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Infotopia, Inc. (OTCBB: IFTA) Corporate Web Site: infotopia.tv Shares Outstanding: 4.1 million Market Capitalization: $4.3 million Closing Price Friday 6/29/01: $1.04 "We began researching this story a few weeks ago… it was intended to be a very positive piece about Infotopia, Inc., a rapidly growing and innovative direct marketer of an expanding line of high-quality, health, fitness and consumer life style products. We still believe that the company has tremendous upside potential, but… the company’s recent surprise 1 for 200 reverse-split, an ambiguous proposed merger press release, and, what we feel, are troubling findings in company SEC filings, have raised some red flags. First the good news… Stockprowler.com can think of no other OTC Bulletin Board company in recent memory generating the revenues and net profits that this company has been able to do in just a little more than a year of operation… absolutely incredible. Quoting from a Business Wire dated June 20, 2001, “Infotopia Announces Year-To-Date Revenue For 2001 Fiscal Year Exceeds 50 Million Dollars; Fiscal 2001 Net Profit Exceeding 4 Million Dollars”. And this, for a stock that is presently trading, after doing a reverse split, at $1.04 a share. Currently, that works out to a P/E of less than 1… compare that with an established direct marketer, Direct Focus, Inc. trading at $47/ share and a P/E of 23…Direct Focus began marketing its high-tech air mattress, Instant Comfort, in 1998. The company later added a line of fitness equipment that is marketed to home users through TV ads, the Internet, and direct mail. On June 6, 2001, Business Week named DFXI No. 2 on Business Week's listing of “Hot Growth Companies.” biz.yahoo.com Infotopia’s impressive revenues are due mainly to the extraordinary success of the Body By Jake Bun and Thigh Rocker, Total Tiger, and the Six Week Body Makeover. Additional revenue from sales of the Ultimate Slimming Formula, Total Trim, Fat Fighting System, the Medicus Dual 2000, and the Backstroke are all part of an ever-growing revenue stream. Recently, Infotopia had three of its infomercials ranked in the Top Ten in the country as reported by Infomercial Monitoring Service Inc.'s National Cable Rankings. Typically, one out every thirty infomercials make it to the top one hundred. Getting three shows in the top ten, at the same time, is a truly exceptional achievement. IMS rankings in the top 10 are generally considered to be a benchmark for mass consumer response to any particular show. Recently, Infotopia announced that it had entered into an agreement with the Wearever Division of Newell Rubbermaid (NYSE:NWL), the 104 year old multinational manufacturer and marketer of complete lines of branded cookware and bakeware. Wearever is the largest manufacturer of cookware in the U.S. Newell brands are among the most widely distributed and recognized in the world. The marketing agreement will provide Wearever with Infotopia's expertise in direct marketing, which will encompass infomercials, live shopping, print and Internet in the US with opportunities for future distribution in select global markets. On June 15, 2001, Infotopia, Inc. and EntrePort Corporation (AMEX:ENP) announced “that they have reached and executed a definitive agreement to pursue a corporate reorganization in which Infotopia, Inc., a Nevada Corporation (“Infotopia Nevada”) will sell its wholly owned subsidiary Infotopia, Inc., an Ohio Company (“Infotopia Ohio”) (the operating entity which contains all the revenue and expenses of the Company) to EntrePort. Subsequently EntrePort will spin-off its existing business to its shareholders. According to the agreement, EntrePort will effect a 1-for-18.55 reverse split of its common stock. EntrePort will then transfer all of its assets and liabilities to a wholly owned subsidiary and will distribute shares of stock of the subsidiary to existing EntrePort shareholders. EntrePort will then acquire all of the assets and assume all of the liabilities of Infotopia by an exchange in which EntrePort will issue to Infotopia Nevada 13,100,000 units, each unit consisting of one share of EntrePort common stock, a warrant to purchase ½ of a share of EntrePort common stock at $5.00 per full share and a warrant to purchase ¼ of a share of EntrePort common stock at $10.00 per full share. EntrePort’s spun-off subsidiary will receive $500,000 in the transaction. The total issued and outstanding shares of common stock of EntrePort after the closing will be approximately 15,480,000 shares. Infotopia Nevada (IFTP) will hold approximately 85.1% ownership in the new share structure in EntrePort (ENP) after the transaction is completed.” Now the not so good news… The merger with EntrePort and the to move to American Stock Exchange should enable Infotopia to achieve a proper valuation and attract financial institutions that specialize in mid-cap markets and do public offerings. Having said that… re-read the above quote from the press release detailing the merger. What is troubling to us is the ambiguity created by the statement, “Infotopia Nevada (IFTP) will hold approximately 85.1% ownership in the new share structure in EntrePort (ENP) after the transaction has been completed.” An argument can be made that because Infotopia Nevada is distinct from Infotopia Ohio, conceivably Infotopia Ohio will go to Entreport (Amex) and Infotopia Nevada will stay on the OTC:BB with the present IFTA long shareholders holding nothing of the new Amex company. It is troubling because the wording of the newswire states Infotopia Nevada “will hold” 85.1% ownership in the new ENP… it doesn’t specifically say that present IFTA (former IFTP) shareholders will receive the share distribution. And, it is especially troubling in view of the company history… Infotopia was spun off as a public company in April 2000 in a reverse merger with a company called Dr. Abravenal’s Formulas, Inc. Prior to that time, Infotopia had been a wholly owned subsidiary of National Boston Medical, Inc., which traded on the OTC Bulletin Board. A May 4, 2000 press release said that National Boston Medical had received 7,949,999 shares of Dr. Abravenal’s Formulas in exchange for 100% of Infotopia. The press release also said that Dr. Abravenal’s Formulas would change its name to Infotopia. At the time of the merger, National Boston Medical said that it planned to distribute the Infotopia shares to its stockholders. On June 9th, however, National Boston Medical announced that it was delaying the proposed distribution. On August 4th, a press release announced that Infotopia had offered to repurchase the shares of Infotopia stock from National Boston Medical that were exchanged in the reverse merger. However, that transaction apparently never occurred and, instead, National Boston Medical filed for bankruptcy. Instead, National Boston Medical declared bankruptcy. Did National Boston Medical ever distribute the Infotopia shares? Apparently not. And who were the players involved? As part of the bankruptcy proceeding, a June 7, 2000 press release from National Boston Medical indicated that Daniel Hoyng, Ernest Zavoral and Clinton Smith had recently resigned as National Boston Medical directors, and that Marek Lozowicki had stepped down as an officer of National Boston Medical. All four individuals are now associated with Infotopia, Inc… Stockprowler.com faxed and e-mailed our concerns to Infotopia, Inc. this past week. And, despite numerous phone calls to the home office and to Robert Tilton, V.P. for Investor Relations, we have, to date, received no answers to our questions. This is very disturbing considering that, in addition to the aforementioned, the company surprised shareholders with an announcement of a 1 for 200 reverse-split done-deal last week. Interestingly, CEO Dan Hoyng, did not suffer the same fate as ordinary shareholders… check out the recently amended 10KSB/A Amended Annual Report dated 6/12/2001. We quote, “The Company has a three-year employment agreement with Daniel Hoyng, its Chief Executive Officer. The term runs through April 26, 2003 and unless notified by the Board of Directors or the Executive Committee of the Company, the agreement will automatically be renewed for one year, each year thereafter. In addition to a base salary, bonuses and other incentives, Mr. Hoyng will be granted 1,000,000 shares of common stock annually on the anniversary date of the agreement. These shares carry an anti-dilution provision and are not subject to any reverse split.” A firestorm of angry shareholders have flooded the RagingBull Infotopia message board this past week… the bashing is no longer confined to an itinerant band of shorters and bashers that inhabit and are the bane of the message boards. Was the sudden unexpected 1 for 200 reverse-split a naïve misstep on the part of management made in the hope of quickly seizing the holy grail… a listing on a major exchange? Or was it a deliberate example of flagrant opportunism, another example of callous disregard or indifference toward shareholders. People want their CEO to step up and give them straight and honest answers. A lot of people believe in the future of this company… don’t shatter their dreams. Direct Marketing is the fastest growing area in the advertising industry. Consumers are buying more from television than ever before. In 1992, direct response marketing sales totaled $750 million for the year. By 1995, the number exceeded $6.5 billion, and projections for 2001 are $25 billion. And it certainly appears to us that companies like Direct Focus, Inc. and Infotopia, Inc. are poised to reap the harvest. A stock is worth only what people are willing to pay for it… the price is a reflection of the confidence that investors have in the company and its management. It is the opinion of Stockprowler.com that Infotopia, Inc. (OTC:BB: IFTA) has the potential to be positively huge, conceivably $20 /share in the next 12 – 18 months… but only if management can regain and build shareholder confidence." ...reprinted from www.Stockprowler.com report dated 7-01-2001 | ||||||||||||||
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