can be exercised can not be
less than the market price of the common share at the time
the Options are granted. As at May 18, 1999, the total
number of Options which were granted at an exercise price of
$0.65 totaled 1,365,000 of which 495,175 were vested.
Note 6 Risks and Uncertainties
As a development stage company the business of Centraxx Inc., entails
risks and uncertainties that affect its outlook and eventual results of
its business and commercialization plan. The primary risks relate to
meeting its product development and commercialization milestones which
require that the Company's products exhibit the cost, durability and
performance required in a commercial product. There is also a risk that
market acceptance might take longer to develop than anticipated. The
Company's business plan recognizes and, to the extent possible, attempts
to manage these risks by pursuing diverse end markets for "UNI-POINTtm "
technology. Within these markets the Company's commercialization plan
is focused on products that it believes have a competitive advantage.
Further, the plan for product and market development is to work closely
with potential strategic partners and key customers who together have
the capability and understanding of their specific markets to develop
products that incorporate Centraxx's UNI-POINTtm technology to meet
consumer requirements.
CENTRAXX CORP.
FINANCIAL STATEMENTS
AS AT DECEMBER 31,1998
<PAGE>
Feldstein & Associates LLP [letterhead]
AUDITORS' REPORT
To the Shareholders of Centraxx Corp.
We have audited the Balance Sheet of Centraxx Corp. as at December 31, 1998
and the statements of Operations and Deficit and Cash Flow for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also Includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1998 and
the results of its operations and the changes in b financial position for the
year then ended in accordance with generally accepted accounting principles.
/s/Feldstein & Associates LLP
FELDSTEIN & ASSOCIATES LLP
Chartered Accountants
Markham, Ontario
May 31, 1999
<PAGE>
<TABLE>
CENTRAXX CORP.
BALANCE SHEET
AS AT DECEMBER 31, 1998
<CAPTION>
In Canadian dollars and Canadian GAAP
1998 1997
$ $
(note 9)
<S> <C> <C>
ASSETS
Cash 218 1,893
Prepaid expenses 29,832 0
Capital assets - note 3 380,520 492,202
Patent costs - note 1 22,561 16,925
Incorporation costs 1,000 1,000
Investment in and advances to subsidiary 0 54,500
Total assets 434,131 566,520
LIABILITIES
Accounts payable and accrued liabilities 498,660 68,676
SHAREHOLDERS' DEFICIENCY
Share capital - note 5 2,432,890 869,293
Deficit (2,497,419) (371,449)
(64,529) 497,844
</TABLE>
Approved on behalf of the Board:
Director
Director
The accompanying notes are an integral part of these financial statements.
<TABLE>
CENTRAXX CORP.
STATEMENT OF OPERATIONS AND DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
In Canadian dollars and Canadian GAAP
1998 1997
$ $
(note 9)
<S> <C> <C>
Revenue 0 0
Expenses
General and administrative costs
Marketing 153,905 19,546
Management fees 210,000 45,000
Professional fees 96,838 75,970
Rent 159,634 63,000
Loss on write-down of investment in
subsidiary - note 10 80,346 0
Salaries and other office 341,356 13,815
Amortization 101,606 25,906
1,143,685 243,237
Research and product development - note 8 982,285 128,212
Loss for the year (2,125,970) (371,449)
Deficit, beginning of year 371,449 0
Deficit, end of year (2,497,419) (371,449)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
CENTRAXX CORP.
STATEMENT OF CASH FLOW
FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
In Canadian dollars and Canadian GAAP
1998 1997
$ $
(note 9)
<S> <C> <C>
Operating activities
Loss for the year (2,125,970) (371,449)
Add back non cash outlays:
Amortization of capital assets 101,606 25,906
Loss on write-down of investment and
advances to subsidiary 80,346 0
(1,944,018) (345,543)
Changes in non-cash operating working capital
Increase in prepaid expenses (29,832) 0
Increase In accounts payable 429,984 68,676
Cash (used in) operating activities (1,543,866) (276,867)
Financing activities
Issuance of share capital, net 1,563,597 869,293
Incorporation posts 0 (1,000)
Cash generated by financing activities 1,563,597 868,293
Investing activities
Capital assets (acquired) sold 10,076 (518,108)
Patent costs (5,636) (16,925)
Investment in and advances to subsidiary (25,846) (54,500)
Cash (used in) provided by investing
activities (21,406) (589,533)
(Decrease) increase In cash for the year (1,675) 1,893
Cash, beginning of year 1,893 0
Cash, end of year 218 1,893
</TABLE>
The accompanying notes are an integral part of these financial statements.
CENTRAXX CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998
1. Description of business
Centraxx Corp., incorporated under the laws of the Province of Ontario of
Canada on August 8,1997, is a wireless data communications company
specializing in providing location technology solutions. The Company has
developed a proprietary radio location two-way land based system utilizing
single-point tracking ("UNI-POINT TM" technology) which can be deployed to
provide effective solutions for numerous safety, security and location
information needs, in multiple network and stand alone applications.
As a development stage company the business of Centraxx Corp. entails risks
and uncertainties that affect its outlook and eventual results of its business
and commercialization plan. The primary risks relate to meeting its product
development and commercialization milestones which require that Centraxx's
products' exhibit the cost, durability and performance required in a
commercial product. There is also a risk that market acceptance might take
longer to develop than anticipated. Centraxx's business plan recognizes and,
to the extent possible, attempts to manage these risks by pursuing diverse end
markets for "UNI-POINT TM" technology. Within these markets, the Company's
commercialization plan is focused on products that it believes have a
competitive advantage. Further, the plan for product and market development is
to work closely with potential strategic partners and key customers
who together have the capability and understanding of their specific markets
to develop products that incorporate Centraxx's Uni-Point Tm technology to
meet consumer requirements.
2. Significant accounting policies
These financial statements have been prepared in accordance with accounting
principles generally accepted in Canada and all amounts are reported in
Canadian dollars. Significant accounting policies are outlined below:
(a) Capital assets and amortization
Capital assets are recorded at the lower of cost less amortization and
net recoverable amount. All capital assets are amortized over 5 years on a
straight line basis.
(b) Measurement uncertainty
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 financial
statements and reported amounts of expenses during the reporting period.
Actual results could differ from those estimates.
(c) Research and product development expenditures
Research and product development costs are expensed as they are
incurred.
(d) Patent costs
Costs incurred for filing for patents are being capitalized and no
amortization is taken until all steps necessary to establish the patent have
been completed.
(9) Foreign currency translation
Monetary assets and liabilities denominated in currencies other than the
Canadian dollar are translated at the rate of exchange in effect at the and of
the year. Expense items are translated at the rate of exchange in effect on
the dates they occur. Exchange gains or losses are reflected in operations
immediately.
Accounting for leases
A lease that transfers substantially all the benefits and risks incident
to ownership of the property is treated as a capital lease, otherwise the
lease is accounted for as an operating lease.
3. Capital assets
Capital assets comprise the following:
1998 1997
Accumulated Net book Net book
Cost Amortization Value Value
Research and development
equipment $434,062 $108,305 $106,816 $127,177
Office equipment 48,229 12,033 136,512 100,220
Other equipment 25,741 7,174 137,192 264,805
508,032 127,512 380,520 492,202
4. Commitments
The Company has the following commitments for equipment rentals:
1999 136,743
2000 136,743
2001 129,766
2002 12,513
2003 0
5. Share capital
1998 1997
Authorized common shares Unlimited Unlimited
Issued 14,367,680 12,265,672
i. On September 2, 1997, the Company issued 12,800,000 common shares for
$0.00001 for a total consideration of $128, of which 2,000,000 common
shares were issued as consideration for certain assets and technology
acquired on the formation of the Company. Subsequently, 2,026,559 of
these common shares were
cancelled by the Company.
ii. On September 30,1997, the Company issued 1,000,000 common shares for
$0.50 per share and 492,222 common shares for $0.75 for a total
consideration of $869,165, of which 725,694 common shares were issued
as consideration for certain capital assets acquired on the formation
of the company.
iii. On September 30, 1998, the Company issued 749,493 common shares for
$0.75 per share and a further 817,150 common shares for a total
consideration of $1,052,066. Included In this amount were 200,000
shares to non-related minority shareholders of an acquired company in
exchange for all remaining outstanding shares of a dormant subsidiary
acquired on September 2, 1997. 533,650 shares were issued for cash of
$433,650, 462,280 shares were issued for $340,383 for services
rendered and 370,713 shares were issued for $278,033 in satisfaction
of a debt to a company subject to significant influence by one of the
directors.
iv. On December 31, 1998, the Company issued 215,420 common shares for
$0.75 per common share, 289,945 common shares for $1.00 per common
share and a further 30,000 common shares for $2.00 per common share
aggregating a total consideration of $511,552. Included in this amount
were 38,700 shares issued for cash of $38,700, 287,449 shares issued
for $263,636 for services rendered and 209,216 shares were issued for
$209,216 in satisfaction of a debt to a company subject to significant
influence by one of the directors.
6. Income taxes
For tax purposes, the Company has loss carry forwards of approximately
$2,700,000 available to reduce future taxable income in Canada subject to
qualified investment tax credits (see note 2b). If not utilized, these losses
will expire in the year 2004 and 2005. In addition, amortization for tax
purposes in the approximate amount of $120,000 may be filed with the tax
authorities. The potential future tax benefit which may result from
the application of these loss carry forwards have not been recorded in these
financial statements.
7. Related party transactions
During the year, the Company had the following related party transactions
which amounts are recorded at the exchange amount, which is the amount of
consideration established and agreed to by the related parties:
(a) Transactions between the Company and a company subject to significant
influence by one of the directors:
(i) Management fees in the amount of $210,000 (1997 - $45,000) under
contract was paid by the Company. The contract is for a one year
term renewable on an annual basis with a termination clause. Monthly
obligations are $22,500.
(ii) Rent in the amount of $159,000 (1997 - $63,000) was paid by the
Company.
(iii) General and administrative expenses in the amount of $402,993 were
paid on the Company's behalf and charged back to the Company.
(iv) The Company received net advances in the amount of $59,405.
(b) Scientific research and development subcontracting expenses totalling
$213,500 (1997- $72,535) under contract were paid to two companies each
controlled by one of the directors. The contract will continue until
terminated by mutual agreement of the parties. Monthly obligations are
$17,000.
8. Research and product development Costs
Research and product development costs consist of the following:
1998 1997
Manpower $589,634 $79,705
Materials 151,943 7,266
Expenses 240,708 41,241
$982,285 $128,212
9. Comparative figures
(a) Comparative figures relate to the period of incorporation of August
8, 1997 to December 31, 1997 and were unaudited and prepared with a Notice to
Reader.
(b) Certain prior year amounts have been reclassified to conform with
the presentation adopted in the current year.
10. Loss on write-down of investment in subsidiary
The Company has written down its 100% owned investment in Paltrac Systems
Corporation to zero because the subsidiary was dormant and management has
assessed the carrying value of the investment to be nil.
11. Subsequent events
(a) From January 1, 1999 to May 10, 1999, the Company issued 61,895 common
shares for $0.75 per share, 600,970 common shares for $1.00 per share and
237,575 common shares for $2.00 per share aggregating a total consideration of
$1,127,556.
(b) On May 18, 1999, the Company became a wholly owned subsidiary
of a US publicly traded Company, Centraxx Inc. (previously Composite
Design Inc.) as a result of a Share Exchange Agreement entered into by the
shareholders of the Company.
(c) On January 4, 1999, the Board of Directors approved a Stock
Option Plan, which provides that a maximum of 3,500,000 common shares can be
issued. Options may be exercised over a period not to exceed 5 years from
the date they are granted. The price at which each option can be exercised
can not be less than the market pries of the common share at the time the
options are granted. Concurrent with the approval of the Stock Option Plan,
the Board of Directors authorized a total of 1,365,000 options at a price of
$1.00 per common share, which grant formed part of the Share Exchange
Agreement (see note 9b) and were accordingly ratified by Centraxx Inc. on May
31, 1999 at which time 512,525 options were vested.
12. Fair value of financial statements
At December 31, 1998 and 1997, the fair value of cash, prepaid expenses and
accounts payable and accrued liabilities approximates carrying values because
of the short-term nature of these instruments.
13. Uncertainty due to the year 2000 Issues
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information
using year 2000 dates is processed. In addition, similar problems may arise in
some systems which use certain dates in 1999 to represent something other than
a date. The effects of the Year 2000 Issue may be experienced before, on, or
after January 1, 2000, and, if not addressed, the impact on operations and
financial reporting may range from minor errors to significant systems
failures which could affect an entity's ability to conduct normal business
operations. It is not possible to be certain that all aspects of the Year 2000
Issue affecting the entity, including those related to the efforts
of customers, suppliers, or other third parties. will be fully resolved.
