U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2000
-----------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________________ to __________________
Commission File No. 33-3358-NY
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CENTRAXX, INC.
----------------------
(Name of Small Business Issuer in its Charter)
NEVADA 88-0224219
------------------------------- --------------------------
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
267 Matheson Road East
Mississauga, Ontario Canada L4Z 1X8
-----------------------------------
(Address of Principal Executive Offices)
Issuer's Telephone Number: (905) 502-5212
Securities Registered under Section 12(b) of the Exchange Act: None.
Securities Registered under 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.
(1) Yes X No (2) Yes X No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. [ ]
State Issuer's revenues for its most recent fiscal year: December 31, 2000-$0-
For the Exhibit Index see Part III, Item 13.
State the aggregate market value of the common voting stock held by non-
affiliates computed by reference to the price at which the stock was sold, or
the average bid and asked prices of such stock, as of a specified date within
the past 60 days.
March 30, 2001-$10,522,442. There are approximately 12,107,198 shares
of common voting stock of the Registrant held by non-affiliates. The
Registrant has valued these shares on the low bid price per share on March 30,
2001.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)
Not Applicable.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the Issuer's
classes of common equity, as of the latest practicable date:
March 31, 2001
18,142,142
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
A description of "Documents Incorporated by Reference" is
contained in Part III, Item 13.
Transitional Small Business Issuer Format Yes X No ___
PART I
Item 1. Description of Business.
------------------------
Business Development.
---------------------
With the exception of the formation of certain subsidiaries through
which some current and future operations will be conducted, there were no
material business developments concerning the Centraxx, Inc., a Nevada
corporation ("Centraxx" or the "Company") during the year ended December 31,
2000.
Two operating subsidiaries were incorporated in 2000, Centraxx
Research, Inc.("Centraxx Research"), and Wireless Location Services, Inc.
("WLSI"). Centraxx Research was formed to conduct the principal research and
development of the UniPoint technology; and WLSI was formed to manufacture and
market the public network tracking products being developed by the Company.
WLSI will subcontract the manufacturing of these products.
The Company, through its newly incorporated investment company
Centraxx International, Inc. also has a 30% equity interest in Centraxx Korea
Co. Ltd. ("Centraxx Korea"). The Company and Samsung SDS Co. Ltd. (the 70%
stockholder) incorporated Centraxx Korea to jointly market and distribute the
Company's products in South Korea.
For information regarding corporate developments and historical
matters for 1999 and prior years, see the Company's 10-KSB Annual Reports for
the years ended December 31, 1998 and 1999, which have been previously filed
with the Securities and Exchange Commission, and are incorporated herein by
reference. See Part III, Item 13.
All computations herein are based upon United States Dollars.
Business.
---------
Centraxx is a two way wireless data communications Company
specializing in location technologies. The Company is the first in the
industry to have developed a low cost, tracking, locating and monitoring
system utilizing revolutionary UNI-POINT (trademark) technology with numerous
network based and stand-alone applications. The UNI-POINT(trademark)
technology is proprietary and patents are pending.
The Centraxx System utilizes radio frequency in a unique
configuration of data and radar communications to track, locate, communicate
with or monitor vehicles, cargo and equipment. The hardware consists of a
receiver or Base Station and an Electronic Location Tag ("Tag"). The object
to be secured is tagged and the Base Station monitors the relative position of
the Tag. A network of Base Stations will enable the Centraxx System to
monitor the location of the tagged object over the network coverage area.
This process occurs on a real-time basis utilizing UNI-POINT(trademark)
tracking. UNI-POINT(trademark) or single-point tracking represents a
breakthrough in the industry as it is more reliable and substantially more
cost effective than alternative systems such as Global Positioning Satellite
Systems or conventional Triangulation systems.
While the Company objective is to complete the development of the
UniPoint technology and launch our tracking network, the UniPoint development
effort is focused on the development of Network hardware for Centraxx Korea,
and of base stations for private tracking system applications. In addition,
Centraxx has incorporated WLSI (wireless location systems Inc.) through which
it will market a new product that is ready for manufacturing. This new product
is a GPS based Public Network tag (PN tag) that will allow Centraxx to start
revenue generation by the 3rd quarter. It will blend well with our UniPoint
products and allow us to offer alternative hybrid multi-mode products that can
operate inside or outside of our Centraxx networks. The Company can offer
customers a dual tracking system for increased coverage, cost effectiveness
and security which can then be marketed across Canada and the US.
The Company expects to start shipping the "hybrid" PN tag products
in the third quarter of 2001. The strategic introduction of this technology
enables Centraxx to secure this immediate revenue opportunity while it
continues to commercialize the UNI-POINT system and technology. Additional
industry awareness and brand recognition will also be created prior to its own
Network launch.
Although there are numerous potential applications, Centraxx will
initially focus its marketing efforts on the stolen vehicle tracking and fleet
management industry. In addition, the Company has entered into negotiations
with a number of major insurance companies, distributors, and other interested
parties to quickly penetrate this market.
The Company has yet to deploy the UniPoint System, and has not
generated any revenues. The Company has minimal assets except the UniPoint
System, and has had no revenues since 1997. Nor, will the Company receive any
revenues related to UniPoint until it deploys a UniPoint Network; nor will it
generate any revenues from the PN tag until it begins to ship product, no
assurance can be given that any future business operations of the Company will
operate on a profitable basis.
Item 2. Description of Property.
---------------------------------
The Company's research and development group was at period end
housed in an 11,000 sq. ft. facility at Mississauga, ON, Canada, consisting of
8,500 sq. ft of office space and 2,500 sq. ft of Lab space.
On December 1, Centraxx moved its R&D group to 350 Britannia Road,
Mississauga, an 85,000 sq. ft facility. Of the 85,000 sq. ft, 45,000 sq. ft
of warehouse space was sublet to a tenant. The remaining 40,000 sq. ft was
for Centraxx's exclusive use. That Lease was terminated at the end of
January.
On February 9th, 2001, Centraxx relocated to its current facility,
267 Matheson Blvd E., Mississauga, Ontario, to save costs.
Item 3. Legal Proceedings.
---------------------------
The Company is not the subject of any pending material legal
proceedings. There are judgements totaling less than $75,000 to Centraxx
Corp., a wholly-owned subsidiary. To the knowledge of management, no
proceedings are presently contemplated against the Company by and federal,
state or local governmental agency.
Further, to the knowledge of the management, no director or
executive officer is party to any action in which any has and interest adverse
to the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
------------------------------------------------------------
No matter was submitted to a vote of the Company's security
holders during the fourth quarter of the period covered by this Report or
during the previous two calendar years.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
-----------------------------------------------------------------
Market Information.
-------------------
The Company's common stock is currently quoted on the OTC Bulletin
Board of the National Association of Securities Dealers, Inc. (the "NASD")
under the symbol "CNXX." and on the Frankfurt Exchange under the symbol "CJQ"
No assurance can be given that the present market for the Company's common
stock will continue or be maintained. Further, the sale of "unregistered"
and "restricted" shares of the Company's common stock pursuant to Rule 144
of the Securities and Exchange Commission by members of management or others
may have a substantial adverse impact on the present or future public market
for the Company's common stock. For information regarding the number of
"restricted securities" potentially available for resale under Rule 144, see
the heading "Recent Sales of Unregistered Securities," below, under this Item.
The following stock quotations were provided by the National
Quotations Bureau, LLC, and do not represent actual transactions; they also do
not reflect mark-ups, mark-downs or sales commissions.
STOCK QUOTATIONS
CLOSING BID
Quarter ended: High Low
-------------- ---- ---
March 31, 1999 Unpriced Unpriced
June 30, 1999 $3.625 $2.50
September 30, 1999 $3.4375 $2.625
December 31, 1999 $4.8125 $2.75
March 31, 2000 $19.4687 $5.062
June 30, 2000 $14.1875 $4.625
September 30, 2000 $6.3125 $2.031
December 31, 2000 $4.0937 $0.75
Recent Sales of Unregistered Securities.
----------------------------------------
The following "restricted securities were issued by the Company
during the years ended December 31, 1999 and 2000:
Share
Name Date Price Numbers
---------------- ---- ----- -------
Centraxx Ontario
Stockholders 5/99 (1) 15,234,415
Supplier 12/99 $4.36 24,390
Supplier 12/99 $4.62 12,883
Supplier 12/99 $8.50 517
Supplier 12/99 $9.42 1,610
Employee 7/00 $4.04 430(2)
Suppliers 8/00 $3.00-$7.96 36,266
Employee 8/00 $0.70 50,000(3)
Supplier 10/00 $1.96 9,602
Employee 10/00 $0.83 26,500(4)
Supplier 11/00 $2.15 11,000
Suppliers 12/00 $4.16-$4.86 61,863
(1) These shares were issued in connection with the
Centraxx Ontario Agreement. See the heading "Business
Development," Part I, Item 1, of the 10-KSB Annual
Report for the year ended December 31, 1999.
(2) Issued in settlement of former employee claim.
(3) These shares were issued on exercise of an Option
Agreement by a former employee.
(4) These shares were issued in settlement of wages of
a former employee.
See Note 7 of the Company's financial statements accompanying this
Report for additional information regarding recent sales of unregistered
securities.
All of these securities were issued to persons who were either
"accredited investors," or "sophisticated investors," who, by reason of
education, business acumen, experience or other factors, were fully capable of
evaluating the risks and merits of an investment in the Company; and each had
prior access to all material information regarding the Company. The offer and
sale of these securities was believed to be exempt from the registration
requirements of the Securities Act of 1933, as amended, pursuant to Sections
4(2) and 4(6) thereof, and Regulation D or Regulation S of the Securities and
Exchange Commission; and from various similar state exemptions.
Sales of "restricted securities" by members of management and others
could have an adverse effect on the public market for the common stock of the
Company. All of the "restricted securities" outlined above that have been
issued for at least one year have been held for a sufficient period of time
for resale under Rule 144 of the Securities and Exchange Commission, subject
to volume limitations of subparagraph (e) of this Rule and other provisions of
this Rule; once two years have lapsed, all of these limitations cease for non-
affiliated stockholders.
Holders.
--------
The number of record holders of the Company's common stock as of
March 31, 2001 was 640; these numbers do not include an indeterminate number
of stockholders whose shares are held by brokers in street name.
Dividends.
----------
There are no present material restrictions that limit the ability
of the Company to pay dividends on common stock or that are likely to do so in
the future. The Company has not paid any dividends with respect to its common
stock, and does not intend to pay dividends in the foreseeable future because
planned principal operations have not commenced, and the Company has had no
revenues from operations.
Item 6. Management's Discussion and Analysis or Plan of Operation.
-------------------------------------------------------------------
Plan of Operation.
------------------
To date, the Company's focus has been on research and development of
its UNI-POINT (trademark) technology, the engineering sample of which was
successfully demonstrated on December 9, 1999. However, management feels that
the Company to move quickly into revenue generation. As reflected in this
report, Centraxx is currently focusing its efforts to become self-sustaining
through the sale of hardware and services that operate on existing public
networks with the PN Tag while continuing development of the UniPoint
technology. Ultimately, the PN tag system can complement the UniPoint system
to form a complete end-to-end supply chain management system, combining the
low cost advantages of UniPoint with the Network coverage afforded by the
Public Networks.
The Company has entered into some geographic joint ventures and is
negotiating with other joint venture partners and distributors, to form
alliances to quickly penetrate the potential market. There can be no
assurances that any agreements will be obtained or that if they are obtained
that they will provide material financial benefit to the Company.
Frankopan, a merchant bank focused on developing technology-based
companies, has directly or indirectly supplied the initial and ongoing funding
to Centraxx. Frankopan is under contract with Centraxx to manage the business
of Centraxx including financial affairs, legal and corporate governance,
public and investor relations service. Overall management of Centraxx, is
being provided by Michael Ivezic, CEO & Chairman of Centraxx Inc. and Managing
Director of Frankopan & Co. Inc.
Centraxx entered into a funding agreement in the form of a
convertible debenture held by Frankopan for the sum of $2.0M in August 1999.
Security for the loan was provided by a GSA held by Frankopan. This agreement
provided funding through the 2nd quarter. A bridge loan of $1.0M was arranged
for by Frankopan acting as agent which became available in May of 2000.
At the beginning of the last quarter of 2000, Centraxx continued
with the development of the UniPoint Technology. Having fully utilized the
$1.0M in bridge financing, Centraxx was in need of further capital in order to
complete development. The $18M equity line announced in the 3rd quarter of
2000 through New York based financial group was sufficient to complete
development and launch the Network in the 2nd quarter of 2001. The Company
proceeded with the preparation of the registration statement and necessary
filings in order that the first $1.5M under this placement would be available
by November when the bridge financing ran out. At this time, the Company had
in excess of 50 employees and the Company was planning to launch the UniPoint
Network in the 2nd quarter of 2001.
The Company did not file the registration statement given the
deterorating market conditions at the time, it was determined that accessing
the $18M was not in the best interests of the shareholders and further, the
issuance of stock at the prices required would have been excessively dilutive
to the shareholders.
Frankopan arranged for a further $1.5M bridge financing reported in
the 3rd quarter report. This financing did not materialize due to the poor
market conditions that particularly affected the High tech sector. Although
a nominal amount of funding has been advanced from Frankopan, Centraxx was
forced to reschedule its development effort, reduce its work force and move to
a smaller facility.
The Company is actively seeking other sources of finance. Failure
to secure adequate financing in the near future will have a detrimental effect
on the Company's ability to continue to operate. The board is cautiously
optimistic that financing can be found given the nature of the Company's
technology and its potential. The Company is in discussions with a number of
potential sources.
The Company has not yet generated any revenues except some deposits
from potential joint venture partners.
Results of Operations.
----------------------
Year Ended December 31, 2000, compared to December 31, 1999.
------------------------------------------------------------
The current year-end net loss was $(4,897,239) compared to
$(1,976,435) for the corresponding 1999 period.
Professional fees increased by $285,012 over 1999 as a result of two
major factors. Firstly, spending on executive search services increased as
Centraxx hired new staff in 2000. Secondly, legal expenses increased as a
result of the new subsidiaries and joint venture partners agreements which
were put into place during 2000, along with increases in costs associated with
litigation.
Salaries and other administrative costs increased from $566,461 in
1999 to $955,713 in 2000, an increase of 68.7%. This increase resulted from
moving expenses, write-down of leasehold improvements related to both the 2700
Argentia office and the 350 Britannia office and increases in expenses related
to the increase in headcount.
Management fees increased by 30.7% to $158,396 in 2000. The
increase in overall general and administrative costs was mitigated by a
reduction in expenses related to marketing and public relations, which
decreased by $161, 259 or 51.8% in 2000 compared to 1999.
The Company's research and product development costs increased by
$2,055,309 largely due to a net increase of 30 employees in R&D by November
2000. Centraxx has invested $4,310,898 in R&D since inception, which
represents approximately 50.3% of the companies operating expenses.
Interest charges totaled $197,297 in 2000 compared to $8,804 in
1999, which reflects the financing costs associated with the convertible
debenture of $2.0M and note payable in the amount of $1.0M. Due to
increases in fixed assets (mostly computers and peripheral equipment)
depreciation and amortization charges increased to $96,860 from $68,509.
Liquidity.
----------
The Company anticipates that during the next twelve months its
working capital requirements will be 0.6 million for the PN tag product. The
planned use from such funding will be for the production and marketing of the
PN tag. Funding requirements to complete the commercialization of the
UniPoint technology are $5M-1M. Thereafter, the Company expects that it
will need to seek additional capital through one or more public or private
offerings of debt or equity to fund network deployment. There can be no
assurance that the Company will be successful in obtaining any such funds on
terms acceptable to it, if at all.
An increase in the number of employees, primarily in marketing,
sales and distribution are anticipated during the third quarter of 2001, when
the Company's products are expected to be ready for market launch.
Risks and Uncertainties
-----------------------
As of the date of this report, the Company anticipates that its
UniPoint technology will not be available for sale for distribution for at
least the next 4 quarters and that the PN tag will not be available until the
3rd quarter 2001. The Company has no established source of revenues and is
dependent on its ability to raise further funding. There can be no assurance
that the Company will be successful in obtaining any funding at reasonable
terms. There can be no assurance that the Company will be able to complete
the commercial development of the UniPoint technology at that time or at any
time, or that the Company will be able to sell or distribute its PN tag
product or the UniPoint technology to generate profitable operations at that
time or in the foreseeable future. There can be no assurance that the
technology will be successfully released to the market or that the Company
will profit therefrom. The Company is currently in financial difficulty and
without a source of funds in the near future the Company's ability to launch
the PN tag product is unlikely. The Company is currently in default of its
obligations to revenue Canada and has 3 million of debt outstanding. Even
with a successful launch of the PN tag product, there is no assurance that the
Company can meet the operational funding requirements.
Forward-Looking Statements
--------------------------
This Annual Report contains certain "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended
and Section 21E of the Securities Exchange Act of 1934, as amended which
represent the Company's expectations or beliefs, including, but not limited
to, statements concerning industry performance, the Company's performance,
financial condition, growth and acquisition strategies, margins and growth in
sales of the Company's performance, financial condition, growth and
acquisition strategies, margins and growth in sales of the Company's products.
For this purpose, any statements contained in this Annual Report that are not
statements of historical fact may be deemed to be forward-looking statements.
With out limiting the generality of the foregoing, words such as "may",
"will", "expect", "believe", "plan", "anticipate", "intend", "could",
"estimate", "continue", "goal" or "strategy" or the negative or other
variations thereof or comparable terminology are intended to identify forward-
looking statements. These statements by their nature involve substantial
risks and uncertainties, certain of which are beyond the Company's control,
and actual results may differ materially depending on a variety of important
factors, including those described previously in the "Risk Factors" section of
the Company's 1999 Form 10-K for the year ended December 31, 1999.
Item 7. Financial Statements.
------------------------------
Centraxx, Inc.
(A Development Stage Company)
Consolidated Financial Statements
(Expressed in U.S. dollars)
December 31, 2000
Contents
Page
Report of Independent Accountants 1
Consolidated Balance Sheet 2
Consolidated Statement of Operations 3
Consolidated Statement of Shareholders' Deficiency 4
Consolidated Statement of Cash Flows 5
Notes to the Consolidated Financial Statements 6 - 18
Report of Independent Accountants
To the Shareholders of
Centraxx, Inc.
We have audited the accompanying consolidated balance sheets of
Centraxx, Inc. (a Nevada Corporation) and subsidiaries, a development
stage company, as at December 31, 2000 and 1999 and the consolidated
statements of operations, changes in shareholders' deficiency and cash
flows for years 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.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform our audits to obtain reasonable assurance 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 consolidated financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, these consolidated financial statements present fairly,
in all material respects, the consolidated financial position of
Centraxx Inc, and subsidiaries as at December 31, 2000 and 1999 and the
results of their operations and their cash flows for the years then
ended in accordance with accounting principles generally accepted in the
United States of America.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in
Note 1 to the consolidated financial statements, the Company has no
established source of revenue and is dependent on its ability to raise
further amounts of funding. This raises substantial doubt about its
ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 1. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/s/Grant Thornton LLP
Markham, Canada
May 10, 2001 Chartered Accountants
Centraxx, Inc.
(A Development Stage Company)
Consolidated Balance Sheet
(Expressed in U.S. Dollars)
December 31 2000 1999
Assets
Current
Cash $ 3,990 $ 234
Prepaid expenses 11,967 42,231
15,957 42,465
Capital assets (Note 2) 297,677 191,413
Other assets 18,816 16,671
$ 332,450 $ 250,549
Liabilities
Current
Accounts payable and accrued liabilities
(Note 4) $ 2,600,266 $ 508,724
Loan facility (Note 5) 1,000,000 -
3,600,266 508,724
Convertible debentures (Note 6) 2,158,114 906,319
5,758,380 1,415,043
Shareholders' Deficiency
Capital stock (Note 7) 18,142 17,946
Contributed surplus 3,065,133 2,498,958
Accumulated other comprehensive gain (loss) 65,529 (3,903)
Deficit (8,574,734)(3,677,495)
(5,425,930)(1,164,494)
$ 332,450 $ 250,549
Commitments (Note 8)
Subsequent events (Note 15)
Contingencies (Note 16)
See accompanying notes to the consolidated financial statements.
Centraxx, Inc.
(A Development Stage Company)
Consolidated Statement of Operations
(Expressed in U.S. Dollars)
August 8, 1997 to
Dec. 31, 2000
Year Ended December 31 2000 1999 Cumulative
Sales $ - $ - $ -
Cost of sales - - -
Gross margin - - -
Expenses
Marketing and public relations 150,132 311,391 579,363
Management fees 158,396 121,156 453,581
Professional fees 436,200 151,188 707,520
Salaries and other administration 955,713 566,461 1,961,242
Research and development costs 2,805,801 750,492 4,310,898
Depreciation and amortization 96,860 68,509 252,556
Interest on debt 197,297 8,804 206,101
Foreign exchange (gain) loss 96,840 (1,566) 103,473
4,897,239 1,976,435 8,574,734
Net loss $ (4,897,239)$(1,976,435)$(8,574,734)
Net loss per share, basic and
diluted (Note 2) $ (0.27)$ (0.11)
See accompanying notes to the consolidated financial statements.
Centraxx, Inc.
(A Development Stage Company)
Consolidated Statement of Shareholders' Deficiency
(Expressed in U.S. Dollars)
Year Ended December 31, 2000
(Note 7)
Common Stock Contributed Accumulated
Shares Amount Surplus Deficit
December 31, 1997 12,265,672 $ 609,303 $ - $(268,272)
Foreign currency
translation adjustment - - - -
Issue of shares
(Note 7(b)) 2,102,008 1,053,779 - -
Net loss 1998 - - - (1,432,788)
Total comprehensive loss - - - -
December 31, 1998 14,367,680 1,663,082 - (1,701,060)
Issue of shares
(Note 7(b)) 866,735 718,712 - -
Share issue costs - (52,000) - -
15,234,415 2,329,794 - (1,701,060)
Issue of stock in
connection with
recapitalization
(Note 1) 2,672,666 (2,311,887) 2,311,887 -
Foreign currency
translation adjustment - - - -
Issue of shares
(Note 7(a)) 39,400 39 187,071 -
Net loss 1999 - - - (1,976,435)
Total comprehensive loss - - - -
December 31, 1999 17,946,481 $ 17,946 $2,498,958 $(3,677,495)
Foreign Currency
translation adjustment - - - -
Issue of shares (Note
7(a)) 195,661 196 566,175 -
Net loss 2000 - - - (4,897,239)
Total comprehensive loss - - - -
December 31, 2000 18,142,142 $ 18,142 $3,065,133 $(8,625,355)
See accompanying notes to the consolidated financial statements.
Centraxx, Inc.
(A Development Stage Company)
Consolidated Statement of Shareholders' Deficiency
(Expressed in U.S. Dollars)
Year Ended December 31, 1999
Accumulated
Other
Comprehensive Total Comprehensive
Loss Deficiency Loss
December 31, 1997 $ 7,917 $348,948 -
Foreign currency
translation
adjustment (11,708) (11,708) (11,708)
Issue of shares
(Note 5(b)) - 1,053,779 -
Net loss 1998 - (1,432,788) (1,432,788)
Total comprehensive loss - - (1,444,496)
December 31, 1998 (3,791) (41,769)
Issue of shares
(Note 5(b)) - 718,712
Share issue costs - (52,000)
(3,791) 624,943
Issue of stock in
connection with
recapitalization
(Note 1) - -
Foreign currency
translation
adjustment (112) (112) (112)
Issue of shares
(Note 5(a)) - 187,110 -
Net loss 1999 - (1,976,435) (1,976,435)
Total Comprehensive loss - - (1,976,547)
December 31, 1999 $(3,903) $(1,164,494)
Foreign currency
translation
adjustment 69,432 69,432 69,432
Issue of shares (Note
7(a)) - 566,371 -
Net loss 2000 - (4,897,239) (4,897,239)
Total comprehensive loss - - (4,827,807)
December 31, 2000 65,529 $(5,425,930)
See accompanying notes to the consolidated financial statements.
Centraxx, Inc.
(A Development Stage Company)
Consolidated Statement of Cash Flows
(Expressed in U.S. Dollars)
Year Ended December 31 2000 1999
Cash flows from (applied to)
Operating
Net loss $(4,897,239) $(1,976,435)
Depreciation and amortization 96,860 68,509
Services for stock 531,645 283,045
(4,268,734) (1,624,881)
Changes in
Prepaid expenses 30,264 (22,925)
Accounts payable and accrued liabilities 2,089,934 186,001
(2,148,536) (1,461,805)
Financing
Issue of shares 34,580 622,738
Share issue costs - (52,000)
Issue of convertible term loan 1,000,000 -
Issue of convertible debenture 1,093,681 906,319
2,128,261 1,477,057
Investing
Purchase of other assets (2,145) (673)
Purchase of capital assets (43,256) (2,202)
(45,401) (2,875)
Foreign currency effect on cash 69,432 (12,284)
Net increase in cash during the year 3,756 93
Cash, beginning of year 234 141
Cash, end of year $ 3,990 $ 234
Supplemental cash flow information (Note 14)
See accompanying notes to the consolidated financial statements.
Centraxx, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
December 31, 2000
Nature of business
Centraxx Inc. (the "Company"), organized under the laws of the State of
Nevada, is a wireless data communications Company specializing in providing
location technology solutions. The Company has developed a proprietary radio
location two-way land-based system utilizing single-point tracking ("UNI-
POINT" technology) which can be deployed to provide effective solutions for
numerous safety, security and location information needs in multiple network
and stand-alone applications. The Company conducts all of its operations
through wholly owned subsidiaries, Centraxx Corp., Centraxx International,
Inc., Centraxx Research Inc., and Wireless Location Services Inc. All of the
subsidiaries are located in Mississauga, Ontario, Canada.
The Company is considered to be in the development stage and the
accompanying financial statements represent those of a development stage
enterprise, and therefore, is subject to the usual business risks of
development stage companies.
1. Summary of significant accounting policies
Accounting principles
The Company's accounting and reporting policies conform to accounting
principles generally accepted in the United States of America. The financial
statements are prepared using United States dollars.
Basis of presentation
The consolidated financial statements include the accounts of Centraxx,
Inc. and its wholly owned subsidiaries. Significant intercompany transactions
have been eliminated.
Foreign currency translation
The functional currency of the Company is the Canadian dollar. The
financial statements are presented in U.S. dollars using the principles set
out in Statement of Financial Accounting Standards No. 52 "Foreign Currency
Translation" (SFAS No. 52). Assets and liabilities are translated at the rate
of exchange in effect at the close of the period. Revenues and expenses are
translated at the weighted average of exchange rates in effect during the
period. The effects of exchange rate fluctuations on translating foreign
currency assets and liabilities into U.S. dollars are included as part of the
accumulated other comprehensive loss component of shareholders' equity.
Centraxx, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
December 31, 2000
1. Summary of significant accounting policies
Investments
The Company accounts for certain investments under the equity method.
The Company accounts for an investment under the equity method if the
investment gives the Company the ability to exercise significant influence,
but not control, over an investee. Significant influence is generally deemed
to exist if the Company has an ownership interest in the voting stock of the
investee of between 20% and 50% although other factors, such as representation
on the investee's Board of Directors and the impact of commercial
arrangements, are considered in determining whether the equity method of
account is appropriate.
Stock based compensation
The Company accounts for stock options granted under its stock options
plan using APB Opinion 25 for options granted to employees and FAS 123 for
options granted to non-employees.
Use of estimates
In preparing the Company's financial statements, management is required
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Advertising expense
Advertising expenditures are expensed as incurred.
Depreciation
Rates of depreciation are applied to write off the cost of capital
assets less estimated salvage value over their estimated useful lives. All
capital assets are being depreciated on a straight line basis over 5 years.
Income taxes
The Company accounts for its income taxes under the liability method
specified by Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes. Deferred tax assets and liabilities are
determined based on the difference between the financial statement and tax
bases of assets and liabilities as measured by the enacted tax rates which
will be in effect when these differences reverse. Deferred tax expense is the
result of changes in deferred tax assets and liabilities.
Centraxx, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
December 31, 2000
1. Summary of significant accounting policies (continued)
Loss per share
The Company reports earnings per share in accordance with the provisions
of SFAS No. 128, Earnings Per Share. SFAS No. 128 requires presentation of
basic and diluted earnings per share in conjunction with the disclosure of the
methodology used in computing such earnings per share. Basic earnings per
share excludes dilution and is computed by dividing income available to common
shares by the weighted average common shares outstanding during the period.
Diluted earnings per share takes into account the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised and converted into common stock.
There were stock options outstanding at December 31, 2000, to purchase
2,878,500 shares of common stock which were not included in the computation of
diluted loss per share because to do so would be antidilutive. Additionally,
the common shares to be issued on conversion of outstanding convertible debt
were not included for the same reason.
Basic weighted average shares outstanding for the year were 17,995,624
(1999 16,835,887).
Ongoing operations
As of December 31, 2000, the Company has experienced a cumulative loss
of $8,574,734, and is in default on its loan facilities and payables. (see
Notes 5 and 16). The Company has commenced its planned principal operations
through its subsidiaries, however, it has not yet earned any revenue therefrom
and the technologies that it intends to develop may require cash in excess of
its current resources. The ability of the Company to translate these
technologies into marketable products is dependent on management's ability to
obtain adequate financing, develop commercially saleable products and to
achieve profitable operations.
Management is continuing to devote significant efforts to obtain
financing to fund the continued development of its Uni-Point technology and PN
tag. At this time, the company is in discussions with interested parties for
ongoing financing.
The Company's current operational focus is to launch the PN tag product
and to continue to develop the Uni-Point technology until it is able to be
commercially exploited.
These financial statements do not reflect adjustments that would be
necessary if the going concern assumption were not appropriate because
management believes that the action already taken, or planned, will support
the validity of the going concern assumptions used in preparing these
financial statements.
Centraxx, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
December 31, 2000
1. Summary of significant accounting policies (continued)
Newly issued accounting standards
In June 1999, SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, was issued and as amended by SFAS No's. 137 and 138 is
effective for all fiscal quarters of fiscal years beginning after June 15,
2000. The Company will adopt SFAS No. 133 effective with the first quarter of
2001. The statement establishes accounting and reporting standards for
derivative instruments and for hedging activities. SFAS No. 133 will require
the Company to measure all derivatives at fair value and to recognize them in
its balance sheet as an asset or liability, depending on the Company's rights
or obligations under the derivative contract. This standard will not impact
the Company's financial statements.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101,
"Revenue Recognition". This staff accounting bulletin summarizes certain of
the staff's views in applying generally accepted accounting principles to
revenue recognition in financial statements. The staff provided this guidance
due, in part, to the large number of revenue recognition issues that
registrants encounter. The adoption of this bulletin will not have a material
impact on the Company's financial statements.
Reclassification
Certain of the 1999 and cumulative comparative figures have been
reclassified to conform with the financial statement presentation adopted in
the current year.
2. Capital assets 2000 1999
Cost
Engineering equipment $ 412,875 $ 209,522
Office furniture and equipment 127,126 124,171
Leasehold improvements - 13,352
540,001 347,045
Accumulated depreciation
Engineering equipment 161,465 90,583
Office furniture and equipment 80,859 58,522
Leasehold improvements - 6,527
242,324 155,632
Net book value
Engineering equipment 251,410 118,939
Office furniture and equipment 46,267 65,649
Leasehold improvements - 6,825
$ 297,677 $ 191,413
Centraxx, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
December 31, 2000
3. Investment
In December the Company and Samsung SDS Co. Ltd. incorporatedc Centraxx
Korea Co. Ltd. to jointly market and distribute the Company's products in
South Korea. The Company's 30% equity interest, at a cost of $250,000, is to
be financed, by agreement between the parties, with future product. Until the
product is delivered the liability will bear interest at Libor + 1%, per
annum. As at December 31, 2000 Centraxx Korea Co. Ltd. has no activity and
the Company has provided no product, therefore no balance sheet or income
statement effect has been recorded.
4. Accounts payable and accrued liabilities 2000 1999
Accounts payable
Trade $ 776,719 $ 201,413
Related parties 602,408 77,130
Customer deposits 66,262 6,790
Payroll and related costs 673,593 153,608
Accrued liabilities 481,283 69,783
$ 2,600,266 $ 508,724
5. Loan facility
The lender has provided a loan facility bearing interest at 12% per
annum due September 30, 2000. As security the Company has provided a general
security agreement covering all the company assets. As at the balance sheet
date the Company is in default under the loan facility, due to non-payment of
the outstanding balance.
The loan has been reflected as current as the Company is in default and
the intention of the holder is unknown.
6. Convertible debentures
The debenture facility, to a maximum of $2,000,000, with a related
party, consists of a series of 8% convertible debentures. As security the
Company has provided a charge on the assets of the Company together with a
guarantee by the Company's subsidiary (Centraxx Corp.). The debenture
provides for a deferment of interest for two (2) years from the date of
issuance of each debenture, thereafter to be paid quarterly, and a conversion
to stock privilege at any time at the rate of $2 per share. The principle is
due five years from the date of issuance of each debenture.
Centraxx, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
December 31, 2000
6. Convertible debentures (continued)
Future repayments are as follows:
January 2004 $200,000
August 2004 $100,000
September 2004 $150,000
October 2004 $200,000
November 2004 $200,000
December 2004 $200,000
February 2005 $350,000
March 2005 $600,000
As at December 31, 2000, interest of $158,114 (1999: $8,804) has been
accrued
7. Capital stock 2000 1999
Authorized:
200,000,000 Common shares with a par value
of $0.001
Issued:
18,142,142 Common shares (1999 17,946,481) $ 18,142 $ 17,946
(a) Centraxx, Inc.
i) In August 2000, 7,650 Common shares were issued, for $3.99 per
share, to a supplier in settlement for services. These services had a market
value of $30,504 and are included in the statement of operations as
professional fees.
ii) In August 2000, 6,528 Common shares were issued, for $6.71 per
share, to a supplier in settlement for services. These services had a market
value of $43,774 and are included in the statement of operations as
professional fees.
iii) In August 2000, 12,088 Common shares were issued, for $7.96 per
share, to a supplier in settlement for services. These services had a market
value of $96,226 and are included in the statement of operations as research
and development costs.
iv) In August 2000, 10,000 Common shares were issued, for $3.01 per
share, to a supplier in settlement for services. These services had a market
value of $30,091 and are included in the statement of operations as marketing
and public relations expense.
Centraxx, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
December 31, 2000
8. Capital Stock (continued)
v) In August 2000, 430 Common shares were issued, for $4.04 per share,
to a supplier in settlement for services. These services had a market value of
$1,737 and are included in the statement of operations as research and
development costs.
vi) In August 2000, 50,000 Common shares were issued, for $0.70 per
share, to a former employee of the Company who exercised outstanding stock
options.
vii) In October 2000, 26,500 Common shares were issued, for $0.83 per
share, to a former employee of the Company in settlement for services. These
services had a market value of $21,904 and are included in the statement of
operations as administration expenses.
viii) In October 2000, 9,602 Common shares were issued, for $1.96 per
share, to a supplier in settlement for services. These services had a market
value of $18,841 and are included in the statement of operations as
professional expense.
ix) In November 2000, 11,000 Common shares were issued, for $2.15 per
share, to a supplier in settlement for services. These services had a market
value of $23,672 and are included in the statement of operations as
administration expense.
x) In December 2000, 14,862 Common shares were issued, for $4.66 per
share, to a supplier in settlement for services. These services had a market
value of $69,298 and are included in the statement of operations as
professional fees.
xi) In December 2000, 47,001 Common shares were issued, for $4.16 per
share, to a supplier in settlement for services. These services had a market
value of $195,324 and are included in the statement of operations as research
and development costs.
xii) In December 1999, 1,610 Common shares were issued, for $9.42 per
share, to a supplier in settlement for services. These services had a market
value of $15,166 and are included in the statement of operations as marketing
expense.
xiii) In December 1999, 12,883 Common shares were issued, for $4.62 per
share, to a supplier in settlement for services. These services had a market
value of $59,519 and are included in the statement of operations as marketing
expense.
xiv) In December 1999, 517 Common shares were issued, for $8.50 per
share, to a supplier in settlement for services. These services had a market
value of $4,395 and are included in the statement of operations as research
and development costs.
xv) In December 1999, 24,390 Common shares were issued, for $4.36 per
share, to a supplier in settlement for services. These services had a market
value of $106,379 and are included in the statement of operations as research
and development costs.
(b) Centraxx Corp.
The following capital stock transactions occured in the subsidiary
(Centraxx Corp.) during the 1988 fiscal year:
i) On September 30, 1998, 749,493 Common shares were issued to a
related party at an issue price of $0.51 per share as per the original
Subscription Agreement dated September 2, 2997. The shares were recorded
at a total consideration of $382,241.
Centraxx, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
December 31, 2000
8. Capital stock (continued)
ii) On September 30, 1998, 30,000 Common shares were issued in exchange
for services to non-related parties at an issue price of $0.67 per share.
The shares were recorded at a total consideration of $20,100. The
corresponding expenses were recorded in the statement of operations.
iii) On September 30, 1998, 8,500 Common shares were issued in exchange
for services to non-related parties at an issue price of $2.05 per share.
The shares were recorded at a total consideration of $17,425. The
corresponding expenses were recorded in the statement of operations as
professional fees.
iv) On December 31, 1998 30,000 Common shares were issued in exchange
for services to non-related parties at an issue price of $1.35 per share.
The shares were recorded at a total consideration of $40,500. The
corresponding expenses were recorded in the statement of operations as
marketing expense.
v) On December 31, 1998, 123,800 Common shares were issued in exchange
for services to non-related parties at an issue price of $0.51 per share.
The shares were recorded at a total consideration of $62,924. The
corresponding expenses were recorded in the statement of operations as
research and development costs.
The following capital stock transactions occurred in the subsidiary
(Centraxx Corp) during the period January 1, 1999 to May 18, 1999:
i) In January 1999, 61,895 Common shares were issued to employees at an
issue price of $0.50 per share. The shares were recorded at a total
consideration of $30,948. These shares were issued as settlement of wages
owed to these employees for the 1998 fiscal year.
ii) During the period January 1, 1999 to May 18, 1999, 270,761 Common
shares were issued to a related party at an issue price of $0.66 per share as
per the original Subscription Agreement dated September 2, 1997. The shares
were recorded at a total consideration of $178,702.
iii)During the period January 1, 1999 to May 18, 1999, 50,155 Common
shares were issued in exchange for services to non-related parties at an issue
price of $1.33 per share. The shares were recorded at a total consideration
of $66,638. The corresponding expense has been included in the statement of
operations.
Centraxx, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
December 31, 2000
8. Commitments
The Company has entered into agreements to lease its office, research
and development, and warehouse premises and certain equipment for various
periods until 2006 under operating leases. Future minimum lease payments under
the operating leases are as follows:
Equipment Premises
2001 $ 153,271 $ 424,489
2002 67,472 432,911
2003 53,344 453,125
2004 - 464,916
2005 - 464,916
2006 - 271,201
See also Note 15.
9. Related party transactions
During the year, the Company incurred the following expenses with
related parties:
Management fees and public relations expense in the amount of $145,248
(1999 - $203,624) were paid to a Company subject to significant influence by
one of the Directors.
Scientific research and development consulting expenses totalling $7,780
(1999 - $138,465) were paid to two companies, each controlled by two Directors
of the Company.
These transactions occurred under terms and conditions reflecting
prevailing market conditions.
Refer to Notes 4 and 6 for details of amounts owing to related parties.
10. Income taxes
The reconciliation of the statutory federal rate to the Company's
effective income tax rate is as follows:
2000 1999
Statutory tax benefit $(2,201,798) $ (896,881)
Non-deductible expense 66,562 51,144
Amortization of share issue costs (4,628) (4,887)
Other - (34,378)
Increase in valuation allowance 2,139,864 885,002
$ - $ -
Centraxx, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
December 31, 2000
10. Income taxes (continued)
Under SFAS No. 109, Accounting for Income Taxes, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates.
The tax effect of temporary differences that give rise to deferred
income taxes is as follows:
2000 1999
Deferred tax assets
Net operating loss carryforwards $ 3,735,152 $ 1,761,055
Capital assets 112,387 26,384
Share issue costs 13,884 19,385
Valuation allowance (3,861,423) (1,806,824)
$ - $ -
At December 31, 2000, the Company had approximately $8,624,000 of net
operating loss carryforwards which expire as follows:
2004 $ 601,500
2005 1,454,100
2006 1,857,400
2007 4,711,000
11. Industry segment
Management has determined that the Company operates in one industry
segment.
12. Stock options
The Company initiated a stock option plan on January 18, 1999 for
employees and on October 1, 1999 for Directors. The plan allows the Company
to grant options to directors and employees up to an aggregate of 20% of the
outstanding common shares of the Company (3,628,428 options as of December 31,
2000). The options have a term expiring five (5) years after the grant date.
The exercise price for each option will be at fair market value per share at
the date the options are granted.
Centraxx, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
December 31, 2000
12. Stock options (continued)
During the year, the Company granted 1,988,500 options that are
accounted for under APB Opinion 25 and related interpretations. Entities that
continue to account for stock options using APB Opinion No. 25 are required to
make pro forma disclosures of net income and earnings per share, as if the
fair value based method of accounting defined in SFAS No. 123 had been
applied. Had compensation cost for the above stock option plan been determined
based on the fair value of the options at the grant dates consistent with the
method of SFAS No. 123, the Company's net income and diluted loss per share
would have been reduced to the pro forma amounts indicated below:
Net loss As reported $(4,947,860)
Pro forma $(6,409,385)
Net loss per share, Basic and Diluted
As reported $ (0.27)
Pro forma $ (0.36)
During the year, the Company granted no options that are accounted
for under SFAS no. 123 "Accounting for Stock-Based Compensation". The standard
contains a fair value based method for valuing stock-based compensation that
entities may use, and measures compensation cost at the grant date based on
the fair value of the award. Compensation is then recognized over the service
period, which is usually the vesting period.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes options pricing model with the following weighted
average assumptions used for grants. Expected volatilities ranging from 72%
to 250%; risk free interest rate of 6%; and expected lives of 5 years.
A summary of the status of the Company's option plans as of December 31,
2000 and changes during the period ending on that date is represented below:
. Shares Weighted Avg.
Outstanding, beginning of period 1,945,000 $ 1.35
Granted 1,988,500 $ 6.97
Exercised (50,000) $ (0.70)
Forfeited or cancelled (1,005,500) $ (5.92)
Outstanding, end of period 2,878,500 $ 3.69
Options exercisable at period-end 1,252,438
Weighted average fair value of options
granted during the period $ 6.03
Centraxx, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
December 31, 2000
12. Stock options (continued)
The following table summarizes information about options outstanding
and exercisable at December 31, 2000:
Options Outstanding Options Exercisable
Range of Weighted Avg.
Exercise Number Remaining Weighted Avg. Number Weighted Average
Prices Outstanding Contractual Life Exercise Price Outstanding Exercise Price
$0.70 800,000 2.7 years $ 0.70 770,876 $ 0.70
$1.00
to $3.00 687,000 3.9 years $ 2.48 253,356 $ 2.53
$3.01 to
$5.00 139,000 4.7 years $ 3.94 31,600 $ 3.88
$5.01 to
$7.00 590,000 4.5 years $ 5.87 74,575 $ 5.88
$7.01 to
$9.00 60,000 4.1 years $ 8.38 7,890 $ 8.30
$9.01 to
$11.00 572,500 4.2 years $ 10.34 109,716 $10.25
$11.01 to
$17.00 30,000 4.2 years $ 16.62 4,424 $16.44
2,878,500 1,252,438
See also Note 15
13. Financial instruments
Foreign currency risk
The Company operates primarily in Canadian dollars.
Fair values
The estimated fair value of cash and cash equivalents, accounts payable
and accrued liabilities approximates carrying value due to the relatively
short term nature of the instruments and/or floating interest rates on
the instruments. The estimated fair value of convertible debenture also
approximates carrying value due to the relatively short term to maturity
and/or effective interest rates that are not significantly different from
market rates.
14. Supplemental cash flow information
2000 1999
Interest paid $ - $ -
Income taxes $ - $ -
During the year the company jointly incorporated a company in Korea (see
Note 3) to market and distribute the company's product therein. The
Company's investment is to be financed by provision of product in the
future.
Centraxx, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
December 31, 2000
15. Subsequent events
(i) Subsequent to the year end the lesser of the equipment under the
operating lease disclosed in Note 8 entered the Company's premises and
reacquired the equipment, as the Company was in arrears of the payments due
under the terms of the lease. The lessor claims not to have recovered
approximately $74,000 of the equipment and is claiming payment thereof. The
Company is disputing a material portion of this claim.
(ii) On February 9, 2001 the Company moved its premises. Under the new
lease arrangement for premises future minimum payments are as follows:
2001 $48,750
2002 $66,000
2003 $71,250
2004 $12,000
(iii) Subsequent to the year end, by the end of January 2001, the Company had
laid off substantially all of its employees. All employees share options
expire 30 days from the date an employee ceases to be employed.
16. Contingencies
The Company is in arrears on the majority of the trade payables. The
Company has received numerous letters of notice of litigation proceedings
to collection. The Company is negotiating with all suppliers to reach
resolution on payment terms acceptable to both parties.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
---------------------
The Company changed independent auditors from Jones, Jenson & Co.,
of Salt Lake City, Utah, to Grant Thornton, LLP, Chartered Accountants, of
Ontario, Canada. The change was not the result of any disagreement on
accounting principals or practices, or accounting or auditing procedure, but
was made to have an auditing firm that was in close proximity to the principal
executive offices of the Company in Ontario, Canada. See the 8-K Current
Report dated November 17, 1999, which has previously been filed with the
Securities and Exchange Commission at or about the same time as this Report,
and is incorporated herein by reference.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
--------------------------------------------------
Identification of Directors and Executive Officers.
---------------------------------------------------
The following table sets forth the names of all current directors
and executive officers of the Company. These persons will serve until the
next annual meeting of the stockholders or until their successors are elected
or appointed and qualified, or their prior resignation or termination.
Date of Date of
Positions Election or Termination
Name Held Designation or Resignation
---- ---- ----------- --------------
Michael Ivezic President 5/18/99 *
Director and CEO 5/18/99 *
David Pamenter Secretary 5/18/99 *
Brian J.
DeChamplain Executive Vice
President 5/18/99 *
Chief Technology
Officer 5/18/99 *
Director 5/18/99 *
Frank Gerlach Vice President 5/18/99 *
Chief Engineer 5/18/99 *
Director 5/18/99 *
Michael St. Vice President 5/18/99 06/30/00
Eve
Tony Monga Director 5/18/99 11/16/00
Frank Executive Vice 10/1/99
Neuperger President 11/17/00
Bob Hill Vice President 10/1/99 *
Diane Wigley Director 10/1/99 11/16/00
* These persons presently serve in the capacities
indicated.
Business Experience.
--------------------
Michael Ivezic, Acting President, Director, age 41. From 1997 to
present, Mr. Ivezic has been the Managing Director of Frankopan & Co, Inc.
Between 1994 and 1997, he was President and CEO of Luminart Inc. Mr. Ivezic
is providing overall direction to Centraxx during its startup and development
phase. Mr. Ivezic has 15 years experience in managing the startup and growth
phases of several companies. He has extensive expertise in identifying high
potential business opportunities and raising the necessary working capital for
these ventures.
David Pamenter, Esq., Secretary. Mr. Pamenter, age 52, a lawyer,
has been a partner with Gowling, Strathy & Henderson from 1997 to present.
Prior to this, he was a partner in the law firm of Lang, Michener.
Brian J. DeChamplain, Executive Vice President, Chief Technology
Officer, Director, age 47. Mr. De Champlain, a co-founder of Centraxx Corp.,
the Company's predecessor, brings 16 years of management and RF electronic
design experience in the communications, cable TV, broadcast and consumer
product industries. His technical accomplishments include the design and
patent of new video and RF based scrambling systems for the cable TV,
broadcast industries and consumer RF markets. He has several patents to his
credit and is well respected as a RF product designer.
Frank Gerlach, Vice President, Chief Engineer and Director, age 41.
Mr. Gerlach is a co-founder of Centraxx Corp. Between 1986 and 1996, Mr.
Gerlach was employed by Spar Aerospace as a Senior Project Engineer
responsible for projects including the redesign of the Canada Arm and
integration of a fiber optic based naval communications systems. From 1996
to 1997, Mr. Gerlach was Vice President of Paltrac International Corporation.
Bob Hill, Vice President Sales, Strategic and Specialty Markets. Mr.
Hill, age 52, brings over 20 years of sales and marketing experience with
leading international consumer products corporations. His expertise in new
product launches and distribution channel programming will ensure the rapid
awareness and acceptance of the Centraxx technology and products in the
international marketplace. The familiarity gained with distribution channels
applicable to Centraxx will be vital to accelerating customer support of the
product offering.
Significant Employees.
----------------------
None; not applicable.
Family Relationships.
---------------------
None; not applicable.
Involvement in Certain Legal Proceedings.
-----------------------------------------
To the knowledge of management, during the past five years, no
present or former director, person nominated to become a director, executive
officer, promoter or control person of the Company:
(1) Was a general partner or executive officer of any business
by or against which any bankruptcy petition was filed,
whether at the time of such filing or two years prior
thereto;
(2) Was convicted in a criminal proceeding or named the subject
of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
(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 from or otherwise limiting, the following activities:
(i) Acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool
operator, floor broker, leverage transaction merchant,
associated person of any of the foregoing, or as an
investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or
employee of any investment company, bank, savings and
loan association or insurance company, or engaging in
or continuing any conduct or practice in connection
with such activity;
(ii) Engaging in any type of business practice; or
(iii) Engaging in any activity in connection with the
purchase or sale of any security or commodity or
in connection with any violation of federal or
state securities laws or federal commodities
laws;
(4) Was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any federal
or state authority barring, suspending or otherwise limiting
for more than 60 days the right of such person to engage in
any activity described above under this Item, or to be
associated with persons engaged in any such activity;
(5) Was found by a court of competent jurisdiction in a civil
action or by the Securities and Exchange 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; or
(6) Was found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to
have violated any federal commodities law, and the judgment
in such civil action or finding by the Commodity Futures
Trading Commission has not been subsequently reversed,
suspended or vacated.
Compliance with Section 16(a) of the Exchange Act.
--------------------------------------------------
Management believes that all reports required to be filed by members
of management or 10% stockholders have been timely filed.
Item 10. Executive Compensation.
-------------------------------
Cash Compensation.
------------------
The following table sets forth the aggregate compensation paid by
the Company for services rendered during the periods indicated:
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Years or other all
principal periods Annual restricted option/ LTIP other
position Ended $ $ Compen- Stock SAR's Payouts Compen-
Salary Bonus sation awards$ # $ sation$
------------------------------------------------------------------------------
Michael 12/31/99 0 0 0 0 0 0 0
Ivezic, Pres 12/31/00 0 0 0 0 0 0 0
Director
David Pamenter12/31/99 0 0 0 0 0 0 0
Sec 12/31/00 0 0 0 0 0 0 0
Brian J.
DeChamplain 12/31/99 0 0 0 0 0 0 0
Exec VP, CTO, 12/31/00$76444* 0 0 0 0 0 0
Director
Frank Gerlach 12/31/99 $72619 0 0 0 0 0 0
VP, Chief Eng 12/31/00 $72614* 0 0 0 0 0 0
Director
Tony Monga 12/31/99 0 0 0 0 0 0 0
Director 12/31/00 0 0 0 0 0 0 0
Frank
Neuperger 12/31/99$142000 0 0 0 0 0 0
Exec. VP 12/31/00$142000* 0 0 0 0 0 0
Bob Hill 12/31/99 $42200 0 0 0 0 0 0
V.P. 12/31/00 $57900* 0 0 0 0 0 0
Diane Wigley 12/31/99 0 0 0 0 0 0 0
Director 12/31/00 0 0 0 0 0 0 0
* $74,744 of Mr. DeChamplain's compensation was deferred and
unpaid; $66,534 of Mr. Gerlach's compensation was also
deferred; $100,900 of Mr. Neuperger's compensation was also
deferred; and $9,540 of Mr. Hill's compensation was also
deferred.
No cash compensation, deferred compensation or long-term incentive
plan awards were issued or granted to the Company's management during the
calendar years ending December 31, 1999 and 2000, or the period ending
on the date of this Report. Further, no member of the Company's management
has been granted any option or stock appreciation right, except those in the
following table:
Name Option Vested Option Price
Awarded Option (USD)
----------------------------------------------------------------------------
Michael Ivezic 75,000 31,233 $2.50
Tony Monga 75,000 31,233 $2.50
Diane Wigley 75,000 31,233 $2.50
Frank Gerlach 150,000 150,000 $0.70
Frank Gerlach 75,000 31,233 $2.50
Brian De Champlain 150,000 150,000 $0.70
Brian De Champlain 75,000 31,233 $2.50
Bob Hill 105,000 105,000 $0.70
Compensation of Directors.
--------------------------
There are no standard arrangements pursuant to which the Company's
directors are compensated for any services provided as director. No
additional amounts are payable to the Company's directors for committee
participation or special assignments.
There are no arrangements pursuant to which any of the Company's
directors was compensated during the Company's last completed calendar year or
the previous two calendar years for any service provided as director. See the
Summary Compensation Table of this Item.
Termination of Employment and Change of Control Arrangement.
------------------------------------------------------------
There are no compensatory plans or arrangements, including
payments to be received from the Company, with respect to any person named in
the Summary Compensation Table set out above which would in any way result in
payments to any such person because of his or her resignation, retirement or
other termination of such person's employment with the Company or its
subsidiaries, or any change in control of the Company, or a change in the
person's responsibilities following a change in control of the Company.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
-----------------------------------------------------------------------
Security Ownership of Certain Beneficial Owners.
------------------------------------------------
The following table sets forth the share holdings of those persons
who own more than five percent of the Company's common stock as of December
31, 2000, and to the date hereof:
Number and Percentage
Name and Address of Shares Beneficially Owned
---------------- ----------------------------
Heartland Trust 3,000,000 16.5%
Champion Business Services, Inc. 2,200,000 12.1%
Worldwide Consulting Services, Inc. 2,200,000 12.1%
High Tech Systems, Inc. 950,000 5.2%
Apollo Systems Ltd. 950,000 5.2%
TOTALS 9,300,000 51.2%
Security Ownership of Management.
---------------------------------
The following table sets forth the share holdings of the Company's
directors and executive officers as of December 31, 2000, and to the
date hereof:
Number and Percentage
Name and Address of Shares Beneficially Owned
---------------- ----------------------------
Michael Ivezic 20,000 .11%
David Pamenter -0- -0-
Brian J. DeChamplain 93,000 .51%
Frank Gerlach 87,300 .48%
Bob Hill 5,000 .02%
Frankopan & Co., Inc. 15,000(1) .08%
Paltrac International Corporation 100,000(2) .55%
TOTALS 331,950 1.83%
(1) Is controlled by Michael Ivezic.
(2) 100,000 shares are held in the name of Paltrac International
Corporation. Brian De Champlain and Frank Gerlach each own 50% of
Paltrac International Corporation.
Changes in Control.
-------------------
None, except see the 8-K Current Report dated May 18, 1999. See
Part III, Item 13.
Item 12. Certain Relationships and Related Transactions.
-------------------------------------------------------
Transactions with Management and Others.
----------------------------------------
Except as indicated below, or under the caption "Executive
Compensation," Part III, Item 10, of this Report, there were no material
transactions, or series of similar transactions, during the Company's last
three calendar years, or any currently proposed transactions, or series of
similar transactions, to which the Company or any of its subsidiaries was or
is to be a party, in which the amount involved exceeded $60,000 and in which
any director, executive officer or any security holder who is known to the
Company to own of record or beneficially more than five percent of any class
of the Company's common stock, or any member of the immediate family of any of
the foregoing persons, or any promoter or founder of the Company had an
interest:
The Company incurred management fees in the amount of $203,623 to a
company subject to significant influence by one of the Company's directors.
The Company also incurred scientific research and development
consulting expenses in the amount of $143,550 to two companies that were each
controlled by two directors of the Company.
Item 13. Exhibits and Reports on Form 8-K.
-----------------------------------------
Reports on Form 8-K.
--------------------
8-K Current Report dated May 18, 1999, as amended, and respectively filed with
the Securities and Exchange Commission on June 18, 1999 and August 13, 1999.
Exhibit
Exhibits* Number
Number. -------
-------
(i)
None.
(ii) Where Incorporated
In This Report
Number. ------------------
-------
10-KSB Annual Report for the year ended Part I, Item 1
December 31, 1998* Part II, Item 5
Part III, Item 10
Articles of Incorporation of SRS Part III, Item 12
Technical, Inc. dated January 15, 1986*
Certificate of Amendment to Articles of
Incorporation of SRS Technical, Inc. dated
June 5, 1987*
Certificate of Amendment to the Articles of
Incorporation of Composite Design, Inc., as
corrected, dated December 13, 1996*
10-KSB Annual Report for the year ended Part II, Item 5
December 31, 1999*
8-K Current Report dated May 18, 1999* Part I, Item 1
8-KA Current Report dated May 18, 1999* Part I, Item 1
8-K Current Report dated November 17, 1999* Part II, Item 8
* A summary of any Exhibit is modified in its entirety by reference
to the actual Exhibit.
** These documents and related exhibits have previously been filed
with the Securities and Exchange Commission and are incorporated
herein by this reference.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
CENTRAXX, INC.
Date: 5/30/2001 By/s/Michael Ivezic
Michael Ivezic, Acting President and
Director
Date: 5/30/2001 By/s/Brian J. DeChamplain
Brian J. DeChamplain, Exec. V.P., Director
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this Report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the dates indicated:
CENTRAXX, INC.
Date: 5/30/2001 By/s/Michael Ivezic
Michael Ivezic, Acting President and
Director
Date: 5/30/2001 By/s/Brian J. DeChamplain
Brian J. DeChamplain, Exec. V.P., Director
Date: 5/30/2001 By/s/Frank Gerlach
Frank Gerlach, Director