SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20509 FORM 8-K/A-1 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act May 18, 1999 Date of Report (Date of Earliest Event Reported) CENTRAXX, INC. (Exact Name of Registrant as Specified in its Charter) Nevada 33-3358-NY 88-0224219 (State or other juris- (Commission File No.) (IRS Employer diction of incorporation) I.D. No.) 2700 Argentia Road, Suite #1000 Mississauga, Ontario Canada L5N 5V4 (Address of Principal Executive Offices) (905) 826-9988 Registrant's Telephone Number Composite Design, Inc. 9005 Cobble Canyon Lane Sandy, Utah 84093 (Former Address of Principal Executive Offices) Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) Financial Statements of Business Acquired. Centraxx Corp. audited financial statements for the year ended December 31, 1998 (Canadian Dollars) Auditors' Report Balance Sheet Statement of Operations and Deficit Statement of Cash Flow Notes to financial statement (b) Pro Forma Financial Information. Pro forma Balance Sheet as of May 18, 1999 (U.S. Dollars). Notes to Proforma Balance Sheet. (c) Exhibits. None. Item 8. Change in Fiscal Year. None; not applicable. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized. CENTRAXX, INC. Date: 8/13/99 By:/s/Mike Ivezic --------- -------------------------------------- Mike Ivezic President, Director CENTRAXX, INC PROFORMA BALANCE SHEET AS AT MAY 18,1999 (in US$ and US GAAP) ASSETS May 18,1999 December 31, 1998 (notes 2a and 5a) (audited) Current Cash 125,758 142 Prepaid expenses 21,878 20,109 147,636 20,251 Capital assets (note 3) 251,512 263,362 Patent costs (note 2f) 16,734 15,401 268,246 278,764 TOTAL ASSETS 415,882 299,014 LIABILITIES Current Accounts payable and accrued costs 385,863 325,226 385,863 325,226 SHAREHOLDERS' EQUITY Paid up Share Capital (note 5) 2,272,865 1,629,063 Deficit -2,242,845 -1,655,275 30,020 -26,212 415,883 299,014 CENTRAXX, INC. Notes to the proforma balance sheet as at may 18, 1999 Note 1 Organization and Description of Business The Company, incorporated as SRS Technical Inc. under the laws of the State of Nevada on January 15, 1986, changed its name to Composite Design Inc. following its purchase of Composite Design Corporation on May 29, 1997. On May 18, 1999, the Company purchased all of the outstanding shares of Centraxx Corp. through an exchange of one of its shares for each share of Centraxx Corp. following which the Company changed its name on May 19, 1999 to Centraxx, Inc. Centraxx Corp., incorporated under the laws of the Province of Ontario of Canada on August 8, 1997, 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. Note 2 Significant Accounting Policies These financial statements have been prepared in accordance with generally accepted accounting principles in the United States. Significant accounting policies are outlined below: a) Basis of presentation On May 18, 1999, the Company, formerly Composite Design Inc. purchased all of the outstanding shares of Centraxx Corp. through an exchange of one of its shares for each share of Centraxx Corp. (the "Transaction"). As a result of the Transaction, the shareholders of Centraxx Corp. owned approximately 85% of the outstanding shares of the Company and, accordingly, the purchase of Centraxx Corp. by the Company is accounted for as a reverse takeover transaction under generally accepted accounting principles. Under the principles of reverse takeover accounting, the consolidated financial statements of the Company, the legal parent, are presented as a continuation of the financial position and results from operations of Centraxx Corp., the legal subsidiary. Application of reverse takeover accounting results in the following: (i) The consolidated financial statements of the combined entity are issued under the name of the legal parent, Centraxx Inc, but are considered a continuation of the financial statements of the legal subsidiary, Centraxx Corp.; (ii) As Centraxx Corp. is deemed to be the acquirer for accounting purposes, its assets and liabilities are included in the consolidated financial statements at their historical carrying values; (iii)Any comparative numbers are those of Centraxx Corp.; and, (iv) For purposes of the accounting for the Transaction, control of the net assets and operations of the Company is deemed to have been acquired by Centraxx Corp. effective April 30,1999. Accordingly, the net asset value of the Company in the amount of $12,024 plus $ 52,000 of transaction costs has been applied to reduce the share capital of the Company immediately prior to the reverse takeover. b) Capital assets Capital assets are recorded at the lower of cost less accumulated amortization and net recoverable amount. All capital assets are amortized over 5 years on a straight-line basis. c) Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and reported amounts of expenses during the reporting period. Actual results could differ from those estimates. d) Basic Loss Per Common Share Basic loss per common share has been calculated based on the weighted average number of common stock outstanding during the period. e) Research and Product Development Costs Research and product development costs are expensed as they are incurred. f) Patent Costs Costs incurred for filing for patents are being capitalized and no amortization is taken until all steps necessary to establish the patent have been taken. g) Monetary Assets Monetary assets and liabilities denominated in currencies other than the US dollar are translated at the rate of exchange in effect at the end of the period. Expense items are translated at the rate of exchange in effect on the dates they occur. Exchange gains and losses are reflected in operations immediately. h) Accounting for Leases A lease that transfers substantially all the benefits and risks incident to ownership of property is treated as a capital lease, otherwise the lease is accounted for as an operating lease. Note 3 Capital Assets Capital assets comprise the following: Cost Accumulated Net Book Net Book Amortization Value Value May 18, December 31, 1999 1998 Research and Development $310,847 $92,114 $218,733 223,796 General Office 33,133 11,424 21,709 24,866 Other 17,684 6,614 11,070 12,755 $361,664 $110,152 $251,512 $261,416 Note 4 Commitments The Company has the following commitments for equipment: Operating Leases 1999 44,442 2000 88,883 2001 73,011 2002 8,133 2003 0 Note 5 Share Capital (a) Authorized and Issued Share Capital Authorized common shares $0.001 par value 200,000,000 Issued 1999 17,906,965 The number of issued and outstanding shares of the Company prior to the Transaction (see note 2a) was 1,069,020, an amount which had not changed since December 31, 1996. This amount was increased, immediately preceding the closing of the Transaction, on the basis of 2.5-for-one to 2,672,550 shares. A further 15,234,415 shares were then issued as part of the Transaction, on a post-split basis, in exchange for all of the outstanding securities of Centraxx Corp., resulting in an aggregate of 17,906,965 outstanding shares of the Company. (b) Stock Option Plan The Company has provided a means for Directors and employees to be granted Options to purchase common shares of the Company or to receive a cash amount that is equivalent of the opportunity to exercise an Option. The Stock Option Plan provides that a maximum of 20% of the Company's issued common shares can be granted unless approved by the shareholders of the Company. Options may be exercised over a period not to exceed 5 years from the date they are granted. The price at which each Option can be exercised can not be less than the market price of the common share at the time the Options are granted. As at May 18, 1999, the total number of Options which were granted at an exercise price of $0.65 totaled 1,365,000 of which 495,175 were vested. Note 6 Risks and Uncertainties As a development stage company the business of Centraxx Inc., entails risks and uncertainties that affect its outlook and eventual results of its business and commercialization plan. The primary risks relate to meeting its product development and commercialization milestones which require that the Company's products exhibit the cost, durability and performance required in a commercial product. There is also a risk that market acceptance might take longer to develop than anticipated. The Company's business plan recognizes and, to the extent possible, attempts to manage these risks by pursuing diverse end markets for "UNI-POINTtm " technology. Within these markets the Company's commercialization plan is focused on products that it believes have a competitive advantage. Further, the plan for product and market development is to work closely with potential strategic partners and key customers who together have the capability and understanding of their specific markets to develop products that incorporate Centraxx's UNI-POINTtm technology to meet consumer requirements. CENTRAXX CORP. FINANCIAL STATEMENTS AS AT DECEMBER 31,1998 Feldstein & Associates LLP [letterhead] AUDITORS' REPORT To the Shareholders of Centraxx Corp. We have audited the Balance Sheet of Centraxx Corp. as at December 31, 1998 and the statements of Operations and Deficit and Cash Flow for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also Includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 1998 and the results of its operations and the changes in b financial position for the year then ended in accordance with generally accepted accounting principles. /s/Feldstein & Associates LLP FELDSTEIN & ASSOCIATES LLP Chartered Accountants Markham, Ontario May 31, 1999 CENTRAXX CORP. BALANCE SHEET AS AT DECEMBER 31, 1998 In Canadian dollars and Canadian GAAP 1998 1997 $ $ (note 9) ASSETS Cash 218 1,893 Prepaid expenses 29,832 0 Capital assets - note 3 380,520 492,202 Patent costs - note 1 22,561 16,925 Incorporation costs 1,000 1,000 Investment in and advances to subsidiary 0 54,500 Total assets 434,131 566,520 LIABILITIES Accounts payable and accrued liabilities 498,660 68,676 SHAREHOLDERS' DEFICIENCY Share capital - note 5 2,432,890 869,293 Deficit (2,497,419) (371,449) (64,529) 497,844 Approved on behalf of the Board: Director Director The accompanying notes are an integral part of these financial statements. CENTRAXX CORP. STATEMENT OF OPERATIONS AND DEFICIT FOR THE YEAR ENDED DECEMBER 31, 1998 In Canadian dollars and Canadian GAAP 1998 1997 $ $ (note 9) Revenue 0 0 Expenses General and administrative costs Marketing 153,905 19,546 Management fees 210,000 45,000 Professional fees 96,838 75,970 Rent 159,634 63,000 Loss on write-down of investment in subsidiary - note 10 80,346 0 Salaries and other office 341,356 13,815 Amortization 101,606 25,906 1,143,685 243,237 Research and product development - note 8 982,285 128,212 Loss for the year (2,125,970) (371,449) Deficit, beginning of year 371,449 0 Deficit, end of year (2,497,419) (371,449) The accompanying notes are an integral part of these financial statements. CENTRAXX CORP. STATEMENT OF CASH FLOW FOR THE YEAR ENDED DECEMBER 31, 1998 In Canadian dollars and Canadian GAAP 1998 1997 $ $ (note 9) Operating activities Loss for the year (2,125,970) (371,449) Add back non cash outlays: Amortization of capital assets 101,606 25,906 Loss on write-down of investment and advances to subsidiary 80,346 0 (1,944,018) (345,543) Changes in non-cash operating working capital Increase in prepaid expenses (29,832) 0 Increase In accounts payable 429,984 68,676 Cash (used in) operating activities (1,543,866) (276,867) Financing activities Issuance of share capital, net 1,563,597 869,293 Incorporation posts 0 (1,000) Cash generated by financing activities 1,563,597 868,293 Investing activities Capital assets (acquired) sold 10,076 (518,108) Patent costs (5,636) (16,925) Investment in and advances to subsidiary (25,846) (54,500) Cash (used in) provided by investing activities (21,406) (589,533) (Decrease) increase In cash for the year (1,675) 1,893 Cash, beginning of year 1,893 0 Cash, end of year 218 1,893 The accompanying notes are an integral part of these financial statements. CENTRAXX CORP. NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1998 1. Description of business Centraxx Corp., incorporated under the laws of the Province of Ontario of Canada on August 8,1997, 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 TM" technology) which can be deployed to provide effective solutions for numerous safety, security and location information needs, in multiple network and stand alone applications. As a development stage company the business of Centraxx Corp. entails risks and uncertainties that affect its outlook and eventual results of its business and commercialization plan. The primary risks relate to meeting its product development and commercialization milestones which require that Centraxx's products' exhibit the cost, durability and performance required in a commercial product. There is also a risk that market acceptance might take longer to develop than anticipated. Centraxx's business plan recognizes and, to the extent possible, attempts to manage these risks by pursuing diverse end markets for "UNI-POINT TM" technology. Within these markets, the Company's commercialization plan is focused on products that it believes have a competitive advantage. Further, the plan for product and market development is to work closely with potential strategic partners and key customers who together have the capability and understanding of their specific markets to develop products that incorporate Centraxx's Uni-Point Tm technology to meet consumer requirements. 2. Significant accounting policies These financial statements have been prepared in accordance with accounting principles generally accepted in Canada and all amounts are reported in Canadian dollars. Significant accounting policies are outlined below: (a) Capital assets and amortization Capital assets are recorded at the lower of cost less amortization and net recoverable amount. All capital assets are amortized over 5 years on a straight line basis. (b) Measurement uncertainty The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and reported amounts of expenses during the reporting period. Actual results could differ from those estimates. (c) Research and product development expenditures Research and product development costs are expensed as they are incurred. (d) Patent costs Costs incurred for filing for patents are being capitalized and no amortization is taken until all steps necessary to establish the patent have been completed. (9) Foreign currency translation Monetary assets and liabilities denominated in currencies other than the Canadian dollar are translated at the rate of exchange in effect at the and of the year. Expense items are translated at the rate of exchange in effect on the dates they occur. Exchange gains or losses are reflected in operations immediately. Accounting for leases A lease that transfers substantially all the benefits and risks incident to ownership of the property is treated as a capital lease, otherwise the lease is accounted for as an operating lease. 3. Capital assets Capital assets comprise the following: 1998 1997 Accumulated Net book Net book Cost Amortization Value Value Research and development equipment $434,062 $108,305 $106,816 $127,177 Office equipment 48,229 12,033 136,512 100,220 Other equipment 25,741 7,174 137,192 264,805 508,032 127,512 380,520 492,202 4. Commitments The Company has the following commitments for equipment rentals: 1999 136,743 2000 136,743 2001 129,766 2002 12,513 2003 0 5. Share capital 1998 1997 Authorized common shares Unlimited Unlimited Issued 14,367,680 12,265,672 i. On September 2, 1997, the Company issued 12,800,000 common shares for $0.00001 for a total consideration of $128, of which 2,000,000 common shares were issued as consideration for certain assets and technology acquired on the formation of the Company. Subsequently, 2,026,559 of these common shares were cancelled by the Company. ii. On September 30,1997, the Company issued 1,000,000 common shares for $0.50 per share and 492,222 common shares for $0.75 for a total consideration of $869,165, of which 725,694 common shares were issued as consideration for certain capital assets acquired on the formation of the company. iii. On September 30, 1998, the Company issued 749,493 common shares for $0.75 per share and a further 817,150 common shares for a total consideration of $1,052,066. Included In this amount were 200,000 shares to non-related minority shareholders of an acquired company in exchange for all remaining outstanding shares of a dormant subsidiary acquired on September 2, 1997. 533,650 shares were issued for cash of $433,650, 462,280 shares were issued for $340,383 for services rendered and 370,713 shares were issued for $278,033 in satisfaction of a debt to a company subject to significant influence by one of the directors. iv. On December 31, 1998, the Company issued 215,420 common shares for $0.75 per common share, 289,945 common shares for $1.00 per common share and a further 30,000 common shares for $2.00 per common share aggregating a total consideration of $511,552. Included in this amount were 38,700 shares issued for cash of $38,700, 287,449 shares issued for $263,636 for services rendered and 209,216 shares were issued for $209,216 in satisfaction of a debt to a company subject to significant influence by one of the directors. 6. Income taxes For tax purposes, the Company has loss carry forwards of approximately $2,700,000 available to reduce future taxable income in Canada subject to qualified investment tax credits (see note 2b). If not utilized, these losses will expire in the year 2004 and 2005. In addition, amortization for tax purposes in the approximate amount of $120,000 may be filed with the tax authorities. The potential future tax benefit which may result from the application of these loss carry forwards have not been recorded in these financial statements. 7. Related party transactions During the year, the Company had the following related party transactions which amounts are recorded at the exchange amount, which is the amount of consideration established and agreed to by the related parties: (a) Transactions between the Company and a company subject to significant influence by one of the directors: (i) Management fees in the amount of $210,000 (1997 - $45,000) under contract was paid by the Company. The contract is for a one year term renewable on an annual basis with a termination clause. Monthly obligations are $22,500. (ii) Rent in the amount of $159,000 (1997 - $63,000) was paid by the Company. (iii) General and administrative expenses in the amount of $402,993 were paid on the Company's behalf and charged back to the Company. (iv) The Company received net advances in the amount of $59,405. (b) Scientific research and development subcontracting expenses totalling $213,500 (1997- $72,535) under contract were paid to two companies each controlled by one of the directors. The contract will continue until terminated by mutual agreement of the parties. Monthly obligations are $17,000. 8. Research and product development Costs Research and product development costs consist of the following: 1998 1997 Manpower $589,634 $79,705 Materials 151,943 7,266 Expenses 240,708 41,241 $982,285 $128,212 9. Comparative figures (a) Comparative figures relate to the period of incorporation of August 8, 1997 to December 31, 1997 and were unaudited and prepared with a Notice to Reader. (b) Certain prior year amounts have been reclassified to conform with the presentation adopted in the current year. 10. Loss on write-down of investment in subsidiary The Company has written down its 100% owned investment in Paltrac Systems Corporation to zero because the subsidiary was dormant and management has assessed the carrying value of the investment to be nil. 11. Subsequent events (a) From January 1, 1999 to May 10, 1999, the Company issued 61,895 common shares for $0.75 per share, 600,970 common shares for $1.00 per share and 237,575 common shares for $2.00 per share aggregating a total consideration of $1,127,556. (b) On May 18, 1999, the Company became a wholly owned subsidiary of a US publicly traded Company, Centraxx Inc. (previously Composite Design Inc.) as a result of a Share Exchange Agreement entered into by the shareholders of the Company. (c) On January 4, 1999, the Board of Directors approved a Stock Option Plan, which provides that a maximum of 3,500,000 common shares can be issued. Options may be exercised over a period not to exceed 5 years from the date they are granted. The price at which each option can be exercised can not be less than the market pries of the common share at the time the options are granted. Concurrent with the approval of the Stock Option Plan, the Board of Directors authorized a total of 1,365,000 options at a price of $1.00 per common share, which grant formed part of the Share Exchange Agreement (see note 9b) and were accordingly ratified by Centraxx Inc. on May 31, 1999 at which time 512,525 options were vested. 12. Fair value of financial statements At December 31, 1998 and 1997, the fair value of cash, prepaid expenses and accounts payable and accrued liabilities approximates carrying values because of the short-term nature of these instruments. 13. Uncertainty due to the year 2000 Issues The Year 2000 Issue arises because many computerized systems use two digits rather than four to identify a year. Date-sensitive systems may recognize the year 2000 as 1900 or some other date, resulting in errors when information using year 2000 dates is processed. In addition, similar problems may arise in some systems which use certain dates in 1999 to represent something other than a date. The effects of the Year 2000 Issue may be experienced before, on, or after January 1, 2000, and, if not addressed, the impact on operations and financial reporting may range from minor errors to significant systems failures which could affect an entity's ability to conduct normal business operations. It is not possible to be certain that all aspects of the Year 2000 Issue affecting the entity, including those related to the efforts of customers, suppliers, or other third parties. will be fully resolved.