Re: 7/19/01 - [IFTP/IFTA] Stockpatrol.com: Update: Infotopia, Inc. (OTCBB:IFTA) - Any Entreport in a Storm
UPDATE: INFOTOPIA, INC. (OTCBB:IFTA) – ANY ENTREPORT IN A STORM
July 19, 2001
Art of the Deal
The contemplated merger between Infotopia Inc. of Ohio (Infotopia-Ohio) and Entreport Corporation (AMEX: ENP) took another step forward this week when Entreport filed a preliminary proxy statement asking its shareholders to approve the transaction.
This is how the deal unfolds. Infotopia-Ohio is a wholly owned subsidiary of Infotopia, Inc. of Nevada (Infotopia-Nevada). Infotopia-Nevada is the Company whose shares trade on the OTC Bulletin Board. According to earlier press releases, Infotopia-Ohio is the “operating entity which contains all the revenue and expenses” of the OTC Bulletin Board company known to investors as Infotopia.
Under the merger agreement, Entreport would acquire 100% of the stock of Infotopia-Ohio from Infotopia-Nevada. Entreport would also receive $500,000. In consideration for those shares and that cash, Entreport would issue 15.6 million Units of Entreport securities to Infotopia-Nevada. Each of those Units would consist of one share of Entreport common stock, 1/2 of a common stock purchase warrant with an exercise price of $5 per share, and 1/4 of a common stock purchase warrant with an exercise price of $10 per share.
The Spin They’re In
If the transaction is completed as planned it appears that Infotopia-Nevada will own 15.6 million Entreport Units, but will have no remaining business operations. That business will now belong to Entreport (which will change its name to Modern Brands, Inc. after the merger). As a result, Infotopia-Nevada will own 86.8% of Entreport, while current Entreport shareholders will see their ownership interest reduced to only 5.6%. Additional dilution may, however, be on the horizon for the Entreport shareholders. Under the merger agreement, all options that have previously been issued by Infotopia-Nevada and Infotopia-Ohio will be cancelled and will be replaced by options to purchase Entreport shares.
What else is in store for those existing Entreport shareholders? The present Entreport operations will be spun-off into a separate, private company called iSucceed.com, which will be owned by the current Entreport shareholders. But, for now at least, the iSucceed.com shares will not be registered for trading on any stock exchange – including the OTC Bulletin Board. That means Entreport shareholders who approve the merger must be willing to accept significant dilution of their holdings and surrender control of an American Stock Exchange listed company (Entreport) in exchange for relatively illiquid stock in a private, unlisted company (iSucceed).
Finders Keepers
Who else will benefit from the merger? The proxy materials reveal that Entreport will be issuing an additional 1.38 million Units as “finders’ fees” in connection with the merger. The term “finders” refers to one or more individuals who are credited with bringing the deal about. Who are those finders? The proxy does not reveal their identities, specify the role they may have played in the merger, or indicate whether they have had any prior relationship with either Entreport or Infotopia.
What will happen to the existing shareholders of Infotopia-Nevada? That question remains unanswered. The merger agreement provides that
[Entreport] shall take any and all necessary action to have the Entreport Units, Shares and Warrants and all other restricted shares of outstanding common stock of Entreport registered with the Securities and Exchange Commission within 45 days following the Closing and to cause such registration to become effective as soon thereafter as is reasonably practicable.
That means the Units issued to Infotopia-Nevada (as well as those given to those unnamed finders) may become eligible for sale relatively soon. As best we can determine, Infotopia-Nevada hasn’t said what it plans to do with those shares. Will the Company distribute the Entreport Units to existing shareholders – in which case Infotopia-Nevada would have no remaining assets? Or does it have other plans, and what might they be? As we noted above, Infotopia-Ohio apparently contains all of the revenues and expenses of the two Infotopias – but what about the liabilities on the balance sheets of Infotopia-Nevada?
Infotopia’s March 31st Form 10-Q noted that its “financial statements include the accounts of Infotopia, Inc. (a Nevada corporation), and its subsidiary Infotopia, Inc. (an Ohio corporation).” That Form 10-Q reported liabilities of more than $13 million. How much, if any, of those liabilities belong to Infotopia-Nevada? Have they increased, or decreased, since then? Are those liabilities being assumed by Entreport, or will some, or all, remain with Infotopia-Nevada? The merger agreement does not seem to address this issue.
And, if Infotopia-Nevada remains responsible for those liabilities, will it try to satisfy them with proceeds from the sale of the Entreport Units, shares and warrants?
Of course, all of this speculation may be moot since the transaction will not proceed unless the American Stock Exchange indicates that the surviving company – Modern Brands, Inc. – will retain an AMEX listing. The AMEX is likely to be asking some of these same questions – and so many more.
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