U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
Transition Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the Transition Period from October 1, 2002 to June 30, 2003
Commission File No. 0-8924
Trinity Learning Corporation
(Exact name of small business issuer as specified in its charter)
Utah 73-0981865
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1831 Second Street, Berkeley, California 94710
(Address of principal executive offices)
(510) 540-9300
(Issuer's telephone number)
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act: Common Stock,
No Par Value
Check whether the issuer (1) filed all reports required to be filed by
sections 13 or 15(d) of the Exchange Act during the past 9 months (or such
shorter period that the issuer was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [X]
No [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B in this form, and no disclosure will be contained, to
the best of the 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. [x]
The issuer's revenues for the transition period October 1, 2002 to
June 30, 2003: $167,790
Due to the absence of a trading market for the common stock of the
Registrant, the aggregate market value of voting stock held by non-
affiliates as of November 4, 2003 was nil.
As of November 4, 2003, the Registrant had outstanding 27,560,401 shares
of Common Stock, no par value per share.
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PART I
Throughout this report, we refer to Trinity Learning Corporation, together
with its subsidiaries, as "we," "us," "our company," "Trinity" or "the
Company."
THIS ANNUAL REPORT ON FORM 10-KSB CONTAINS FORWARD-LOOKING STATEMENTS.
THESE STATEMENTS RELATE TO FUTURE EVENTS OR OUR FUTURE FINANCIAL
PERFORMANCE. IN SOME CASES, YOU CAN IDENTIFY FORWARD-LOOKING STATEMENTS BY
TERMINOLOGY SUCH AS MAY, WILL, SHOULD, EXPECT, PLAN, INTEND, ANTICIPATE,
BELIEVE, ESTIMATE, PREDICT, POTENTIAL OR CONTINUE, THE NEGATIVE OF SUCH
TERMS OR OTHER COMPARABLE TERMINOLOGY. THESE STATEMENTS ARE ONLY
PREDICTIONS. ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY. IN
EVALUATING THESE STATEMENTS, YOU SHOULD SPECIFICALLY CONSIDER VARIOUS
FACTORS, INCLUDING THE RISKS OUTLINED BELOW. THESE FACTORS MAY CAUSE OUR
ACTUAL RESULTS TO DIFFER MATERIALLY FROM ANY FORWARD-LOOKING STATEMENT.
ALTHOUGH WE BELIEVE THAT THE EXPECTATIONS REFLECTED IN THE FORWARD-LOOKING
STATEMENTS ARE REASONABLE, WE CANNOT GUARANTEE FUTURE RESULTS, LEVELS OF
ACTIVITY, PERFORMANCE OR ACHIEVEMENTS. MOREOVER, NEITHER WE NOR ANY OTHER
PERSON ASSUMES RESPONSIBILITY FOR THE ACCURACY AND COMPLETENESS OF THE
FORWARD-LOOKING STATEMENTS. WE ARE UNDER NO DUTY TO UPDATE ANY OF THE
FORWARD-LOOKING STATEMENTS AFTER THE DATE OF THIS ANNUAL REPORT TO CONFORM
SUCH STATEMENTS TO ACTUAL RESULTS OR TO CHANGES IN OUR EXPECTATIONS.
ITEM 1. DESCRIPTION OF BUSINESS
General
Trinity Learning Corporation ("Trinity") is a publicly-held Utah
corporation that provides advanced learning solutions around the world for
corporations, organizations and individuals. Our mission is to become a
leading global learning corporation through acquisition, business
development and strategic relationships. We commenced our strategy in 2002
to acquire operating companies in strategic markets that have developed
proprietary technology-enabled learning, training and certification
services targeted at major customers in worldwide industries. Our initial
target market is medium to large companies and organizations that provide
workplace training and certification to their employees in a cost effective
and efficient manner.
We are seeking to achieve market entry and increased penetration in
geographic markets throughout the world through multiple acquisitions and
integration of operating companies. We are acquiring operating companies
with established customer bases, proprietary platforms and learning
systems. Growth will also be achieved through licensing of software and
other technologies, internal business development, and the expansion of
sales offices and other sales representation around the world. We have
targeted acquisitions that position us to:
- Provide workplace learning services to multiple organizational
levels of major employers;
- Leverage investments in content and delivery systems across
multiple industry segments;
- Cross-market learning services developed by our operating
subsidiaries;
- Design and implement long-term workplace human capital
development programs for large corporations, organizations and
governments; and
- Provide meaningful learning experiences to end-users.
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We adopted our present strategy in 2002 based on competitive analysis,
market research and an analysis of our ability to acquire operating
companies in key market areas and segments and attractive valuations.
Since adopting this strategy, we have focused our corporate development
efforts on identifying and completing five strategic acquisitions,
expanding our executive management team, entering into key strategic
relationships with financial advisors and investment banks, and developing
and implementing a development and growth stage financing strategy.
Recent Acquisitions
Following our initial acquisition of Competency Based Learning, Inc.,
discussed below, our corporate development efforts in 2003 were
concentrated on the identification of additional acquisition candidates
including due diligence, negotiation of terms and conditions, and the
development of integration and financing strategies for each acquisition.
We have also focused on raising growth capital through private placements
to be used as working capital for Trinity and our subsidiaries. On
September 1, 2003, we completed the following three non-related
acquisitions. Additional information concerning these transactions and the
various companies involved will be filed in due course on Forms 8-K in the
near future.
TouchVision (California)
We completed the acquisition of all of the issued and outstanding
shares of TouchVision, Inc., a California corporation ("TouchVision") that
is in the business of providing technology-enabled information and learning
systems to healthcare providers, financial services companies and other
industry segments. In consideration for the TouchVision shares, we issued
an aggregate of 1,250,000 restricted shares of our common stock, of which
312,500 shares are subject to the terms of an escrow agreement as
collateral for the indemnification obligations of the former TouchVision
shareholders. We also agreed to loan to TouchVision the sum of $20,000 per
month for the twelve-month period following closing, to be used for working
capital. We had previously loaned TouchVision the sum of $50,000 in June,
2003 by way of bridge financing pending completion of the acquisition. In
connection with the acquisition, TouchVision entered into substantially
similar employment agreements with each of Messrs. Gregory L. Roche and
Larry J. Mahar, the former principals of TouchVision, which have a term of
two years and provide for annual salaries of $120,000.
River Murray Training Pty. Ltd. (Australia)
We completed the acquisition of all of the issued and outstanding
shares of River Murray Training Pty Ltd ("RMT") an Australian company that
is in the business of providing workplace training programs for various
segments of the food production industry, including viticulture and
horticulture. In consideration for the shares of RMT we issued 700,000
restricted shares of our common stock, of which 350,000 shares are subject
to the terms of an escrow agreement as collateral for the indemnification
obligations of the former RMT shareholders. We also loaned US$49,000 to
RMT for the purpose of repaying outstanding loans advanced to RMT by its
former shareholders.
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Riverbend Group Holdings (Proprietary) Limited (South Africa)
We completed the acquisition of 51% of the issued and outstanding
shares of Ayrshire Trading Limited, a British Virgin Islands company
("Ayrshire") that owns 95% of Riverbend Group Holdings (Proprietary)
Limited ("Riverbend"), a South African company that provides learning
services to corporations and individuals in South Africa. We also acquired
the option to purchase the remaining 49% of Ayrshire. In consideration
for the Ayrshire shares, we issued a convertible non-interest-bearing
promissory note in the amount of US$20,000, which amount is convertible
from time to time, but no later than December 30, 2006, into a maximum of
2,000,000 restricted shares of our common stock. Of these shares, up to
400,000 may be withheld in satisfaction for any breach of warranties by the
former shareholders of Ayrshire. The Ayrshire shares are subject to escrow
and pledge agreements will be reconveyed to the former shareholders in the
event of a default by us of certain terms and conditions of the acquisition
agreements, including, among other things, a voluntary or involuntary
bankruptcy proceeding involving us or the failure by us to list our shares
of common stock on a major stock exchange by December 30, 2006.
As further consideration for the Ayrshire shares, we agreed to make a
non-interest-bearing loan of U.S. $1,000,000 to Ayrshire, $300,000 of which
was advanced at closing and the remaining $700,000 was advanced on November
3, 2003. We may exercise an option to acquire the remaining 49% of
Ayrshire in consideration for the issuance of 1,500,000 shares of our
common stock, subject to certain adjustments.
In connection with the Riverbend acquisition, we agreed to appoint Mr.
Arthur Kidson to our board of directors, to serve until our next annual
meeting. In addition, we agreed to invite Mr. Nigel Tattersal to attend
all meetings of our board of directors as an observer until our next annual
meeting. Messrs. Kidson and Tattersal are both principals of Riverbend.
IRCA
We have entered into a definitive agreement to acquire majority
control of IRCA (Pty) Ltd. ("IRCA"), an international firm specializing in
corporate learning, certification, and risk mitigation in the areas of
Safety, Health Environment, and Quality Assurance ("SHEQ"). We anticipate
closing this transaction within the next 30 days. IRCA is headquartered in
South Africa and operates international sales offices and operations in the
United Kingdom and the United States. We will acquire majority interest in
IRCA through a combination of stock and cash payments. The definitive
agreement contains certain closing conditions and certain future provisions
that will enable Trinity to acquire full ownership of IRCA and its various
operating subsidiaries.
IRCA, founded in 1993, operates in South Africa, England and the
United States through various operating subsidiaries. IRCA's professionals
assess workplace issues related to safety, health, environment and quality,
advise clients on learning programs and other interventions that can reduce
corporate financial risks, and assist in the implementation and
certification of programs. IRCA develops proprietary content and also
markets best practice SHEQ content and programs developed by other leading
certification and standards organizations. Clients include many Fortune
1000 companies operating in Africa, Europe, Australia, and the United
States.
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Competency Based Learning, Inc.
We completed our first acquisition in October 2002 when we acquired
Competency Based Learning, Inc., a California corporation ("CBL-
California"), and two related Australian companies, Competency Based
Learning, Pty. Ltd. and ACN 082 126 501 Pty. Ltd., (collectively referred
to as "CBL Australia"), in consideration for the issuance of a total of
3,000,000 restricted shares of our common stock and $1,000,000 in
convertible promissory notes and the assumption of $222,151 in
indebtedness. The transactions were effected through CBL Global Corp.
("CBL Global") our wholly-owned subsidiary. CBL-California and CBL-
Australia are sometimes hereinafter collectively referred to as "CBL." The
acquisition of CBL provided us with proprietary workplace learning content
for the global mining and power generation industries, initial contracts
with employers in these industries, an experienced staff of instructional
designers and learning system developers and a proprietary workplace
learning system. Since the acquisition, CBL Global has concentrated its
efforts on the development of additional learning content and new products.
It has focused its business development activities in its core industry
segments and in new geographic markets. In September 2003, we initiated
legal proceedings against CBL-California and the former principals of CBL-
California and CBL-Australia pursuant to which, among other things, we are
seeking to enforce the indemnification provisions of the agreements
relating to the CBL acquisition. See "Item 3. Legal Proceedings."
In conjunction with our proposed acquisition of IRCA, we anticipate
that we will combine the operations of CBL Global with those of IRCA
whereby IRCA will market CBL Global products and CBL Global will operate
primarily as a resource to support development of additional products to be
sold by IRCA and other Trinity subsidiaries. These efforts are intended to
reduce the operating costs of CBL Global as an independent operating unit
and to accelerate return on our investment in the development of CBL Global
intellectual property.
Corporate Background
We were incorporated on April 14, 1975 in Oklahoma under the name U.S.
Mineral & Royalty Corp. as an oil and gas exploration, development and
operating company. In 1989, we changed our name to Habersham Energy
Company. Historically, we were engaged in the business of acquiring and
producing oil and gas properties, but did not have any business activity
from 1995 to 2002. Subsequent to our reorganization in 2002, we changed
our domicile to Utah, amended our capital structure and changed our name to
Trinity Companies Inc., then, in March 2003, to Trinity Learning
Corporation.
On June 16, 2003, we completed a recapitalization of our common stock
by (i) effecting a reverse split of our outstanding common stock on the
basis of one share for each 250 shares owned, with each resulting
fractional share being rounded up to the nearest whole share, and (ii)
subsequently effecting a forward split by dividend to all shareholders of
record, pro rata, on the basis of 250 shares for each one share owned.
The record date for the reverse and forward splits was June 4, 2003.
Immediately prior to the recapitalization, we had 13,419,774 shares of
common stock outstanding. Following the recapitalization and the
cancellation of 108,226 shares of common stock beneficially owned by
members of management, we had 13,419,774 shares of common stock
outstanding.
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On August 6, 2003, our board of directors approved a change in our
fiscal year-end from September 30 to June 30 to align it with those of the
companies we had already acquired or were at that time in the process of
acquiring. The information presented in this transition report on Form 10-
KSB relates to the period October 1, 2002 through June 30, 2003.
The Learning Market
We provide learning services for major global industries such as
agriculture, mining, energy, technology and healthcare. We are building a
unique global learning company by acquiring operating companies around the
world that serve established segments of the education, training and
corporate learning market. We are seeking to create one of the first
globally recognized brands in the learning services industry. Worldwide
estimates for workplace education, including training, ongoing professional
education, and lifelong learning, range from $300 billion to over $1
trillion. There are approximately 2.5 billion people in the global
workforce, estimated to grow to over 3 billion workers in the next 10
years. Technology is revolutionizing access to learning around the world
through computer-based learning, high-speed network access, distance
learning, e-learning and online accredited education. This is occurring
during a period of rapid generational turnover in the global workforce in
the United States and Europe as the so-called "Baby-Boom" generation
retires and is replaced in the workforce.
We believe a growing need exists to create a global learning company
that integrates educational and training delivery technologies, platforms
and methodologies. Our operating subsidiaries specialize in learning
content and delivery technologies for particular industries or that target
a particular segment of the workforce. We completed our first acquisition
of CBL on October 1, 2002, and in September 2003 acquired two additional
operating companies headquartered in California and Australia as well as
majority ownership in a company headquartered in South Africa. On
September 18, 2003 we announced our intention to acquire the majority
ownership of a company headquartered in South Africa with a global sales
and marketing organization that covers Africa, Australia, Europe and North
America. We believe that there are product and service synergies between
and among our various subsidiaries and, more importantly, that there is a
timely opportunity to create a global sales force to represent our entire
list of products and services.
The "blended learning" concept is central to our competitive
advantage. What has been observed over the past twenty years in the human
capital development and educational research fields is that people clearly
learn in different ways and there is no single method or technology that
works for every skill, every type of worker, or for all types of content.
The companies that we are acquiring understand the benefits and synergies
of operating as a family of companies. We believe that we will be one of
the first companies to be able to serve major multinational employers at
multiple levels of their organizations.
We believe that we will be a leader in the certification of completed
courses and training. Certification enables our customers to measure the
knowledge base in their workforce and better monitor improvements in
productivity. Certification also helps corporations with compliance issues
relating to health, safety, environment and quality. Certifications will
range from single modules, vocational certifications to professional
certifications and university degrees from accredited universities.
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Our Business
Our acquisitions to date have positioned us as a global learning
company with the ability to:
- Serve major customers in a number of industry verticals from
mining to healthcare to agriculture;
- Provide training to multiple levels of an organization from blue
collar to management to executives; and
- Utilize a blend of delivery methods including online learning,
e-learning, instructor led training and competency based
learning.
CBL Global
Until the recent acquisitions of RMT, TouchVision and Riverbend in
September 2003, CBL Global was our primary operating subsidiary. We
anticipate that, in the future, revenues from RMT, TouchVision, Riverbend
and IRCA will constitute the majority of our revenues on a consolidated
basis.
CBL Global is engaged in the business of providing technology-enabled
training, workplace education, and skills certification to the global
mining and electrical power industries. CBL Global is expanding its
product development and sales efforts to other key large scale global
industries including construction, oil and gas refining, and agribusiness.
Since 1995, CBL Global and its predecessor, CBL, focused on developing
and marketing a proprietary workplace learning platform called the "CBL
System (R)." CBL Global has successfully marketed its services to major
customers in the mining industries in Australia, Asia-Pacific, Latin
America, North America and Africa. CBL Global has developed over 500
learning units designed for skilled and semi-skilled laborers in heavy
industries. Collectively, these units enable certification in the use of
tools, machinery and mobile equipment. Certification in workplace health
and safety, and other skills identified by clients as critical to meeting
project-related or corporate performance objectives is also available.
CBL Global's proprietary Web-enabled CBL System (R)has been developed
to transform traditional training approaches in large-scale, high-employment
industries worldwide. Developed over a ten-year period, the CBL System (R)
enables companies to build, measure and track employee competency within
single work sites or across multiple operations around the world. Over the
past decade, in many countries and in distinct local cultures, the CBL
System (R) has been field-proven to increase employees' performance and to
deliver high returns on investment in the form of measurable, sustainable
improvements in safety, productivity and profitability. To date, over
3,500 end-users have completed a total of approximately 10,000 CBL Global
learning modules.
The initial market focus for CBL Global was the global mining
industry. As a result of this focus, CBL Global owns and markets a
comprehensive suite of workplace learning modules for the mining industry,
a thirty million person workforce globally. Fully digitized in several
languages and web-accessible, CBL System (R) learning modules are
customizable to the needs and circumstances of individual client operations
regardless of the physical, process or regulatory environment. A unique
feature of the CBL System (R) is its utilization of clients' own employees
as mentors and competency verifiers, allowing managers and end-user
employees to take "ownership" of the results of CBL-enabled learning and
training.
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The second immediate market focus for CBL Global is the world's power
generation and distribution industry. The cross-industry scalability of the
CBL System (R) is demonstrated by its use by an electrical power station
builder and operator. For this customer, CBL Global developed a suite of
workplace learning guides for the management and operation of its eighteen
coal and gas fired power stations. The power stations are located in the
United States, Mexico, Colombia, Brazil, United Kingdom, Turkey, Egypt,
China, Philippines and Australia.
CBL Global generates fee revenue from licensing, consulting and
certification. We believe that each of these revenue streams will provide
recurring revenue through long-term contracts, the completion and
certification of multiple learning modules per employee per year, the need
for continual and additional training, and, in many cases, governmental
requirements for annual re-certification. CBL Global generally receives
consulting fees at the outset of a new contract to cover design costs for
new learning modules and customization of pre-existing ones. Ongoing
licensing and certification fees generate the largest portion of revenue
over the life of the learning and certification contract.
CBL Global has spent approximately $100,000 in the last two years on
the continued development of its intellectual property. CBL Global
recognizes the importance of protecting its intellectual property, as such
CBL Global materials are copyrighted and the CBL System (R) is a registered
trademark in the United States. We rely on a combination of trademark
laws, confidentiality provisions and other contractual arrangements to
protect our intellectual property rights. We understand that these do not
always present an impenetrable barrier against infringement, especially in
countries with poorly developed or inadequately enforced intellectual
property laws. In those situations we evaluate whether the opportunities
of conducting business in those countries outweigh the risks.
TouchVision
TouchVision is a California-based provider of technology-enabled
information and learning systems to healthcare providers, financial
services companies and other industry segments. The addition of TouchVision
provides other Trinity companies with access to new software technology and
delivery platforms. TouchVision specializes in software systems that
provide end-users convenient, self-service access to information,
transactions and educational content through a variety of interactive
devices such as touch-screens, kiosks, computers, personal digital
assistants ("PDA's"), and other digital communication devices.
TouchVision's products are web-enabled and can be deployed through various
broadband and wireless networks. Competitors in the kiosk software market
are primarily focused on the delivery of a paper product such as an event
or airline ticket. The TouchVision product is uniquely focused on
information and content delivery.
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Over the past eight years, TouchVision has demonstrated its ability to
deliver solutions to leading companies in healthcare, financial services,
education, and retail services in the United States. TouchVision serves
what it believes is a large and growing market in the United States and
around the world for products and services that make information and
content easily accessible, particularly where using a personal computer is
either cost-prohibitive, inaccessible or inappropriate. Through its
VisMed (R) brand, TouchVision delivers solutions that are tailored to the
unique needs of the healthcare sector; there are similar opportunities for
offerings that focus on other industry sectors and geographic markets.
Today, TouchVision's customers are primarily US based Fortune 1000
companies and educational institutions.
We anticipate that the TouchVision suite of products will have broad
application in technology-enabled workplace learning where access to a
desk-top computer is not available to many sectors of the workforce. While
continuing to develop its own unique customer opportunities, TouchVision
will work closely with our other operating companies to co-develop
workforce training applications and distribution platforms. For example,
in conjunction with CBL training products, TouchVision kiosks can be used
at the entrance to a mine to provide employees with safety and technology
training. Similarly, handheld clipboards can be used for one or more
employees in a conference room type setting to deliver training modules and
certification.
RMT
RMT is an Australian training firm specializing in workplace learning
programs for viticulture and other segments of the food production
industry. The addition of RMT expands our product offering to the
agriculture industry. RMT is based in Australia's major wine production
region and one of its primary regions for agricultural products. RMT is at
the leading edge of workplace training in Australia, empowering client
companies to develop and manage their own sustainable training systems.
This approach is quite different to how their competitor training
organizations operate. As a registered training organization in Australia,
RMT has developed a wide range of nationally accredited programs and short
courses to meet the specific needs of its customers. We believe that RMT's
curriculum and experience can benefit companies in markets outside
Australia, and that RMT can deliver products from our other operating
companies to its customers in Australia.
The basis of the RMT training model is partnering with companies to
develop training programs. This provides two key benefits for its
customers. First, training is made relevant to the workplace. Second,
when customer personnel are actively involved in training program
development, opportunities arise that foster the creation of a learning
environment. This in turn provides a medium through which the customer can
achieve continuous improvement. RMT maintains 350 training modules with
the majority in the wine sector. Other modules include training for retail
services, small business office administration and frontline management.
RMT's customers are the major wine producing companies in Australia
receiving government funding for vocational training. RMT's primary
sources of revenue are from consulting, training and software licensing.
RMT believes that future growth will come from training for the public-
sector, agribusiness, and geographic expansion.
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Riverbend
Riverbend is a premier provider of online university degrees and other
learning services to corporations and individuals in South Africa. The
addition of Riverbend expands Trinity's product offering to higher
education and online degrees. Riverbend, founded in 1998, operates through
four operating subsidiaries. Together, these operating subsidiaries have
developed a holistic approach to technology-enabled learning, education and
training. Riverbend, Price Waterhouse Coopers and a South African media
group are co-owners of Riverbed's primary subsidiary, eDegree, and a
provider of corporate learning solutions including online degrees from some
of South Africa's most respected universities. Other Riverbend
subsidiaries, described more fully below, include Learning Advantage, a
customized learning solutions provider to corporations, Reusable Objects, a
leading-edge learning software developer, and Learning Strategies, an e-
learning consulting services provider. These Riverbend subsidiaries serve
major corporate customers in South Africa and are leaders in South Africa's
initiative to increase employment and competitiveness by expanding and
improving adult basic education and training. We anticipate that
Riverbend's future revenue generation will occur primarily through product
development, business development and geographic expansion.
eDegree is a leading provider of e-learning and online learning
support. eDegree has applied its wide-ranging practical experience as well
as substantial theoretical modeling to assist universities and corporate
partners to make the most of the web-technology for effective instructional
delivery. eDegree offers academic institutions and corporate partners
development, hosting, marketing and delivery of online courses. eDegree's
state-of-the-art technologies allow eDegree to efficiently integrate
content, both off the shelf and customized, for online delivery. eDegree
has successfully created, designed, developed, and administered courses on
behalf of and in partnership with a number of leading South African
academic institutions. eDegree is currently supplying and actively
managing the delivery of online education in collaboration with educational
institutions to more than 4,000 students worldwide. eDegree represents
approximately 70% of total revenue of Riverbend. It is anticipated that
future revenue growth will be derived from broader distribution on behalf
of its existing programs and geographic growth through development of new
partnerships with educational institutions, corporations and government
programs worldwide.
Reusable Objects designs and develops software tools for the efficient
authoring, development, management and publishing of instructional software
programs. Reusable Objects' products allow it to create cost-effective
solutions designed in such a way that they can be deployed for a variety of
courses and programs customized to the needs of differing contexts, target
audiences, technical platforms and educational frameworks. Learner
management, presentation of multiple perspectives, and use of interesting
and appropriate graphics, and audio/video tools are central to Reusable
Objects' solutions strategy. Reusable Objects focuses heavily on
encouraging skills development and application instead of memorization and
retention of factual information. Currently, Reusable Objects represents
approximately 10% of Riverbend's total revenue. Revenue growth will be
derived from increased product development and product deployment to
corporations and universities both locally in South Africa and worldwide in
conjunction with growth in other Riverbend businesses. It is anticipated
that 30% to 50% of Reusable Objects' revenue growth will be outside of
South Africa over the next few years.
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Learning Strategies is a consulting organization whose goal is to
enhance competitiveness through effective learning. Learning Strategies
enables corporate organizations, government programs and higher education
institutions to create, develop, and implement integrated e-learning and
knowledge management strategies that are embedded in stable and user-
friendly Internet technologies. Knowledge management assistance ranges
from awareness workshops to technology development strategies. Learning
Strategies' consultants provide consulting in the areas of strategy,
financial management, human resource management, supply chain optimization,
general process improvement and assessment of management information needs.
As part of their leadership and industrial relations services, consultants
facilitate team building, manage conflict through mediation, provide
training for effective workplace relations, and develop and implement
organizational transformation and restructuring. Currently, Learning
Strategies represents less than 10% of Riverbend's total revenue.
Significant growth in this area is not anticipated during the next five
years. Learning Strategies' customers are primarily corporations based in
South Africa.
Learning Advantage specializes in the supply and support of world-
class e-learning applications. In partnership with leading companies,
Learning Advantage is supplying and managing e-learning solutions
throughout South Africa. Learning Advantage is licensed to distribute a
wide range of e-learning support tools and has extensive experience in the
installation, configuration, end-user training and support of its products.
Currently, Learning Advantage represents less than 15% of total Riverbend
revenue. It is anticipated that revenue growth will be derived from the
development of new product and geographic expansion.
IRCA
IRCA is an international firm specializing in corporate learning,
certification, and risk mitigation in the areas of SHEQ. IRCA is
headquartered in South Africa and operates international sales offices and
operations in the United Kingdom, Australia, Malaysia and North America.
IRCA's professionals assess workplace SHEQ, advise clients on learning
programs and assist in the implementation and certification of programs.
IRCA believes that the application of sound, consistent management
principles to SHEQ improves profitability, employee health and
productivity, and compliance with government regulatory policy. IRCA uses
its proprietary content along with programs developed by other leading
certification and standards organizations. Clients include Fortune 1000
companies operating in Africa, Europe and the United States. Trinity
anticipates that the acquisition of IRCA will provide Trinity with an
international sales force, increased customer penetration in the mining
industry and a cross-industry product segment that can be sold with other
Trinity products.
Competitive Business Conditions
The competitive market for corporate training and workplace learning
is fragmented by geography, curricula, and targeted segments of the
workforce. Although there are many companies that provide training, we
believe that we derive competitive advantage because of our ability to
provide a suite of learning solutions on a worldwide basis at multiple
levels of the workforce ranging from industrial workers to executive
management. Most of our competition, in general sense, comes from:
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- Smaller, specialized local training companies;
- Providers of online and e-learning products targeted at corporate
softskills and technical training;
- Not-for-profit trade schools, vocational schools and
universities; and
- Learning services divisions of large, multinational computer,
software and management consulting firms.
We anticipate that market resistance may come from the trainers in the
organizations to whom we sell. Traditional trainers may see outsourcing as
a threat to their job security. We seek to overcome this by focusing our
business development strategy on senior management in operations, finance
and human resources. We will also reshape the value proposition for
internal training functions from tactical to strategic. We believe we can
enhance the role of internal training and human capital development
departments by providing a proven, integrated set of learning tools. In
this way, we can provide measurable results and increase both the actual
effectiveness and the perceived value of internal training departments.
Employees
As of October 31, 2003, we had 126 full time employees; fifteen in
California, sixteen in Australia and ninety-five in South Africa.
Risk Factors
You should carefully consider the following risks before making an
investment in our company. In addition, you should keep in mind that the
risks described below are not the only risks that we face. The risks
described below are the risks that we currently believe are material to our
business. However, additional risks not presently know to us, or risks
that we currently believe are not material, may also impair our business
operations. You should also refer to the other information set forth in
this Annual Report on Form 10-K, including the discussions set forth in
"Item 6. Management's Discussion and Analysis or Plan of Operation" and
"Item 1. Description of Business," as well as our financial statements and
the related notes.
Trinity is a Development-Stage Company
We are in the development stage and our company must be considered
promotional. Management's efforts have been allocated primarily to
organizational activities, and our ability to establish our company as a
going concern is dependent upon equity and debt financing. Potential
investors should be aware of the difficulties normally encountered by a new
enterprise in its development stage, including undercapitalization, cash
shortages, limitations with respect to personnel, technological, financial
and other resources and lack of a customer base and market recognition,
most of which are beyond our control. The likelihood that we will succeed
must be considered in light of the problems, expenses and delays frequently
encountered in connection with the competitive environment in which we
operate. There can be no assurance that we, with our limited
capitalization, will be able to compete in our market and achieve
profitability.
12
Additional Capital is Necessary to Sustain and Grow Our Business; We
have an Accumulated Deficit
During the development stage of our operations, we can be expected to
sustain substantial operating expenses without generating any operating
revenues, or the operating revenues generated can be expected to be
insufficient to cover expenses. For the foreseeable future, unless and
until we attain profitable operations, our financial statements will show a
net operating loss or minimal net income. Thus, we will likely be
dependent for the foreseeable future on capital raised in equity and/or
debt financing, and there can be no assurance that we will be able to
obtain such financing on favorable terms, if at all.
Our auditor's reports, dated October 13, 2003 for the nine-month
transition period ended June 30, 2003 and December 31, 2002 for the year
ended September 30, 2002, included going concern qualifications which state
that our significant operating losses raise substantial doubt about our
ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
Trinity's Business Strategy Is Based on Acquiring and Consolidating
Additional Suitable Operating Companies at Attractive Valuations
Our growth strategy includes integrating our recent acquisitions and
building a world-wide learning technology company. Acquisitions involve
various inherent risks, such as:
- The ability to assess accurately the value, strengths,
weaknesses, contingent and other liabilities and potential
profitability of acquisition candidates;
- The potential loss of key personnel of an acquired business;
- The ability to integrate acquired businesses and to achieve
identified financial and operating synergies anticipated to
result from an acquisition; and
- Unanticipated changes in business and economic conditions
affecting an acquired business.
We Need to Successfully Integrate Recently Acquired and Potential
Additional Operating Companies
As a result of our recent acquisitions and, as part of our general
business strategy, we expect to experience significant growth and expect
such growth to continue into the future. This growth is expected to place
a significant strain on our management, financial, operating and technical
resources. Failure to manage this growth effectively could have a material
adverse effect on our financial condition or results of operations.
13
There can be no assurance that we will be able to effectively
integrate the acquired operations with our own operations. Expansion will
place significant demands on our marketing, sales, administrative,
operational, financial and management information systems, controls and
procedures. Accordingly, our performance and profitability will depend on
the ability of our officers and key employees to (i) manage our business
and our subsidiaries as a cohesive enterprise, (ii) manage expansion
through the timely implementation and maintenance of appropriate
administrative, operational, financial and management information systems,
controls and procedures, (iii) add internal capacity, facilities and third-
party sourcing arrangements as and when needed, (iv) maintain service
quality controls, and (v) attract, train, retain, motivate and manage
effectively our employees. There can be no assurance that we will
integrate and manage successfully new systems, controls and procedures for
our business, or that our systems, controls, procedures, facilities and
personnel, even if successfully integrated, will be adequate to support our
projected future operations. Any failure to implement and maintain such
systems, controls and procedures, add internal capacity, facilities and
third-party sourcing arrangements or attract, train, retain, motivate and
manage effectively our employees could have a material adverse effect on
our business, financial condition and results of operations.
We Are Controlled by Our Officers and Directors
Our directors and executive officers beneficially own a significant
percentage of our outstanding shares of common stock. As a result, these
people exert substantial influence over our affairs and may have the
ability to substantially influence all matters requiring approval by the
stockholders, including the election of directors (see "Item 11. Security
Ownership of Certain Beneficial Owners and Management").
Our Growth Strategy Is Dependent on a Variety of Requirements, Any One
of Which May Not Be Met
Our growth strategy and future profitability will be dependent on our
ability to recruit additional management, operational and sales
professionals and to enter into contracts with additional customers in
global markets. There can be no assurance that our business development,
sales, or marketing efforts will result in additional customer contracts,
or that such contracts will result in profitable operations. Further, our
growth strategy includes plans to achieve market penetration in additional
industry segments. In order to remain competitive, we must (a) continually
improve and expand our workplace learning and other curricula, (b)
continually improve and expand technology and management-information
systems, and (c) retain and/or recruit qualified personnel including
instructional designers, computer software programmers, learning
consultants, sales engineers, and other operational, administrative and
sales professionals. There can be no assurance that we will be able to
meet these requirements.
Our Business Will Suffer if Technology-Enabled Learning Products and
Services Are Not Widely Adopted
Our technology-enabled solutions represent a new and emerging approach
for the workplace learning and education, and training market. Our success
will depend substantially upon the widespread adoption of e-learning
products for education and training. The early stage of development of
this market makes it difficult to predict customer demand accurately. The
failure of this market to develop, or a delay in the development of this
market -- whether due to technological, competitive or other reasons --
would severely limit the growth of our business and adversely affect our
financial performance.
14
We Face Significant Competition from Other Companies
The education marketplace is fragmented yet highly competitive and
rapidly evolving, and is expected to continue to undergo significant and
rapid technological change. Other companies may develop products and
services and technologies superior to our services which may result in our
services becoming less competitive. Many of these companies have
substantially greater financial, manufacturing, marketing and technical
resources than do we and represent significant long-term competition. To
the extent that these companies offer comparable products and services at
lower prices, or higher quality and more cost effective, our business could
be adversely affected.
Our Future Growth Depends on Successful Hiring and Retention,
Particularly with Respect to Sales, Marketing and Development
Personnel, and We May Be Unable to Hire and Retain the Experienced
Professionals We Need to Succeed
Failure on our part to attract and retain sufficient skilled
personnel, particularly sales and marketing personnel and product
development personnel, may limit the rate at which we can grow, may
adversely affect the quality or availability of our products and may result
in less effective management of our business, any of which may harm our
business and financial performance. Qualified personnel are in great
demand throughout the learning and software development industry.
Moreover, newly hired employees generally take several months to attain
full productivity, and not all new hires satisfy our performance
expectations.
The Length of the Sales Cycle for Services May Make Our Operating
Results Unpredictable and Volatile
The period between initial contact with a potential customer and the
purchase of our products by that customer typically ranges from six to
eighteen months. Factors that contribute to the long sales cycle include
(a) the need to educate potential customers about the benefits of our
services; (b) competitive evaluations and bidding processes managed by
customers; (c) customers' internal budgeting and corporate approval
processes; and (d) the fact that large corporations often take longer to
make purchasing decisions due to the size of their organizations.
There Is a Limited Public Market for Our Stock
There has to date been only a limited public market for our common
stock. Though we have applied for a listing of our common stock on the OTC
Bulletin Board of the National Association of Securities Dealers ("NASD"),
there can be no assurance that this application will prove successful or,
if successful, that an active market will develop for our common stock or,
if developed, that such market will be able to be sustained.
Penny Stock Rules Pose Risks to Investors in Our Stock
Our common stock may be deemed to be "penny stock" as that term is
defined in Reg. Section 240.3a51-1 of the Securities and Exchange
Commission ("SEC"). Penny stocks are stocks (i) with a price of less than
five dollars per share; (ii) that are not traded on a "recognized" national
exchange; (iii) whose prices are not quoted on the NASD automated quotation
system ("NASDAQ" -- NASDAQ listed stocks must still meet requirement (i)
above); or (iv) in issuers with net tangible assets less than $2,000,000
(if the issuer has been in continuous operation for at least three years)
or $5,000,000 (if in continuous operation for less than three years), or
with average revenues of less than $6,000,000 for the last three years.
15
Subject to compliance with applicable listing standards, we are
attempting to qualify for listing on the OTC Bulletin Board of NASD.
Section 15(g) of the 1934 Act, as amended, and Reg. Section 240.15g-2 of
the SEC require broker-dealers dealing in penny stocks to provide potential
investors with a document disclosing the risks of penny stocks and to
obtain a manually signed and dated written receipt of the document before
effecting any transaction in a penny stock for the investor's account.
Potential investors in our common stock are urged to obtain and read such
disclosures carefully before purchasing any shares that are deemed to be
"penny stocks."
Moreover, Reg. Section 240.15g-9 of the SEC requires broker-dealers in
penny stocks to approve the account of any investor for transactions in
such stocks before selling any penny stock to that investor. This
procedure requires the broker-dealer to (i) obtain from the investor
information concerning his or her financial situation, investment
experience and investment objectives; (ii) reasonably determine, based on
that information, that transactions in penny stocks are suitable for the
investor and that the investor has significant knowledge and experience to
be reasonably capable of evaluating the risks of penny stock transactions;
(iii) provide the investor with a written statement setting forth the basis
on which the broker-dealer made the determination in (ii) above; and (iv)
receive a signed and dated copy of such statement from such investor,
confirming that it accurately reflects the investor's financial situation,
investment experience and investment objects. Compliance with these
requirements may make it more difficult for investors in our common stock
to resell the shares to third parties or to otherwise dispose of them.
ITEM 2. DESCRIPTION OF PROPERTY
Our corporate office in Berkeley, California is leased from an
unaffiliated third party. The term of the lease commenced September 1, 2003
and expires May 31, 2004. CBL Pty. Ltd., leases contiguous office pursuant
to two separate lease agreements for its operations located in Queensland,
Australia. The term of the first lease expires in January 2004 with a
three year option to renew. The term of the second lease expires in
January 2007 with a three year option to renew. These facilities are
adequate for our needs at the present time and foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
On September 12, 2003, we filed a Complaint in the United States
District Court for the District of Utah, Central Division, against CBL
Global Corporation (f/k/a CBL Acquisition Corporation), and Robert Stephen
Scammell, the sole shareholder of CBL-California, (Case No. 2:03CV00798DAK)
alleging, among other things, that Scammell and CBL-California provided us
with misstated financial statements prior to our merger in October 2002
with CBL-California and CBL Global. On September 18, 2003, we filed a
First Amended Complaint and Jury Demand, which added as defendants
CBL-Global and Brian Kennedy, the sole shareholder of CBL-Australia. The
First Amended Complaint alleges causes of action for violations of Section
10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder, for violations of Section 20(a) of the Securities Exchange Act
of 1934, for declaratory relief and breach of contract, for common law
fraud, and for negligent misrepresentation.
16
The First Amended Complaint alleges, among other things, that the
defendants were advised by CBL-California's accountant on September 18,
2002 that CBL-California's financial statements were misstated, and alleges
that new restated financial statements were issued on September 19, 2002.
The First Amended Complaint alleges, however, that the restated financial
statements were not provided to us prior to the October 1, 2002 closing of
the merger. The First Amended Complaint seeks damages in an amount to be
proven at trial, but which amount presently is estimated to exceed, at a
minimum, the full amount of the consideration paid by us and CBL Global in
the merger, as well as treble damages, and attorneys' fees. The First
Amended Complaint also seeks a declaration that we (i) are entitled to
retain certain of our shares of common stock that were issued in connection
with the acquisition of CBL and placed in escrow, (ii) are entitled to set-
off amounts owed to Messrs. Scammell and Kennedy pursuant to the CBL
acquisition; and (iii) are entitled to seek the return of the shares of our
common stock that have already have been distributed to defendants Messrs.
Kennedy and Scammell in the merger. We intend to vigorously pursue our
claims against the defendants.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is currently no public market for our shares of common stock.
As of November 4, 2003, there were 551 holders of record of our common
stock. We have not declared any cash dividends on our stock since our
inception and we have no present plans to declare dividends.
The 2002 Stock Plan
On December 2, 2002, at a special meeting of our shareholders, the
2002 Stock Plan was approved. The maximum aggregate number of shares that
may be optioned and sold under the plan is the total of (a) 3,000,000
shares, (b) an annual 500,000 increase to be added on the last day of each
fiscal year beginning in 2003 unless a lesser amount is determined by the
board of directors. The plan became effective with its adoption and
remains in effect for ten years unless terminated earlier. Options granted
under the plan vest 25% on the day of the grant and the remaining 75% vests
monthly over the next 36 months.
The following table sets forth certain information regarding
securities authorized for issuance under the 2002 Stock Plan.
Equity Compensation Plan Information
------------------------------------
Number of Weighted Number of
Securities to Average Securities
be Issued Upon Exercise Remaining
Upon Exercise Price of Available
of Outstanding Outstanding for Future
Plan Category Options Options Issuances
--------------- --------------- --------------- ---------------
2002 Stock Plan 2,447,000 $0.23 1,053,000
17
Recent Sales of Unregistered Securities
In October 2002, we (i) issued promissory notes to certain individuals
and entities for a total principal amount of $500,000 ("Bridge Financing
Amount"), such notes ("Bridge Financing Notes") being convertible under
certain conditions into shares of common stock, and (ii) in connection with
the issuance of the Bridge Financing Notes, issued warrants ("Bridge
Financing Warrants") to the holders of the notes to purchase additional
shares of common stock. Of the Bridge Financing Amount, $55,000 was
advanced by Kings Peak Advisors, LLC ("KPA") and $120,000 by Mr. Theodore
Swindells. See "Item 12 Certain Relationships and Related Transactions."
On May 19, 2003, the entire Bridge Financing Amount of $500,000 and accrued
interest thereon totaling $34,745 was converted into 1,336,867 shares of
common stock at a price of $0.40 per share. The Bridge Financing Warrants
are exercisable for a period of one year at a price of $0.05 per share, and
contain a net issuance provision whereby the holders may elect a cashless
exercise of such warrants based on the fair market value of the common
stock at the time of conversion.
On May 19, 2003 we issued an aggregate of 1,336,864 restricted shares
of common stock upon conversion of all principal and interest owing under
the Bridge Financing Notes (see "Item 12 Certain Relationships and
Related Transactions"). In connection with this conversion, we also issued
1,250,000 warrants to the holders of the Bridge Financing Notes to purchase
up to 1,250,000 additional shares of our common stock at a price of $0.05
per share. The issuance of these securities was made in reliance on
Section 4(2) of the Securities Act as a transaction not involving any
public offering. No advertising or general solicitation was employed in
offering the securities, the offerings and sales were made to a limited
number of persons, all of whom were directors and existing shareholders,
and we restricted transfer of the securities in accordance with the
requirements of the Securities Act. The recipients of the securities
represented their intention to acquire the securities for investment only
and not with a view to or for sale in connection with any distribution
thereof and appropriate legends were affixed to the share certificates and
other instruments issued in such transactions.
During the period from September 27, 2002 to June 30, 2003 we issued
convertible unsecured promissory notes to Mr. Swindells, who lends money to
us from time to time on a non-interest bearing basis, in the total
principal amount of $925,000. The principal may be converted into such
other debt or equity securities financings that we may issue in private
offerings while the note is outstanding. In September 2003, we repaid
$500,000 on the note balance then outstanding. The issuance of securities,
should it occur, is made in reliance on Section 4(2) of the Securities Act
as a transaction not involving any public offering.
On July 8, 2003, we issued a five-year warrant to Merriman, Curran,
Ford & Co. a financial service company, to purchase up to 20,000 shares of
our common stock for a period of five years at $0.50 per share in
consideration for financial advisory services provided to us by the firm.
The issuance of these securities was made in reliance on Section 4(2) of
the Securities Act as a transaction not involving any public offering.
18
On September 1, 2003, we issued an aggregate of 1,250,000 restricted
shares of our common stock to the twelve shareholders of TouchVision, Inc.
in exchange for acquisition of all of the issued and outstanding shares of
TouchVision, a California corporation that is in the business of providing
technology-enabled information and leaning systems. The issuance of these
securities was made in reliance on Section 4(2) of the Securities Act as a
transaction not involving any public offering. No advertising or general
solicitation was employed in offering the securities, the offerings and
sales were made to a limited number of persons, and we restricted transfer
of the securities in accordance with the requirements of the Securities
Act. The recipients of the securities represented their intention to
acquire the securities for investment only and not with a view to or for
sale in connection with any distribution thereof and appropriate legends
were affixed to the share certificates and other instruments issued in such
transactions. In conjunction with the acquisition of TouchVision, we
issued 735,000 stock options pursuant to the 2002 Stock Plan at $0.50 per
share.
On September 1, 2003, we issued 700,000 restricted shares of our
common stock to two shareholders of River Murray Training Pty. Ltd. ("RMT")
in exchange for all of the issued and outstanding shares of RMT, an
Australian company that is in the business of providing workplace training
programs for various segments of the food production industry, including
viticulture and horticulture. The issuance of these securities was made in
reliance on Section 4(2) of the Securities Act as a transaction not
involving any public offering. No advertising or general solicitation was
employed in offering the securities, the offerings and sales were made to a
limited number of persons, and we restricted transfer of the securities in
accordance with the requirements of the Securities Act. The recipients of
the securities represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates and other instruments issued in such transactions.
On September 1, 2003 we issued a $20,000 convertible promissory note
that converts into 2,000,000 restricted shares of our common stock in
consideration for 51% of the issued and outstanding shares of Ayrshire
Trading Limited a British Virgin Islands company, that owns 95% of
Riverbend Group Holdings (Proprietary) Limited. The note converts at $0.01
per share and conversion of the note is mandatory by maturity, December 30,
2006. The issuance of these securities was made in reliance on Section
4(2) of the Securities Act as a transaction not involving any public
offering. No advertising or general solicitation was employed in offering
the securities, the offerings and sales were made to a limited number of
persons, and we restricted transfer of the securities in accordance with
the requirements of the Securities Act. The recipients of the securities
represented their intention to acquire the securities for investment only
and not with a view to or for sale in connection with any distribution
thereof and appropriate legends were affixed to the share certificates and
other instruments issued in such transactions.
19
During the period June 1, 2003 to October 31, 2003, we sold by way of
private placement an aggregate of 5,143,300 units at a price of $1.00 per
unit, for aggregate consideration of $5,123,300. Each unit comprised two
shares of our common stock and two warrants, each exercisable for one
additional share of our common stock. In addition, each unit carried the
right to acquire an additional warrant to purchase, under certain
conditions, up to one additional share of common stock. In connection with
the private placement, we paid $448,105 in commissions and issued to
various financial advisors, 567,160 additional shares of our common stock
and five-year warrants to purchase 207,050 shares of our common stock. In
our opinion, the offer and sale of these securities was exempt by virtue
of Section 4(2) of the Securities Act and the rules promulgated
thereunder.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS AND OTHER PORTIONS OF THIS REPORT CONTAIN FORWARD-
LOOKING INFORMATION THAT INVOLVES RISKS AND UNCERTAINTIES. OUR ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED BY THIS FORWARD-
LOOKING INFORMATION. THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE
FINANCIAL STATEMENTS AND THE RELATED NOTES INCLUDED ELSEWHERE IN THIS
REPORT.
General
On August 6, 2003, our board of directors approved a change in our
fiscal year-end from September 30 to June 30 to align it with those of the
companies we had already acquired or were at that time in the process of
acquiring. The information presented in this transition report on Form 10-
KSB relates to the period October 1, 2002 through June 30, 2003.
We substantially reorganized our business and changed our strategic
business plan during the fiscal year ended September 30, 2002. This
reorganization continued into the transition period covered by this report.
As part of this reorganization, we incurred significant costs associated
with hiring new management, acquiring new office facilities and engaging
professional advisors to assist us in the process of developing and
executing new business opportunities for our company. We also sought and
obtained debt and equity financing which permitted us to complete our first
corporate acquisition in October 2002 and to close three additional
acquisitions in September 2003.
Critical Accounting Policies and Estimates
Our financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America
and form the basis for the following discussion and analysis on critical
accounting policies and estimates. The preparation of these financial
statements requires us to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. On a regular basis we
evaluate our estimates and assumptions. We base our estimates on
historical experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.
20
A summary of our significant accounting policies is set out in Note 2
to our Financial Statements. We had marginal revenues during the fiscal
year, but to the extent relevant, we believe these accounting policies
reflect our more significant estimates and assumptions used in the
preparation of our financial statements.
Related Party Transactions
Our corporate reorganization during the fiscal year ended September
30, 2002 was effected primarily by two of our officers and directors,
Douglas Cole and Edward Mooney. During our last fiscal year and period
subsequent thereto, we entered into several transactions with these
individuals and with entities controlled by them.
As of August 8, 2002, we formalized a Debt Conversion Agreement with
Global Marketing Associates, Inc. ("GMA"), holder of a convertible
promissory note (the "GMA Note") in the principal amount of $166,963,
pursuant to which the principal amount of the note, along with accrued
interest thereon, was made convertible, under certain conditions, into
3,200,000 shares of common stock. The GMA Note was originally issued in
November 2000 to our company's former attorneys and was subsequently
acquired by Pacific Management Services, Inc., who assigned the note to
GMA; both entities are unrelated to us. GMA subsequently assigned the
right to acquire 2,600,000 of the 3,200,000 shares of common stock into
which the note is convertible, to several persons, including Messrs. Cole
and Mooney, who are officers and directors of our company. Pursuant to the
assignment, Messrs. Cole and Mooney each acquired the right to acquire
600,000 shares of the common stock into which the GMA Note is convertible
and Mr. Theodore Swindells acquired the right to acquire 1,000,000 shares.
As of January 2003, all 3,200,000 shares of our common stock had been
issued pursuant to the terms of the GMA Note. Fifty percent of the shares
issuable upon the conversion of the GMA Note are subject to a two-year
lock-up provision that restricts transfer of such shares without prior
written consent of our board of directors.
As of July 15, 2002, we entered in a two-year Advisory Agreement with
KPA (see "Item 5. Market for Common Equity and Related Stockholder
Matters"), automatically renewable for an additional 12-month period.
Under the terms of the Advisory Agreement, KPA agreed to provide us with
general corporate, financial, business development and investment advisory
services on a non-exclusive basis. These services include assisting with
the identification of placement agents, underwriters, lenders and other
sources of financing, as well as additional qualified independent directors
and members of management. KPA is a private company whose principals are
Douglas Cole and Edward Mooney, who are officers and directors of our
company, and Theodore Swindells. At its August 19, 2003 meeting, the board
of directors' voted to suspend the Advisory Agreement from August 15, 2003
until January 2004. Through June 30, 2003, KPA had earned a total of
$285,000 under the Advisory Agreement, $110,000 of which was converted into
4,400,000 shares of common stock in March 2003. Of the balance of
$175,000, $134,132 was paid to KPA, leaving a balance owing at June 30,
2003 of $40,868.
21
In October 2002, we (i) issued Bridge Financing Notes (see "Item 5.
Market for Common Equity and Related Stockholder Matters")to certain
individuals and entities for a total principal amount of $500,000 that were
convertible under certain conditions into shares of common stock, and (ii)
in connection with the issuance of the Bridge Financing Notes, issued the
Bridge Financing Warrants to the holders of the Notes to purchase
additional shares of common stock. Of the Bridge Financing Amount, $55,000
was advanced by KPA and $120,000 by Mr. Swindells. On May 19, 2003, the
entire Bridge Financing Amount of $500,000 and accrued interest thereon
totaling $34,745 was converted into 1,336,867 shares of common stock at a
price of $0.40 per share. The Bridge Financing Warrants are exercisable
for a period of one year at a price of $0.05 per share, and contain a net
issuance provision whereby the holders may elect a cashless exercise of
such warrants based on the fair market value of the common stock at the
time of conversion.
Effective October 1, 2002, we issued an aggregate of 1,200,000
restricted shares of our common stock at a price of $0.025 per share to our
three directors, Messrs. Cole, Mooney and Jobe, in consideration for past
services valued at $30,000.
From time to time, since inception of our current operating strategy,
Mr. Swindells has provided short-term working capital loans on a non-
interest bearing basis. During our previous fiscal year, we were advanced
$145,000 by Mr. Theodore Swindells, and during the transition period from
October 1, 2002 to June 30, 2003, we were advanced an additional $780,000
by Mr. Swindells. The principal may be converted into such other debt or
equity securities financings that we may issue in private offerings while
the loan is outstanding. In September 2003, we repaid $500,000 on the loan
balance then outstanding.
Results of Operations
TRANSITION PERIOD ENDED JUNE 30, 2003 COMPARED TO FISCAL YEAR ENDED
SEPTEMBER 30, 2002
Our revenues for nine-month transitional period ended June 30, 2003
were $167,790, as compared to $0 for the fiscal year ended September 30,
2002. These revenues were generated by our operating subsidiary, CBL
Global. Net loss for the nine-month transitional period ended June 30,
2003 was $(2,071,984) as compared to $(565,931) for the fiscal year ended
September 30, 2002.
Our operating expenses increased from $552,774 for the year ended
September 30, 2002 to $2,157,840 for the nine-month transitional period
ended June 30, 2003. This increase was due primarily to a significant
increase in salaries and benefits, which increased $960,123 from $83,000
for the year ended September 30, 2002 to $1,043,123 for the period ended
June 30, 2003. Of this amount, $603,551 was paid for salaries and related
tax, medical and other benefits for the thirteen employees of CBL Global.
During the period, we also hired our president, our chief financial officer
and our chief learning officer and incurred the salary expense associated
with these positions. Other significant increases in our operating expenses
were related to travel and entertainment expenses, which increased
$121,725, from $60,868 for the year ended September 30, 2002 to $182,593
for the transition period ended June 30, 2003. Professional fees increased
from $363,770 to $437,836, and included financial advisory and legal
expenses associated with our recent financing and acquisition activities.
22
See "Item 12. Certain Relationships and Related Transactions." Also
included in operating expense is $167,747 amortization expense resulting
from the $1,118,312 capitalization of intellectual property acquired with
CBL Global and related amortization of this asset. Interest Expense of
$76,865 increased substantially, from $14,983 for the year ended September
30, 2002. This increase is primarily attributable to interest paid on
various loans incurred immediately prior to and during the period (see
"Item 12. Certain Relationships and Related Transactions").
FISCAL YEAR ENDED SEPTEMBER 30, 2002 COMPARED TO FISCAL YEAR ENDED
SEPTEMBER 30, 2001
We had no revenues during the year ended September 30, 2002. Our net
loss before taxes during the year was $565,931, as compared to $35,510 for
the previous year.
Our operating expenses increased from $25,492 for the year ended
September 30, 2001 to $552,774 for the year ended September 30, 2002. This
increase was due to significant increases in professional fees, salaries
and travel and entertainment expenses associate with our corporate
reorganization during the year. We incurred professional fees of $363,770,
consisting primarily of financial advisory fees and legal fees; salary
expense of $83,000, accrued at year-end; and we incurred $60,868 in travel
and entertainment expenses incurred in connection with the CBL acquisition
and other potential acquisitions that have not yet been consummated.
Interest expense was $14,983 and $10,018, respectively, for the years ended
September 30, 2002 and 2001.
Liquidity and Capital Resources
Our expenses are currently greater than our revenues. We have had a
history of losses, and our accumulated deficit as of June 30, 2003 was
$11,188,913, as compared to $9,116,929 as of September 30, 2002. We
incurred significant liabilities during the year, and our current
liabilities exceeded our current assets by $2,646,065 as of June 30, 2003.
At June 30, 2003, we had a cash balance of $86,511 compared to
$368,788 at September 30, 2002. Net cash used by operating activities
during the transition period ended June 30, 2003 was $1,295,443,
attributable primarily to our loss from operations of $2,071,984. Cash
generated by financing activities was $1,072,440 for the nine-month
transitional period ended June 30, 2003 representing the net proceeds from
the issuance of $780,000 in notes payable and $292,440 in common stock.
Accounts payable increased from $229,375 at September 30, 2002 to
$391,872 at June 30, 2003. This increase is attributable to expenses
incurred in connection with our acquisitions, the business of CBL Global
and our continuing corporate expansion during the year.
Our current liabilities increased from $1,149,340 at September 30,
2002 to $2,873,280 at June 30, 2003. This increase in debt is primarily
attributable to $1,000,000 in convertible promissory notes that were issued
in connection with the acquisition of CBL that are due and payable on the
earlier of September 1, 2004 or the date upon which we close an equity
financing the proceeds of which, together with the net proceeds of all
equity financing since October 1, 2002 exceed $10,000,000, and the issuance
of $780,000 in short-term promissory notes to a related party (see "Item
12. Certain Relationships and Related Transactions").
23
We commenced a private offering of our securities in May 2003. As of
October 31, 2003, we had closed the offering and raised an aggregate of
$5,143,300. Of these funds, $254,000, $81,663, $240,000 and $1,000,000
were advanced as loans to our subsidiaries, CBL Global, RMT, TouchVision
and Riverbend, respectively, $448,105 was paid in commissions to financial
advisors for fundraising activities, and $500,000 was repaid on the short-
term promissory notes to a related party.
For the fiscal year 2004, we anticipate total revenue to exceed
$20,000,000 and operating expenses in our subsidiaries to total
$18,000,000. Actual results may differ significantly from these estimates
in part due to market conditions for our products as well as the impact of
future acquisitions, should they occur.
To meet our present and future liquidity requirements, we will
continue to seek additional funding through private placements, conversion
of outstanding loans and payables into common stock, development of the
business of our newly-acquired subsidiaries and through additional
acquisitions that have sufficient cash flow to fund subsidiary operations.
There can be no assurance that we will be successful in obtaining more debt
and/or equity financing in the future or that our results of operations
will materially improve in either the short- or the long-term. If we fail
to obtain such financing and improve our results of operations, we will be
unable to meet our obligations as they become due. That would raise
substantial doubt about our ability to continue as a going concern.
ITEM 7. FINANCIAL STATEMENTS
See Item 13(a) for an index to the financial statements attached
hereto.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
ITEM 8A. DISCLOSURE CONTROLS AND PROCEDURES
Our Chief Executive Officer and Chief Financial Officer, after
conducting an evaluation, together with other members of our management, of
the effectiveness of the design and operation of our disclosure controls
and procedures as of the end of the period covered by this report, have
concluded that our disclosure controls and procedures were effective to
ensure that information required to be disclosed by us in our reports filed
or submitted under the Securities Exchange Act of 1934 (the "Exchange Act")
is recorded, processed, summarized, and reported within the time periods
specified in the rules and forms of the SEC. There were no significant
changes in our internal controls or in other factors that could
significantly affect these controls subsequent to that evaluation, and
there were no significant deficiencies or material weaknesses in such
controls requiring corrective actions.
24
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The following table sets forth the names, ages and titles of our
executive officers and directors.
Name Age Position
---- --- --------
Douglas D. Cole 48 Chief Executive Officer and Director
Edward P. Mooney 44 President and Director
Christine R. Larson 50 Chief Financial Officer
William D. Jobe 65 Director
Certain biographical information pertaining to the above-named
officers and directors is set forth below.
Douglas D. Cole. Mr. Cole has served been a director since January
2002 and has served as our Chief Executive Officer since August 2002. For
the past twenty-five years, Mr. Cole has worked in the information
technology industry, with a focus on sales and marketing. He has
successfully completed numerous acquisitions and strategic partnerships for
and among various companies. He served as a director of USA Broadband,
Inc., a publicly-traded company specializing in delivery of digital video
and television programming, from October 2001 to October 2003 and served as
interim President of its operating subsidiary Cable Concepts, Inc., from
November 2001 to April 2002. From August 1998 to June 2000, Mr. Cole
served as a director of RateXchange Corporation and as a director of two of
its subsidiaries, RateXchange I, Inc. and PolarCap, Inc. He served as
Chairman, Chief Executive Officer, President and Principal Accounting
Officer of RateXchange from April 1999 to February 2000. He served as the
Chief Executive Officer of PolarCap, Inc. from its inception until August
1998. He previously served as a director of Great Bear Technology Company.
Edward P. Mooney. Mr. Mooney has been a director since January 2002
and has served as our President since October 1, 2002. Mr. Mooney has
twenty years experience in corporate development, corporate finance, and
financial research and analysis. He served as a director and officer of
USA Broadband, Inc. from April 2001 to October 2003. He served as interim
Chief Executive Officer until September 2002 and provided consulting
services to USA Broadband until May 2003. Prior thereto, Mr. Mooney was
self-employed as a corporate consultant. Mr. Mooney served as a director
for RateXchange Corporation from November 1998 to April 2000 and as
Executive Vice President from April 1999 to April 2000. Mr. Mooney also
served as a director of WorldPort Communications, Inc. from September 1996
to May 1998 and as President from September 1996 to April 1997. During
2002, Mr. Mooney served as a director of Category 5 Technologies, Inc. a
publicly traded company. He also served as a director of InterAmericas
Communications Corporation, HQ Office International and HQ Office Supplies
Warehouse.
25
Christine R. Larson. Ms. Larson has over twenty years experience as a
business and financial professional. She has served as our chief financial
officer since January 2003. Prior to that time, she worked as an
independent financial and marketing consultant to start-up software,
hardware and internet service companies. In 1999, she worked for KPMG
Consulting, Inc. She was previously employed from 1985 to 1998 by Bank of
America Corporation, most recently as a senior vice president in their
interactive services division. While working at Bank of America
Corporation, she served as chief financial officer of their leasing
subsidiary, BA Leasing and Capital Corporation and of their venture capital
subsidiary, BA Ventures Inc. She is a certified public accountant licensed
in the state of California.
William D. Jobe. Mr. Jobe has been a director since January 2002. He
has been a private venture capitalist and a computer, communications and
software industry advisor since 1991. Prior to that time, he worked in
executive management for a number of firms in the computer, software and
telecommunications industries including MIPS Technology Development where
he served as President and Data General where he was Vice President of
North American Sales. Mr. Jobe has served as a director for a number of
privately held and publicly held high technology companies including Qualix
Group, Inc., Fulltime Software, Inc., Multimedia Access Corporation where
he served as chairman of the board and director, Viewcast.com, GreatBear
Technology Company, Tanisys Technology, Inc. and Interand Group
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
We are in the process of arranging for filing Forms 3 by each of our
officers, directors and 10% shareholders, which filing we anticipate will
occur in the very near future. Forms 3 were due to be filed in respect of
our directors and 10% shareholders in 2002 and in respect of certain
officers in 2003. In addition, Forms 4 were due to be filed in respect of
certain transactions involving these persons at various dates in 2002 and
2003.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the
annual and long-term compensation for services to us in all capacities for
the nine month transitional period ended June 30, 2003 and the fiscal years
ended September 30, 2002 and 2001 of Messrs. Douglas Cole and Edward
Mooney. These individuals received no other compensation of any type,
other than as set out below, during the fiscal years indicated.
In conjunction with our recent private offering, see "Item 6.
Management's Discussion and Analysis of Plan of Operation Liquidity and
Capital Resources," and in consideration of the company's development
stage, Messrs. Cole and Mooney have agreed to defer a portion of their
salaries until such time as the company completes additional financings or
until such time as the company's working capital enables full payment of
current and accrued salaries. From time to time during the past year, Cole
and Mooney have deferred or accrued salaries and expense reimbursement
depending on the company's working capital situation, and may do so in the
future if required. In addition, in conjunction with the private offering,
Messrs Cole and Mooney have each agreed to subject 500,000 shares held by
them into a lock-up agreement until such time as the company has met
certain revenue objectives and other corporate development targets.
26
SUMMARY COMPENSATION TABLE
--------------------------
Annual Compensation Long Term Compensation
------------------------- ----------------------
Long
Other Restr Term All
Name and Annual -icted Incen- Other
Principal Compen Stock Stock tive Compen
Position Year Salary Bonus -sation Awards Options Payouts -sation
---------------- ---- --------- ------- ------- ------- ------- ------- -------
Douglas D. Cole 2003 $ 135,000 $ 25,000 $ 9,000 - 250,000 - -
Chief Executive 2002 $ 75,000 - $ 5,000 - - - $ 12,500
Officer 2001 - - - - - - -
Edward P. Mooney 2003 $ 135,000 $ 25,000 $ 9,000 - 250,000 - -
2002 - - - - - - $ 12,500
2001 - - - - - - -
The following table sets forth the individual stock option grants made
during the nine month period ended June 30, 2003 to each of the above named
executive officers.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
---------------------------------------
Individual Grants
-----------------
Percentage of
Number Total Options
of Securities Granted to Exercise
Underlying Employees in Price Expiration
Name Options Fiscal Year per Share Date
--------------- -------------- -------------- -------------- ---------------
Douglas D. Cole 250,000 13.7% $0.25 November 30, 2007
Edward P. Mooney 250,000 13.7% $0.25 November 30, 2007
The following table sets forth the aggregate stock option exercises and
fiscal year-end option values for each of the above named executive
officers. No stock options were exercised during the nine month period
ended June 30, 2003.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END VALUES
----------------------------------------------------------------
Number of
Securities
Underlying Value of
Unexercised Unexercised
Options Options
at FY-End at FY-End
Shares acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
--------------- -------------- -------------- -------------- ---------------
Douglas D. Cole - - 98,958/151,042 $24,739/$37,761
Edward P. Mooney - - 98,958/151,042 $24,739/$37,761
27
Employment Agreements
As of August 12, 2002, we formalized an employment agreement that
provides for the employment of Mr. Cole as our chief executive officer at
an annual salary of $180,000, or such higher rate as our board of directors
may determine. The agreement, which has a two-year term from August 12,
2002, is automatically renewable for a further twelve-month period, unless
earlier terminated. In addition to his salary, Mr. Cole is entitled to
$1,000 per month for automobile reimbursement and various other benefits.
On October 1, 2002, we entered into an employment agreement with Mr. Mooney
on substantially similar terms to the agreement with Mr. Cole, pursuant to
which Mr. Mooney agreed to serve as our President.
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of November 4,
2003 regarding current beneficial ownership of our common stock by (i) each
person known by us to own more than 5% of the outstanding shares of our
common stock, (ii) each of our executive officers and directors, and (iii)
all of our executive officers and directors as a group. Except as noted,
each person has sole voting and sole investment or dispositive power with
respect to the shares shown. The information presented is based on
27,560,401 outstanding shares of common stock as of November 4, 2003.
Unless otherwise indicated, the address for each of the following is 1831
Second Street, Berkeley, California 94710.
Percent of
Number of Total Class
Name and Address of Number of Options & Beneficial Beneficially
Beneficial Owner Shares Owned Warrants(1) Ownership(2) Owned
----------------------- ------------ ------------ ------------ ------------
Douglas D. Cole 2,573,557 181,250 2,754,807 10.00%
Chief Executive Officer (4) (4)(5)
and Director
Edward P. Mooney 2,573,557 181,250 2,574,807 10.00%
President and Director (4) (4)(5)
William Jobe 200,000 14,583 214,583 0.78%
6654 Bradbury Court
Forth Worth, TX 76132
Director
Christine R. Larson - 104,167 104,167 0.38%
Chief Financial Officer (5)
Steve Hanson 2,000,000 3,000,000 5,000,000 18.14%
1319 NW 86th Street
Vancouver, WA 98665
5% Shareholder
Brian Kennedy 1,545,000 392,917 1,937,917 7.03%
5% Shareholder (3)(5)
CEO, CBL Global Corp.
28
Percent of
Number of Total Class
Name and Address of Number of Options & Beneficial Beneficially
Beneficial Owner Shares Owned Warrants(1) Ownership(2) Owned
----------------------- ------------ ------------ ------------ ------------
Robert Stephen Scammell 1,455,000 377,917 1,832,917 6.65%
5% Shareholder
President, CBL Global Corp.
Theodore Swindells 2,791,680 2,470,833 5,262,513 19.09%
11400 Southeast 8th Street (4) (4)
Bellevue, WA 98004
5% Shareholder
Luc Verelst 2,000,000 3,000,000 5,000,000 18.14%
Verbier, Switzerland 1936
5% Shareholder
Kings Peak Advisors, LLC 4,420,670 137,500 4,558,170 16.54%
1338 South Foothill Drive, (4) (4)
Suite 171
Salt Lake City, Utah 84108
5% Beneficial Owner
All executive officers and 5,347,114 481,250 5,828,364 21.15%
directors of the Company (4) (4)
as a group (4 persons)
(1) Reflects warrants, options or other convertible securities that will
be exercisable, convertible or vested as the case may be within 60
days of November 4, 2003.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that
person, shares of common stock subject to options held by that person
that are currently exercisable or become exercisable within 60 days
following November 4, 2003 are deemed outstanding. These shares,
however, are not deemed outstanding for the purpose of computing the
percentage ownership of any other person. Unless otherwise indicated
in the footnotes to this table, the persons and entities named in the
table have sole voting and sole investment power with respect to the
shares set forth opposite such stockholder's name.
(3) Includes shares issuable upon conversion of notes issued in connection
with the CBL Global transaction.
(4) Shares are owned by Kings Peak Advisors, LLC, a Utah limited liability
corporation. Mr. Cole, Mr. Mooney and Mr. Swindells each own a
33-1/3% interest in KPA, and each disclaims beneficial ownership of
the shares in the Company that are issuable to KPA. Proportionate
ownership of these shares is included in the calculation of
beneficiary ownership for Mr. Cole, Mr. Mooney and Mr. Swindells.
(5) Includes that portion of options that have vested or will vest within
60 days from November 4, 2003 under the 2002 Stock Plan.
29
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of August 8, 2002, we formalized a Debt Conversion Agreement with
GMA ("see Item 6. Management's Discussion and Analysis or Plan of
Operation"), holder of a convertible promissory note in the principal
amount of $166,963, pursuant to which the principal amount of the note,
along with accrued interest thereon, was made convertible, under certain
conditions, into 3,200,000 shares of common stock. The GMA Note was
originally issued in November 2000 to our company's former attorneys and
was subsequently acquired by Pacific Management Services, Inc., who
assigned the note to GMA; both entities are unrelated to us. GMA
subsequently assigned the right to acquire 2,600,000 of the 3,200,000
shares of common stock into which the note is convertible, to several
persons, including Messrs. Cole and Mooney, who are officers and directors
of our company. Pursuant to the assignment, Messrs. Cole and Mooney each
acquired the right to acquire 600,000 shares of the common stock into which
the GMA Note is convertible and Mr. Swindells acquired the right to acquire
1,000,000 shares. As of January 2003, all 3,200,000 shares of our common
stock had been issued pursuant to the terms of the GMA Note. Fifty
percent of the shares issuable upon the conversion of the GMA Note are
subject to a two-year lock-up provision that restricts transfer of such
shares without prior written consent of our board of directors.
As of July 15, 2002, we entered in a two-year Advisory Agreement with
KPA (see "Item 5. Market for Common Equity and Related Stockholder
Matters") automatically renewable for an additional 12-month period. Under
the terms of the Advisory Agreement, KPA agreed to provide us with general
corporate, financial, business development and investment advisory services
on a non-exclusive basis. These services include assisting with the
identification of placement agents, underwriters, lenders and other sources
of financing, as well as additional qualified independent directors and
members of management. KPA is a private company whose principals are
Messrs. Cole and Mooney, who are officers and directors of our company, and
Mr. Swindells. At its August 19, 2003 meeting, the board of directors'
voted to suspend the Advisory Agreement from August 15, 2003 until January
2004. Through June 30, 2003, KPA had earned a total of $285,000 under the
Advisory Agreement, $110,000 of which was converted into 4,400,000 shares
of common stock in March 2003. Of the balance of $175,000, $134,132 was
paid to KPA, leaving a balance owing at June 30, 2003 of $40,868.
In October 2002, we (i) issued Bridge Financing Notes (see "Item 5.
Market for Common Equity and Related Stockholder Matters") to certain
individuals and entities for a total principal amount of $500,000 that were
convertible under certain conditions into shares of common stock, and (ii)
in connection with the issuance of the Bridge Financing Notes, issued the
Bridge Financing Warrants to the holders of the Notes to purchase
additional shares of common stock. Of the Bridge Financing Amount, $55,000
was advanced by KPA and $120,000 by Mr. Swindells. On May 19, 2003, the
entire Bridge Financing Amount of $500,000 and accrued interest thereon
totaling $34,745 was converted into 1,336,867 shares of common stock at a
price of $0.40 per share. The Bridge Financing Warrants are exercisable
for a period of one year at a price of $0.05 per share, and contain a net
issuance provision whereby the holders may elect a cashless exercise of
such warrants based on the fair market value of the common stock at the
time of conversion.
Effective October 1, 2002, we issued an aggregate of 1,200,000
restricted shares of our common stock at a price of $0.025 per share to our
three directors, Messrs. Cole, Mooney and Jobe, in consideration for past
services valued at $30,000.
30
From time to time, since inception of our current operating strategy,
Mr. Swindells has provided short-term working capital loans on a non-
interest bearing basis. During our previous fiscal year, we were advanced
$145,000 by Mr. Theodore Swindells, and during the transition period from
October 1, 2002 to June 30, 2003, we were advanced an additional $780,000
by Mr. Swindells. The principal may be converted into such other debt or
equity securities financings that we may issue in private offerings while
the loan is outstanding.
ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following financial statements of Trinity Learning Corporation and
related notes thereto and auditor's report thereon, are filed as part of
this Annual Report on Form 10-KSB:
Page
32 Independent Auditor's Report dated October 18, 2003
33 Consolidated Balance Sheets as of June 30, 2003 and
September 30, 2002
34 Consolidated Statements of Operations for the nine months
ended June 30, 2003 and the year ended September 30, 2002
35 Consolidated Statements of Stockholders' Equity for the
nine months ended June 30, 2003 and the year ended
September 30, 2002
38 Consolidated Statements of Cash Flows for the nine months
ended June 30, 2003 and the year ended September 30, 2002
39 Notes to Financial Statements
2. Exhibits
The exhibits listed on the accompanying index to exhibits
immediately following the financial statements are filed as part of, or
hereby incorporated by reference into, this Annual Report on Form 10-KSB.
(b) Reports on Form 8-K Filed During the Last Quarter of the
Transition Period Ended June 30, 2003.
1. On April 4, 2003, we filed a Current Report on Form 8-K with
respect to our name change and the appointment of Mr. David Grebow as our
Chief Learning Officer.
2. On June 19, 2003 we filed a Current Report on Form 8K with
respect to an agreement to acquire Riverbend Group Holdings (Pty.) Ltd. and
concerning the recapitalization of our common stock.
31
Bierwolf, Nilson & Associates
Certified Public Accountants
1453 South Major street
A Partnership of Salt Lake City, Utah 84115
Professional Telephone (801)363-1175 Nephi J. Bierwolf, CPA
Corporations Fax (801) 363-0615 Troy F. Nilson, CPA
___________________________________________________________________________
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Trinity Learning Corporation
We have audited the accompanying consolidated balance sheet of Trinity
Learning Corporation, (a Utah corporation) as of June 30, 2003 and
September 30, 2002, and the related consolidated statements of operations,
stockholders' equity and cash flows for the transition period October 1,
2002 to June 30, 2003 and the fiscal year ended September 30, 2002. These
consolidated financial statements are the responsibility of the management
of Trinity Learning Corporation. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards, in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about 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 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 audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Trinity Learning
Corporation as of June 30, 2003 and September 30, 2002, and the
consolidated results of their operations and its cash flows for the
transition period October 1, 2002 to June 30, 2003 and the fiscal year
ended September 30, 2002, in conformity with generally accepted accounting
principles, in the United States of America.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed
in Note 13 to the consolidated financial statements, the Company's
significant operating losses raise substantial doubt about its ability to
continue as a going concern. These consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/S/ Bierwolf, Nilson & Associates
Bierwolf, Nilson & Associates
Salt Lake City, Utah
October 18, 2003
Trinity Learning Corporation
Balance Sheet
June 30, September 30,
2003 2002
------------ ------------
Assets
------
Current Assets
Cash $ 86,511 $ 368,788
Accounts Receivable 42,719 -
Interest Receivable 41 1,826
Prepaid Expense 97,944 1,500
------------ ------------
Total Current Assets 227,215 372,114
------------ ------------
Property & Equipment (Note 3)
Furniture & Equipment 53,385 6,151
Accumulated Depreciation (7,824) (80)
------------ ------------
Net Property & Equipment 45,561 6,071
------------ ------------
Intangible Asset (Note 4)
Technology-Based Asset 1,118,312 -
Accumulated Amortization (167,747) -
------------ ------------
Net Intangible Asset 950,565 -
------------ ------------
Other Assets
Notes Receivable (Note 5) 25,000 -
Other Assets 94,003 -
------------ ------------
Total Other Assets 119,003 -
------------ ------------
Total Assets $ 1,342,344 $ 378,185
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities
Accounts Payable 391,872 229,375
Accrued Expenses 270,270 83,000
Interest Payable 63,987 25,001
Notes Payable (Notes 7 & 8) - 694,352
Notes Payable Related Party (Notes 7 & 8) 2,147,151 117,611
------------ ------------
Total Liabilities 2,873,280 1,149,339
------------ ------------
Stockholders' Equity
Preferred Stock, 10,000,000 Shares at No
Par Value; No Shares Issued and Outstanding
(Note 9) - -
Common Stock, 100,000,000 Shares Authorized
at No Par Value, 14,956,641 shares and 49,774
shares Issued and Outstanding, Respectively
(Notes (9 & 10) 9,693,447 8,380,775
Accumulated Deficit (11,188,913) (9,116,929)
Subscription Receivable (Note 9) (35,000) (35,000)
Other Comprehensive Income (470) -
------------ ------------
Total Stockholders' Equity (1,530,936) (771,154)
------------ ------------
Total Liabilities and Stockholders' Equity $ 1,342,344 $ 378,185
============ ============
The accompanying notes are an integral part of these financial statements.
33
Trinity Learning Corporation
Statement of Operations
Transition
Period Fiscal
October 1, Year Ended
2002 to June September
30, 2003 30, 2002
------------ ------------
Revenue $ 167,790 $ -
------- ------------ ------------
Expenses
--------
Salaries & Benefits 1,043,123 83,000
Professional Fees 437,836 363,770
General & Administrative 228,931 31,647
Travel & Entertainment 182,593 60,868
Depreciation & Amortization 175,497 80
Rent 44,524 3,750
Office Expense 45,336 9,659
------------ ------------
Total Expense 2,157,840 552,774
------------ ------------
Income (Loss) from Operations (1,990,050) (552,774)
------------ ------------
Other Income (Expense)
----------------------
Interest Income (487) 1,826
Interest Expense (76,865) (14,983)
Foreign Currency Gain/(Loss) (4,582) -
------------ ------------
Total Other Income (Expense) (81,934) (13,157)
------------ ------------
Income (Loss) Before Taxes (2,071,984) (565,931)
Taxes - -
------------ ------------
Net Income (Loss) $ (2,071,984) $ (565,931)
============ ============
Net Loss Per Common Share $ (0.25) $ (11.66)
Weighted Average Shares Outstanding 8,364,218 48,540
A summary of the components of other comprehensive income for the
transition period from October 1, 2002 to June 30, 2003 is as follows:
Transition Period
October 1, 2002
to June 30, 2003
--------------------------
Before Tax After Tax
Amount Amount
------------ ------------
Net Income (Loss) $ (2,071,984) $ (2,071,984)
Foreign currency translation (470) (470)
------------ ------------
Total Other Comprehensive Income $ (2,072,454) $ (2,072,454)
============ ============
The accompanying notes are an integral part of these financial statments.
34
Trinity Learning Corporation
Statement of Stockholders' Equity
For the Period October 1, 2001 to June 30, 2003
Additional
Paid-In Comprehensive Accumulated
Shares Amount Capital Income Deficit
----------- ------------ ------------ ------------ -------------
Balance at
October 1, 2001 46,174 $ 4,617 $ 8,341,158 $ - $ (8,550,998)
Issuance of Shares
for a Subscription
Receivable 3,500 35,000 - - -
Rounding Due to
Reverse Split 100 1,000 (1,000) - -
Change in Par Value - 8,340,158 (8,340,158) - -
Net Loss for the
Period Ended
September 30, 2002 - - - - (565,931)
----------- ------------ ------------ ------------ -------------
Balance at
September 30, 2002 49,774 8,380,775 - - (9,116,929)
Shares Issued for
CBL Global Corp.
Acquisition 3,000,000 75,000 - - -
Shares Issued for
Services at $0.025
per Share 6,670,000 166,750 - - -
Shares Issued for
Conversion on Note
Payable at $0.052
per Share 3,200,000 166,963 - - -
Shares Issued for
Conversion of Note
and Interest
Payable at $0.40
per Share 1,336,867 534,745 - - -
Shares Issued for
Cash at $0.50 per
Share 700,000 350,000 - - -
Cost of Share
Issuance - (57,560) - - -
Foreign Currency
Translation - - - (470) -
The accompanying notes are an integral part of these financial statements.
35
Trinity Learning Corporation
Statement of Stockholders' Equity
For the Period October 1, 2001 to June 30, 2003
Additional
Paid-In Comprehensive Accumulated
Shares Amount Capital Income Deficit
----------- ------------ ------------ ------------ -------------
Stock Option
Issuance - 76,774 - - -
Net Loss for the
Period Ended
June 30, 2003 - - - - (2,071,984)
----------- ------------ ------------ ------------ -------------
Balance at
June 30, 2003 14,956,641 $ 9,693,447 $ - $ (470) $(11,188,913)
=========== ============ ============ ============ =============
The accompanying notes are an integral part of these financial statements.
36
Trinity Learning Corporation
Statement of Cash Flows
Transition
Period
October 1, Fiscal
2002 to Year Ended
June 30, September 30,
2003 2002
------------ ------------
Cash Provided by Operating Activities
Net Income (Loss) $ (2,071,984) $ (565,931)
Adjustments to reconcile Net Loss to Net Cash Used
Depreciation & Amortization Expense 175,497 80
Non-Cash Effect from Foreign Currency Translation (397) -
Non-Cash Effect from Stock Option Issuance 76,774 -
Non-Cash Effect from Write-Off of Fixed Asset 6,071 -
Non-Cash Effect from CBL Global Acquisition 159,728 -
Non-Cash Effect from Stock Issuance for Services 166,750 -
Non-Cash Effect from Interest Payable Conversion
to Common Stock 34,745 -
(Increase)/Decrease in Accounts Receivable (42,719) -
(Increase)/Decrease in Interest Receivable 1,785 (1,826)
(Increase)/Decrease in Prepaid Expense (96,444) (1,500)
(Increase)/Decrease in Other Assets (94,003) -
Increase in Accounts Payable 162,497 284,133
Increase in Accrued Expense 187,270 -
Increase in Interest Payable 38,987 14,983
------------ ------------
Net Cash (Used) by Operating Activities (1,295,443) (270,061)
------------ ------------
Cash (Used) by Investing Activities
-----------------------------------
(Purchase) of Fixed Assets (34,274) (6,151)
(Cash Paid) for Investment in Notes Receivable (25,000) -
------------ ------------
Total Cash (Used) by Investing Activities (59,274) (6,151)
------------ ------------
Cash Provided by Financing Activities
-------------------------------------
Proceeds from Issuance of Unsecured Convertible Notes 780,000 645,000
Proceeds from Issuance of Common Stock 350,000 -
Costs Associated with Issuance of Common Stock (57,560) -
------------ ------------
Total Cash Provided by Financing Activities 1,072,440 645,000
------------ ------------
Net Increase (Decrease) in Cash (282,277) 368,788
Consolidated Cash at Beginning of Period 368,788 -
------------ ------------
Cash at End of Period $ 86,511 $ 368,788
============ ============
The accompanying notes are an integral part of these financial statements.
38
Trinity Learning Corporation
Notes to the Financial Statements
June 30, 2003
NOTE 1 - Corporate History
Trinity Learning Corporation ("Trinity," "the Company" or "we") was
incorporated on April 14, 1975 in Oklahoma under the name U.S. Mineral &
Royalty Corp. as an oil and gas exploration, development and operating
company. In 1989, the Company changed its name to Habersham Energy
Company. Historically, the Company was engaged in the business of
acquiring and producing oil and gas properties, but did not have any
business activity from 1995 to 2002. Pursuant to its reorganization in
2002, the Company changed its domicile to Utah, amended its capital
structure and changed its name to Trinity Companies Inc., then, in March
2003, to Trinity Learning Corporation. Until adoption of its recent
operating strategy in 2002, the Company had not had any business activity
since 1995.
Pursuant to a series of related transactions that closed on October 1,
2002, ("the Acquisition Date") the Company issued 3,000,000 restricted
shares of its common stock, issued $1,000,000 in convertible promissory
notes and assumed $222,151 in indebtedness to acquire Competency Based
Learning, Inc. (CBL-California), a California corporation and two related
Australian companies, Competency Based Learning, Pty. Ltd. ACN 084 763 780
("CBL-Australia") and ACN 082 126 501 Pty. Ltd. (collectively referred to
as "CBL"). The transactions were effected through CBL Global Corp. ("CBL
Global"), a wholly-owned subsidiary.
On June 16, 2003, we completed a recapitalization of our common stock by
(i) effecting a reverse split of our outstanding common stock on the basis
of one share for each 250 shares owned, with each resulting fractional
share being rounded up to the nearest whole share, and (ii) subsequently
effecting a forward split by dividend to all shareholders of record, pro
rata, on the basis of 250 shares for each one share owned. The record
date for the reverse and forward splits was June 4, 2003. Immediately
prior to the recapitalization, we had 13,419,774 shares of common stock
outstanding. Following the recapitalization and the cancellation of
108,226 shares of common stock beneficially owned by members of management,
we had 13,419,774 shares of common stock outstanding.
On August 6, 2003, our board of directors approved a change in our fiscal
year-end from September 30 to June 30 to align with those of the companies
we had already acquired or were at that time in the process of acquiring.
The information presented in this transition report on Form 10-KSB relates
to the period October 1, 2002 through June 30, 2003.
NOTE 2 - Significant Accounting Policies
A. Method of Accounting. The Company uses the accrual method of
accounting.
B. Revenue and Expense Recognition. Revenues and directly related
expenses are recognized in the financial statements in the period when
the goods are shipped to the customer.
C. Cash and Cash Equivalents. The Company considers all short-term,
highly liquid investments that are readily convertible within three
months to known amounts, as cash equivalents.
D. Depreciation and Amortization. The cost of property and equipment is
depreciated over the estimated useful lives of the related assets.
The cost of leasehold improvements is amortized over the lesser of the
length of the lease of the related assets or the estimated lives of
the assets. Depreciation and amortization is computed on the
straight-line method.
39
E. Use of Estimates. The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
F. Consolidation Policies. The accompanying consolidated financial
statements include the accounts of the Company and its wholly owned
subsidiaries. Intercompany transactions and balances have been
eliminated in consolidation.
G. Foreign Currency Translation/Remeasurement Policy. Assets and
liabilities that occur in foreign currencies are recorded at
historical cost and translated at exchange rates in effect at the end
of the reporting period. Statement of Operations accounts are
translated at the average exchange rates for the year. Translation
gains and losses are recorded as Other Comprehensive Income in the
Equity section of the Balance Sheet.
H. Purchase Accounting. The cost of fixed assets purchased in the
acquisition of CBL was determined based on their historical value less
accumulated depreciation. All other assets were valued at their
current value and a technology-based intangible asset was recorded.
NOTE 3 - Fixed Assets
The Company capitalizes furniture and equipment purchases in excess of
$5,000 or at lower amounts based on local jurisdiction. Capitalized
amounts are depreciated over the useful life of the assets using the
straight-line method of depreciation. Scheduled below are the assets,
cost, depreciation expense, and accumulated depreciation at June 30, 2003
and September 30, 2002.
Depreciation Accumulated
Asset Cost Expense Depreciation
--------------------- --------------------- ---------------------
06/30/2003 09/30/2002 06/30/2003 09/30/2002 06/30/2003 09/30/2002
---------- ---------- ---------- ---------- ---------- ----------
Furniture &
Equipment $ 53,385 $ 6,151 $ 7,750 $ 80 $ 7,824 $ 80
NOTE 4 Technology-Based Intangible Assets
The Company capitalized a technology-based intangible asset in its
acquisition of CBL. The amount capitalized is equal to the difference
between the consideration paid for CBL including any liabilities assumed
and the value of the other assets acquired. Other assets were valued at
the current value at the date of the acquisition including the net value of
fixed assets, historical price less accumulated depreciation, of $53,385.
The technology-based intangible asset is being amortized over a five-year
period using the straight-line method. The value assigned to the
technology -based intangible asset is considered appropriate based on
average annual revenues earned from licensing of this asset in excess of
$300,000 over the two year period ended June 30, 2002 and the expectation
that future revenues for the five year period subsequent to the acquisition
will equal or exceed this amount. Scheduled below is the asset cost,
amortization expense and accumulated amortization at June 30, 2003.
Amortization Accumulated
Asset Cost Expense Amortization
--------------------- --------------------- ---------------------
06/30/2003 09/30/2002 06/30/2003 09/30/2002 06/30/2003 09/30/2002
---------- ---------- ---------- ---------- ---------- ----------
Intangible
Assets $1,118,312 $ - $ 167,747 $ - $ 167,747 $ -
40
NOTE 5 Notes Receivable
On June 5, 2003, we agreed to lend TouchVision, Inc. ("TouchVision")
$50,000 in two equal installments of $25,000 each. Interest accrues on the
unpaid principal amount of the note at a rate equal to six percent per
year. Interest accrued under the note is paid annually, with the first
payment due June 5, 2004. All unpaid principal and interest are due June
29, 2005. At June 30, 2003, $25,000 had been advanced to TouchVision and
accrued interest totaled $41.
NOTE 6 - Operating Leases
In July 2003, the Company signed a lease agreement for new office space at
1831 Second Street in Berkeley, California. The lease term commenced
September 1, 2003 and will expire on May 31, 2004. The Company will pay a
minimum of $5,025 per month. The Company paid $10,050 upon the execution
of the lease that includes $5,025 security deposit that may be refunded at
the end of the lease.
CBL-Australia leases contiguous office pursuant to two separate lease
agreements for its operations located in Queensland, Australia. The term
of the first lease expires in January 2004 with a three year option to
renew. The monthly rental amount of that lease is $2,471. The term of the
second lease expires in January 2007 with a three year option to renew.
The monthly rental amount of that lease is $2,140. CBL-Australia also
leases a car for use by Brian Kennedy, its chief executive officer. The
lease expires in October 2005; the monthly rental amount is $338.
Total Minimum Lease Commitments as of June 30, 2003:
Calendar Year Amount
------------- ---------
2003 $ 49,791
2004 56,032
2005 31,236
2006 29,607
Thereafter 2,477
---------
Total $169,143
=========
NOTE 7 Related Party Transactions
As of July 15, 2002, Trinity entered in a two-year Advisory Agreement with
Kings Peak Advisors, LLC ("KPA") with automatic renewal for a 12-month
period. Under the terms of the Advisory Agreement, KPA will provide the
Company with general corporate, financial, business development and
investment advisory services on a non-exclusive basis. These services
include assisting with the identification of placement agents,
underwriters, lenders and other sources of financing, as well as additional
qualified independent directors and members of management. KPA is a
private company whose principals are Douglas Cole and Edward Mooney, who
are officers and directors of Trinity, and Mr. Theodore Swindells.
The Advisory Agreement provides that KPA will be compensated for its
various advisory services as follows: (i) for general corporate advisory
services, an initial retainer of $25,000 and a fee of $20,000 per month
throughout the term of the agreement, which monthly fee amount is payable,
at KPA's option, in shares of common stock at a price per share equal to
$0.025; (ii) for financial advisory services, a fee based on 10% of the
gross proceeds of any equity financings and/or 1.5% of any gross proceeds
of debt financings that are completed by underwriters or placement agents
introduced by KPA, as well as any fees which may be due to KPA for its
assistance in identifying prospective investors pursuant to terms and
conditions of offering memoranda issued by the Company; (iii) for merger
41
and acquisition services involving a transaction resulting from a contact
provided by KPA, a sliding fee based on a percentage of the value of the
transaction, subject to an additional $100,000 bonus in the event the
transaction is valued at $3,000,000 or more; (iv) in respect of general
business development advisory services, a fee to be negotiated with KPA
based upon certain agreed-upon fee parameters between the parties; and (v)
in respect of debt, credit or leasing facilities, a fee to be negotiated on
a case-by-case basis.
Trinity acknowledged that it was indebted to KPA for prior services
rendered since April 1, 2002 in the amount of $30,000, up to 50% of which
amount is payable, at KPA's option, in shares of common stock at a price
per share of $0.025. The total number of shares of common stock issuable
to KPA under the Advisory Agreement may not exceed 4,400,000 shares.
Through June 30, 2003, KPA had earned a total of $285,000 under the
Advisory Agreement, $110,000 of which was converted into 4,400,000 shares
of common stock in March 2003. Of the balance of $175,000, $134,132 has
been paid to KPA, leaving a balance owing at June 30, 2003 of $40,868.
As of August 8, 2002, Trinity formalized a Debt Conversion Agreement with
Global Marketing Associates, Inc. ("GMA"), holder of a convertible
promissory note (the "GMA Note") in the principal amount of $166,963,
pursuant to which the principal amount of the note, along with accrued
interest thereon, was made convertible, under certain conditions, into
3,200,000 shares of common stock. The GMA Note was originally issued in
November 2000 to the Company's former attorneys and was subsequently
acquired by Pacific Management Services, Inc., who assigned the note to
GMA; both entities are unrelated to Trinity. GMA subsequently assigned the
right to acquire 2,600,000 of the 3,200,000 shares of common stock into
which the note is convertible, to several persons, including Messrs. Cole,
Mooney and Swindells. Pursuant to the assignment, Messrs. Cole and Mooney
each acquired the right to acquire 600,000 shares of the common stock into
which the GMA Note is convertible and Mr. Swindells acquired the right to
acquire 1,000,000 shares. Fifty percent of the shares issuable upon the
conversion of the GMA Note are subject to a two-year lock-up provision that
restricts transfer of such shares without prior written consent of
Trinity's board of directors. As of January 2003, 3,200,000 shares of our
common stock had been issued pursuant to the terms of the GMA Note.
Pursuant to the acquisition of CBL on October 1, 2002 described in Note 1
above, we issued to shareholders of CBL two convertible promissory notes in
the amounts of $485,000 and $515,000. The notes accrue interest at 7% per
annum and are considered due and payable upon the earlier of September 1,
2004 or the date, upon which we close an equity financing, the net proceeds
of which, together with the net proceeds of all equity financing conducted
by the Company after the Acquisition Date, equal or exceeds $10,000,000.
The conversion price on the notes is $2.00 per share of common stock. At
June 30, 2003, accrued interest totaled $52,356.
At the Acquisition Date, we issued two unsecured promissory notes in the
amount of $222,151 to cancel three unsecured promissory notes previously
issued by CBL-Australia and CBL-California to its shareholders, Messrs.
Scammell and Kennedy. The notes accrue interest at 7% per annum and are
considered due and payable upon the earlier of the September 1, 2003 or the
date, upon which the company closes an equity financing, the net proceeds
of which, together with the net proceeds of all equity financing conducted
by us after the Acquisition Date, equal or exceeds $3,000,000. At June 30,
2003, accrued interest totaled $11,631. The notes were due and payable on
September 1, 2003 for which the payment has not been made pending the
outcome of a lawsuit filed against Messrs. Scammell and Kennedy, see Note
14, Subsequent Events.
42
Concurrent with its acquisition of CBL, Trinity (i) issued promissory notes
to certain individuals and entities for a total principal amount of
$500,000 ("Bridge Financing Amount"), such notes ("Bridge Financing Notes")
are convertible under certain conditions into shares of common stock, and
(ii) in connection with the issuance of the Bridge Financing Notes, issued
warrants ("Bridge Financing Warrants") to the holders of the Notes to
purchase additional shares of Common Stock. Of the Bridge Financing
Amount, $55,000 was advanced by KPA and $120,000 by Mr. Swindells.
The Bridge Financing Notes bear interest at a rate of 9% per annum and are
due one year from the date of the respective notes, unless automatically
converted upon the closing by the Company of an equity financing consisting
of at least 500,000 shares of common stock. On May 19, 2003, the principal
amount of $500,000 and accrued interest of $34,745 on the respective notes
were converted into 1,336,867 shares of common stock at $0.40 per share.
The Bridge Financing Warrants are exercisable for a period of one year at a
price of $0.05 per share, and contain a net issuance provision whereby the
holders may elect a cashless exercise of such warrants based on the fair
market value of the common stock at the time of conversion.
From time to time, since inception of our current operating strategy, Mr.
Swindells has provided short-term working capital loans on a non-interest
bearing basis. During our previous fiscal year, we were advanced $145,000
by Mr. Theodore Swindells, and during the transition period from October 1,
2002 to June 30, 2003, we were advanced an additional $780,000 by Mr.
Swindells. The principal may be converted into such other debt or equity
securities financings that we may issue in private offerings while the loan
is outstanding. In September 2003, we repaid $500,000 on the $925,000 note
balance then outstanding.
NOTE 8 - Notes Payable
At June 30, 2003, notes payable to accredited investors and related parties
totaled $2,147,151 as compared with $811,963 at September 30, 2002. The
notes bear interest between the rates of 0% and 7% per annum, some of which
are secured by our common stock. Certain notes are convertible into the
Company's common stock.
The Company has the following notes payable obligations:
June 30, September 30,
2003 2002
------------ ------------
Convertible Bridge Financing notes payable to investors
due between June 15, 2003 and September 15, 2003 plus
accrued interest at a rate of 9% per annum. One May 19,
2003, $445,000 was converted to common stock, see Note 7. $ - $ 445,000
Unsecured convertible notes payable due on December 1,
2003, see Note 7. 925,000 145,000
Unsecured convertible notes payable convertible after
August 2002 plus accrued interest at a rate of 6% per
annum. As of January 2003 $104,352 was converted to
common stock, see Note 7. - 104,352
Unsecured convertible notes payable to related parties
convertible after August 2002 plus accrued interest at
a rate of 6% per annum. As of January 2003, $62,611
was converted common stock, see Note 7. - 62,611
43
Convertible Bridge Financing notes payable to related
parties due between June 15, 2003 and September 15,
2003 plus accrued interest at a rate of 9% per annum.
On May 19, 2003, $55,000 was converted to common stock,
see Note 7. - 55,000
Unsecured notes payable to related parties, see Note 7
for due date, plus accrued interest at a rate of 7%
per annum. 222,151 -
Convertible notes payable to related parties, see Note 7
for due date, plus accrued interest at a rate of 7% per
annum. 1,000,000 -
------------ ------------
Total Notes Payable 2,147,151 811,963
Less: Current Maturities (2,147,151) (811,963)
------------ ------------
Long Term Notes Payable $ - $ -
============ ============
NOTE 9 - Stockholders' Equity
On February 5, 2002, the Company effected a one hundred for one (100 for 1)
reverse split. No shareholder was reversed below 100 shares. Shareholders
with 100 shares or less, prior to the reverse, were not affected.
On May 5, 2002, the Company amended its Articles of Incorporation to
reflect a change in par value from $0.10 per share to no par value per
share. Accordingly, this change effecting the common stock and additional
paid in capital values has been retroactively applied to all prior years.
On October 1, 2002, the Company issued a total of 3,000,000 shares of
common stock in conjunction with its acquisition of CBL-Australia and CBL-
California at $0.025 per share. Accordingly, $75,000 has been charged to
common stock to reflect the total cost of the shares.
On October 1, 2002, the Company authorized a Stock Purchase Agreement in
order to retain qualified directors and officers. The Stock Purchase
Agreement allows various directors to purchase an aggregate of 1,200,000
shares of the Company's common stock at a price of $0.025 per share. The
purchase price shall be payable by each Purchaser in the form of the
cancellation of the Company's obligation to pay the various Purchasers a
total of $30,000 as compensation for services already performed by
Purchaser for the Company.
On October 2, 2002, the Company issued 1,070,000 shares of common stock in
settlement of outstanding amounts due for services rendered to the Company.
These shares were issued at $0.025 per share totaling $26,750.
On October 21, 2002, the Company adopted and approved the "2002 Stock Plan"
which was approved by the Company's shareholders at its special shareholder
meeting on December 2, 2002. The Plan authorizes issuance of 3,000,000
shares to be increased by 500,000 shares annually. The plan expires in ten
years. As of June 30, 2003, 2,447,000 options have been granted at prices
ranging from $0.05 per share to $0.50 per share of which 963,625 were
vested as of June 30, 2003.
During the period November 15, 2002 to January 21, 2003, we issued
3,200,000 shares in exchange for $166,953, respectively of unsecured notes
payable. The original amount of the note was $166,963 (See Notes 7 and 8).
44
Between January and April 2003, we received subscriptions to our December
2002 Private Placement Memorandum totaling $250,000 from outside investors
to purchase 250,000 units at a price of $1.00 per unit. Each unit entitles
the holder to two shares of our common stock and two three year warrants,
each to purchase an additional share of common stock for $1.00 per share.
If all warrants are fully exercised by the holder of such warrants, a bonus
warrant will be issued entitling the holder to purchase one additional
share of common stock for $2.00.
On March 20, 2003, we issued 4,400,000 shares of common stock in settlement
of $110,000 of amounts due to Kings Peak Advisory, LLC (see Note 7).
On May 19, 2003, we issued 1,250,000 and 86,867 shares of the common stock
in exchange for the total principal Bridge Financing Notes of $500,000 and
the accrued interest payable on such notes of $34,745, respectively (see
Note 7).
On June 16, 2003, we completed a recapitalization of its common stock by
effecting a reverse split of its outstanding common stock on the basis of
one share for each 250 shares owned, with each resulting fractional share
being rounded up to the nearest whole share, and subsequently effecting a
forward split by dividend to all shareholders of record, pro rata, on the
basis of 250 shares for each one share owned. Immediately prior to the
recapitalization, we had 13,419,774 shares of common stock outstanding.
Following the recapitalization and the cancellation of 108,226 shares of
common stock beneficially owned by members of management, the Company had
13,419,774 shares of common stock outstanding.
Between June and October 2003, we received subscriptions to our May 2003
Private Placement Memorandum ("May 2003 PPM") totaling $5,143,300 from
outside investors to purchase 5,143,300 units at a price of $1.00 per unit.
Each unit entitles the holder to two shares of our common stock and two
three year warrants, each to purchase an additional share of common stock
for $1.00 per share. If all warrants are fully exercised by the holder of
such warrants, a bonus warrant will be issued entitling the holder to
purchase one additional share of common stock for $2.00. In connection
with the May 2003 Private Placement, we issued to various financial
advisors, 567,160 additional shares of our common stock and five-year
warrants to purchase 207,050 shares of our common stock.
NOTE 10 Stock Option Plan
On December 2, 2002, at a special meeting of our shareholders, the 2002
Stock Plan was approved. The maximum aggregate number of shares that may
be optioned and sold under the plan is the total of (a) 3,000,000 shares,
(b) an annual 500,000 increase to be added on the last day of each fiscal
year beginning in 2003 unless a lesser amount is determined by the board of
directors. The plan became effective with its adoption and remains in
effect for ten years unless terminated earlier. Options granted under the
plan vest 25% on the day of the grant and the remaining 75% vests monthly
over the next 36 months. The following schedule summarizes the activity
during the nine-month transition period ended June 30, 2003.
45
2002 STOCK PLAN
------------------------
Weighted
Average
Number of Exercise
Shares Price
----------- -----------
Outstanding at October 1, 2002 - $ -
Options Granted 2,447,000 $ 0.23
Options Exercised - -
Options Canceled - -
----------- -----------
Options Outstanding at June 30, 2003 2,447,000 $ 0.23
=========== ===========
Options Exercisable at June 30, 2003 963,625 $ 0.22
=========== ===========
In accordance with Statement of Financial Accounting Standards Number 123,
"Accounting for Stock-Based Compensation", option expense of $76,774 was
recognized for the nine-month transition period ended June 30, 2003.
June 30, 2003
-------------
Five-Year Risk Free Interest Rate 3.01%
Dividend Yield nil
Volatility nil
Average Expected Term (Years to Exercise) 4.4
Stock options outstanding and exercisable under 2002 Stock Plan as of June
30, 2003 are as follows:
Average
Weighted Remaining Weighted
Range of Number of Average Contractual Number Average
Exercise Options Exercise Life Of Options Exercise
Price Granted Price (Years) Vested Price
----------- ----------- ----------- ----------- ----------- -----------
$0.05 600,000 $0.05 4.3 262,500 $0.05
$0.25 1,589,000 $0.25 4.3 624,813 $0.25
$0.50 258,000 $0.50 4.6 76,313 $0.50
NOTE 11 - Income Taxes
Income tax expense includes federal and state taxes currently payable and
deferred taxes arising from timing differences between income for financial
reporting and income tax purposes.
The Company has adopted Statement of Financial Accounting Standards Number
109 ("SFAS No. 109") "Accounting for Income Taxes." SFAS No. 109 requires
an asset and liability approach for financial accounting and reporting for
income tax purposes. This statement recognizes (a) the amount of taxes
payable or refundable for the current year and (b) deferred tax liabilities
and assets for future tax consequences of events that have been recognized
in the financial statements or tax returns.
46
Deferred income taxes result from temporary differences in the recognition
of accounting transactions for tax and financial reporting purposes.
There were no temporary differences at June 30, 2003 and earlier years;
accordingly, no deferred tax liabilities have been recognized for all
years.
The Company has cumulative net operating loss carryforwards of over
$11,100,000 at June 30, 2003 and $9,100,000 at September 30, 2002. No
effect has been shown in the financial statements for the net operating
loss carryforwards as the likelihood of future tax benefit from such net
operating loss carryforwards is not probable. Accordingly, the potential
tax benefits of the net operating loss carryforwards at June 30, 2003 and
September 30, 2002 have been offset by valuation reserves of the same
amount.
Deferred tax assets and the valuation account at June 30, 2003 and at
September 30, 2002 are as follows:
Deferred Tax Asset June 30, 2003 September 30, 2002
------------------ ---------------- ------------------
Net Operating Loss Carryforwards $ 4,600,000 $ 3,800,000
Valuation Allowance (4,600,000) (3,800,000)
---------------- ------------------
Total $ - $ -
================ ==================
NOTE 12 - Net Earnings (Loss) Per Share
Basic earnings (loss) per common share ("BEPS") are based on the weighted-
average number of common shares outstanding during each period. Diluted
earnings (loss) per common share ("DEPS") are based on shares outstanding
(computed under BEPS) plus dilutive potential common shares. Shares from
the exercise of the outstanding options were not included in the
computation of DEPS, because their inclusion would have been antidilutive
for the nine months ended June 30, 2003.
The following data shows the shares used in the computing loss per common
share including dilutive potential common stock at June 30, 2003:
Amount
-------------
Common shares outstanding at June 30, 2003 14,956,641
=============
Weighted-average number of common shares used in basic EPS
dilutive effect of options 8,364,218
=============
Weighted-average number of common shares and dilutive
potential common shares used in diluted EPS 8,364,218
=============
47
NOTE 13 - Going Concern
Our financial statements are prepared using generally accepted accounting
principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course
of business. Currently, we do not have significant cash or other material
assets, nor do we have an established source of revenues sufficient to
cover our operating costs and to allow us to continue as a going concern.
We do not currently possess a financial institution source of financing and
we cannot be certain that our existing sources of cash will be adequate to
meet our liquidity requirements. However, we have undertaken the following
to meet our liquidity requirements:
(a) Seek additional equity funding through private placements to
raise sufficient funds to continue operations and fund its
ongoing development, merger and acquisition activities. In May
2003, we commenced a $5,000,000 private placement, the proceeds
of which will be used for (i) corporate administration, (ii) the
expansion of subsidiary operations, and (iii) expenses and funds
advanced for acquisitions in 2003. In conjunction with the
private placement, we have engaged various financial advisory
firms and other finders to identify prospective investors. We
completed the private offering on October 31, 2003.
(b) Continue conversion of certain outstanding loans and payables
into common stock in order to reduce future cash obligations;
(c) Generate sufficient cash flow to sustain and grow subsidiary
operations and, if possible, create excess cash flow for
corporate administrative expenses through our operating
subsidiaries; and
(d) Identify prospective acquisition targets with sufficient cash
flow to fund subsidiary operations, as well as potentially
generating operating cash flow that may sustain corporate
administrative expenses.
Trinity's future capital requirements will depend on its ability to
successfully implement these initiatives and other factors, including our
ability to maintain our existing customer base and to expand our customer
base into new geographic markets, and overall financial market conditions
in the United States and other countries where we will seek prospective
investors.
NOTE 14 - New Technical Pronouncements
In October 2002, Statement of Financial Accounting Standards Number 147
("SFAS 147"), "Acquisitions of Certain Financial Institutions - an
amendment of FASB Statements Numbers 72 and 144 and FASB Interpretation
Number 9" was issued to be used in acquisitions of financial institutions
after October 1, 2002. It is anticipated that SFAS 147 will have no
effect upon the Company's financial statements.
In December 2002, Statement of Finanial Accounting Standards Number 148
("SFAS 148"), "Accounting for Stock-Based Compensation - Transition and
Disclosure - an amendment of FASB Statement Number 123" was issued for
fiscal years beginning after December 15, 2003. It is anticipated that
SFAS 148 will have no effect upon the Company's financial statements.
In April 2003, Statement of Financial Accounting Standards Number 149
("SFAS 149"), "Amendment of Statement 133 on Deriviative Instruments and
Hedging Activities" was issued for fiscal quarters that began prior to
June 15, 2003. Adoption of SFAS 149 will have no effect upon the
Company's financial statements.
In May 2003, Statement of Financial Accounting Standards Number 150
("SFAS 150"), "Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity" was issued for the first
interim period beginning after June 15, 2003. The Company anticipates
that SFAS 150 may impact the accounting for certain future acquisitions
and the anticipated distribution of stock for services.
NOTE 15 - Subsequent Events
On July 8, 2003, we issued a five-year warrant to Merriman, Curran, Ford &
Co. a financial service company, to purchase up to 20,000 shares of our
common stock for a period of five years at $0.50 per share in consideration
for financial advisory services provided to us by the firm.
On September 1, 2003, we completed the acquisition of all of the issued and
outstanding shares of TouchVision, a California corporation that is in the
business of providing technology-enabled information and learning systems
to healthcare providers, financial services companies and other industry
segments. In consideration for the TouchVision shares, we issued an
aggregate of 1,250,000 restricted shares of our common stock, of which
312,500 shares are subject to the terms of an escrow agreement as
collateral for the indemnification obligations of the former TouchVision
shareholders. We also agreed to loan to TouchVision the sum of $20,000 per
month for the twelve-month period following closing, to be used for working
capital. We had previously loaned TouchVision the sum of $50,000 in June,
2003 by way of bridge financing pending completion of the acquisition. In
connection with the acquisition, TouchVision entered into substantially
similar employment agreements with each of Messrs. Gregory L. Roche and
Larry J. Mahar, the former principals of TouchVision, which have a term of
two years and provide for annual salaries of $120,000. In conjunction with
the acquisition of TouchVision, we issued 735,000 stock options pursuant to
the 2002 Stock Plan at $0.50 per share.
48
On September 1, 2003, we completed the acquisition of all of the issued and
outstanding shares of River Murray Training Pty Ltd ("RMT") an Australian
company that is in the business of providing workplace training programs
for various segments of the food production industry, including viticulture
and horticulture. In consideration for the shares of RMT we issued 700,000
restricted shares of our common stock, of which 350,000 shares are subject
to the terms of an escrow agreement as collateral for the indemnification
obligations of the former RMT shareholders. We also loaned US$49,000 to
RMT for the purpose of repaying outstanding loans advanced to RMT by its
former shareholders.
On September 1, 2003, we completed the acquisition of 51% of the issued and
outstanding shares of Ayrshire Trading Limited, a British Virgin Islands
company ("Ayrshire") that owns 95% of Riverbend Group Holdings
(Proprietary) Limited ("Riverbend"), a South African company that provides
learning services to corporations and individuals in South Africa. We also
acquired the option to purchase the remaining 49% of Ayrshire. In
consideration for the Ayrshire shares, we issued a convertible
non-interest-bearing promissory note in the amount of $20,000, which amount
is convertible from time to time but no later than December 30, 2006 into a
maximum of 2,000,000 shares of our common stock. Of these shares, up to
400,000 may be withheld in satisfaction for any breach of warranties by the
former shareholders of Ayrshire. The Ayrshire shares are subject to escrow
and pledge agreements will be reconveyed to the former shareholders in the
event of a default by us of certain terms and conditions of the acquisition
agreements, including, among other things, a voluntary or involuntary
bankruptcy proceeding involving us or the failure by us to list our shares
of common stock on a major stock exchange by December 30, 2006.
As further consideration for the Ayrshire shares, we agreed to make a non-
interest-bearing loan of $1,000,000 to Ayrshire, $300,000 of which was
advanced at closing and $700,000 was advanced On November 3, 2003. We may
exercise an option to acquire the remaining 49% of Ayrshire in
consideration for the issuance of 1,500,000 shares of our common stock,
subject to certain adjustments.
During the period June 1, 2003 to October 31, 2003, we sold by way of
private placement an aggregate of 5,143,300 units at a price of $1.00 per
unit, for aggregate consideration of $5,143,300. Each unit comprised two
shares of our common stock and two warrants, each exercisable for one
additional share of our common stock. In addition, each unit carried the
right to acquire an additional warrant to purchase, under certain
conditions, up to one additional share of common stock. In connection with
the private placement, we paid $448,105 in commissions and issued to
various financial advisors, 567,160 additional shares of our common stock
and five-year warrants to purchase 207,050 shares of our common stock. In
our opinion, the offer and sale of these securities was exempt by virtue
of Section 4(2) of the Securities Act and the rules promulgated
thereunder.
On September 12, 2003, we filed a Complaint in the United States District
Court for the District of Utah, Central Division, against CBL Global
Corporation (f/k/a CBL Acquisition Corporation), and Robert Stephen
Scammell, the sole shareholder of CBL-California, (Case No. 2:03CV00798DAK)
alleging, among other things, that Scammell and CBL-California provided us
with misstated financial statements prior to our merger in October 2002
with CBL-California and CBL Global. On September 18, 2003, we filed a
First Amended Complaint and Jury Demand, which added as defendants CBL-
Global and Brian Kennedy, the sole shareholder of CBL-Australia. The First
Amended Complaint alleges causes of action for violations of Section 10(b)
of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder, for violations of Section 20(a) of the Securities Exchange Act
of 1934, for declaratory relief and breach of contract, for common law
fraud, and for negligent misrepresentation.
49
The First Amended Complaint alleges, among other things, that the
defendants were advised by CBL-California's accountant on September 18,
2002 that CBL-California's financial statements were misstated, and alleges
that new restated financial statements were issued on September 19, 2002.
The First Amended Complaint alleges, however, that the restated financial
statements were not provided to us prior to the October 1, 2002 closing of
the merger. The First Amended Complaint seeks damages in an amount to be
proven at trial, but which amount presently is estimated to exceed, at a
minimum, the full amount of the consideration paid by us and CBL Global in
the merger, as well as treble damages, and attorneys' fees. The First
Amended Complaint also seeks a declaration that we (i) are entitled to
retain certain of our shares of common stock that were issued in connection
with the acquisition of CBL and placed in escrow, (ii) are entitled to
set-off amounts owed to Messrs. Scammell and Kennedy pursuant to the CBL
acquisition; and (iii) are entitled to seek the return of the shares of our
common stock that have already have been distributed to defendants Messrs.
Kennedy and Scammell in the merger. We intend to vigorously pursue our
claims against the defendants.
On September 18, 2003 we announced that we had entered into a definitive
agreement to acquire majority control of IRCA (Pty.) Ltd. ("IRCA"), an
international firm specializing in corporate learning, certification, and
risk mitigation in the areas of safety, health environment, and quality
assurance ("SHEQ"). We anticipate closing this transaction within the next
30 days. IRCA is headquartered in South Africa and also operates
international sales offices and operations in the United Kingdom and the
United States. We will acquire majority interest in IRCA through a
combination of stock and cash payments. The definitive agreement contains
certain closing conditions and certain future provisions that will enable
Trinity to acquire full ownership of IRCA and its various operating
subsidiaries.
EXHIBIT INDEX
Exhibits.
---------
2.1 Articles of Restatements of the Articles of Incorporation of
Trinity Learning Corporation dated February 25, 2003 (4)
2.2 Bylaws of Trinity Companies, Inc. (1)
10.1 Financial Advisory Agreement and Indemnification Letter
entered into as of July 31, 2002 between Trinity Companies,
Inc. and European American Securities, Inc. (1)
10.2 Debt Conversion Agreement dated as of August 8, 2002 between
Trinity Companies, Inc. and Global Marketing Associates, Inc.
(1)
10.3 Form of Executive Employment Agreement. (1)
10.4 Advisory Agreement dated as of July 15, 2002 between Trinity
Companies, Inc. and Kings Peak Advisors, LLC. (1)
10.5 Agreement and Plan of Reorganization dated as of October 1,
2002, among the Company, Competency Based Learning, Inc. and
CBL Acquisition Corp. (2)
10.6 Securities Purchase Agreement dated as of October 1, 2002
between CBL Acquisition Corp. and Brian Kennedy, relating to
shares of Competency Based Learning, Pty. Ltd ACN 084 763 780.
(2)
50
10.7 Securities Purchase Agreement dated as of October 1, 2002 by
and among CBL Acquisition Corp. and Brian Kennedy and Robert
Stephen Scammell, relating to shares of ACN 082 126 501 Pty.
Ltd. (2)
10.8 Escrow Agreement dated as of October 1, 2002 by and among the
Company, CBL Acquisition Corp., Robert Stephen Scammell, Brian
Patrick Kennedy and Heritage Bank of Commerce. (2)
10.9 Convertible Promissory Note in the principal amount of
$485,000 dated October 1, 2002 issued by CBL Acquisition Corp.
to Robert Stephen Scammell. (2)
10.10 Convertible Promissory Note in the principal amount of
$515,000 dated October 1, 2002 issued by CBL Acquisition Corp.
to Brian Kennedy. (2)
10.11 Promissory Note in the principal amount of US$198,079.12 dated
October 1, 2002 issued by CBL Acquisition Corp. to Robert
Stephen Scammell. (2)
10.12 Promissory Note in the principal amount of AUD$36,100.80 dated
October 1, 2002 issued by CBL Acquisition Corp. to Brian
Kennedy. (2)
10.13 Employment Agreement dated as of September 1, 2002 between CBL
Acquisition Corp. and Robert Stephen Scammell. (2)
10.14 Employment Agreement dated as of September 1, 2002 between CBL
Acquisition Corp. and Brian Kennedy. (2)
10.15 Security Agreement dated as of October 1, 2002 by and between
CBL Acquisition Corp., Robert Stephen Scammell and Trinity
Companies, Inc. (2)
10.16 Form of Deed of Charge executed as of October 1, 2002 by
Competency Based Learning Pty Ltd. (2)
10.17 Form of Guarantee and Indemnity executed as of October 1, 2002
by Competency Based Learning Pty Ltd. (2)
10.18 Form of Guarantee and Indemnity executed as of October 1, 2002
by ACN 082 126 501 Pty. Ltd. (2)
10.19 Form of Stock Purchase Agreement entered into as of October 1,
2002 between Trinity Companies, Inc., and each of its
directors. (2)
10.20 Note and Warrant Purchase Agreement dated as of August 20,
2002 between Trinity Companies and various purchasers. (2)
10.21 Form of Convertible Promissory Note issued pursuant to the
Note and Warrant Purchase Agreement dated as of August 20,
2002. (2)
10.22 Form of Warrant issued pursuant to the Note and Warrant
Purchase Agreement dated as of August 20, 2002. (2)
10.23 Commercial Tenancy Agreement between Wedgetail Systems PTY LTD
ACN 003356429 and Competency Based Learning PTY LTD CAN 084
763780 dated December 12, 2000. (3)
51
10.24 Deed of Variation of Lease dated 1 July 2002 between Wedgetail
Systems PTY LTD ACN 003356429 and Competency Based Learning
PTY LTD ACN 084 763780. (3)
10.25 Registration Agreement dated June 2003 between Trinity
Learning Corporation and certain of its shareholders. (5)
10.26 Securities Purchase Agreement date September 1, 2003 by and
among Trinity Learning Corporation and the shareholders of
TouchVision, Inc. (6)
10.27 Escrow Agreement dated September 1, 2003 by and among Trinity
Learning Corporation, Gregory L. Roche, Larry J. Mahar and
Heritage Bank of Commerce. (6)
10.28 Promissory Note dated September 1, 2003 from TouchVision, Inc.
to Trinity Learning Corporation. (6)
10.29 Employment Agreement dated September 1, 2003 between
TouchVision, Inc. and Gregory L. Roche. (6)
10.30 Employment Agreement dated September 1, 2003 between
TouchVision, Inc. and Larry J. Mahar. (6)
10.31 Securities Purchase Agreement date August 12, 2003 by and
among Trinity Learning Corporation and Barbara McPherson and
Ildi Hayman. (6)
10.32 Escrow Agreement dated August 12, 2003 by and among Trinity
Learning Corporation, Barbara McPherson, Ildi Hayman and
Heritage Bank of Commerce. (6)
10.33 Acquisition Agreement dated September 1, 2003 between Great
Owl Limited, a British Virgin Islands company, and Trinity
Learning Corporation. (6)
10.34 Escrow Agreement dated September 1, 2003 by and among Great
Owl Limited, a British Virgin Islands company, Trinity
Learning Corporation, and Reed Smith of London as escrow
agent. (6)
10.35 Deed of Pledge dated September 1, 2003 by Trinity Learning
Corporation to Great Owl Limited, a British Virgin Islands
company. (6)
10.36 Warranties of Seller under the Acquisition Agreement dated
September 1, 2003 between Great Owl Limited, a British Virgin
Islands company, and Trinity Learning Corporation. (6)
10.37 Warranties of Purchaser under the Acquisition Agreement dated
September 1, 2003 between Great Owl Limited, a British Virgin
Islands company, and Trinity Learning Corporation. (6)
10.38 Convertible Promissory Note dated September 1, 2003, issued by
Trinity Learning Corporation to Great Owl Limited, a British
Virgin Islands company. (6)
21.1 Subsidiaries of Trinity Learning Corporation. *
31.1 Certification of Chief Executive Officer. *
31.2 Certification of Chief Financial Officer. *
52
32.1 Certification of Chief Executive Officer. *
32.2 Certification of Chief Financial Officer. *
* Filed herewith.
(1) Incorporated by reference from the quarterly report on Form
10-QSB filed by the registrant on August 21, 2002.
(2) Incorporated by reference from the current report on Form 8-K
filed by the registrant on October 16, 2002.
(3) Incorporated by reference from the annual report on Form
10-KSB filed by the registrant on January 10, 2003.
(4) Incorporated by reference from the quarterly report on Form
10-QSB filed by the registrant on May 20, 2003.
(5) Incorporated by reference from the current report on Form 8-K
filed by the registrant on June 19, 2003.
(6) Incorporated by reference from a current report on Form 8-K
filed by the registrant on September 16, 2003.
53
SIGNATURES
Pursuant to the requirements 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.
TRINITY LEARNING CORPORATION
November 4, 2003 By:/S/ DOUGLAS D. COLE
----------------------------------
Douglas D. Cole
Chief Executive Officer
November 4, 2003 By:/S/ CHRISTINE R. LARSON
----------------------------------
Christine R. Larson
Chief Financial Officer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
November 4, 2003 By: /S/ DOUGLAS D. COLE
----------------------------------
Douglas D. Cole
Chief Executive Officer and Director
November 4, 2003 By: /S/ EDWARD P. MOONEY
----------------------------------
Edward P. Mooney
President and Director
November 4, 2003 By: /S/ WILLIAM JOBE
----------------------------------
William Jobe
Director
54