SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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FORM 10KSB/A
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 000-25499
INFINITE TECHNOLOGY CORPORATION
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(Former Name)
FLEXXTECH CORPORATION
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(New Name)
(Name of Small Business Issuer in its Charter)
Nevada 88-0390360
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
5777 W. Century Boulevard
Suite 775, Los Angeles, California 94010
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(Address of Principal Executive Offices) (Zip Code)
(310) 342-0794
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(Issuer's Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Exchange Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Exchange Act:
Common Stock $0.001 Par Value
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [x] No [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this Form 10-KSB/A or any amendment to this
Form 10-KSB/A. [ ]
The revenue of Flexxtech Corporation for the fiscal year ended December
31, 2000, was $4,526,003.
As of December 31, 2000, Flexxtech Corporation had a limited public
trading market for its common stock. The aggregate market value of the common
equity held by non-affiliates of Flexxtech Corporation on December 31, 2000,
was $20,171,694. Directors, Officers, advisors and ten percent or greater
stockholders are considered affiliates for purposes of this calculation but
should not necessarily be deemed affiliates for any other purpose.
The number of shares outstanding of Flexxtech Corporation's Common Stock
as of December 31, 2000, was 7,316,590.
Transitional Small Business Disclosure Format (check one): Yes [] No [x]
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TABLE OF CONTENTS
Page
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PART I
Item 1 Business. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Item 2 Description of Property . . . . . . . . . . . . . . . . . . . 9
Item 3 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 9
Item 4 Submission of Matters to Vote of Security Holders . . . . . . 9
PART II
Item 5 Market For Common Equity and Related Stockholder Matters. . . 9
Item 6 Management's Discussion and Analysis or Plan of Operation . .12
Item 7 Financial Statements. . . . . . . . . . . . . . . . . . . . .17
Independent Auditors' Report. . . . . . . . . . . . . . . . .18
Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . .19
Statements of Operations. . . . . . . . . . . . . . . . . . .20
Statement of Changes in Stockholders' Equity. . . . . . . . .21
Statements of Cash Flows. . . . . . . . . . . . . . . . . . .22
Notes to Financial Statements . . . . . . . . . . . . . . . .23
Item 8 Changes and Disagreements with Accountants. . . . . . . . . .37
Item 9 Directors, Executive Officers, Promoters and Control Persons.37
PART III
Item 10 Executive Compensation. . . . . . . . . . . . . . . . . . . .39
Item 11 Security Ownership of Certain Beneficial Owners and
Management. . . . . . . . . . . . . . . . . . . . . . . . . .40
Item 12 Certain Relationships and Related Transactions. . . . . . . .41
Item 13 Exhibits and Reports on 8-K . . . . . . . . . . . . . . . . .41
PART I
ITEM 1. BUSINESS
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
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This Annual Report on Form 10-KSB/A contains forward-looking statements,
including (without limitation) statements concerning possible or assumed
future results of operations of Registrant and those preceded by, followed by
or that include the words "believes," "could," "expects," "anticipates," or
similar expressions. For those statements, Registrant claims the protection
of the safe
2
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. You should understand that various events
could cause those results to differ materially from those expressed in such
forward- looking statements: materially adverse changes in economic conditions
in the markets served by the companies; competition from others in the same
markets and other industry segments; the ability to enter, the timing of entry
and the profitability of entering new markets; greater than expected costs;
and other risks and uncertainties as may be detailed from time to time in
Registrant's public announcements and SEC filings.
OUR COMPANY
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HISTORY
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We were originally incorporated in the State of Nevada as Color Strategies
on March 24, 1998. On October 1, 1999, we created a wholly-owned subsidiary
named Infinite Technology Holding, Inc. We changed our name to Infinite
Technology Corporation on December 23, 1999. On May 4, 2000, we changed our
name from Infinite Technology Corporation to Flexxtech Corporation. On the
same date, May 4, 2000, the name of our wholly-owner subsidiary was changed
from Infinite Technology Holding Corporation to Flexxtech Holdings, Inc.,
which is referred to in this report as "Flexxtech Holdings." Flexxtech
Corporation is sometimes referred to in this report as "our Company."
At the time we were named Color Strategies, our business purpose was
creating and presenting self-improvement and motivational seminars which
utilized the concept of image and style enhancements. At the time that we
changed our name to Infinite Technology Corporation we also changed our
business focus. We are now focused on and engaged in the business of
developing, operating and investing in emerging technology growth companies,
through our wholly-owned subsidiary, Flexxtech Holdings. Our objective is to
build long-term capital appreciation for our shareholders.
BUSINESS
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OUR PRINCIPAL ACQUISITION AND INVESTMENT STRATEGY
-------------------------------------------------
Our investment objective is to seek long-term capital appreciation by
Investing, through our subsidiary, Flexxtech Holdings, Inc., in primarily
emerging growth technology companies and those companies positioned to benefit
from the growth of the Internet and intranets. We believe that our strategy
also promotes opportunities for investment in undervalued situations and
synergistic business relationships among the companies in which we have
investments. The primary focus in technology include the internal development
and investment in the following categories:
. Data Storage
. Internet Infrastructure
. Wireless Technologies
. Computer Software
. Computer Networking
. Financial Services
. Telecommunications
. Networks/Equipment and Services
. Semiconductor
. Circuit Board Manufacturing
. Equipment and Electronic Manufacturers and Services
Under normal conditions, our subsidiary, Flextech Holdings, Inc., will
acquire and invest at least 50% of total assets in equity securities of
companies that are engaged in the research, design, development, manufacturing
or distribution of products, processes or services for use with data networks.
Our portfolio is concentrated on middle-market established businesses as well
as young emerging
3
growth companies that our own research suggests have potential for gaining the
dominant role in their markets and for producing extraordinary price
appreciation over time.
There is no limit on the market capitalization of the companies that our
subsidiary, Flexxtech Holdings, Inc., may acquire or invest in, or in the
length of operating history for the companies. Our subsidiary may invest
without limit in private as well as public companies, initial public
offerings, private placements, bridge financing, debt securities, foreign
securities and purchase and sell options. Our subsidiay may also margin up to
100% of its marginable securities.
In seeking new business opportunities our management, and that of our
subsidiary, Flexxtech Holdings, Inc., may consider:
(1) the potential for growth and profitability, indicated by new technology
anticipated market expansion or new products:
(2) its perception of how any particular business opportunity will be
received by the investment community and by the company's stockholders;
(3) the extent to which the business opportunity can be advanced;
(4) capital requirements and anticipated availability of funds;
(5) competitive position as compared to other companies of similar size and
experience within the industry segment as well as within the industry as a
whole;
(6) strength and diversity of existing management or new management that
are scheduled to be recruited in connection with the new business prospect;
We have initiated a program with special interest in the acquisition of
printed circuit board companies. We have called this program a circuit board
plan or a circuit board roll-up plan, although the term roll-up is used in a
plain meaning non-securities, non-technical sense.
In addition to the circuit board plan, we intend to seek, through our
subsidiary, Flexxtech Holdings, Inc., additional industries where where
efficiencies through consolidation will greatly benefit the Company. The
thrust will be to:
. Acquire "islands of excellence" in attractive, complementary markets.
. Efficiently acquire and integrate new companies while preserving
their entrepreneurial spirit.
. Use the greater purchasing power to obtain improved vendor deals.
. Keep and integrate only those superior managers.
MERGER & ACQUISITION TENETS
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. Build on our organizational skill in performing acquisitions; develop
systems for managing the process from lead evaluation, negotiation,
contracting, and post-closing integration.
. Pay reasonable multiples with extra incentives to ensure seller
commitment.
. Exercise complete due diligence to ensure smooth integration of
personnel and operations.
. Achieve rapid returns on investment by implementing the best practices
in the acquired operation.
. Reduce overhead by vacating unneeded premises.
. Centralize any duplicated support functions into the headquarters
location.
SPECIFIC INVESTMENT STRATEGY AND RISKS
--------------------------------------
Equity Securities. We invest, through our subsidiary, Flexxtech
Holdings, or otherwise, in companies and equity securities, which include
common stocks, preferred stocks and securities convertible into common stocks.
There is no limit on
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the market capitalization of the companies in which we may so invest, or in
the length of operating history for the companies.
Foreign Companies and Securities. Foreign securities include investments
in non-U.S. dollar-denominated securities traded outside of the United States
and dollar-denominated securities of foreign issuers traded in the United
States. Foreign securities also include investments such as American
Depository Receipts ("ADRs") which are U.S. dollar-denominated receipts
representing shares of foreign-based corporations. We may invest, through our
subsidiary, Flexxtech Holdings, or otherwise, up to 50% of our total assets in
foreign securities.
Mutual Funds and Hedge Funds. We may invest our cash position from time
to time, through our subsidiary, Flexxtech Holdings, or otherwise, in
selective mutual fund shares and hedge fund shares. We may invest, through our
subsidiary, Flexxtech Holdings, or otherwise, up to 75% of our cash assets in
mutual funds and/or hedge funds.
Options. An option is a type of investment instrument that gives the
holder the right (but not the obligation) to buy (a "Call") or sell (a "Put")
an asset in the future at an agreed upon price prior to the expiration date of
the option. We may, through our subsidiary, Flexxtech Holdings, or otherwise,
write (sell) covered call options, buy put options, buy call options and write
secured put options for hedging purposes. Options may relate to particular
securities, foreign or domestic securities indices, financial instruments or
foreign currencies.
Short-Term Trading. Although our objective is long-term capital
appreciation and long-term investment in emerging technology companies, we may
from time to time, through our subsidiary, Flexxtech Holdings, or otherwise,
take advantage of certain opportunities that are available through short-term
trading.
Illiquid Investments. We may acquire and invest, through our subsidiary,
Flexxtech Holdings, in companies that are private (non-publicly traded), and
in illiquid securities including private placements or other securities that
are subject to legal or contractual restrictions on resale or for which there
is no readily available market. We may acquire, through our subsidiary,
Flexxtech Holdings, 100% of private, illiquid companies and may use all or a
majority of its assets for such acquisitions and investments.
Securities Lending. In order to generate additional income, we may lend
securities on a short-term or long-term basis to qualified companies and
institutions. By reinvesting any cash collateral it receives in these
transactions, we could realize additional income gains or losses.
Borrowing and Reverse Repurchase Agreements. We can borrow money from
banks and enter into reverse repurchase agreements with banks and other
financial institutions. Reverse repurchase agreements involve the sale of
securities held by us subject to our agreement to repurchase them at a
mutually agreed upon date and price (including interest).
INVESTMENT COMPANY ACT OF 1940
------------------------------
Although we, or our subsidiary Flexxtech holdings, Inc., may participate
in the purchasing, trading or selling the securities of various business, we
do not intend to engage primarily in such activities involving passive
investment interests. Specifically, we intend to conduct our activities so as
to avoid being classified as an investment company under the Investment
Company Act of 1940 and, therefore, to avoid the potential application of
costly and restrictive registration and other provisions of that Act and the
regulations promulgated thereunder. In the event, however, that we or our
subsidiary, Flexxtech Holdings, Inc., engages in business transactions which
result in the holding of passive investment interests in a number of entities,
we or our subsidiary, Flexxtech Holdings, Inc., may be subject to regulation
under the Investment Company Act of 1940. In such event, we or our subsidiary,
Flexxtech Holdings, Inc., would be required to register as an Investment
Company and could be expected to incur significant registration and compliance
costs. we have obtained no formal determination that the Securities and
Exchange Commission as to our status or that of Flexxtech Holdings, Inc. under
the Investment
5
Company Act of 1940. Any violation of such act would subject us or our
subsidiary, Flexxtech Holdings, Inc., to material adverse consequences.
WHAT DOES IT TAKE TO BE A FLEXXTECH COMPANY?
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Large Potential Market. The market for the product or service must be
very large or have good prospects of becoming a very large market. For
example, online retailing represents a massive global business opportunity and
Amazon.com is the leading online retailer. Their potential to increase sales
globally with additional products and services is enormous.
"First Mover" Advantage. Perhaps as in no other industry, being first to
deploy an advanced technology in a product or service often provides a
distinct advantage. QLogic, a Flexxtech stock, was first to lead the global
market for fibre channel host bus adapters. Its nearly 40% market share is
difficult to challenge.
High Barriers to Entry. Combining an early head start with superior
technology produces barriers to entry that protect the "first movers" lead
over other potential challengers. The desires of users and developers to adopt
a standard is unique to technology. The adoption process only further
fortifies the leader and increases barriers to entry. Oracle, one of our
portfolio stocks, used increasing barriers to entry to build a dominant
position in computer software that helps corporations manage and grow their
business.
Technology Edge. Superior technology is often the springboard of success
for a young technology company. The better the technological prowess of the
firm the more likely they are to build technology solutions that customers
will embrace. Emulex, another portfolio stock, has a competitive advantage by
offering a broad line of fibre channel host adapters, hubs, ASICs and software
products that enhance access to, and storage of electronic data and
applications.
Seasoned Management Team. A history of accomplishment in the technology
field is one of our basic requirements when it evaluates a company's
management. Technical expertise, broad knowledge, a sense of urgency and clear
vision are a must if a team is going to succeed. Extensive experience and deep
industry contacts have enabled us to recognize first-hand some of what we feel
are among the most successful management teams in technology today.
MAJOR HOLDINGS IN OUR PORTFOLIO OF COMPANIES
--------------------------------------------
Listed below are the major holdings in the portfolio of our subsidiary,
Flexxtech Holdings, Inc. Various smaller investments are not listed because
they represent in total less than five percent (5%)of the total portfolio
assets and management may change them from time to time.
MARDOCK, INC.
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Mardock, Inc. is a designer, manufacturer and distributor of apparel and
promotional products to the corporate community. Mardock is in the process of
developing an e-commerce site for corporate promotional products and plans to
create the premier corporate promotional products site on the Internet.
Additional information can be obtained at www.mardock.com.
Our subsidiary, Flexxtech Holdings, Inc., owns 100% of Mardock.
OPITV.COM
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OpiTV.com ("opiTV") is an I-commerce technology company engaged in the
business of manufacturing, marketing and distributing a set-top-box device
(the "Box"), targeted to a demographics based on a value-added experience. The
Box is a convergence device giving the consumer high-speed Internet access and
enhanced
6
communications as well as full computing capabilities in their home or office.
Connecting to regular telephone lines, the Box can be used for personal
computing, Internet access, education, video conferencing, video games, as
well as entertainment.
As an Intranet function, and because OpiTV owns the equipment, they can
inject commercials, ads, movie trailers, infomercials, notices, etc. based on
certain time periods, geographical locations and subscriber activity.
Our subsidiary, Flexxtech Holdings, Inc., owns 82% of OpiTV.com.
PRIMAVERA CORPORATION
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Primavera Corporation is the parent company of North Texas Circuit Board
Co., Inc. ("NTCB") (www.ntcb.com). NTCB manufactures high-quality,
high-technology, quick-turn printed circuit boards. The Company has had a
restructuring year in 2000, after being profitable in 22 of its 23 years of
existence, is ISO 9002 certified, manufactures 28+ layers, uses Exotic
Materials and provides 24-hour delivery. 1999 sales were $9.9 million.
NTCB is the platform company for the Company's circuit board roll-up. The
Company is seeking out additional circuit board companies with established
reputations and proven records of profitability, and having operated in the
business on average of over 20 years.
NTCB's partial customer list includes: Allied Signal, BAE Systems, Boeing
Defense and Space Group, L3 Communication, Litton Marine Systems, Lockheed
Martin Aeronautical, Lockheed Martin Fairchild, Northrop, Orbital Sciences
Corp., Raytheon Co., Raytheon E-Systems, Rockwell International, Rockwell
Communications, Texas Instruments, TRW, Varo Cop., and Westinghouse.
Our subsidiary, Flexxtech Holdings, Inc., owns 80% of Primavera Corp..
THE MARKET
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COMPARABLE COMPANIES AND COMPETITION
------------------------------------
There is nothing static about our company. We are a Company in constant
motion--expanding through acquisitions and investments in emerging technology
and Internet-related companies that enhance the Flexxtech business plan.
Although competition for the consolidated Company is difficult to gauge based
on our portfolio size, there are several comparable companies with distinct
yet similar business plans that are much larger and financial stronger than we
are. The most prominent of these companies include Comdisco (NYSE: CDO), and
Safeguard Scientific (NYSE:SFE).
PRINTED CIRCUIT BOARD MARKET
----------------------------
The circuit board element is one of the largest component of our plans.
The market for circuit boards was strong in 2000. The Book-to-Bill Ratio for
September 2000 was 1.18. Shipments in September 2000 increased 25.2% over
September 1999 and orders booked increased 25.4% over September 1999. Compared
to 1999, bookings of PWBs are up 28.9% year-to-date, while shipments of PWBs
are up 17.8% year-to-date. The information is based on data provided by the 91
rigid and flexible PWB manufacturers participating in IPC's monthly
Statistical Program. IPC is a U.S. based trade association with 2,700 member
companies employing 400,000 people with $44 billion U.S. industry.
Electronic equipment demand was very strong in 2000. In June 2000 the
combined growth of computer and office, communications, instruments and
controls and military electronics was up 34.7% versus June 1999 and 24.7% on a
3-month basis (Apr-June
7
2000 vs. Apr-June 1999).
The PCB growth is well supported by equipment growth including
communication group up 36%.
Internet Market Dynamics
------------------------
Although neither we nor our subsidiary, Flexxtech Holdings, Inc., are an
Internet company, almost all technology companies must address the Internet
and how it plays a roll within the organization. Because nearly all roads in
technology lead to the Internet we are addressing the market dynamics of the
Internet.
The Internet is a collection of computer networks connecting millions of
public and private computers around the world. The emergence of the Web and
the graphical, multimedia environment of the Internet have resulted in the
development of the Internet as a new mass communications medium. The ease and
speed of publishing, distributing and communicating text, graphics, audio and
video over the Internet has led to a proliferation of Internet-based services.
Existing Internet services include chat rooms, online magazines, news feeds,
interactive games and a wealth of educational and entertainment information,
as well as the development of online communities. In addition, by eliminating
many of the costs involved in executing routine commercial transactions such
as simple banking services and retail purchases, the Internet is rapidly
providing individuals and organizations with a new medium for conducting
business.
The consumer online and Internet services industry is now in the early
stage of an evolution embraced by both consumers and businesses worldwide.
The Internet is moving closer to a mass market. A study by IDC/LINK projects
that the number of Web users in the U.S. will increase from approximately 100
million in 1999 to 189 million in 2003.
The U.S. Internet Market
------------------------
As the number of Americans using Internet technology continues to grow,
people increasingly turn to the Internet to conduct research for work, obtain
entertainment and travel information, shop and catch up with friends and
family.
The Pew Research Center reported that over the last three years, the
number of Americans who own computers had grown from 36% to 43%, and the
percentage using the Internet and e-mail has increased even more. Now 41% of
Americans go online -- up from just 14% in 1995.
Unlike many technologies developed in recent decades that are used
primarily in the workplace, the Internet is taking root right at home. Fully
74% of people who use the Internet go online at least some of the time at
home, and nearly half (49%) connect to the Internet solely from home. This
represents more than the total number of people who go online at work
exclusively or some of the time (38%).
Some 12% of Americans -- 22 million -- go online every day, compared to
just 3% three years ago. Internet users tend to go online throughout the day,
for relatively brief periods of time. One in four (25%) Internet users
generally go online during the daytime, and nearly as many favor the dinner
(22%) or late night hours (22%). Fewer go online during the morning hours
(16%).
The typical user spends an hour or less online on any given day. Among
Internet users surveyed, 29% were online for a half-hour or less, while 41%
were online for up to one hour. The remaining 30% spent more than an hour
online throughout the day.
Reflecting the steady growth of the Internet in America, the Pew Research
Center survey found that 46% of users started going online just within the
last year. As the online population expands, there are signs that the
Internet -- used by a relatively small and elite group several years ago -- is
beginning to reach a broader cross-section of the public.
8
40% of those who started going online within the past year never attended
college, which is nearly twice the number as among experienced Internet users
(22%). Similarly, 23% of new users have household incomes below $30,000 a
year, compared to just 16% of those who have been online for more than a year.
Despite these substantial changes in the Internet population, it is still
a long way from mirroring the country as a whole. Americans who go online
remain substantially younger, better educated and more affluent than the U.S.
population at large. 39% of Internet users are college graduates, for
example, compared to just 22% of all Americans. Similarly, 80% of Internet
users are under age 50, compared to 63% of all Americans.
RESEARCH AND DEVELOPMENT ACTIVITIES IN THE PAST TWO YEARS
---------------------------------------------------------
We have been in business only since March of 1998 and we have only
conducted material business since April 2000. We have spent no money on
research and development.
TOTAL NUMBER OF EMPLOYEES
-------------------------
We have no employees as of this date other than Greg Mardock who is
also our President, Secretary/Treasurer and a director. We have no plans to
hire any additional employees during the next twelve months.
ITEM 2. DESCRIPTION OF PROPERTY
We sublease office space at 5777 West Century Blvd., Suite 775-A, Los
Angeles, California 90045. Our subsidiary, Flexxtech Holdings, Inc., also
shares the same space. Our monthly rent is approximately $770. Mardock, Inc.,
leases approximately 5,000 square feet of office space in McMinnville, Oregon.
The monthly rent of Mardock, Inc is $2,600. North Texas Circuit Board Co.
leases approximately 25,000 square feet of office and factory space in Grand
Prairie, Texas. OpiTV.com conducts its operations at Flexxtech headquarters.
Neither we nor our majority owned subsidiaries own any real property.
ITEM 3. LEGAL PROCEEDINGS
Mardock, Inc., the wholly-owned subsidiary of our subsidiary Flexxtech
Holdings, Inc., became the holder of a secured promissory note in principal
amount of $1,270,000, accruing interest at 10% per annum, in regard to the
sale of 500,000 shares of our common stock. The note was made by Ameri-First
Financial Group, Inc., is secured by the assets of Ameri-First and is due on
demand. Mardock, Inc. has made demand for payment and Ameri-First Financial
Group, Inc. has failed to pay. The note is now due and unpaid. On January 3,
2001 Mardock, Inc. filed a complaint against Ameri-First Financial Group, Inc.
to collect on the Note. The complaint was filed in the Los Angeles County
superior Court. The Complaint was amended on January 5, 2001. The amended
complaint includes causes of action for breach of promissory note, common
counts and foreclosure of security interest. The amended complaint seeks
unpaid principle, interests and attorney fees and costs. The amended complaint
names Ameri-First Financial Group, Inc., Pacific Sports Holdings, Inc., Oregon
Outerwear, Inc., Tahoe Pacific Corporation, Southbay Golf, Inc. and outback
Apparel group, Inc. as defendants. A settlement is currently being
investigated.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
9
MARKET INFORMATION
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We do not have a substantial public trading market for our Common Stock.
Our Common Stock is quoted on the Pink Sheets LLC (formerly National Quotation
Bureau) Electronic Quotation Service, a quotation service for Over-the-Counter
(OTC) securities. There is no assurance that a substantial trading market for
our common stock will ever develop. There are no outstanding options,
warrants to purchase, or securities convertible into our common equity. We
have not agreed to register any shares of its common stock for any
shareholder.
On October 7, 1998 we submitted a Form 211 to the NASD Regulation
pursuant to Rule 15c2-11. The Form 211 was accepted by the NASD Regulation on
May 26, 1999. On March 5, 1999, we filed a Form 10-SB12G for the registration
of our outstanding common stock. We filed a Form 10-SB12/A on May 14, 1999.
Our Common Stock was approved for quotation on the Pink Sheets OTC
Electronic Quotation Service under the symbol "FLXT" during the second quarter
of 1999. However, our Common Stock did not trade until the second quarter of
2000. Prior to quotation on the Pink Sheets OTC Electronic Quotation Service
our common stock was not quoted, listed or traded on any organized market
system. The holders of our Common Stock are entitled to one vote per share.
The Common Stock holders do not have preemptive rights to purchase,
subscribe for, or otherwise acquire any shares of Common Stock.
The table below sets forth the high and low bid prices for our Common
Stock for each quarter within the last two fiscal years as reported by Prophet
Financial Systems. These over-the-counter market quotations may reflect
inter-dealer prices without retail mark-up, markdown or commission and may
not necessarily represent actual transactions.
Common Stock Bid
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High Low
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Fiscal 1999:
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1st Quarter $0 $0
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2nd Quarter $0 $0
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3rd Quarter $0 $0
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4th Quarter $0 $0
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Fiscal 2000:
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1st Quarter $0 $0
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2nd Quarter $3.67 $3.67
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3rd Quarter $4.83 $3.33
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4th Quarter $7.33 $3.67
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HOLDERS
-------
As of December 31, 2000 we estimate that we had approximately 400
shareholders directly of record and in street name.
Our stock has had a market price of less than $5.00 per share in recent
times. The SEC has adopted regulations which generally define "penny stock" to
be any equity security that has a market price (as defined) less than $5.00
per share or an
10
exercise price less than $5.00 per share, subject to certain exceptions.
Accordingly, our common stock may become subject to rules that impose
additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited
investors (generally those with assets in excess of $1,000,000 or annual
income exceeding $200,000, or $300,000 together with their spouse). For
transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchase of such securities and have
received the purchaser's written consent to the transaction prior to the
purchase.
Additionally, for any transaction involving a penny stock, unless exempt,
the rules require the delivery, prior to the transaction, of a disclosure
schedule prepared by the SEC relating to the penny stock market. The
broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market-maker, the
broker-dealer must disclose this fact and the broker-dealer's presumed control
over the market. Finally, monthly statements must be sent disclosing recent
price information for the penny stock held in the account and information on
the limited market in penny stocks. Consequently, the "penny stock" rules may
restrict the ability of broker-dealers to sell our common stock and may affect
the ability of investors to sell our common stock in the public market.
DIVIDENDS
---------
The payment of dividends is within the discretion of our Board of
Directors. We currently intend to retain all earnings, if any, in the
foreseeable future for use in the development of our business. We have not
paid dividends since our inception. It is not anticipated that any dividends
will be paid in the foreseeable future and there can be no assurance that
dividends can or will ever be paid. The payment of dividends is contingent
upon future earnings, if any, our financial condition and capital
requirements, general business conditions and other factors.
SALES OF UNREGISTERED SECURITIES
--------------------------------
On June 26, 2000 we commenced a private placement offering ("Offering")
pursuant to Regulation D, Rule 506, as amended and Regulation S, as amended
for the sale of up to 3,000,000 shares of our common stock at a price of $2.50
per share. On September 8, 2000 we amended the Offering price to $5.00 per
share and commenced a new phase of the Offering. In the three months ended
December 31, 2000 and pursuant to Regulations D and/or S, we sold 236,942
shares of common stock at $1.00 per share for proceeds of $236,942, 1,800
shares of common stock at $1.67 per share for proceeds of $3,000, 23,600
shares of common stock at $2.12 per share for proceeds of $50,000, 1,700
shares of common stock at $2.35 per share for proceeds of $4,000, 449,962
shares of common stock at $2.50 per share for proceeds of $1,124,905, 14,034
shares of common stock at $2.67 per share for proceeds of $37,471, 16,493
shares of common stock at $3.33 per share or proceeds of $54,921, and 36,000
shares of common stock at $5.00 per share for proceeds of 180,000. We sold
141,412 shares pursuant to the provisions of Regulation S resulting in gross
proceeds of $376,030. We sold 639,119 shares pursuant to the exemptions
afforded by Regulation D resulting in gross proceeds of $1,315,209. We sold a
total of 780,531 shares of common stock pursuant to the Offering as of
December 31, 2000. The total gross Offering proceeds as of December 31, 2000
were $1,691,239. We utilized the services of finders in placing the Offering.
We did not utilize the services of brokers or underwriters. The Offering was
self-underwritten. The Offering expenses were approximately $253,685 or %15
of the gross Offering proceeds. We paid finders' fees in the approximate
amount of $169,123. The balance of the Offering expenses were related to
general sales expenses, including, but not limited to, due diligence,
accounting and legal expenses.
The net Offering proceeds are to be used for two main purposes: (1) to
fund the acquisition and investment of various technology companies; and (2)
to develop, operate and invest in technology and the interest for those
companies in the forefront of advanced information technologies. The maximum
Offering proceeds, based upon the Offering of up to 3,000,000 Shares, is
$15,000,000.00. The minimum subscription is 5000 Shares or $25,000.00.
11
The Shares are being offered to persons who are "accredited investors,"
as defined under Rule 506 of Regulation D of the Securities Act of 1933 as
amended (the "Act"). An additional thirty-five (35) non-accredited investors
may participate in the Offering. Accredited investors must have a net worth or
joint net worth with their spouse of $1,000,000.00 or more, or have individual
income in excess of $200,000.00 (or $300,000.00 joint income with a spouse) in
each of the two most recent years and who reasonably expects an income of
$200,000.00 (or $300,000.00 joint income with a spouse) in the current year.
The Offering is being conducted by us as a self underwriting. Shares in
the Offering are available only through us. The Offering is being conducted
over a three month period commencing on September 8, 2000. We have the option
to extend the Offering up to an additional three months. We are making the
Offering on a best efforts basis. This means that we have not establish any
minimum amount of proceeds that must be generated in the Offering.
Accordingly, investors who subscribe for Shares in the earlier stages of the
Offering will assume a substantially greater risk than investors who subscribe
for Shares later in the Offering.
Even if we sell all of the Shares covered by the Offering and raise
maximum proceeds, such proceeds may be insufficient to implement our business
investment plan. There is no guarantee that the funds generated by the
Offering will be sufficient to cover the financial requirements for our
growth.
We have arbitrarily set the price of the Shares in the Offering. The
price of the Shares is based upon the amount of capital that we desire to
raise and the percentage of our outstanding capital stock that we are willing
to sell at this point in our development. We have established the price of the
Shares and the value of our company without an independent appraisal. The
price has no relationship to book value per share, current earnings or other
generally accepted measurements of value. The Offering may involve immediate
and substantial dilution.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements based upon
current expectations that involve risks and uncertainties. When used in this
Form 10-KSB/A, the words "intend," "anticipate," "believe," "estimate,"
"plan" and "expect" and similar expressions are included to identify
forward-looking statements. The Company's actual results and the timing of
certain events could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those set
forth in this discussion and elsewhere in this Form 10-KSB/A. We do not
intend to update these forward looking statements.
The discussion and financial statements contained herein are for the
months and year ended December 31, 2000 and September 30, 1999. The following
discussion regarding the financial statements of the Company should be read in
conjunction with the financial statements of the Company included herewith.
OVERVIEW
--------
Our Company, through our wholly-owned subsidiary, Flexxtech Holdings,
Inc., is engaged in the business of developing, operating, and investing in
emerging growth companies in technology. Our objective is to build long-term
capital appreciation for our shareholders through the acquisition of
technology companies. Our primary focus in technology will include the
acquisition, investment, and internal development in the following categories:
Data Storage, Internet Service Providers, Internet Portals, Internet
Infrastructure, Wireless Technologies, Computer Software, Computer Networking,
Financial Services, Telecommunications Networks equipment and services,
Semiconductor Equipment and Electronic Manufacturers and Services.
GENERAL PLAN OF OPERATION
-------------------------
12
We are a holding company, through our wholly-owned subsidiary, Flexxtech
Holdings, Inc., of a variety of investments in the technology arena that
include 100% ownership in Mardock, Inc., 80% ownership in Primavera
Corporation, the parent company of North Texas Circuit Board Co., 82%
ownership in OpiTV.com, and investments in a variety of other technology
companies.
CIRCUIT BOARD STRATEGY
----------------------
In addition to the circuit board plan, we will seek out additional
industries where efficiencies through consolidation will greatly benefit the
target. The thrust will be to:
. Acquire "islands of excellence" in attractive, complementary markets.
. Efficiently acquire and integrate new companies while preserving their
entrepreneurial spirit.
. Use the greater purchasing power to obtain improved vendor deals.
. Keep and integrate only those superior managers.
MERGER & ACQUISITION TENETS
---------------------------
. Build on our organizational skill in performing acquisitions; develop
systems for managing the process from lead evaluation, negotiation,
contracting, and post-closing integration.
. Pay reasonable multiples with extra incentives to ensure seller
commitment.
. Exercise complete due diligence to ensure smooth integration of
personnel and operations.
. Achieve rapid returns on investment by implementing the best practices
in the acquired operation.
. Reduce overhead by vacating unneeded premises.
. Centralize any duplicated support functions into the Headquarter
location.
In April 2000 we changed the direction and business plan of our Company
to its current model. Before April 2000 we virtually had no meaningful
business. New Officers and Directors were approved and appointed by the
shareholders to guide our Company and our new business plan. On April 26,
2000, our subsidiary, Flexxtech Holdings, Inc., acquired 100% of Mardock,
Inc., an Oregon Corporation, for 600,000 shares of the Company's common stock.
On May 10, 2000 our subsidiary, Flexxtech Holdings, Inc., acquired 1,500,000
shares of the common stock of Infinite Networks, Inc. for 1,500,000 shares of
the Company's common stock. On June 15, 2000, our subsidiary, Flexxtech
Holdings, Inc., acquired 100,000 shares of common stock of Accesspoint
Corporation, 100,000 shares of common stock of Ameri-First Financial Group,
Inc., 100,000 shares of Easyriders, Inc. and 180,000 shares of OpiTV.com in
exchange for 1,500,000 shares of our common stock.
On July 18, 2000, we, through our wholly-owned subsidiary Flexxtech
Holdings, Inc. acquired an additional 125,000 shares of Accesspoint
Corporation at a price of $4.00 per share, for a total of $500,000. The
acquisition consisted of our Company issuing 300,000 shares of common stock,
at a price of $1.00 per share and a promissory note for $200,000 at 10%
interest per annum, due on demand. The holder of the issued shares and Note is
Atlantis Aggressive Growth.
On August 14, 2000 we paid 100,000 shares of its common stock to Sierra
Nevada Advisors for financial consulting and advisory services. The stock was
valued at par value.
On August 15, 2000 we, through our wholly-owned subsidiary Flexxtech
Holdings, Inc. acquired 67% of Primavera Corporation, the parent company of
North Texas Circuit Board Company. Flexxtech Holdings was issues 203 newly
issued shares of Primavera Corporation in consideration of $1,575,000. On
October 31, 2000, the ownership was increased to 80% of Primavera Corporation.
The consideration is payable in cash of $1,250,000 by installments through
January 15, 2001 and in the form of 130,000 shares of our common stock at
$2.50 per share. As of September 30, 2000, the 130,000 shares have not been
issued to Primavera shareholders and are expected to be issued in our fourth
quarter. The cash installments have been
13
delivered ahead of schedule and we have delivered $1,250,000 through January
15 2001 to Primavera and North Texas Circuit Board for working capital.
On September 8, 2000 the Company's subsidiary, Flexxtech Holdings, Inc.,
executed a Financial Advisory and Consulting Agreement with Ameri-First
Financial Group, a Nevada Corporation, whereas Flexxtech Holdings has agreed
to render financial advisory services in connection with the negotiation of
transactions, marketing and support of the Company, acquisitions, and
corporate development and organization. Under the one year agreement,
Flexxtech was issued 500,000 shares of the common stock of Ameri-First
Financial Group, Inc. (OTCBB: AMFR). Pursuant to the Agreement, Ameri-First
agrees to register the 500,000 shares with the Securities and Exchange
Commission within ninety days of this agreement. Each month the stock is not
registered, Ameri-First will pay a penalty of 50,000 shares per month.
On September 15, 2000, through our wholly-owned subsidiary Flexxtech
Holdings, Inc., we acquired 80% or 7,578,000 of shares of common stock of
OpiTV.com from two principle shareholders of OpiTv.com in exchange for 100,000
shares of our common stock valued at $6.25 per share. The acquisition resulted
in goodwill of $625,000. Prior to the acquisition, our subsidiary, Flexxtech
Holdings, Inc, owned 180,000 shares of common stock of OpiTV.com. The total
holdings of Flexxtech Holdings, Inc. in OpiTV.com is 82%.
Also, in the three months ended December 2000, we issued shares of our
common stock at a value of $ per share to various consultants to the company.
On June 26, 2000 we commenced a private placement offering pursuant to
Regulation D, Rule 506, as amended and Regulation S, as amended. On September
8, 2000 we amended the Offering price to $5.00 per share and commenced a new
phase of the Offering. For the period ended December 31, 2000 and pursuant to
Regulation D, we sold 639,119 shares of common stock for gross proceeds of
$1,315,209. Pursuant to Regulation S, we sold 141,412 shares for gross
proceeds of $376,030. As of December 31, 2000 we sold a total of 780,531
shares of common stock pursuant to the Offering resulting in total gross
proceeds of $1,691,239. While there is no assurance that we will be successful
in raising additional capital, we are actively seeking private equity
financing to assure that we will be capable of financing the continuation of
our business. Any additional capital raised above and beyond what we need as
our monthly expenditure would be used in increasing marketing and sales
efforts and future investments and acquisitions. Should we fail to raise
additional funding, we will be forced to curtail our growth, both through
internal development and through investments and acquisitions. As only a
holding company to date, we do not generate our own revenues, but we rely on
additional financing to pay our operating expenses. We are currently
developing a plan to provide a variety of consulting services to emerging
technology companies to include business and marketing plan development,
merchant and investment banking services and general business consulting. We
hope to attract clients for these new services in the third quarter of 2001,
thereby not having to rely on additional financing to support our role as a
holding company.
YEAR ENDED DECEMBER 31, 2000 AS COMPARED TO YEAR MONTHS ENDED DECEMBER 31,
1999
Results of Operations
---------------------
We have generated consolidated revenues of $4,526,003 for the year ended
December 31, 2000 as compared to $2,257 for the year ended December 31, 1999.
We anticipate an increase in generating revenues in the future. Currently, our
cash needs include, but are at no means limited to, rent, salaries and wages,
cash raising expenses and to fund operation of its subsidiaries, and for
future acquisitions. On June 15, 2000, the Company executed a promissory note
with a shareholder in the amount of $100,000 at 10% interest per annum, due
September 15, 2000. On July 18, 2000 the Company executed a promissory note
with a shareholder in the amount of $200,000 at 10% interest per annum, due on
demand. On December 15, 2000, the Company sold 225,000 shares of Accesspoint
Corporation to a shareholder for $900,000 on a promissory note at 8% interest
per annum and collateralized by 300,000 shares of the Company's common stock.
In December, 2000, the Company executed a promissory note for $150,000 on a
loan from a shareholder. The promissory note bears interest at the rate of at
10% per annum and is due on January 2, 2002.
14
The wholly-owned subsidiary, Mardock, Inc., of our subsidiary Flexxtech
Holdings, Inc. became the holder of a secured promissory note in principal
amount of $1,270,000, accruing interest at 10% per annum, in regard to the
sale of 500,000 shares of our common stock. The Note was made by Ameri-First
Financial Group, Inc., is secured by the assets of Ameri-First and is due on
demand. Mardock, Inc. has made demand for payment and Ameri-First Financial
Group, Inc. has failed to pay. The note is now due and unpaid. Mardock, Inc.
has filed and served a complaint against Ameri-First Financial Group, Inc. to
collect on the Note. A settlement is currently being investigated.
We plan on growing our revenues through the acquisition of various
technology companies in various markets and increasing its products and
services in part through acquisition of existing technology businesses. We
will continue to seek capital for acquisitions and in the internal development
of those companies acquired. We will seek capital through private investors
and anticipates attracting institutional investors in the near future. In the
event the Company does not attract such capital and is unable to generate
revenues sufficient to support its expenses, then the Company will be required
to curtail its operations, sell existing investments, and slow down its plan
for expansion. The Company, however, is taking all necessary action to limit
its overhead and cut expenses at its operating subsidiaries. we do not
foresee a slow down in our acquisition plans or in our expansion plans for
sometime. We feel that the current economic conditions benefit us and
Flexxtech Holdings, Inc. in our and its choice of acquisitions.
Revenues
--------
We had revenues of $4,526,003 for the year ended December 31, 2000 as
compared to $2,257 for the year ended December 31, 1999. The increase in
revenues was the result of the acquisition of Mardock, Inc. on April 26, 2000,
and the acquisition of Primavera Corporation, the parent company of North
Texas Circuit Board Company on August 15, 2000.
Cost of Sales
-------------
We incurred Cost of Sales of $4,058,847 for the year ended December 31,
2000 as compared to $2,094 for the year ended December 31, 1999. The increase
in Cost of Sales is the result of consolidated Cost of Sales from the
subsidiaries, Mardock, Inc., Primavera Corporation and North Texas Circuit
Board Co.
General, Administrative and Selling Expenses
--------------------------------------------
We incurred costs of $2,070,276 for the year ended December 31, 2000 as
compared to $24,698 for the year ended December 31, 1999. The increase of
operating expenses is the result of the Mardock and North Texas Circuit Board
acquisitions and their consolidated operating expenses and an increase in
rent, salaries, wages, and expenses related to raising capital for our
Company.
Net loss before income taxes
----------------------------
We had a loss before taxes of $1,812,553 for the year ended December 31,
2000 as compared to a loss of $24,535 for the year ended December 31, 1999.
Unrealized gain on investments
------------------------------
We have an unrealized gain on investments available for sale of $366,370
for the year ended December 31, 2000. The unrealized gain is contributed to
the fluctuating market value of the securities that our subsidiary, Flexxtech
Holdings, Inc., owned at the closing of the period. The securities owned are
marked to market on the last day of the trading month for the period ended.
15
Net loss
--------
We had a net loss of $1,814,953 for the year ended December 31, 2000 as
compared to a net loss of $24,535 for the year ended December 31, 1999. The
net loss was mostly due to the acquisition and inclusion of operations of
North Texas Circuit Board Co. and Mardock, Inc., from the period of
acquisition through December 31, 2000 and the increase in general and
administrative expenses.
Liquidity and Capital Resources
-------------------------------
Our business plan was restructured in April 2000 to its now current form.
We must continue to raise capital to fulfill our plan of acquiring technology
companies and assisting in the development of those companies internally. A
majority of our expenses are related to raising capital. Future expenses will
include legal and accounting and other professional fee expenses. If we are
unable to raise any additional capital our operations will be curtailed and we
may have to liquidate our current investments for operating capital. As of
December 31, 2000, we had total Current Assets of $5,315,011 and Current
Liabilities of $4,623,750. Cash and cash equivalents were $519,865.
Stockholders' Equity was $4,180,127. In the acquisition of North Texas Circuit
Board, our management feels that it has made necessary cost cutting efforts to
reduce the debt and increase productivity of the Company. In its turn-around
effort, our management feels additional capital will be needed to complete a
full turnaround, but that we have made significant strides toward a successful
turnaround. Our management feels that our other operations are financially
sound at this time and that no outside forces, including inflation has had a
significant impact on our operations. We will continue to raise capital for
acquisitions and the internal development of our subsidiaries.
Subsidiaries
------------
Flexxtech Holdings, Inc. is a wholly-owned subsidiary of our Company. On
April 26, 2000, Flexxtech Holdings acquired 100% of the outstanding common
stock of Mardock, Inc., an Oregon Corporation. We issued 600,000 shares of our
common stock for all of the shares of Mardock. Mardock, established in 1986,
is a designer, manufacturer, and distributor of apparel and promotional
products to the corporate community. Mardock is in the process of developing
an e-commerce site for corporate promotional products. Greg Mardock, the
President and CEO of Mardock, Inc. is also a director of the Company. On
August 31, 2000, Greg Mardock became President of Flexxtech Corporation
On August 15, 2000 we, through through our wholly-owned subsidiary
Flexxtech Holdings, Inc. acquired 67% of Primavera Corporation, the parent
company of North Texas Circuit Board Company. Flexxtech Holdings was issues
203 newly issued shares of Primavera Corporation in consideration of
$1,575,000. On October 31, 2000, the ownership was increased to 80% of
Primavera Corporation. The consideration was payable in cash in the amount of
$1,250,000 by installments through January 15, 2001 and in the form of 130,000
shares of our common stock valued for purposes of the transaction at $2.50 per
share. As of December 31, 2000, the 130,000 shares were issued to Primavera
shareholders. We have delivered $1,250,,000 to Primavera and North Texas
Circuit Board for working capital. All terms of the Primavera acquisition have
been satisfied. For the six months ended June 30, 2000 and twelve months
ended December 31, 1999, North Texas Circuit Board Company had net revenue of
$4,798,997 and $9,887,025 respectively. A net loss for the same periods was
$765,731 and $868,775 respectively.
For the twelve months ended December 31, 2000, net revenues were
$8,347,037. Net income/(loss) for the twelve months ended December 31, 2000
were $792,636. Sales for the period from the acquisition (August 15, 2000)
through December 31, 2000, amounted to $4,071,000. Net loss for the same
period amounted to $874,000.
Primavera Corporation was formed in Texas on April 26, 2000. The company
is a holding company which operates primarily through its wholly-owned
subsidiary, North Texas Circuit Board Company ("NTCB"), which was formed in
1978 in the state of Texas. NTCB manufacturers printed circuit boards on a
quick-turn basis. On May 11,
16
2000, Primavera acquired 100% of the common stock of NTCB.
On September 15, 2000 we, through our wholly-owned subsidiary Flexxtech
Holdings, Inc., acquired 80% or 7,578,000 of the shares of common stock of
OpiTV.com from two principle shareholders of OpiTv.com in exchange for 100,000
shares of our common stock valued for purposes of the transaction at $6.25 per
share. Howard Frantom the Chairman, President and CEO of OpiTV.com and our
Company passed away in December 2000. Greg Mardock, President and Director of
Company was elected Chairman, President and CEO. Out of the 100,000 shares to
be issued, 60,000 shares of Common stock which were to be issued to Howard
Frantom have not been issued pursuant to default. The acquisition resulted in
goodwill of $625,000. Prior to the acquisition, Flexxtech Holdings, Inc. owned
180,000 shares of common stock of OpiTV.com. The total holdings in OpiTV.com
is 82%. The acquisition resulted in goodwill of $805,000.
OpiTV.com, a Nevada Corporation, was formed on October 12, 1999. OpiTV is
an I-Commerce technology company that is engaged in the development of a
Set-Top-Box (STB) device on a rental or acquisition basis. The STB is a
convergence device, giving the consumer high-speed Internet access and
enhanced communications as well as full computing capabilities in their home
or office. OpiTV plans on distributing the STB in January 2001 and is
currently finalizing manufacturing arrangements. Sales will be made through
agent's distributors and sub-licenses. OpiTV has no revenues to date and
operating expenses of approximately $20,000 per month, consisting mostly of
wages, rent and sales expenses. Opitv.com had no revenues in the year 2000.
Plans to Raise Capital
----------------------
We currently plan to raise additional capital during at least the first
two quarters of the fiscal year ending December 31, 2001. We expect to use
the proceeds from any such capital raising transactions for general corporate
purposes, including working capital. A portion of the proceeds may also be
used for the acquisition of businesses and technologies that are anticipated
to be either complementary to our existing business. If we do not
successfully address the need to raise capital, our ability to continue to
conduct business would be seriously harmed.
Risk Factors
------------
We reported significant risk factors in our Form 8-K filed on December 4,
2000. We hereby incorporate the discussion of such risk factors in this
report on Form 10-KSB/A.
ITEM 7. FINANCIAL STATEMENTS
The following financial statements are included herewith: our audited
financial statements for the year ended December 31, 1999, and our audited
financial statements for the year ended December 31, 2000.
17
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND COLOR STRATEGIES
INDEPENDENT AUDITOR'S REPORT
|
|KABANI & COMPANY, INC.
--|--------------------------------------------------------------------------
|CERTIFIED PUBLIC ACCOUNTANTS 8700 Warner Ave.,Suite #280
| Fountain Valley, CA 92708
Tel. 714.849.1543
Fax 714.596.0303
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
Flexxtech Corporation:
We have audited the accompanying consolidated balance sheet of Flexxtech
Corporation (formerly, Infinite Technology Corporation and Color Strategies),
a Nevada Corporation and the subsidiaries (the "Company") as of December 31,
2000 and the related statements of operations, stockholders' equity and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit. The
financial statements as of December 31, 1999 and for the year then ended, were
audited by other auditor whose report dated February 18, 2000, expressed an
unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Flexxtech Corporation and subsidiaries as of December 31, 2000 and the
consolidated results of their operations and their consolidated cash flows for
the year then ended in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As shown in the
consolidated financial statements, the Company has accumulated deficit of
$1,842,151 including net losses of $1,814,953 and $24,535 for the year ended
December 31, 2000 and 1999, respectively. These factors, among others, as
discussed in Note 3 to the consolidated financial statements, raise
substantial doubt about the Company's ability to continue as a going concern.
Management has taken measures to reduce debts and obtain additional equity
financing. Management's plans in regard to these matters are also described in
Note 3. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Kabani & Company, Inc.
KABANI & COMPANY, INC.
CERTIFIED PUBLIC ACCOUNTANTS
Fountain Valley, California
March 24, 2001
19
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
BALANCE SHEET
DECEMBER 31, 2000
ASSETS
Current Asset:
Cash and cash equivalent $ 519,865
Accounts receivable 1,252,555
Inventory 503,598
Investments in stocks available for sale 459,531
Notes Receivable 1,250,000
Notes Receivable - related parties 1,052,524
Insurance Receivable 247,490
Deposits & other current assets 29,448
-------------
Total Current Asset 5,315,011
-------------
Property & equipment 1,684,707
Goodwill on acquisition 1,828,420
-------------
TOTAL ASSETS $ 8,828,138
=============
LIABILITIES STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,310,228
Accrued expenses 77,591
Loans payable - Current 2,713,467
Notes payable - related parties 519,066
Customer deposits 3,398
-------------
Total Current Liabilities 4,623,750
Long-term Liabilities:
Long-term Loans 24,261
STOCKHOLDERS' EQUITY
Common stock, authorized 25,000,000 shares
at $.001 par value, issued and outstanding
10,974,885 shares 10,975
Additional Paid in Capital 6,377,673
Accumulated deficit (1,842,151)
Accumulated other comprehensive income:
Unrealized gain on securities available
for sale (366,370)
-------------
Total Stockholders' Equity 4,180,127
-------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,828,138
=============
The accompanying notes are an integral part of these financial statements.
2
19
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000 & 1999
2000 1999
------------- -------------
Sales $ 4,526,003 $ 2,257
Cost of sales 4,058,847 2,094
------------- -------------
Gross profit 467,156 163
General and Administrative expenses 2,070,276 24,698
------------- -------------
Loss from operations (1,603,120) (24,535)
Other income (expenses)
Realized loss on sale of marketable securities (53,398) -
Interest income 26,350 -
Interest expense (182,385) -
------------- -------------
Total other income (expenses) (209,433) -
------------- -------------
Net loss before income tax (1,812,553) (24,535)
Provision of Income tax 2,400 -
------------- -------------
Net Loss $ (1,814,953) $ (24,535)
============= =============
Other comprehensive loss:
Unrealized gain on investments available for sale (366,370) -
------------- -------------
Comprehensive Income (Loss) (2,181,323) (24,535)
============= =============
Basic and diluted loss per share $ (0.312) $ (0.009)
============= =============
Basic and diluted weighted average
shares outstanding * 5,814,635 2,668,472
============= =============
* The basic and diluted net loss per share has been restated
to retroactively effect a forward stock split in the ratio
of one share for 13.09322865 shares on December 22, 1999,
a 2:1 forward split on April 14, 2000, a 1:3 reverse split
on April 29, 2000 and a forward stock split at March 26, 2001.
The accompanying notes are an integral part of these financial statements.
3
20
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000 & 1999
Common Stock
----------------------- Additional Other Total
Number of paid in Accumulated Comprehensive Stockholders'
Shares Amount capital Deficit Income (loss) Equity
------------ ----------- ------------ ------------- ------------- ------------
Balance, January 1, 1999 5,260,876 $ 5,261 $ 43,301 $ (2,663) $ - $ 45,899
Repurchase of common stock (2,592,459) (2,592) (19,233) - - (21,825)
Net loss for the year - - - (24,535) - (24,535)
------------ ----------- ------------ ------------- ------------- ------------
Balance, December 31, 1999 2,668,417 2,669 24,068 (27,198) - (461)
Issuance of Common stock
for consulting services 100,672 100 385,572 - - 385,672
Issuance of Common stock
for acquisition of
subsidiaries 1,245,000 1,245 1,548,755 - - 1,550,000
Issuance of Common stock
against debt settlement 90,000 90 59,910 - - 60,000
Issuance of Common stock
for acquisition of
marketable Securities 4,950,000 4,950 1,420,050 - - 1,425,000
Issuance of Common stock
against a note receivable 750,000 750 1,249,250 - - 1,250,000
Issuance of shares for cash 1,170,796 1,171 1,690,0680 - - 1,691,239
Unrealizable loss on
marketable securities - - - - (366,370) (366,370)
Net Loss for year ended
December 31, 2000 - - - (1,814,953) - (1,814,953)
------------ ----------- ------------ ------------- ------------- ------------
Balance, December 31, 2000 10,974,885 $ 10,975 $ 6,377,673 $ (1,842,151) $ (366,370) $ 4,180,127
============ =========== ============ ============= ============= ============
The accompanying notes are an integral part of these financial statements.
4
21
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2000 & 1999
2000 1999
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (1,814,953) $ (24,535)
Adjustments to reconcile net loss to cash used in
operating activities
Depreciation and amortization 144,437 -
Amortization of goodwill 56,745 -
Issuance of shares for consulting services 385,672 -
Loss on sale of marketable securities 53,398 -
(Increase) / decrease in current assets
Accounts receivable 454,473 -
Inventory 383,639 -
Deposits & other current assets (9,035) 600
Accounts payable (260,853) 2,445
Accrued expenses (244,515) -
Customers' deposit (3,976) -
Insurance receivable (247,490) -
------------- -------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (1,102,458) (21,490)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of marketable securities (202,671) -
Sale of marketable securities 48,485 -
Acquisition of property & equipment (218,128) -
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (372,314) -
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sales of common stock 1,691,239 -
Payments on notes receivable (152,524) -
Proceeds from loans 453,053 -
Offering costs - (21,825)
------------- -------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,991,768 (21,825)
------------- -------------
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENT 516,996 (43,315)
CASH AND CASH EQUIVALENT -BEGINNING 2,869 46,184
------------- -------------
CASH AND CASH EQUIVALENT -ENDING $ 519,865 $ 2,869
============= =============
The accompanying notes are an integral part of these financial statements.
5
22
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2000 AND 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and Basis of Presentation:
The Company was organized on March 24, 1998, under the laws of the State of
Nevada, as Color Strategies. On December 20, 1999, the Company changed its
name to Infinite Technology Corporation. The Company changed its name to
Flexxtech Corporation in April 2000.
Prior to March 31, 2000 the Company was in the development stage whereby all
the activities were devoted to obtaining financing for the acquisitions of
businesses. Since April 2000, the Company is in the business of acquiring,
through its subsidiary Flexxtech Holdings, Inc., emerging technology companies
and assisting in the development of those companies internally.
Mardock, Inc. was established in 1986 and is a designer, manufacturer, and
distributor of apparel and promotional products to the corporate community.
Mardock is in the process of developing an e-commerce site for corporate
promotional products.
Primavera Corporation ("PC") was incorporated in the state of Texas on April
26, 2000. Pursuant to an acquisition agreement, dated May 11, 2000, PC
acquired one hundred percent (100%) of the common shares outstanding of the
North Texas Circuit Board, Inc.(NTCB). NTCB was incorporated in 1978 in the
state of Texas. NTCB manufactures printed circuit boards. The products are
sold through its distribution center in Irving, Texas utilizing outside sales
people. Deliveries are made primarily throughout the United States.
OpiTV.com, a Nevada Corporation, was formed on October 12, 1999. OpiTV.com is
an I-Commerce technology company that is engaged in the business of marketing
and distributing a Set-Top-Box (STB) device on a rental or acquisition basis.
The STB is a convergence device, giving the consumer high-speed Internet
access and enhanced communications as well as full computing capabilities in
their home or office.
Flexxtech Holdings, Inc., a Nevada Corporation, was formed on October 1, 1999.
Flexxtech Holdings, Inc. owns majority shares ownership of Mardock, Primavera
and OpiTV.
Flexx Capital Partners, a Nevada Corporation, was formed on December 1, 2000.
The purpose of organization is to engage in merchant banking advisory
activities for technology companies. Flexx Capital Partners did not have any
operations during 2000.
Principles of Consolidation:
The accompanying financial statements include the accounts of Flexxtech
Corporation (the "Parent"), and its 100% owned subsidiaries, Flexxtech
Holdings, Inc., Mardock Promotional Products, Inc, (an Oregon corporation),
82% owned Optv.com (a Nevada corporation) and 80% owned Primavera Corporation
and its wholly owned subsidiary North Texas Circuit Board Co., Inc. (a Texas
corporation). All significant inter-company accounts and transactions have
been eliminated in consolidation.
23
6
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2000 AND 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents
The Company considers all liquid investments with a maturity of three months
or less from the date of purchase that are readily convertible into cash to be
cash equivalents.
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.
Marketable Securities
The Company's securities are classified as available-for-sale and, as such,
are carried at fair value. Securities classified as available-for-sale may be
sold in response to changes in interest rates, liquidity needs, and for other
purposes. The Company does not currently have any held-to-maturity or trading
securities.
Unrealized holding gains and losses for available-for-sale securities are
excluded from earnings and reported as a separate component of stockholder's
equity. Realized gains and losses for securities classified as
available-for-sale are reported in earnings based upon the adjusted cost of
the specific security sold.
Property & Equipment
Property and equipment is carried at cost. Depreciation of property and
equipment is provided using the straight-line method over the estimated useful
lives of the assets. Expenditures for maintenance and repairs are charged to
expense as incurred.
Income taxes
Deferred income tax assets and liabilities are computed annually for
differences between the financial statements and tax basis of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted laws and rates applicable to the periods in which the
differences are expected to affect taxable income (loss). Valuation allowance
is established when necessary to reduce deferred tax assets to the amount
expected to be realized.
7
24
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2000 AND 1999
Basic and diluted net loss per share
Net loss per share is calculated in accordance with the Statement of financial
accounting standards No. 128 (SFAS No. 128), "Earnings per share". SFAS No.
128 superseded Accounting Principles Board Opinion No.15 (APB 15). Net loss
per share for all periods presented has been restated to reflect the adoption
of SFAS No. 128. Basic net loss per share is based upon the weighted average
number of common shares outstanding. Diluted net loss per share is based on
the assumption that all dilutive convertible shares and stock options were
converted or exercised. Dilution is computed by applying the treasury stock
method. Under this method, options and warrants are assumed to be exercised at
the beginning of the period (or at the time of issuance, if later), and as if
funds obtained thereby were used to purchase common stock at the average
market price during the period.
Stock-based compensation
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation". SFAS No. 123 prescribes accounting and reporting standards for
all stock-based compensation plans, including employee stock options,
restricted stock, employee stock purchase plans and stock appreciation rights.
SFAS No. 123 requires compensation expense to be recorded (i) using the new
fair value method or (ii) using the existing accounting rules prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for stock issued to
employees" (APB 25) and related interpretations with proforma disclosure of
what net income and earnings per share would have been had the Company adopted
the new fair value method. The implementation of this standard did not have
any impact on the Company's financial statements.
Fair value of financial instruments
Statement of financial accounting standard No. 107, Disclosures about fair
value of financial instruments, requires that the Company disclose estimated
fair values of financial instruments. The carrying amounts reported in the
statements of financial position for current assets and current liabilities
qualifying as financial instruments are a reasonable estimate of fair value.
Comprehensive income
Statement of financial accounting standards No. 130, Reporting comprehensive
income (SFAS No. 130), establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity, except those resulting
from investments by owners and distributions to owners. Among other
disclosures, SFAS No. 130 requires that all items that are required to be
recognized under current accounting standards as components of comprehensive
income be reported in financial statements that are displayed with the same
prominence as other financial statements. Accumulated other comprehensive
income as reported in the accompanying consolidated balance sheet represents
unrealized gains on available for sale securities.
8
25
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2000 AND 1999
Reporting segments
Statement of financial accounting standards No. 131, Disclosures about
segments of an enterprise and related information (SFAS No. 131), which
superceded statement of financial accounting standards No. 14, Financial
reporting for segments of a business enterprise, establishes standards for the
way that public enterprises report information about operating segments in
annual financial statements and requires reporting of selected information
about operating segments in interim financial statements regarding products
and services, geographic areas and major customers. SFAS No. 131 defines
operating segments as components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in
assessing performances.
Costs of start-up activities
In April 1998, the ASEC of AICPA issued SOP No. 98-5, "Reporting on the costs
of start-up activities", effective for fiscal years beginning after December
15, 1998. SOP 98-5 requires the costs of start-up activities and organization
costs to be expensed as incurred. The implementation of this standard did not
have a material impact on the Company's financial statements.
Revenue Recognition
The Company recognizes revenue at the time of shipments, net of sales returns
and allowances. Expenses are recognized in the period in which the
corresponding liability is incurred.
Allowance for doubtful accounts
In determining the allowance to be maintained, the management evaluates many
factors including industry and historical loss experience. The allowance for
doubtful accounts is maintained at an amount management deems adequate to
cover estimated losses. The allowance for doubtful accounts at December 31,
2000 was $34,148 for trade receivables.
Advertising
The Company expenses advertising costs as incurred.
Inventory
Inventory is valued at the lower of cost or market value. Cost is determined
using the first-in, first-out method. Inventory at December 31, 2000
consisted of:
Raw materials $ 311,167
Work-in-process 142,740
Gold Tank 49,691
--------------
$ 503,598
==============
9
26
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2000 AND 1999
Goodwill
The Company continuously monitors its goodwill to determine whether any
impairment of this asset has occurred. In making such determination with
respect to goodwill, the Company evaluates the performance, on an undiscounted
cash flow basis, of the underlying assets or group of assets that gave rise to
this amount. Goodwill is being amortized on the straight-line basis over 15
years. As of December 31, 2000, goodwill was $1,828,420 after amortization of
the goodwill amounting $56,745 for the year ended December 31, 2000.
Risks and Uncertainties
In the normal course of business, the Company is subject to certain risks and
uncertainties. The Company provides its product on unsecured credit to most of
its customers, the majority of which are in the defense industry.
Consequently, the Company's ability to collect the amounts due from customers
is affected by the economic fluctuations in that industry.
Recent Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133 "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded on the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. SFAS
No. 133, as amended by SFAS No. 137 and SFAS No. 138, is effective for fiscal
quarters of fiscal years beginning after June 15, 2000. This statement is not
applicable to the Company.
In June 1999, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standards (SFAS) No. 136, "Transfer of Assets to a
Not-for-Profit Organization or Charitable Trust that raises or Holds
Contributions for Others." This statement is not applicable to the Company.
In June 1999, the FASB issued Financial Accounting Standards (SFAS) No. 137,
"Accounting for Derivative Instruments and Hedging Activities." The Company
does not expect adoption of SFAS No. 137 to have a material impact, if any, on
its financial position or results of operations.
In June 2000, the FASB issued Financial Accounting Standards (SFAS) No. 138,
"Accounting for Certain Instruments and Certain Hedging Activities." This
statement is not applicable to the Company.
In June 2000, the FASB issued Financial Accounting Standards (SFAS) No. 139,
"Rescission of FASB Statement No. 53 and Amendments to Statements No. 63, 89,
and 121." This statement is not applicable to the Company.
10
27
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2000 AND 1999
In September 2000, the FASB issued Financial Accounting Standards SFAS No.
140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, and a replacement of FASB Statement No. 125."
This statement is not applicable to the Company.
In December 1999, the Securities and Exchange Commission (the "SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 summarizes the SEC's views on the application of GAAP
to revenue recognition. In June 2000, the SEC released SAB No. 101B that
delays the implementation date of SAB 101 until no later than the fourth
fiscal quarter of fiscal year beginning after December 15, 1999. The Company
has reviewed SAB No. 101 and believes that it is in compliance with the SEC's
interpretation of Revenue recognition.
In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain
Transactions involving Stock Compensation." This Interpretation clarifies (a)
the definition of employee for purposes of applying APB Opinion No. 25, (b)
the criteria for determining whether a plan qualifies as a no compensatory
plan, (c) the accounting consequence of various modifications to the terms of
a previously fixed stock option or award, and (d) the accounting for an
exchange of stock compensation awards in a business combination. The adoption
of this Interpretation has not had a material impact on the Company's
financial position or operating results.
In September 2000, Emerging Issues Task Force Issue 00-10 (EITF 00-10),
"Accounting for Shipping and Handling Fees and Costs" was issued. EITF 00-10
provides guidance on the financial reporting of shipping and handling fees. It
requires companies to provide uniform reporting of shipping and handling costs
by requiring all amounts billed to a customer in a sale transaction related to
shipping and handling be classified as revenue. Additionally, it disallows
companies from recording the related shipping expenses against revenue. The
Company adopted EITF 00-10 in the fourth quarter of 2000.
Reclassifications
Certain amounts in the 1999 financial statements have been reclassified to
conform with the 2000 presentation
3. GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplate continuation of the
Company as a going concern. However, the Company has accumulated deficit of
$1,842,151 including net losses of $1,814,953 and $24,535 for the year ended
December 31, 2000 and 1999, respectively. The continuing losses have adversely
affected the liquidity of the Company. The Company faces continuing
significant business risks, including but not limited to, its ability to
maintain vendor and supplier relationships by making timely payments when due.
In view of the matters described in the preceding paragraph, recoverability of
a major portion of the recorded asset amounts shown in the accompanying
balance sheet is dependent upon continued operations of the Company, which in
turn is dependent upon the Company's ability to raise additional capital,
obtain financing
11
28
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2000 AND 1999
and to succeed in its future operations. The financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or amounts and classification of liabilities that might
be necessary should the Company be unable to continue as a going concern.
Management has taken the following steps to revise its operating and financial
requirements, which it believes are sufficient to provide the Company with the
ability to continue as a going concern. Management devoted considerable
effort during the period ended December 31, 2000, towards (i) obtaining
additional equity financing (ii) reduction of salaries and general and
administrative expenses (iii) management of accounts payable and (iv)
evaluation of its distribution and marketing methods.
4. NOTES RECEIVABLE
As of December 31, 2000, the Company has several notes receivable from an
investment brokerage Corporation amounting $1,250,000, bearing interest rate
ranging from 8% to 12% per year, secured by the assets and due on demand.
Company has sued the debtor for recovery of the Note. A settlement is
currently being investigated. Company expects to recover the full amount of
the note.
As of December 31, 2000, the Company has notes receivable from related party
amounting $1,052,524. The notes bear interest rate of 10% per year, are
unsecured and due on demand. Interest income for the year amounted to $26,350.
5. INVESTMENTS IN STOCK AVAILABLE FOR SALE
Following is a summary of investment securities classified as available for
sale:
Gross Unreal-
Cost Basis Fair Value ized Loss
------------- ------------ --------------
Marketable securities $ 826,647 $ 460,277 $ 360,370
The change in net unrealized holding gain on securities available for sale
that has been included as a separate component of stockholders' equity for the
year ended December 31, 2000 was $366,370.
6. PROPERTY AND EQUIPMENT
Machinery and equipment $ 2,544,743
Furniture & fixtures 180,209
Computer software 141,893
Leasehold improvements 37,904
Transportation equipment 111,076
--------------
3,015,825
Less Accumulated Depreciation (1,331,118)
--------------
$ 1,684,707
==============
12
29
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2000 AND 1999
7. LOANS PAYABLE
Lender Terms Current Long-term
----------- ------------------------------- ------------ ----------
Note Payable Due on demand unpaid balance plus $ 703,836 -
Commercia Bank interest at lower of Maximum rate
defined as interest rate is subject
to changes under various conditions
maximum nonuserous rate of interest
or prime rate plus 2%. The note and
other debtness to the bank are
secured by assets of NTCB.
Revolving Line Receivable line of credit, payable 1,401,999 -
of credit on demand, unpaid balance plus
Comerica Bank interest at lower of Maximum rate
defined as maximum nonuserous rate
of interest or prime rate plus 2%.
The interest rate is subject to
changes under various conditions.
The note and other debtness to the
bank are secured by assets of the
Company. The note is personally
guaranteed by the president of NTCB.
Note Payable Bridge Financing - Due on demand. 200,000 -
Legacy Bank Bears an interest rate of 1% plus
of Texas prime rate (9.5% at December 31,
2000). Guaranteed by all the
shareholders of Primavera, Inc.
Note Payable Note Payable to an affiliated company 60,000 -
BECO M-A, L.P related through Common majority
shareholder. Due on demand, unsecured
and bears an interest rate of 9% per
year.
Notes payable Due by July 2001, bear interest rates 370,528 -
to Various ranging from 8% to 12% and secured
lenders by the assets of NTCB.
Notes payable The notes are due on demand, bear 459,066 -
to related interest rate ranging from 10% to 18%
parties per year and unsecured. Interest paid
during the year amounted to $27,500
Total Current $ 3,195,429 -
=========== ==========
13
31
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2000 AND 1999
The current maturity of notes payable, including capital lease obligations, is
as follows:
Year Ended December 30
2001 $ 3,232,533
2002 6835
2003 7383
2004 7974
2005 2069
---------------
TOTAL $ 3,256,794
===============
8. CAPITAL LEASE OBLIGATIONS
At December 31, 2000, the Company had the following capital lease:
(1) Lessor Payments Monthly Security Interest Rate
------- -------- ------- ------------ ------------
CIT Group 60 $2,955 Pumiflex SHD/A/Prime/ 9.44%
Aluminum Oxide
The equipment is recorded as Machinery & equipment in the balance sheet and
the amortization is included in depreciation expense. The obligation at
December 31, 2000 amounted to $30,777 and is due by December 31, 2001.
(2) Lessor Payments Monthly Security Interest Rate
-------- -------- ------- ------------- -------------
First
Federal S&L 60 $ 706 By a Vehicle 7.74%
being leased
The assets are recorded as transportation in the balance sheet and the
amortization is included in depreciation expense. The obligation at December
31, 2000 amounted to $30,588 and is due by March 10, 2005.
9. INCOME TAXES
No provision was made for Federal income tax since the Company has significant
net operating loss carryforwards. Through December 31, 2000, the Company
incurred net operating losses for tax purposes of approximately $1,600,000.
Differences between financial statement and tax losses consist primarily of
amortization & allowance for doubtful accounts. The net operating loss
carryforwards may be used to reduce taxable income through the year 2016.
The gross deferred tax asset balance as of December 31, 2000 was approximately
$640,000. A 100% valuation allowance has been established against the
deferred tax assets, as the utilization of the loss
14
32
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2000 AND 1999
carrytforwards can not reasonably be assured. There was no significant
difference between reportable income tax and statutory income tax.
10. CONTRACTS AND AGREEMENTS
Lease - NTCB leases its office and business facilities in Irving, Texas under
a lease agreement for two years beginning May 2000 for $10,000 per month, with
an option to renew the lease for three additional years at a rental rate of
$12,500 per month. The Company shall have an option to purchase the property
for $690,000 during the initial two-year rental term and for $750,000 during
the 3-year renewal period.
Insurance receivable - The Company has filed an insurance claim against an
insurance company for damage to inventory amounting $247,490. The Company
expects to recover full amount in the year 2001.
11. RELATED PARTY TRANSACTIONS
In normal course of business, the Company purchases and sells inventory and
services from a company affiliated through ownership by an officer of NTCB.
The total of all the transactions is immaterial to the financial statements.
At December 31, 2000, the Company had a note receivable of $100,000 from the
officer of NTCB. The note carries an interest rate of 6% per annum and is due
on demand.
During 2000, the Company purchased several notes receivable, from a related
entity, related through common majority shareholders, for $1,250,000 by
issuing 750,000 of common stock for $1,250,000. The notes are receivable from
an investment brokerage Corporation, bear interest ranging from 8% to 12% per
year, unsecured and due on demand.
12. STOCKHOLDERS' EQUITY
Stock Split
On December 29, 2000, the Board of Directors of the Company declared a
13.09322865 to 1 forward stock split of the Company's common stock. The
stockholders approved an increase in the authorized number of shares of common
stock from 26 million to 100 million. On April 14, 2000, the Company effected
a 2-for-1 forward stock split of its common stock. On April 29, 2000, the
Company effected a reverse stock split of 1:3.
15
32
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2000 AND 1999
Common stock
In 1999, the Company repurchased 2,592,459 shares of common stock and retired
them.
In 2000, the Company issued a total of 100,672 shares of its common stock to a
consultant against the consulting fees of $385,572.
In 2000, the Company acquired three (3) subsidiaries (note 14) by issuing an
aggregate of 1,245,000 shares of common stock for $1,550,000.
In 2000, the Company purchased marketable securities in exchange of 4,950,000
shares of common stock valued at $1,425,000.
In 2000, the Company acquired a note receivable of $1,250,000 from a related
party in exchange of 750,000 shares of common stock.
In 2000, the company commenced a private placement offering pursuant to
Regulation D, Rule 506, as amended and Regulation S, as amended. Through
December 31, 2000, the Company sold 212,118 shares of common stock pursuant to
Regulation S for $376,030 and 958,679 for $1,315,209. Following is the
break-up of cash received per share for various issues:
-------------------------------------------------------------
Par value Number of shares issued Amount received
---------- ----------------------- ----------------
$ 1.00 355,413 $ 236,942
1.67 2,700 3,000
2.12 35,400 50,000
2.35 2,550 4,000
2.50 674,943 1,124,905
2.67 21,051 37,424
3.33 24,740 54,968
5.00 54,000 180,000
--------- ----------------------- ----------------
Total 1,170,797 $ 1,691,239
-------------------------------------------------------------
Stock option plan
The Company has adopted a Stock option plan for the granting of options to
employees, consultants and other providers of goods and services to the
Company. The Company has set aside 1,000,000 shares of common stock under the
plan. No option has been granted under the plan through December 31, 2000.
16
33
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2000 AND 1999
13. SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
The Company prepares its statements of cash flows using the indirect method as
defined under the Financial Accounting Standard No. 95.
The Company paid income taxes of $3,614 and interest of $126,361 during the
year ended December 31, 2000. The Company did not pay any amount for income
tax or interest during the year ended December 31, 1999.
Supplemental disclosure of non-cash investing and financing activities:
(1) The Company made certain acquisitions (note 14) during the year whereby
the Company issued its common shares in exchange. The consolidated cash flow
statement does not include acquisitions of following assets acquired and
liabilities assumed due to acquisitions:
Assets acquired $ 4,155,751
Liabilities assumed 4,490,916
Shares issued 1,550,000
-------------
Goodwill on acquisition $ 1,885,165
=============
(2) The Company acquired certain marketable securities by issuing 4,950,000
shares of common stock valued at $1,425,000.
(3) The Company acquired a note receivable amounting $1,250,000 by issuing
750,000 shares of common stock.
(4) The Company settled a debt of $60,000 by issuing 60,000 shares of common
stock.
14. ACQUISITION
On April 26, 2000, Flexxtech Holdings, Inc. entered into an agreement with
Mardock Promotional Products, Inc. whereby Flexxtech Holdings, Inc. acquired
100% issued and outstanding common stock of Mardock Promotional Products, Inc.
The consideration was paid by issuing 900,000 shares of the Company's common
stock valued at $600,000. The Acquisition has been recorded under the purchase
method of accounting and resulted in Goodwill of $531,243.
On August 15, 2000, Flexxtech Holdings, Inc. entered into an agreement with
Primavera Corporation, whereby Flexxtech Holdings, Inc. acquired 67% newly
issued and outstanding common stock of Primavera Corporation. Flexxtech
Holdings, Inc. was issued 203 newly issued shares of Primavera Corporation in
consideration of $1,575,000. On October 31, 2000, the ownership of Flexxtech
Holdings, Inc. was increased to 80% of Primavera Corporation. The
consideration is payable in cash of $1,250,000 by installments and remaining
amount in form of 195,000 shares of the Company's common stock for $325,000 to
be delivered to
17
34
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2000 AND 1999
the former shareholders of Primavera, subsequent to the acquisition. The
acquisition has been recorded under the purchase method of accounting and
resulted in Goodwill of $548,922 after considering additional value 195,000
shares.
On September 15, 2000, Flexxtech Holdings, Inc. entered into an agreement with
Opitv.com, whereby Flexxtech Holdings, Inc. acquired 7,578,000 newly issued
shares of common stock representing 80% issued and outstanding common stock of
Optv.com. OPTVi did not have any operations at the time or subsequent to the
acquisition. The consideration was paid by issuing additional 150,000 shares
of the Company's common stock valued at $625,000. The Acquisition has been
recorded under the purchase method of accounting and resulted in Goodwill of
$805,000.
The following un-audited pro forma financial information assumes the
acquisition of subsidiaries occurred at the beginning of the year in which the
acquisition took place and, for comparative purposes, at the beginning of the
immediately preceding year. These results have been prepared for
informational purposes only and are not necessarily indicative of the
operating results that would have occurred had the acquisition been made as
discussed above. In addition, they are not intended to be a projection of
future results (in thousands):
Year Ended
December 31, 2000 December 31, 1999
----------------- -----------------
Revenues $ 9,671,539 $ 10,843,306
Net income (loss) $ (1,648,312) $ (878,492)
Net income per share - basic $ (0.28) $ (0.32)
Net income per share - diluted $ (0.28) $ (0.32)
15. SEGMENT INFORMATION
In computing income from operations by industry segment, unallocable general
and administrative expenses have been excluded from each segments' pre-tax
operating earnings before interest expense and have been included in general
corporate and other operations.
The Company reportable business segments are strategic business units that
offer distinctive products and services that are marketed through different
channels. They are managed separately because of their unique technology,
marketing, and distribution requirements. The Company is a holding company
that is comprised of two operating subsidiaries: North Texas Circuit Board,
Inc. (a 100% subsidiary of Primavera, Inc.) and Mardock, Inc. North Texas
Circuit Board, Inc. (NTCB) manufactures printed circuit boards. The products
are sold through its distribution center in Irving, Texas utilizing outside
sales people. Deliveries are made primarily throughout the United States.
Mardock is a designer, manufacturer, and distributor of apparel and
promotional products to the corporate community.
18
35
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2000 AND 1999
Following is a summary of segmented information for the year ended December
31, 2000:
NTCB Mardock
--------------- ----------------
Sales $ 4,071,000 $ 455,000
Operating loss 845,700 56,300
Total Assets 4,183,087 1,490,582
Capital Expenditure 218,000 -
Depreciation and amortization 119,700 24,737
Substantially all of the Company's operations are domestic. The Company's
foreign operations are not material to the Company's results of operations.
16. SUBSEQUENT EVENTS
On March 26, 2001, the Board of Directors of the Company declared a 3 for 2
forward stock split of the Company's common stock. All shares and per share
data have been retroactively restated to reflect these stock split and the
change in the authorized shares.
19
36
ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in or disagreements with our independent
accountants.
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
OFFICERS AND DIRECTORS
----------------------
The names and ages of all of our directors and executive officers, along
with their respective positions, term of office and period such position(s)
was held, is as follows:
Name Age Position Held & Since (1)
---------------- --- ---------------------
Edward Fearon (2) 55 Chief Executive Officer and Director.
Greg Mardock 45 President, Chairman of the Board of
Directors and Director.
Chris H. Beshlian 32 Secretary, Treasurer and Director.
Khanh Tran 35 Director.
David Pimentel 30 Director
------------------------
(1) Each of the above individuals will serve in their respective capacities
until the next annual meeting of the shareholders or until a successor is duly
qualified and elected.
(2) Mr. Fearon has agreed to serve as CEO and Director of our Company upon
execution of an employment agreement. The Agreement was not executed as of
December 31, 2000.
BIOGRAPHICAL INFORMATION ON OFFICERS AND DIRECTORS
--------------------------------------------------
Edward Fearon, age 55, serves as CEO and Director of a subsidiary of
Flexxtech Holdings, Inc., Primavera Corporation, and Chairman of North Texas
Circuit Board Company and has agreed to serve as CEO and Director of our
Company upon execution of an employment agreement. Mr. Fearon, a physicist,
filed his first United States Patent Application in 1966 and for a period of
more than thirty years has been engaged in the research, development and
invention of devices in the Electronics Article Surveillance and other
industries and holds 126 United States and foreign patents. Mr. Fearon is
regarded as the founder of the Electronic Article Surveillance field. His
Patents are the grandfather, or original patents in the field. His patents in
the EAS field were licensed to 3M and Sensormatic and are for protection of
books, audio and videotapes, clothing and other merchandise.
Early in his career, Mr. Fearon first served with ElectroChemical
Laboratories In Tulsa, Oklahoma where he conducted research for Sinclair
Research (division of Sinclair Oil & Gas) and the Williams Brothers Companies
(pipeline & energy) on Radio Carbon 14 and Nuclear Magnetic Resonance
nondestructive non-contact analysis: magnetometers for pitch/yaw of missiles
and gradiometer magnetic field mapping of magnetite of planet earth for
prediction of oil fields: flaw/defect detection and analysis in buried
pipelines; geophones for seismic data for prediction of oil fields. Mr. Fearon
in 1969 joined Standard Engineering & Manufacturing Co. (SEMCO) as Vice
President of R&D where their principal business was Electronic Article
Surveillance. In 1971 Mr. Fearon was the founder and President of S D & E,
Inc. dba
37
Systems Development & Engineering, an engineering firm. He managed this
company until 1986. In 1973 Mr. Fearon became the managing partner of Martin
Wholesale, Inc. a national distributor for Sony, Panasonic, Sharp, Hitachi and
other commercial lines. He managed this company until 1998 when it was
acquired by Fox Electronics. In 1998 Mr. Fearon served as Chairman of the
Board and Chief Executive Officer of a public company, EAS Technologies, Inc.
which was acquired and served as director of Canyon Creek National Bank and a
member of the loan and discount committee. Mr. Fearon was the founder,
President and majority shareholder of Computer Crossroads of America, Inc., a
designer, integrator and manufacturer of defense related computer equipment
from 1979 until 1995. CCA had annual revenues in the range of $20 million and
employed an average of fifty people. Mr. Fearon was responsible for all
administration with actual involvement in all departments including
purchasing, engineering, production, finance, accounting and sub-contract
management. Mr. Fearon has extensive experience in the area of Government
contracting including preparation, negotiation, and management of SF1411/1412
proposals and contracts. Mr. Fearon has an extensive working knowledge of FAR,
and FAR requirements. He has also administered Corporate/Divisional Material
Agreement negotiations and contracts as well as contracts with customers such
as General Dynamics, Fairchild Communications and Electronics Co., McDonnell
Douglas, Boeing, U.S. Army and the U.S. Air Force.
Mr. Fearon holds Security Clearances.
Greg Mardock, age 45, currently serves as President and has served as a
Director of our Company since April 2000. Mr. Mardock also serves as the
President and CEO of Mardock, Inc., a subsidiary of Flexxtech Hodlings, Inc..
Mardock, Inc. designs, manufactures, and distributes corporate promotional
products. Mardock is developing its e-commerce site to become the premier
corporate promotional company on the Internet. Mr. Mardock is also a Partner
in Oregon.com, a state-wide portal providing information on the State of
Oregon, and in Oregon Interactive, an e-commerce site designer and developer.
He further serves as the President of Sterling Golf, Inc., a golf equipment
distributor. From 1976 to 1986, Mr. Mardock served as Founder and President of
Sports Graphics, Inc. and has designed and produced products for Nike's Sports
Apparel Program, Speedo Swimwear, Guess Athletic, K Swiss Footwear, and
Panasonic, among others.
Chris H. Beshlian, Esq., age 32, currently serves as Secretary and
Director of our Company. Mr. Beshlian is a practicing attorney in corporate
law with offices in Los Angeles, California. From March 1998 to January 2000,
Mr. Beshlian served as Secretary and Director of Pacific Sports Holdings,
Inc., a publicly traded sports equipment and apparel holding company. Mr.
Beshlian holds a law degree from Southwestern University School of Law and a
BA degree in Economics from the University of California, Los Angeles.
Khanh Tran, age 35, has served as a Director of our Company since April
2000. Since 1994, Mr. Tran has served as Chairman, President, CEO and founder
of Chameleon Technology, Inc., a fiber channel design and development company,
which was acquired by Applied Micro Circuits (NASDAQ: AMCC) in March 2000.
Mr. Tran has lead design teams at Motorola, Boeing, Atmel, Applied Materials,
Rockwell, LSI Logic and Western Digital. Mr. Tran has also served as Vice
President of Design Engineering with California ASIC Technical Services, Inc.
from May 1992 to November 1994. From 1988 to 1992, Mr. Tran served as a Design
Manager for Lasarray Corporation. Mr. Tran holds a BS degree in Electrical
Engineering from the University of California, Irvine and an MBA from
California State University, Fullerton.
David Pimentel, age 30, has served as a Director of our Company since
April 2000. Mr. Pimentel currently serves as the Chief Information Officer for
Absolute Internet Marketing, Inc. where his responsibilities include the
design, installation and maintenance of networking infrastructure for
multi-million dollar projects. From 1998 to 2000, Mr. Pimentel served as the
Chief Information Officer, Secretary and Co-Founder of ivenue.com, a developer
of a complete electronic commerce suite for management of online stores
utilizing a web browsers. From June 1997 to January 1999 Mr. Pimentel served
as the Chief Information Officer and Partner of Top Level Design, Inc. Mr.
Pimentel served as a network manager and systems analyst for the University of
Southern California from 1994 through 1998 and also served as a PC/LAN Analyst
for the Walt Disney Company from 1995 through 1997. Mr. Pimentel studied
Computer Science at the University of Southern California.
38
Our Company does not presently maintain key man life insurance coverage
with respect to any of its officers, directors, or key employees; however, we
intend to investigate the addition of key man life insurance in the future.
There is no assurance we will be able to obtain it.
FAMILY RELATIONSHIPS
--------------------
There are no family relationships among our directors and/or executive
officers.
INVOLVEMENT IN OTHER PUBLIC COMPANIES
-------------------------------------
None of our directors are involved in other public companies that
would be described as "reporting" companies.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
----------------------------------------
Except as indicated herein, to the knowledge of our management, during the
past five years, no present or former director, executive officer, or person
nominated to become a director or executive officer of our Company:
(1) Filed a petition under federal bankruptcy laws or any state
insolvency law, nor had a receiver, fiscal agent or similar officer appointed
by a court for the business or property of such person, or any partnership in
which he was a general partner at or within two years before the time of such
filing, or any corporation or business association of which he was an
executive officer at or within two years before the time of such filing;
(2) Was convicted in a criminal proceeding or named subject of a pending
criminal proceeding (excluding traffic violations and other minor offences);
(3) Was the subject of any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining him or her from or otherwise limiting
his/her involvement in any type of business, securities or banking activities;
(4) Was found by a court of competent jurisdiction in a civil action, by
the Securities and Exchange Commission or the Commodity Futures Trading
Commission, to have violated any federal or state securities law, and the
judgment in such civil action or finding by the Securities and Exchange
Commission has not been subsequently reversed, suspended, or vacated.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
-------------------------------------------------
Based solely on the review of Form 3's furnished to us, to the best
knowledge of our management, each of our officers/directors and 10%
shareholders has filed their Initial Statement of Beneficial Ownership on Form
3, although the same were filed on a delinquent basis.
PART III
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth certain information as to compensation
received by our Chief Executive Officer who is also a director of our Company
and our President and Secretary, as of December 31, 2000.
39
SUMMARY COMPENSATION TABLE
Long Term Compensation
--------------------------------------------------------------------------------------------------------------
Annual Compensation Awards Payouts
--------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Name Annual Restricted Other
and Compensa- Stock Underlying LTIP Compensa-
Principal sation Award Options/ Payouts tion
Position Year Salary($) Bonus($) ($) ($) SAR's(#) ($) ($)
--------------------------------------------------------------------------------------------------------------
Greg Mardock(1) 2000 -0- -0- -0- -0- -0- -0- -0-
President, Treasurer 1999 -0- -0- -0- -0- -0- -0- -0-
Director
--------------------------------------------------------------------------------------------------------------
(1) Mr. Mardock receives compensation from Mardock, Inc., a subsidiary of our
wholly-owned subsidiary, Flexxtech Holdings, Inc.
OPTIONS/SAR GRANTS
------------------
There were no stock options or stock appreciation rights granted to any
executive officer since its inception through present date.
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR END OPTION/SAR VALUE TABLE
--------------------------------------------------------------------------
Not applicable.
LONG TERM INCENTIVE PLANS
-------------------------
There are no long term incentive plans in effect and therefore no awards
have been given to any executive officer in the past year.
COMPENSATION OF DIRECTORS
-------------------------
We pays no fees to members of our Board of Directors for the performance
of their duties as directors. We are in the process of establishing an Audit
Committee, but we have not established any other committees of the Board of
Directors.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
------------------------------------------------------------------------
We have no employment contracts in effect with any of the members of our
Board of Directors or our executive officers nor are there any agreements or
understandings with such persons regarding termination of employment or
change-in-control arrangements.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 31, 2000, the amount and
nature of beneficial ownership of each person known to a beneficial owner of
more than five percent of the issued and outstanding shares of our Company.
The following information is based on 7,316,590 shares issued and outstanding
as of December 31, 2000.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
(1) (2) (3) (4)
Title of Name and Amount and Percent of
Class Address of Nature of Class
Beneficial Beneficial
Owner Owner
-------- ---------- ---------- ----------
40
Common VLK Capital Corp. (1) 2,000,000 29.36%
P.O. Box 812
McMinnville, OR. 97128
Common Mardock.com, Inc. (2) 600,000 8.20%
P.O. Box 812
McMinnville, OR 97128
---------------------------------------
(1) Greg Mardock is an officer of VLK Capital Corp. Mr. Mardock does not own
any shares of our Company individually.
(2) Greg Mardock is a shareholder, officer and director of Mardock.com, Inc.
The shares are owned by Mardock.com, Inc. Mr. Mardock does not own any shares
of our Company in his individual capacity.
The following table sets forth the amount and nature of beneficial
ownership of each of the executive officers and directors of our Company. The
information below is based on 7,316,590 shares issued and outstanding as of
December 31, 2000.
SECURITY OWNERSHIP OF MANAGEMENT
(1) (2) (3) (4)
Title of Name and Amount and Percent of
Class Address of Nature of Class
Beneficial Beneficial
Owner Owner
-------- ---------- ---------- ----------
Common Edward Fearon (1) 55,500 .76%
Post Office Box 802525
Dallas, Texas 75380-2525
Common Greg Mardock (2) 600,000 8.20%
P.O. Box 812
McMinnville, OR 97128
-----------------------------------------------------------------------
Officers & Directors as a group 655,500 shares 8.96%
-----------------------------------------------------------------------
(1) Mr. Fearon has agreed to serve as CEO and Director of our Company upon
execution of an employment agreement. The Agreement was not executed as
of December 31, 2000.
(2) Greg Mardock is a shareholder, officer and director of Mardock.com, Inc.
The shares are owned by Mardoc.com, Inc. Mr. Mardock does not own any
shares of our Company in his individual capacity.
CHANGES IN CONTROL
------------------
We have no arrangements which might result in a change in control of our
Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
ITEM 13. EXHIBITS AND REPORTS ON 8-K
(a) Exhibits
Exhibit 21 List of Subsidiaries
(b) Reports on Form 8-K.
On December 13, 2000 we filed a report on Form 8-K regarding the death of
Howard Frantom, Chairman of the Board of Directors and CEO of our Company.
Greg Mardock was then elected by the directors of our company to assume the
CEO position of our company.
41
On December 4, 2000 we filed a report on Form 8-K wherein we report the
acquisition of various assets, including the acquistiion by our wholly-owned
subsidiary, Flexxtech Holdings, Inc., of 67% of Primavera Corporation, the
parent company of North Texas Circuit Board Company, Inc. and the acquisition
by our wholly-owned subsidiary, Flexxtech Holdings, Inc., of an additional 80%
of the issued and outstanding shares of Opitv.com., A Nevada corporation,
bringing our total ownership to 82%. We also reported the change in our
business purpose and matters regarding the private placement of our common
stock. We further reported that Mr. Brian Kulhanjian resigned as President,
Secretary and Treasurer. On the same date, Mr. Greg Murdock was elected to
serve as President. Mr. Howard Frantom was elected to serve as Chief Executive
Officer and Mr. Chris H. Beshlian was elected to serve as Secretary and as a
Director of our corporation.
On November 29, 2000 we filed a report on Form 8-K regarding, among other
things, a Plan of Reorganization whereby our wholly-owned subsidiary,
Flexxtech Holdings, Inc., acquired 100% of the issued and outstanding shares
of Mardock, Inc., an Oregon corporation, in exchange for an issuance of
600,000 shares of our common stock. The reorganization transaction resulted in
Mardock, Inc., becoming a wholly-owned subsidiary of Flexxtech Holdings, Inc.
we also report a change in our certifying accountants.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report be signed on its behalf by the undersigned, thereunto duly
authorized.
Registrant:
FLEXXTECH CORPORATION
Date: May 11, 2001 By: /s/ Greg Mardock
-----------------------------
Greg Mardock
President and Chairman of
the Board of Directors