Re: 7/1/01 - [IFTP/IFTA] Chairman's Message
"...we welcome any scrutiny by the SEC or any governmental agency. We also welcome the opportunity to defend the good name of the Company and its officers and directors in any court in the United States."
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July 1, 2001
Dear Shareholders,
The past several weeks have been filled with much speculation about the future of Infotopia, Inc. In addition, the Company has filed two lawsuits against parties who clearly have attempted to damage the good name of Infotopia, as well as its officers and directors. We are currently taking action against the continued spread of outright lies, as we feel it must be stopped. With the close of the second quarter upon us, we will have completed our second consecutive quarter of revenue and profit growth. Those who continue to use statements such as “Infotopia is a scam”, “Infotopia will have more than fifteen million shares outstanding prior to the completion of the transaction with EntrePort (ENP)”, “The officers and directors are lining their pockets at the expense of the shareholders”, and “Infotopia is headed for bankruptcy”, need only look at our filings and press releases to see that those statements are blatantly false.
The Company continues to grow its revenue and profit base daily. Infotopia is clearly one of the fastest growing companies in the United States. We would welcome any opportunity to show how our Company is growing and how the Company is being built to survive for many years to come. The recent additions of our new Vice President of Corporate Finance should help provide greater credibility to the financial community. The Company has invested in its media, products, inventory and marketing campaigns to provide a solid financial base for many years to come.
Growing a company from less than $200,000 a week in sales to over $3,000,000 a week and growing in less than a year is remarkable. We are part of an industry that requires cash up front for inventory and media, cash for development of new products and cash to build an infrastructure to support the growth. This growth has required the issuance of hundreds of millions of shares of common stock. The equity funding is helping to build a foundation that will last for generations. We recently had a corporate meeting and our team was energized as we examined each segment of our business. The strategic partnerships that we established are returning excellent results which will be reflected in the second quarter earnings. We have asked our accountants and lawyers to prepare the 10Q, which is due August 15, 2001 as fast as reasonably possible. We are very excited that the shareholders will continue to see the amazing revenue, profit growth and the development of the infrastructure which will fuel the Company to new heights. There is no question this report will provide the credibility and help necessary to establish true value of the Company’s worth.
The Company’s success is well documented in the Direct Response Industry and our products have been constant performers on the various Infomercial Monitoring reports. Our strategic partnerships with Modern Interactive Technologies, Lohan Media, and Provida Life Sciences continue to prosper. The recent launch of Michael Thurmond’s “Six Week Body Makeover” continues to build on our recent history of success. Body by Jake Bun & Thigh Rocker continues to thrive with the recent 100,000 unit opening retail order. The potential for Body by Jake Bun & Thigh Rocker retail orders is in excess of 1,000,000 units. Infotopia’s products have had much success on the Home Shopping Network and in the coming quarters our products will continue to expand on the various shopping channels. It is clear that Infotopia is not a “scam”. I feel confident that I do not need to address this issue any further.
All of you are aware that the Company was reaching its maximum number of authorized shares of common stock back in May 2001. This affected the Company’s ability to secure additional capital, bring new celebrity endorsers to our products, acquire new products and fulfill contractual obligations for stock that the Company needed to issue under pre-existing contracts. The Company had planned to undertake a stock buyback plan in February, but the phenomenal success of current shows required that inventories be ramped up quickly and sufficient media needed to be purchased in advance to ensure the success of our products. It is imperative for us to continue to build on the momentum. Though the Company is projecting a profit for each month of the balance of this fiscal year, it is important to note that it takes several months to collect all the cash on sales of many of our products as the Company offers an extensive multi-pay program for our customers. Additionally, the Company also prepays for media and inventory before ever making a sale. The Company has now reached positive cash flow on its Body by Jake Campaign, but continues to invest in its other products. The Company stills plans to implement an aggressive stock buyback program at that time. The timing of this buyback will be based on the Company’s ability to utilize its existing cash flow without hurting the growth of the Company.
After careful consideration and consultation with a variety of financial institutions, it was decided that the Company needed to make significant changes in its capital structure. As a result, the Company chose to undertake a 200:1 reverse split of its common stock. This left the Company with approximately 2,500,000 common shares outstanding. Prior to the reverse, 100% of the preferred shares outstanding were converted into shares of common stock and there is currently no outstanding preferred stock. As per our licensing agreements, the Company has approximately 480,000 warrants that are held by Modern Media and they are exercisable in excess of $4.00 per share. The Company also completed financing arrangements on the sales of 1,800,000 shares of restricted common stock for additional equity funding. Thus assuming the conversion of all the previously committed warrants and restricted stock, the Company would have less than five million shares outstanding at this time. All officers and directors shares were subject to the reverse split. The officers and directors have only options that are priced at over $1.00 per share. However, those options will be carried into EntrePort (ENP) after the completion of the transaction. Therefore, per terms of our current definitive agreement with EntrePort, Infotopia, Inc. (Nevada, IFTA) would receive 2.62 units (a unit consists of one share of common stock and a ½ warrant at $5.00 per share and a ¼ warrant at $10.00 per share). I will today ask that EntrePort agree to an additional 2,500,000 units to be included in this transaction. Thus bringing the total to 3.12 units and .75 warrants, an equivalent of 3.87 shares for each share of IFTA outstanding. I am confident EntrePort’s Board of Directors will accept this.
A question that continues to arise is why did Infotopia take the steps now of completing the reverse prior to the completion of the transaction with EntrePort. After careful consideration, it was felt that the “float” (the number of outstanding shares tradable in DTC format) had become too large, allowing for potential market manipulation, shorting, etc. However, the primary reason is with the help of our financial consultants and our new Vice President of Corporate Finance, the Company is working on completing a new investment banking arrangement. This arrangement would allow the Company to leverage traditional bank lines of credit, a potential bond offering. A portion of these proceeds could be utilized to buy back stock at these low prices while allowing conversion of the bonds at a far later date for much less stock. This would also allow the placement of additional shares to institutional investors, thus bringing new shares into the hands of long term holders, rather than immediately going into the public float as it has in the past. However, it was clear that we needed to complete the reverse split prior to any of this taking place, thus we chose to go forward with the reverse split at this time. We are now working to complete such investment banking arrangements. The Company’s balance sheet is solid and the Company is not in danger of bankruptcy. We are growing more financially stable each and every day.
We, the Board of Directors ask each of our shareholders to look at the big picture. With the first and second quarters completed, the weighted earnings per share is approximately $1.00 per share. Therefore at today’s share price, we are trading at a multiple of ONE. Given a current multiple of seventeen, the average for companies in our market segment, it would still project to a share price of $17.00 per share based on just the first two quarters earnings per share with the third and fourth quarters ahead.
Shareholders have been flooding our phone lines, calling personal cell phone numbers and home numbers. No officer, director or employee will answer questions from shareholders, including myself, the appropriate forum is to contact Robert Tilton at 609-888-4111. This will ensure that all information is consistent. We realize that Mr. Tilton can only respond to so many calls and emails a day, but he will work diligently to answer as many as possible. It is sad that many calls that we receive on the voice mails attached to our personal cell phone numbers, home numbers, or to Bob Tilton are filled with profanity and threats. Those calls will not be answered and in fact are being saved and turned over to our attorneys. The Company continues to perform very well in very difficult economic times. We do not control the multiple at which a stock trades at, we can only build a Company that is financially sound and poised for the future and that we are doing. We ask our shareholders to be patient, we all hope and believe that our common stock trading price will truly reflect the Company’s worth as we continue to post each new 10Q.
The future of the Company has never been brighter. The Company is solid; we welcome any scrutiny by the SEC or any governmental agency. We also welcome the opportunity to defend the good name of the Company and its officers and directors in any court in the United States. We are confident with the amazing success of Infotopia, Inc. and the integrity of its officers and directors, the above will clearly be seen by all. The officers, directors and strategic partners look forward to providing the continued explosive growth of the past two quarters and are confident our revamped capital structure will enable us to ramp up current projects and enable the Company to continue to pursue new projects to provide additional growth for years to come.
Sincerely,
Daniel Hoyng
CEO and Chairman
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This information includes "forward-looking statements" that include risk and uncertainties. The forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to a variety of factors, including without limitation the Company's ability to produce and market products and/or services and other risks detailed from time to time in their Company's reports filed with the Securities Exchange Commission.
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