February 26, 2001
It seems we just finished our series on Infotopia, Inc. (Infotopia, Inc. Part I – Is This A Limited Time Offer; Part II – For A Few Products More; Part III – Bye Bye Shares; and Part IV – Predictions, Projections and Plans for the Future). But the Company is still making news – some with considerable fanfare, and some far more quietly.
With A Flourish
First, the fanfare. On February 6th, Infotopia announced that “revenues for the month of January totaled over $8.0 million (unaudited) with a profit for the month in excess of $1.8 million.” In fact, the Company said it expects “to report revenue of over $30 million and record net income for the first quarter ending March 31, 2001.”Then, on February 15th, Infotopia issued another press release, this time saying that “the revenue from its various products is exceeding earlier projections for the 1st quarter 2001.” Indeed, the Company now said that revenues were on track to exceed $12 million in February and that gross revenues were expected to be more than $34 million for the first quarter of 2001. The Company attributed these revenues primarily to the “extraordinary success” of the Body By Jake Bun and Thigh Rocker.
Since these announcements came only weeks after the Company filed its Form 10-Q financial report for the period ended November 30, 2000, investors will have to wait awhile before any reported revenues appear in the Company’s next quarterly financial statement. Such quarterly reports routinely include unaudited, rather than audited, financial statements.
So when can investors expect to see audited numbers? Audited financials (ie. those reviewed by an independent outside accountant) are included in a company’s annual financial report – the Form 10-K. Does this mean that audited figures for January and February 2001 will be in the next 10-K filed by Infotopia? Not hardly – as the Duke used to say. On February 23rd, Infotopia filed a Form 8-K advising the SEC that the Company had changed its fiscal year-end from February 28, 2001 to December 31, 2000. That means the audited figures reported in the next 10-K will be limited to results through December 31, 2000. Infotopia says it will file that report by March 30, 2001. It would appear then that an audit confirming those January and February 2001 numbers could be another year away.
And a Bang
There have been other developments at Infotopia in recent weeks – most notably relating to the Company’s acquisition plans. But while Infotopia’s planned acquisitions were prominently featured in at least two press releases, its subsequent decision to discontinue those endeavors was not.On January 22nd, the Company issued a press release heralding plans to acquire “two Infomercial related Companies with revenues in excess of $175,000,000 and profits in excess of $8,000,000.” That same press release said that Infotopia was also preparing “to begin negotiations on a merger and/or share exchange with a Nasdaq ready Company that is debt free to allow Infotopia to move to NASDAQ.”
Over 68 million shares of Infotopia stock traded on the day of that release and the following day, as prices moved from an intraday low of 17 cents on January 22nd to an intraday high of 25 cents on January 23rd.
The January 22nd press release, and subsequent surge in trading volume, was followed by a January 24th letter to Infotopia shareholders from the Company’s Chairman and CEO, Daniel Hoyng. Mr. Hoyng’s letter reiterated the Company’s plans to pursue the two acquisitions and seek yet another merger partner “which will meet the criteria for qualification for NASDAQ (including share price), when deal is completed between the two Companies.” (Hoyng’s January 24th letter to shareholders is discussed in detail in Part IV of our series on Infotopia, Inc. - – Predictions, Projections and Plans for the Future). The public had ample opportunity to read Hoyng’s letter. It was included in a press release issued by Infotopia over Business Wire on January 24th and posted in the “Chairman’s Message” section on Infotopia’s website.
It seems, however, that not all of the “Chairman’s Messages” have enjoyed such dual exposure. Instead, some are posted only on the website, and not included in a simultaneous press release.
And A Whimper
Which is why many members of the public may have missed Hoyng’s February 16, 2001 letter to shareholders. It can be found on the Infotopia website but, as far as we can determine, it has not been included in any press release issued by the Company through Business Wire or any other news service.That letter reveals that Infotopia has abandoned the heralded acquisition of those two companies. That information comes to light midway through the letter to shareholders, where Hoyng states that “[a]fter careful review of the two private acquisitions the Company has decided to not go forward with the acquisitions. Though both Companies could have provided significant revenue, the purchase price and dilution that would have been required for the profit that would have been made were neither feasible nor prudent.”
And what had happened to the search for a Nasdaq-ready partner? Hoyng’s letter implies that Infotopia may look to go it alone instead. According to Hoyng, the Company continues to discuss other potential mergers or share exchanges. But, he says, “[w]ith the current success of the Company with its continuing performance, the Company should achieve the needed share value on its own to qualify for a major national exchange.”
This time there was no press release. So investors, like those who traded more than 68 million shares when the plans for acquisitions, merger and/or a share exchange were publicly announced on January 22nd, were unlikely to discover this news unless they checked in at the Infotopia website – and carefully read the entire “Chairman’s Message” for February 16th.
We did.
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