U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the Quarterly Period Ended September 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 (I.R.S. Employer Identification)
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: None
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 12 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 [ ]
As of November 14, 2003, 27,560,401 shares of the issuer's Common Stock, no
par value per share, were outstanding.
TRINITY LEARNING CORPORATION AND SUBSIDIARIES
Throughout this report, we refer to Trinity Learning Corporation, together
with its subsidiaries, as "we," "us," "our company," "Trinity" or "the
Company."
THIS FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2003, CONTAINS FORWARD-
LOOKING STATEMENTS, INCLUDING STATEMENTS ABOUT THE CONTINUED STRENGTH OF
OUR BUSINESS AND OPPORTUNITIES FOR FUTURE GROWTH. 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. WE BELIEVE THAT OUR EXPECTATIONS ARE REASONABLE AND ARE BASED
ON REASONABLE ASSUMPTIONS. HOWEVER, SUCH FORWARD-LOOKING STATEMENTS BY
THEIR NATURE INVOLVE RISKS AND UNCERTAINTIES.
WE CAUTION THAT A VARIETY OF FACTORS, INCLUDING BUT NOT LIMITED TO THE
FOLLOWING, COULD CAUSE OUR BUSINESS AND FINANCIAL RESULTS TO DIFFER
MATERIALLY FROM THOSE EXPRESSED OR IMPLIED IN FORWARD-LOOKING STATEMENTS:
OUR ABILITY TO SUCCESSFULLY INTEGRATE TOUCHVISION, INC. ("TOUCHVISION"),
RIVER MURRAY TRAINING PTY LTD ("RMT") AND OUR MAJORITY INTEREST IN AYRSHIRE
TRADING LIMITED ("AYRSHIRE"); DETERIORATION IN CURRENT ECONOMIC CONDITIONS;
OUR ABILITY TO PURSUE BUSINESS STRATEGIES; PRICING PRESSURES; CHANGES IN
THE REGULATORY ENVIRONMENT; OUTCOMES OF PENDING AND FUTURE LITIGATION; OUR
ABILITY TO ATTRACT AND RETAIN QUALIFIED PROFESSIONALS; INDUSTRY
COMPETITION; CHANGES IN INTERNATIONAL TRADE; MONETARY AND FISCAL POLICIES;
OUR ABILITY TO INTEGRATE FUTURE ACQUISITIONS SUCCESSFULLY; AND OTHER
FACTORS DISCUSSED MORE FULLY IN MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS AND RISK FACTORS BELOW, AS
WELL AS IN OTHER REPORTS SUBSEQUENTLY FILED FROM TIME TO TIME WITH THE
SECURITIES AND EXCHANGE COMMISSION. WE ASSUME NO OBLIGATION TO UPDATE ANY
FORWARD-LOOKING STATEMENTS.
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet, September 30, 2003 and June 30, 2003
Consolidated Statements of Operations and Comprehensive Income,
Three months ended September 30, 2003 and 2003
Consolidated Statements of Cash Flows, Three months ended
September 30, 2003 and 2002
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
2
PART I
FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
Trinity Learning Corporation and Subsidiaries
Consolidated Balance Sheet
September 30, June 30,
2003 2002
------------- -------------
(Unaudited)
Assets
------
Current Assets
--------------
Cash $ 1,301,593 $ 86,511
Accounts Receivable 1,073,587 42,719
Interest Receivable - 41
Prepaid Expenses 211,837 97,944
------------- -------------
Total Current Assets 2,587,016 227,215
------------- -------------
Property & Equipment (Note 3)
--------------------
Furniture & Equipment 266,559 53,385
Accumulated Depreciation (21,880) (7,824)
------------- -------------
Net Property & Equipment 244,679 45,561
------------- -------------
Intangible Assets (Note 4)
--------------------------
Technology-Based Asset 6,029,698 1,118,312
Accumulated Amortization (314,767) (167,747)
------------- -------------
Net Intangible Assets 5,714,930 950,565
------------- -------------
Other Assets
------------
Note Receivable (Note 7) - 25,000
Other Assets 315,923 94,003
------------- -------------
Total Other Assets 315,923 119,003
------------- -------------
Total Assets $ 8,862,547 $ 1,342,334
============= =============
Continued
3
Trinity Learning Corporation and Subsidiaries
Consolidated Balance Sheet
September 30, June 30,
2003 2002
------------- -------------
(Unaudited)
Liabilities and Stockholders' Equity
------------------------------------
Liabilities
-----------
Accounts Payable $ 1,108,578 $ 391,872
Accrued Expenses 662,610 270,270
Interest Payable 85,577 63,987
Deferred Revenue (Note 1) 127,016 -
Notes Payable - Current (Notes 8 & 9) 614,164 -
Notes Payable - Related Party (Notes 7 & 8) 1,567,151 2,147,151
Notes Payable - Long Term (Notes 8 & 9) 224,432 -
------------- -------------
Total Liabilities 4,409,528 2,873,280
Minority Interest 2,203,365 -
----------------- ------------- -------------
Stockholders' Equity
--------------------
Preferred Stock, 10,000,000 Shares Authorized
at No Par Value; No Shares Issued and
Outstanding - -
Common Stock, 100,000,000 Shares Authorized
at No Par Value 2,915,641 and 14,956,641
Shares Issued and Outstanding, Respectively 13,384,043 9,693,447
Conditionally redeemable common stock,
2,000,000 shares at No Par Value 1,000,000 -
Accumulated Deficit (12,100,493) (11,188,913)
Subscriptions Receivable (35,000) (35,000)
Other Comprehensive Income 1,104 (470)
------------- -------------
Total Stockholders' Equity 2,249,654 (1,530,936)
------------- -------------
Total Liabilities & Stockholders' Equity $ 8,862,547 $ 1,342,344
============= =============
The accompanying notes are an integral part of these financial statements.
4
Trinity Learning Corporation and Subsidiaries
Consolidated Statement of Operations and Comprehensive Income
(Unaudited)
Three Months Ended
September 30,
2003 2002
------------- -------------
Revenue
-------
Sales Revenue $ 616,787 $ -
Cost of Sales (248,092) -
------------- -------------
Gross Profit 368,695 -
Expenses
--------
Salaries & Benefits 587,354 38,000
Professional Fees 217,374 323,741
General & Administrative 170,619 11,735
Travel & Entertainment 64,542 11,086
Depreciation & Amortization 167,454 80
Rent 37,287 3,750
Office Expenses 59,197 9,659
------------- -------------
Total Expenses 1,303,827 398,051
------------- -------------
Loss from Operations (935,132) (398,051)
------------- -------------
Other Income (Expenses)
-----------------------
Interest Income 22,639 698
Interest (Expense) (24,170) (7,468)
Foreign Currency (Loss) (781) -
------------- -------------
Total Other Income (Expenses) (2,312) (6,770)
Minority Interest 25,864 -
----------------- ------------- -------------
Loss Before Taxes (911,580) (404,821)
Taxes - -
------------- -------------
Net Loss $ (911,580) $ (404,821)
============= =============
Net Loss Per Common Share
------------------------- ------------- -------------
Basic $ (0.05) $ (8.34)
============= =============
Diluted (0.05) (8.34)
============= =============
Weighted Average Shares Outstanding 17,795,891 48,540
============= =============
Continued
5
Trinity Learning Corporation and Subsidiaries
Consolidated Statement of Operations and Comprehensive Income
(Unaudited)
A summary of the components of other comprehensive loss for the first
quarter ended September 30, 2003 and 2002 is as follows:
For the Three Months Ended
September 30, 2003
---------------------------
After Before
Tax Amount Tax Amount
------------- -------------
Net Loss $ (911,580) $ (911,580)
Foreign Currency Translation 1,104 1,104
------------- -------------
Comprehensive Loss $ (910,476) $ (910,476)
============= =============
For the Three Months Ended
September 30, 2002
---------------------------
After Before
Tax Amount Tax Amount
------------- -------------
Net Loss $ (404,821) $ (404,821)
Foreign Currency Translation - -
------------- -------------
Comprehensive Loss $ (404,821) $ (404,821)
============= =============
The accompanying notes are an integral part of these financial statements.
6
Trinity Learning Corporation
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
September 30,
2003 2002
------------- -------------
Cash flows from operating activities
Net loss $ (911,580) $ (404,821)
Adjustments to reconcile net loss to net
cash provided by operating activities;
Depreciation and Amortization 167,854 80
Foreign Currency Translation Loss 781 -
Stock Compensation 58,734 -
Changes in current assets and liabilities,
Net of business acquired;
Accounts receivable (57,865) -
Interest receivable 41 (698)
Prepaid expenses and other assets (4,556) (1,500)
Accounts payable, accrued salaries and benefits,
accrued expenses (26,418) 178,751
Interest payable 21,592 7,468
------------- -------------
Total adjustments 160,163 184,101
------------- -------------
Net cash used by operating activities (751,417) (220,621)
------------- -------------
Cash flows from investing activities
Payment for business acquisitions,
net of cash acquired (109,759) -
Capital expenditures - (6,151)
------------- -------------
Net cash used by investing activities (109,759) (6,151)
------------- -------------
Cash flows from financing activities
Repayments under short-term notes (500,000) 756,963
Payments of financing fees (428,242) (163,035)
Proceeds from sale of common stock, net 3,004,500 -
------------- -------------
Net cash provided (used) by
financing activities 2,076,258 (593,928)
------------- -------------
Net increase in cash 1,215,082 367,156
Cash at beginning of period 86,511 1,632
------------- -------------
Cash at end of period $ 1,301,593 $ 368,788
============= =============
Supplemental information:
Issuance of common stock for business acquisitions $ 975,000 $ -
The accompanying notes are an integral part of these financial statements.
7
Trinity Learning Corporation and Subsidiaries
Notes to the Financial Statements
September 30, 2003
NOTE 1. ACCOUNTING POLICIES
Overview
The accompanying unaudited interim consolidated financial statements and
related notes have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB and Rule 10-01 of Regulation S-X. Accordingly,
they do not include all the information and footnotes required by generally
accepted accounting principles for complete financial statements. These
financial statements include the accounts of Trinity Learning Corporation
and its consolidated subsidiaries. All significant intercompany
transactions and accounts have been eliminated in consolidation.
These unaudited interim consolidated financial statements should be read in
conjunction with the audited financial statements and related notes thereto
included in the Company's Transition Report on Form 10-KSB for the
transition period from October 1, 2002 to June 30, 2003. 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 results of
operations for the three months ended September 30, 2003, are not
necessarily indicative of the operating results for the full year and
future operating results may not be comparable to historical operating
results due to our September 1, 2003 acquisitions of TouchVision, Inc.
("TouchVision"); River Murray Training Pty Ltd ("RMT"); and 51% of the
issued and outstanding shares of Ayrshire Trading Limited ("Ayrshire").
Ayrshire owns 95% of the issued and outstanding shares of Riverbend Group
Holdings (Pty.) Ltd. ("RGH"). These companies are collectively referred to
as Riverbend.
In the opinion of management, the accompanying unaudited interim
consolidated financial statements reflect all normal recurring adjustments
that are necessary for a fair presentation of the financial position,
results of operations and cash flows for the interim periods presented.
The preparation of the Company's unaudited interim consolidated financial
statements in conformity with generally accepted accounting principles
necessarily requires it to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the balance sheet dates and the reported amounts
of revenues and costs during the reporting periods. Actual results could
differ from those estimates. On an ongoing basis, the Company reviews its
estimates based on information that is currently available. Changes in
facts and circumstances may cause the Company to revise its estimates.
8
Income Per Common Share
Basic earnings (loss) per common share is computed by dividing net
income(loss) available for common stockholders by the weighted average
number of common shares outstanding for the period. Diluted earnings
(loss) per common share ("DEPS") is computed giving effect to all dilutive
potential shares of common stock issuable upon the exercise of stock
options and warrants. DEPS is computed by dividing net income (loss)
available for common stockholders by the weighted-average common shares and
dilutive potential common shares that were outstanding during the period.
Shares from the exercise of the outstanding options and warrants were not
included in the computation of DEPS, because their inclusion would have
been antidilutive for the three months ended September 30, 2003 and 2002.
In accordance with the disclosure requirements of Statement of Accounting
Standards No. 128 ("SFAS 128"), "Earnings Per Share," a reconciliation of
the numerator and denominator of basic and diluted income (loss) per common
share is provided as follows:
Three Months Ended
September 30,
2003 2002
------------- -------------
Numerator - Basic
Net (loss) available for common stockholders $ (911,580) $ (404,821)
Denominator - Basic
Weighted-average common stock outstanding 17,795,891 48,540
Basic loss per share $ (0.05) $ (8.34)
Numerator - Diluted
Net (loss) available for common stockholders $ (911,580) $ (404,821)
Denominator - Diluted
Weighted-average common stock outstanding 17,795,891 48,540
Effect of dilutive securities
Stock options - -
Warrants - -
Diluted (loss) per share $ (0.05) $ (8.34)
Stock options to purchase 3,182,000 shares of common stock at prices
ranging from $0.05 to $0.50 per share were outstanding at September 30,
2003, but were not included in the computation of diluted loss per share
because the exercise price was greater than the average market value of the
shares of common stock. Warrants to purchase 16,199,900 shares of common
stock at prices ranging from $0.50 to $2.00 per share were outstanding at
September 30, 2003, but were not included in the computation of diluted
loss per share because the exercise price was greater than the average
market value of the shares of common stock.
Deferred Revenue
Deferred revenue in the accompanying consolidated balance sheets represents
advanced billings to clients in excess of costs and earnings on uncompleted
contracts. As of September 30, 2003, and June 30, 2003, deferred revenue
was $127,016 and $0, respectively. The Company anticipates that
substantially all such amounts will be earned over the next twelve months.
9
Stock-Based Compensation
In January 2003, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 148 ("SFAS 148"),
"Accounting for Stock-Based Compensation Transition and Disclosure."
SFAS 148 amends FASB Statement 123 ("SFAS 123"), "Accounting for Stock-
Based Compensation," to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-
based employee compensation. In addition, SFAS 148 amends the disclosure
requirements of SFAS 123 to require prominent disclosure in both annual and
interim financial statements of the method of accounting for stock-based
employee compensation and the effect of the method used on reported
results. SFAS 148 is effective for fiscal years, including interim periods
beginning after December 15, 2002, and thus, this disclosure is included in
the table below. SFAS 148 also requires disclosure of pro-forma results on
the interim basis as if the Company had applied the fair value recognition
provisions of SFAS 123. The Company changed to the fair value based method
of accounting for stock-based employee compensation during the transition
period from October 1, 2002 to June 30, 2003 and there was not a material
impact to the financial results of the Company (see Note 10-Stock Option
Plan).
Recently Issued Accounting Standards
In June 2002, the FASB issued Statement of Financial Accounting Standard
No. 146 ("SFAS 146"), "Accounting for Costs Associated with Exit or
Disposal Activities." SFAS 146 replaces Emerging Issues Task Force
("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (Including Certain
Costs Incurred in a Restructuring)" in its entirety and addresses
significant issues relating to recognition, measurement and reporting costs
associated with an exit or disposal activity, including restructuring
activities. Under EITF Issue No. 94-3, a liability is recognized, measured
and reported as of the date of an entity's commitment to an exit plan.
Pursuant to SFAS 146, a liability is recorded on the date on which the
obligation is incurred and should be initially measured at fair value.
SFAS 146 is effective for exit or disposal activities initiated after
December 31, 2002. The Company adopted SFAS 146 on July 1, 2003 and
adoption of SFAS 146 did not significantly impact the Company's financial
statements.
EITF Consensus Issue No.00-21 ("EITF 00-21"), "Revenue Arrangements with
Multiple Deliverables" was first discussed at the July 2000 EITF meeting
and was issued in February 2002. Certain revisions to the scope of the
language were made and finalized in May 2003. EITF 00-21 addresses the
accounting for multiple element revenue arrangements, which involve more
than one deliverable or unit of accounting in circumstances, where the
delivery of those units takes place in different accounting periods. EITF
00-21 requires disclosures of the accounting policy for revenue recognition
of multiple element revenue arrangements and the nature and description of
such arrangements. The accounting and reporting requirements are effective
for revenue arrangements entered into in fiscal periods beginning after
June 15, 2003. The Company has completed its initial evaluation and
adoption of EITF 00-21 does not have a significant impact on the Company's
financial statements. The Company continues its evaluation to determine
whether the reporting requirements of EITF 00-21 will impact the Company's
financial statements in the future.
10
In May 2003, the FASB issued Statement of Financial Accounting Standards
No. 150 ("SFAS 150"), "Accounting for Certain Instruments with
Characteristics of Both Liabilities and Equity." SFAS 150 establishes
standards for how an issuer classifies and measures certain financial
instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its
scope as a liability (or an asset in some circumstances). SFAS 150 is
effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. As permitted, the Company will adopt
SFAS 150 on October 1, 2003 and does not anticipate a significant impact on
the Company's financial statements.
Reclassifications
Certain reclassifications have been made to the 2002 financial statements
and notes to conform to the 2003 presentation with no effect on
consolidated net loss, equity or cash flows as previously reported.
NOTE 2 Acquisitions
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.
On September 1, 2003, we completed the acquisition of 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. 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 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
11
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 of the acquisition 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.
Purchased Intangible Assets
Of the total purchase price paid for the TouchVision acquisition,
approximately $1,292,972 has been allocated to purchased intangible assets,
which include software and being amortized on a straight line basis over a
useful life of five years.
Of the total purchase price paid for the RMT acquisition, approximately
$390,630 has been allocated to purchased intangible assets, which include
software and being amortized on a straight line basis over a useful life of
five years.
Of the total purchase price paid for the Riverbend acquisition,
tapproximately $1,000,000 has been allocated to purchased intangible
assets, which include software and being amortized on a straight line basis
over a useful life of five years.
Pro Forma Results
The operating results of CBL Global Corporation ("CBL"), TouchVision, RMT
and our interest in Ayrshire has been included in the accompanying
consolidated financial statements from the date of acquisition forward.
Accordingly, CBL, TouchVision, RMT and Ayrshire's business' results of
operations for the period July 1, 2002 through September 30, 2002 were not
included in the Company's consolidated statements of operations.
TouchVision, RMT and Ayrshire's business' results of operations for the
months of July and August 2003 were not included in the Company's
consolidated statements of operations.
The following unaudited pro forma financial information presents the
combined results of operations of the Company and CBL, TouchVision, RMT and
our interest in Ayrshire as if these acquisitions had occurred at July 1,
2002. An adjustment of $68,000 and $157,900, net of tax, for three months
ended September 30, 2003 and 2002, respectively, has been made to the
combined results of operations, reflecting amortization of purchased
intangibles, as if the CBL, TouchVision, RMT and Ayrshire acquisitions had
occurred at July 1, 2002. The unaudited pro forma financial information is
not intended to represent or be indicative of the consolidated results of
the operations of the Company that would have been reported had these
acquisitions been completed as of the dates presented, nor should it be
taken as a representation of the future consolidated results of operations
of the Company.
12
Three Months Ended
September 30,
2003 2002
------------- -------------
Revenues $ 1,794,000 $ 787,062
Operating loss $ (1,028,259) $ (437,200)
Net loss available for common stockholders $ (976,500) $ (446,500)
Net loss per common share:
Basic $ (0.06) $ (0.03)
Diluted $ (0.06) $ (0.03)
Finalization of Purchase Price
Certain information necessary to complete the purchase accounting is not
yet available, including the completion of independent valuations of the
intangible assets for each of the three acquisitions. Purchase accounting
will be finalized upon receipt of these independent valuations.
Anticipated Acquisition
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.
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, and accumulated depreciation at September 30, 2003 and June 30, 2003,
respectively and depreciation expense for the three months ended September
30, 2003 and 2002, respectively.
Accumulated
Asset Cost Depreciation Expense Depreciation
---------------------- --------------------- ----------------------
09/30/2003 06/30/2003 09/30/2003 06/30/2003 09/30/2003 06/30/2003
---------- ---------- ---------- ---------- ---------- ----------
Furniture &
Equipment $ 266,559 $ 53,385 $ 9,370 $ 80 $ 21,880 $ 7,824
13
NOTE 4 Technology-Based Intangible Assets
The Company capitalized technology-based intangible assets in its
acquisitions of CBL, TouchVision, RMT and Ayrshire ("acquisitions"). The
amounts capitalized were equal to the difference between the consideration
paid for acquisitions 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 acquisitions including the net value of fixed assets,
historical price less accumulated depreciation, of $244,679. The
technology-based intangible assets are being amortized over a five-year
period using the straight-line method. The values assigned to the
technology-based intangible assets are considered appropriate - until the
Company receives independent valuations - based on average annual revenues
earned from licensing of these assets over the two year period ended
September 30, 2003 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 and accumulated amortization at September
30, 2003 and June 30, 2003, respectively, and amortization expense for the
three months ended September 30, 2003 and 2002, respectively:
Accumulated
Asset Cost Amortization Expense Amortization
---------------------- --------------------- ----------------------
09/30/2003 06/30/2003 09/30/2003 06/30/2003 09/30/2003 06/30/2003
---------- ---------- ---------- ---------- ---------- ----------
Intangible Asset $6,029,698 $1,118,312 $ 158,084 $ - $ 314,767 $ 167,747
NOTE 5 Commitments and Contingencies
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 space 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.
TouchVision leases office space pursuant to a lease agreement for its
operations located in California. The lease term will expire on February
28, 2005. TouchVision will pay a minimum of $5,600 per month. TouchVision
also leases office equipment pursuant to lease arrangements which will
expire by September 30, 2005 and which total $1,258 per month.
On May 1, 2002, RMT signed a lease agreement to lease commercial space for
its corporate offices in South Australia. RMT pays $7,333 per annum or
monthly payments of $611. The term of the lease expires on April 30, 2005.
On July 28, 2000, RMT signed a lease agreement for office equipment. The
term of the lease is for five years. The monthly payment is $339. The
lease agreement expires on June 28, 2005.
14
Riverbend leases office space pursuant to a lease agreement for its
operations located in South Africa. The lease term will expire on October
31, 2005. Riverbend will pay a minimum of $14,215 per month. Riverbend
also leases office equipment pursuant to lease arrangements which will
expire by October 31, 2007 and which total $1,395 per month.
Total Minimum Lease Commitments as of September 30, 2003:
Calendar Year Amount
------------- -----------
2003 $ 102,569
2004 361,319
2005 233,922
2006 44,890
Thereafter 8,783
-----------
Total $ 751,483
===========
NOTE 6 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 there
under, 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.
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.
18
NOTE 7 Notes Receivable
On June 5, 2003, we agreed to lend TouchVision $50,000 in two equal
installments of $25,000 each. Interest accrued 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. Subsequent to the TouchVision acquisition on September 1,
2003, this note receivable was reclassified to intercompany notes
receivable and eliminated in consolidation at September 30, 2003.
NOTE 8 Related Party Transactions
From time to time, Ms. Barbara McPherson and Ms. Ildi Hayman, officers of
RMT, have advanced funds to RMT. The current balance of $13,835 is due
December 31, 2004 and accrues interest at a rate of 6% per annum.
From time to time, certain officers of Riverbend have advanced funds to
Riverbend. The current balance of $331,165 is non interest bearing and
there are no fixed terms for repayment.
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
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 September 30, 2003, KPA had earned a total of $315,000 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 $205,000, $156,310 has
been paid to KPA, leaving a balance owing at September 30, 2003 of $48,690.
19
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 September 30, 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 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") on October 1, 2002, ("the Acquisition Date"),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
September 30, 2003, accrued interest totaled $70,000.
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 were
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
September 30, 2003, accrued interest totaled $15,550. 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 5, Commitments and Contingencies.
From time to time, since inception of our current operating strategy, Mr.
Theodore 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. 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.
17
NOTE 9 - Notes Payable
At September, 2003, notes payable to accredited investors and related
parties totaled $2,425,747 as compared with $2,147,151 at June 30, 2003.
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:
September June
30, 2003 30, 2003
----------- -----------
Unsecured convertible notes payable due on December 1, 2003,
see Note 8. $ 425,000 $ 925,000
Note payable to bank due October 29, 2004, plus interest
payable annually at 9.5%, secured by vehicle. 15,367 -
Note payable to related parties, see Note 8 for due date,
plus interest payable at 7% per annum. 13,835 -
Secured note payable to bank due August 29, 2007, plus
interest payable at prime plus 2%. 150,000 -
Borrowings under revolving line of credit issued by a bank,
plus interest payable at prime plus 2.625%. 99,950 -
Borrowings under revolving line of credit issued by a bank,
plus interest payable at prime plus 6.75%. 34,975 -
Borrowings under revolving line of credit issued by a
third party creditor, plus interest payable at prime rate
plus 1.99%. 38,872 -
Notes payable to third party individuals, due September 1,
2006, plus interest payable at 10% per annum. 94,432 -
Unsecured notes payable to related parties, see Note 8. 331,165 -
Unsecured notes payable to related parties, see Note 8 for
due date, plus accrued interest at a rate of 7% per annum. 222,151 222,151
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 1,000,000
----------- -----------
Total Notes Payable $2,425,747 $ 2,147,151
Less: Current Maturities (614,146) (2,147,151)
----------- -----------
Long Term Notes Payable $1,811,583 $ -
=========== ===========
18
NOTE 10 - Stockholders' Equity
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 September 30, and June 30, 2003, 3,182,000 and 2,447,00
options, respectively, have been granted at prices ranging from $0.05 per
share to $0.50 per share of which 1,303,125 and 963,625 were vested as of
September 30 and June 30, 2003, respectively.
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.
Between June and October 2003, we received subscriptions to our May 2003
Private Placement Memorandum ("May 2003 PPM") totaling $5,123,300 from
outside investors to purchase 5,123,300 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.
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.
NOTE 11 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 three months ended September 30, 2003:
19
2002 STOCK PLAN
------------------------
Weighted
Average
Number of Exercise
Shares Price
------------ ----------
Outstanding at June 30, 2003 2,447,000 $ 0.23
Options Granted 735,000 0.50
Options Exercised - -
Options Canceled - -
------------ ----------
Options Outstanding at September 30, 2003 3,182,000 $ 0.29
============ ==========
Options Exercisable at September 30, 2003 1,303,125 $ 0.26
============ ==========
In accordance with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation", and Statement of Financial
Accounting Standards Number 148 ("FASB 148"), "Accounting for Stock-Based
Compensation Transition and Disclosure" option expense of $58,734 was
recognized for the three months ended September 30, 2003:
September 30, 2003
--------------------
Five-Year Risk Free Interest Rate 3.63%
Dividend Yield nil
Volatility nil
Average Expected Term (Years to Exercise) 5
Stock options outstanding and exercisable under 2002 Stock Plan as of
September 30, 2003 are as follows:
Weighted Average Weighted
Range of Number of Average Remaining Number Average
Exercise Options Exercise Contractual of Options Exercise
Price Granted Price Life(Years) Vested Price
----------- ----------- ----------- ----------- ----------- -----------
$0.05 600,000 $0.05 4.1 287,500 $0.05
$0.25 1,589,000 $0.25 4.2 724,125 $0.25
$0.50 993,000 $0.50 4.7 291,500 0.50
20
NOTE 12 - 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 13 - Subsequent Events
Between June and October 2003, we received subscriptions to our May 2003
Private Placement Memorandum ("May 2003 PPM") totaling $5,123,300 from
outside investors to purchase 5,123,300 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.
21
From time to time, since inception of our current operating strategy, Mr.
Theodore 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. 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Our fiscal year ends on June 30. This management's discussion and analysis
of financial condition and results of operations and other portions of this
Quarterly Report on Form 10-QSB contain forward looking information that
involves risks and uncertainties. Our actual results could differ
materially from those anticipated by this forward looking information.
Factors that could cause or contribute to such differences include, but are
not limited to, those discussed or referred to in the Transition Report on
Form 10-KSB for the period ended June 30, 2003, filed on November 17, 2003,
under the heading Information Regarding Forward-Looking Statements and
elsewhere. Investors should review this quarterly report on Form 10-QSB in
combination with our Transition Report on Form 10-KSB in order to have a
more complete understanding of the principal risks associated with an
investment in our common stock. This management's discussion and analysis
of financial condition and results of operations should be read in
conjunction with our unaudited condensed consolidated financial statements
and related notes included elsewhere in this document.
OVERVIEW
We commenced a 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 mission is to become a leading global learning
solution corporation through acquisition, business development and
strategic relationships. We earn revenues from selling our services
to medium to large companies and organizations that provide workplace
training and certification to their employees. The principal components of
our costs of sales are labor costs for employees who are directly involved
in providing services to clients. Other costs of sales include expenses
associated with specific projects including materials and incidental
expenses. Operating expenses include salaries and benefits for management,
administrative, marketing and sales personnel, research and development,
occupancy and related overhead costs.
Following our initial acquisition of Competency Based Learning, Inc., and
related companies, 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.
22
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.
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.
23
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.
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 1. Legal Proceedings."
24
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.
Change In Fiscal Year
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 Transition Report on Form 10-KSB
relates to the transition period October 1, 2002 through June 30, 2003.
Results for the first quarter of fiscal year 2004 reflect one month's
results of operations for the three companies we recently acquired as well
as CBL's activity for the first three months of fiscal year 2004.
Revenues from our clients were $616,787 for the first quarter of fiscal
year 2004, compared with $0 for the same quarter ended June 30, 2002. Of
the total increase in revenues from our clients, approximately $340,000 was
due to the three acquisitions described above that we made during the first
quarter of fiscal year 2004.
We believe that the acquisitions we completed in the first quarter of
fiscal year 2004 will shift our business in the direction of markets that
we believe offer good growth potential for the Company.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions in certain circumstances that affect amounts
reported in the accompanying consolidated financial statements and related
footnotes. In preparing these financial statements, management has made
its best estimate and judgments of certain amounts included in the
financial statements, giving consideration to materiality. Historically,
our estimates have not materially differed from actual results.
Application of these accounting policies, however, involves exercise of
judgment and use of assumptions as to future uncertainties. As a result,
actual results could differ from these estimates.
Material accounting policies that we believe are the most critical to
investor's understanding of our financial results and condition and require
complex management judgment have been expanded and are discussed below.
Information regarding our other accounting policies is included in our
Transition Report on Form 10-KSB for the transition period ended June 30,
2003.
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.
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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.
E. 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.
F. 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.
Adoption of Statements of Financial Accounting Standards
In June 2002, the FASB issued Statement of Financial Accounting Standard
No. 146 ("SFAS 146"), "Accounting for Costs Associated with Exit or
Disposal Activities." SFAS 146 replaces Emerging Issues Task Force
("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (Including Certain
Costs Incurred in a Restructuring)" in its entirety and addresses
significant issues relating to recognition, measurement and reporting costs
associated with an exit or disposal activity, including restructuring
activities. Under EITF Issue No. 94-3, a liability is recognized, measured
and reported as of the date of an entity's commitment to an exit plan.
Pursuant to SFAS 146, a liability is recorded on the date on which the
obligation is incurred and should be initially measured at fair value.
SFAS 146 is effective for exit or disposal activities initiated after
December 31, 2002. The Company adopted SFAS 146 on July 1, 2003 and
adoption of SFAS 146 did not significantly impact the Company's financial
statements.
EITF Consensus Issue No.00-21 ("EITF 00-21"), "Revenue Arrangements with
Multiple Deliverables" was first discussed at the July 2000 EITF meeting
and was issued in February 2002. Certain revisions to the scope language
were made and finalized in May 2003. EITF 00-21 addresses the accounting
for multiple element revenue arrangements, which involve more than one
deliverable or unit of accounting in circumstances, where the delivery of
those units takes place in different accounting periods. EITF 00-21
requires disclosures of the accounting policy for revenue recognition of
multiple element revenue arrangements and the nature and description of
such arrangements. The accounting and reporting requirements are effective
for revenue arrangements entered into in fiscal periods beginning after
June 15, 2003. The Company has completed its initial evaluation and
adoption of EITF 00-21 does not have a significant impact on the Company's
financial statements. The Company continues its evaluation to determine
whether the reporting requirements of EITF 00-21 will impact the Company's
financial statements in the future.
In January 2003, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 148 ("SFAS 148"),
"Accounting for Stock-Based Compensation Transition and Disclosure."
SFAS 148 amends FASB Statement 123 ("SFAS 123"), "Accounting for Stock-
Based Compensation," to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-
based employee compensation. In addition, SFAS 148 amends the disclosure
requirements of SFAS 123 to require prominent disclosure in both annual and
interim financial statements of the method of accounting for stock-based
employee compensation and the effect of the method used on reported
results. SFAS 148 is effective for fiscal years, including interim periods
beginning after December 15, 2002, and thus, this disclosure is included in
the table below. SFAS 148 also requires disclosure of pro-forma results on
the interim basis as if the Company had applied the fair value recognition
provisions of SFAS 123. The Company changed to the fair value based method
of accounting for stock-based employee compensation during the transition
period from October 1, 2002 to June 30, 2003. Adopting SFAS 148 did not
impact the financial results of the Company significantly.
In April 2003, the FASB issued Statement of Financial Accounting Standards
No. 149 ("SFAS 149"), "Amendment of Statement 133 on Derivative Instruments
and Hedging Activities." SFAS 149 amends and clarifies financial
accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred
to as derivatives) and for hedging activities. The accounting and
reporting requirements will be effective for contracts entered into or
modified after June 30, 2003 and for hedging relationships designated after
June 30, 2003. Currently, we do not have any derivative instruments and do
not anticipate entering into any derivative contracts. Accordingly,
adoption of SFAS 149 does not have a significant impact to our financial
statements.
In May 2003, the FASB issued Statement of Financial Accounting Standards
No. 150 ("SFAS 150"), "Accounting for Certain Instruments with
Characteristics of Both Liabilities and Equity." SFAS 150 establishes
standards for how an issuer classifies and measures certain financial
instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its
scope as a liability (or an asset in some circumstances). SFAS 150 is
effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. As permitted, the Company will adopt
SFAS 150 on October 1, 2003. The Company does not anticipate adoption of
SFAS 150 to significantly impact the Company's financial statements.
Related Party Transactions
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
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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 September 30, 2003, KPA had earned a total of $315,000 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 $205,000, $156,310 was
paid to KPA, leaving a balance owing at September 30, 2003 of $48,690.
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.
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. 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.
Results of Operations
First Quarter Ended September 30, 2003 Compared to September 30, 2002
Our gross sales revenues were $616,787 for the quarter ended September 30,
2003, as compared to $0, the amount we reported for the quarter ended
September 30, 2002. The increase in revenues was primarily due to the CBL,
TouchVision, RMT and Ayrshire acquisitions ("acquisitions") which provided
the revenues for the first quarter of fiscal year 2004.
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Costs of sales for the quarter ended September 30, 2003, which consist of
labor and hardware costs, and other incidental expenses, increased by
$248,092, as compared to $0 for the same period last year. This increase
was a result of the acquisitions, which increased costs of sales.
Our gross profit was $368,695 for the quarter ended September 30, 2003, as
ompared to $0, the amount we reported for the quarter ended September 30,
2002. The increase in gross profit was due to the acquisitions, which
provided $368,695 in gross profit.
Operating expenses for the quarter ended September 30, 2003 increased by
$905,776, or 228%, over the amount we reported for the same period last
year. The increase in operating expenses was primarily due to the
additional labor, benefits, travel and entertainment from the acquisitions
during the first three months of fiscal year 2004 and an increase in
amortization expense as a result of the capitalization of in intellectual
property acquired from CBL Global, TouchVision, RMT and Ayrshire and
related amortization of these assets. Net interest expense for the quarter
ended September 30, 2003 increased by $8,301 due to the additional interest
paid on various loans incurred immediately prior to and during the period.
We reported net loss available for common shareholders of $911,580, or
$0.05 per share on a diluted basis, for the quarter ended September 30,
2003, compared with a net loss of $404,821, or $8.34 per share on a diluted
basis, for the same period last year.
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 September 30, 2003 was
$12,100,493, as compared to $11,188,913 as of June 30, 2003. We incurred
significant liabilities during the year, and our current liabilities
exceeded our current assets by $1,475,980 as of September 30, 2003.
At September 30, 2003, we had a cash balance of $1,301,593 compared to
$86,511 at June 30, 2003. Net cash used by operating activities during
the transition period ended September 30, 2003 was $751,417, attributable
primarily to our loss from operations of $911,580. Cash generated by
financing activities was $2,076,258 for the quarter ended September 30,
2003 representing the net of repayments under short-term notes of $500,000,
financing fees of $428,242 and $3,004,500 in proceeds from issuance of
common stock.
Accounts payable increased from $391,872 at September 30, 2002 to
$1,108,579 at September 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.
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
$5,123,300. 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, $441,105 was paid in commissions to financial
advisors for fundraising activities, and $500,000 was repaid on 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.
29
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 3. 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.
PART II
OTHER INFORMATION
ITEM 1. 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 there
under, 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.
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
30
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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities
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.
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.
31
On September 1, 2003 we issued a $20,000 convertible promissory note that
is convertible 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.
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 $441,105 in commissions and issued to
various financial advisors, 527,160 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
there under.
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.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)Exhibits
The following exhibits are filed herewith:
31.1 Certification of the Company's Chief Executive Officer.
31.2 Certification of the Company's Chief Financial Officer.
32.1 Certification of the Company's Chief Executive Officer.
32.2 Certification of the Company's Chief Financial Officer.
(b)Reports on Form 8-K
1. On July 18, 2003, we filed a Current Report on Form 8-K
concerning an agreement to acquire TouchVision, Inc.
2. On August 5, 2003, we filed a Current Report on Form 8-K
concerning an agreement to acquire IRCA (PTY) Ltd.
3. On August 8, 2003, we filed a Current Report on Form 8-K
concerning a decision by our Board of Directors to change our
fiscal year-end to June 30.
4. On August 20, 2003, we filed a Current Report on Form 8-K
concerning an agreement to acquire River Murray Training Ltd.
5. On September 16, 2003, we filed a Current Report on Form 8-K
concerning our acquisition of TouchVision, Inc.
6. On September 16, 2003, we filed a Current Report on Form 8-K
concerning our acquisition of River Murray Training Ltd.
7. On September 16, 2003, we filed a Current Report on Form 8-K
concerning our acquisition of control of Ayrshire Trading
Limited.
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 19, 2003 By: Douglas D. Cole
--------------------------------------
Douglas D. Cole
Chief Executive Officer
November 19, 2003 By: /S/ Christine R. Larson
--------------------------------------
Christine R. Larson
Chief Financial Officer
33