SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported)
November 25, 2003 (September 1, 2003)
Trinity Learning Corporation
(Exact Name of Registrant as Specified in Its Charter)
Utah
(State of Other Jurisdiction of Incorporation)
0-8924 73-0981865
(Commission File Number) (IRS Employer Identification No)
1831 Second Street
Berkeley, California 94710
(Address of Principal Executive Officer) (Zip Code)
(510) 540-9300
(Registrant's Telephone Number, Including Area Code)
Item 7. Financial Statements and Exhibits
Included with this amendment to the Report on Form 8-K for Trinity
Learning Corporation, originally filed with the Securities and Exchange
Commission on September 16, 2003 are the financial statements of Riverbend
Group Holdings (Pty.) Ltd., as of June 30, 2003 and June 30, 2002 along
with pro forma financial information giving effect to the acquisition of
this entity.
RIVERBEND GROUP HOLDINGS (PROPRIETARY) LIMITED
AND SUBSIDIARY COMPANIES
Registration No: 1998 / 016713 / 03
CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2003
Page 1
RIVERBEND GROUP HOLDINGS (PROPRIETARY) LIMITED AND SUBSIDIARIES
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
for the year ended 30 June 2003
Index
Report of the independent auditors 2
The following were approved by the directors:
Report of the directors 3
Balance sheet 4
Income statement 5
Statement in change of equity 6
Cash flow statement 7
Notes to the financial statements 8 - 15
The financial statements set out on pages 3 to 15 were approved by the
directors and are signed on its behalf by:
-------------------------------------
N.C. Tattersall
-------------------------------------
Date
Page 2
REPORT OF THE INDEPENDENT AUDITORS
TO THE MEMBERS OF
RIVERBEND GROUP HOLDINGS (PROPRIETARY) LIMITED AND SUBSIDIARIES
We have audited the group financial statements of Riverbend Group Holdings
(Proprietary) Limited as set out on page 3 to 15 for the year ended 30 June
2003. The financial statements are the responsibility of the company's
directors. Our responsibility is to express an opinion on these financial
statements based on our audit.
Scope
We conducted our audit in accordance with statements of South African
Auditing Standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance that the financial statements are free
of material misstatement. An audit includes:
- examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements;
- assessing the accounting principles used and significant estimates
made by management; and
- evaluating the overall financial statement presentation
We believe that our audit provides a reasonable basis for our opinion.
Audit opinion
In our opinion these financial statements fairly present, in all material
respects, the financial position of the company and the group at 30 June
2003 and the results of its operations and cash flows for the year then
ended in accordance with South African Statements of Generally Accepted
Accounting Practice and in the manner required by the Companies Act.
J F van Zyl.
Chartered Accountants (SA)
Registered Accountants and Auditors
JOHANNESBURG
27-Oct-03
Page 3
RIVERBEND GROUP HOLDINGS (PROPRIETARY) LIMITED AND SUBSIDIARIES
REPORT OF THE DIRECTORS
The directors have pleasure in submitting their report to the shareholders
on the financial information of the company and the group as at 30 June
2003.
GENERAL REVIEW
The principal activity is that of a technology holding company.
The operations and the results thereof for your company and its
subsidiaries are clearly reflected in the attached financial statements.
No material fact or circumstance has occurred between the accounting date
and the date of this report.
STATEMENTS OF RESPONSIBILITY
The directors are responsible for the maintenance of adequate accounting
records and the preparation and integrity of the annual financial
statements and related information. The auditor is responsible to report
on the fair presentation of the annual financial statements. The annual
financial statements have been prepared in accordance with generally
accepted accounting practice.
The directors are also responsible for the company's system of internal
financial control. These are designed to provide reasonable, but not
absolute, assurance as to the reliability of the financial statements, and
to adequately safeguard, verify and maintain accountability of assets, and
to prevent and detect misstatement and loss. Nothing has come to the
attention of the directors to indicate that any material breakdown in the
functioning of these controls, procedures and systems has occurred during
the year under review.
The consolidated annual financial statements have been prepared on the
going concern basis, since the directors have every reason to believe that
the company has adequate resources in place to continue in operation for
the foreseeable future.
SHARE CAPITAL
Changes in the share capital are reflected in note 6 to the financial
statements.
FINANCIAL RESULTS
The consolidated profit for the period was R 1,798,799 (2002: 1,188,481).
DIVIDENDS
No dividends were declared during the period under review, nor are any
recommended.
DIRECTORS
Your directors are:
NC Tattersall (Chairman)
CA Elfick
JR Raubenheimer
JD van Wyk
SECRETARY
The company secretary in L de Jager.
SUBSIDIARIES
The subsidiary companies are reflected in note 4 to the financial
statements.
Page 4
RIVERBEND GROUP HOLDINGS (PROPRIETARY) LIMITED AND SUBSIDIARIES
BALANCE SHEETS AS AT 30 JUNE 2003
Company Group
Notes R R R R
ASSETS
Non - current assets
Fixed assets 2 152,244 115,247 1,193,175 1,604,836
Deferred tax assets 3 - - 1,214,009 -
Intangible assets 4 1,118,571 756,021 20,434,376 16,606,243
Investments in subsidiaries 5 1,103,685 885,695 - -
Cost of control - - 441,005 882,010
----------- ----------- ----------- -----------
2,374,500 1,756,963 23,282,565 19,093,089
----------- ----------- ----------- -----------
Current assets
Accounts receivable 100,377 883,832 6,746,261 3,709,589
Balance balances and cash 5,917 - 259,268 1,933,577
----------- ----------- ----------- -----------
106,294 883,832 7,005,529 5,643,166
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Total assets 2,480,794 2,640,795 30,288,094 24,736,255
=========== =========== =========== ===========
EQUITY AND LIABILITIES
Capital and reserves
Share capital 6 25,000 10,000 25,000 10,000
Share premium 7 100,000 100,000 13,075,000 13,075,000
Non distributable reserve - - (602,055) (2,652,959)
Retained income/(accumulated loss) 250,354 (91,322) 821,386 (521,457)
----------- ----------- ----------- -----------
375,354 18,678 13,319,331 9,910,584
----------- ----------- ----------- -----------
Minority interest 8 - - 9,997,139 10,858,655
----------- ----------- ----------- -----------
Non - current liabilities
Shareholders' loans 9 1,863,244 2,199,950 2,427,266 2,199,950
----------- ----------- ----------- -----------
Current liabilities
Creditors and provisions 10 181,530 316,155 4,483,692 1,661,054
Bank overdrafts 60,666 106,012 60,666 106,012
----------- ----------- ----------- -----------
242,196 422,167 4,544,358 1,767,066
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
2,480,794 2,640,795 30,288,094 24,736,255
=========== =========== =========== ===========
Page 5
RIVERBEND GROUP HOLDINGS (PROPRIETARY) LIMITED AND SUBSIDIARIES
INCOME STATEMENTS FOR THE YEAR ENDED 30 JUNE 2003
Company Group
Notes R R R R
Revenue 2,322,127 1,594,666 22,011,639 12,321,027
Cost of sales (1,258,674) (757,406)(11,223,531) (5,690,156)
----------- ----------- ----------- -----------
Gross profit 1,063,453 837,260 10,788,108 6,630,871
Other income 452,805 - - -
Operating expenditures (1,018,659) (861,162)(10,250,670) (5,807,183)
----------- ----------- ----------- -----------
Operating profit/(loss) 11 497,599 (23,902) 537,438 823,688
Finance income/(costs) 12 82 - 936,789 364,793
----------- ----------- ----------- -----------
Profit/(loss) before taxation 497,681 (23,902) 1,474,227 1,188,481
Taxation 3 - - (1,214,009) -
----------- ----------- ----------- -----------
Profit/(loss) from normal
operations 497,681 (23,902) 2,688,236 1,188,481
Minority interest (889,437)
Profit on sale of shares in
subsidiary 4 285,000 - 285,000 -
----------- ----------- ----------- -----------
Net profit/(loss) for the year 782,681 (23,902) 2,083,799 1,188,481
=========== =========== =========== ===========
Page 6
RIVERBEND GROUP HOLDINGS (PROPRIETARY) LIMITED AND SUBSIDIARIES
STATEMENTS IN CHANGES OF EQUITY FOR THE YEAR ENDED 30 JUNE 2003
Company Group
2003 2002 2003 2002
R R R R
Share capital
Ordinary shares
At beginning of year 10,000 10,000 10,000 10,000
Ordinary shares issued 15,000 - 15,000 -
----------- ----------- ----------- -----------
At end of year 25,000 10,000 25,000 10,000
=========== =========== =========== ===========
Share premium
At beginning of year 100,000 100,000 13,075,000 13,075,000
Movement during the year - - - -
----------- ----------- ----------- -----------
At end of year 100,000 100,000 13,075,000 13,075,000
=========== =========== =========== ===========
----------- ----------- ----------- -----------
Total share capital at end of year 125,000 110,000 13,100,000 13,085,000
=========== =========== =========== ===========
Non distributive reserves
At beginning of year - - (2,652,959) (695,038)
Intangible asset valuation reserve
Present value adjustment of
intangible assets - - - (2,278,277)
Transfer to minority interest - - 1,750,953 -
Transfer from valuation reserve on
unwinding of present value
adjustment - - 299,951 320,356
----------- ----------- ----------- -----------
At end of year - - (602,055) (2,652,959)
=========== =========== =========== ===========
Retained income/(accumulated loss)
At beginning of year (91,322) (67,420) (521,457) (1,389,582)
Net Profit/(loss) for the year 782,681 (23,902) 2,083,799 1,188,481
Cost of control written off (441,005) - (441,005) -
Transfer from valuation reserve
on unwinding of present value
adjustment - - (299,951) (320,356)
----------- ----------- ----------- -----------
At end of year 250,354 (91,322) 831,386 (521,457)
=========== =========== =========== ===========
Page 7
RIVERBEND GROUP HOLDINGS (PROPRIETARY) LIMITED AND SUBSIDIARIES
CASH FLOWS STATEMENT FOR THE YEAR ENDED 30 JUNE 2003
Company Group
Notes R R R R
CASH FLOWS FROM
OPERATING ACTIVITIES
Cash receipts from customers
and third parties 3,558,387 773,652 18,974,968 10,339,180
Cash paid to suppliers and
third parties (2,348,456) (1,319,562)(15,245,381) (8,323,828)
----------- ----------- ----------- -----------
Cash generated from operations 1,209,931 (545,910) 3,729,587 2,015,352
Interest received 5,383 - 90,470 84,799
Interest paid (5,301) - (35,891) (40,362)
----------- ----------- ----------- -----------
Net cash inflow from operating
activities 14 1,210,013 (545,910) 3,784,166 2,059,789
----------- ----------- ----------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES
Fixed assets acquired (100,499) (114,183) (311,894) (1,421,547)
Development costs (362,550) (495,709) (5,628,551) (5,988,494)
Investment in subsidiaries (658,995) 402,766 - -
Cost of control arising from
acquisition of shares in
subsidiary company - - - (882,010)
Loans (to)/from associated
companies - - - -
----------- ----------- ----------- -----------
Net cash outflow from investing
activities (1,122,044) (207,126) (5,940,445) (8,292,051)
----------- ----------- ----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from issue of ordinary
shares 15,000 - 15,000 -
Proceeds from premium on issue
of ordinary shares - - - -
Proceeds from sale of shares
in subsidiary 285,000 - 285,000 -
Proceeds from minority loans
received - - - 5,858,152
Change in shareholders loans (336,706) 652,827 227,316 477,027
----------- ----------- ----------- -----------
Net cash inflow from financing
activities (36,706) 652,827 527,316 6,335,179
Cash and cash equivalents at
beginning of year (106,012) (5,803) 1,827,565 1,724,648
----------- ----------- ----------- -----------
Cash and cash equivalents at
end of year 15 (54,749) (106,012) 198,602 1,827,565
=========== =========== =========== ===========
Page 8
RIVERBEND GROUP HOLDINGS (PROPRIETARY) LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting policies
The financial statements are prepared on the historical cost basis and
incorporate the following principle accounting policies used by the
company which are consistent with those of the previous year.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and enterprises controlled by the Company
(its subsidiaries) up to 30 June each year. Control is achieved where
the Company has the power to govern the financial and operating
policies of an investee enterprise so as to obtain benefits from its
activities.
The results of subsidiaries acquired or disposed of during the year
are included in the consolidated income statement from the effective
date of acquisition or up to the effective date of disposal, as
appropriate.
The assets, liabilities and results of Elearning Systems (Pty) ltd are
consolidated as the board of directors of the subsidiary is controlled
by the Company.
Fixed assets
Fixed assets are stated at cost less depreciation. Cost includes all
costs directly attributable to bringing the assets to working
condition for their intended use. Depreciation is calculated on the
straight line basis so as to write off the cost or amount of the
valuation of the assets over their expected useful lives.
The depreciation rates applicable to each category of fixed assets is
as follows:
Computer equipment 33.30% p.a.
Computer software 50.00% p.a.
Furniture and fittings 16.67 - 33.33% p.a.
Leasehold improvements 33.30% p.a.
The gain or loss arising on the disposal or retirement of an asset is
determined as the difference between sales proceeds and the carrying
amount of the asset and is recognised in the income statement when the
asset is sold or retired.
Publishing rights and licenses
The net present value of expected future utilisation of publishing
rights, calculated using an incremental borrowing rate, is capitalised
as a intangible asset and amortised on the straight-line basis over
the expected useful life of the asset, but generally over five years.
The carrying amount of each intangible asset is reviewed annually and
adjusted for impairment where necessary.
Page 9
RIVERBEND GROUP HOLDINGS (PROPRIETARY) LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
Development costs
Development costs which result in an asset which is considered to have
an enduring benefit are capitalised and amortised on the straight-line
basis over a period of five years so as to match expenditures with
future related economic benefits. This only occurs where the
directors are satisfied that certain requirements for the
capitalisation of development costs have been met. Internal software
development cost are generally expensed. The requirements for
capitalisation include:
- the technical feasibility of completion and the intention to
complete the development of the asset;
- it is probable that future economic benefits will be received;
- adequate resources are available to complete development of the
asset; and
- the expenditure attributable to the asset is measurable.
Cash and cash equivalents
Cash and cash equivalents consist of bank balances, deposits and cash,
net of bank overdrafts for the purpose of the cash flow statement.
Cost of control
Cost of control, being the excess purchase price of shares in
subsidiaries over the net assets acquired, is written off over two
years.
Revenue
Sales are recorded in the financial statements at the date the goods
are delivered to customers or services are performed.
Impairment
A periodic impairment review of assets is carried out by comparing the
net book value of the assets with their fair values. Where the fair
value is less than the net book value, the impairment is charged
against income to reduce the carrying amount of the affected assets to
recoverable amounts.
Provisions
A provision is recognized when there is a legal or constructive
obligation, as a result of a past event for which it is probable that
a transfer of economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation.
Cash and cash equivalents
Cash and cash equivalents consist of bank balances, deposits and cash,
net of bank overdrafts for the purpose of cash flow statement.
Financial instruments
Financial assets
The Group's principal financial assets are bank balances, deposits and
cash, trade and other receivables.
Page 10
RIVERBEND GROUP HOLDINGS (PROPRIETARY) LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
Trade receivables are stated at their nominal value as reduced by
appropriate allowances for estimated irrecoverable amounts.
Financial liabilities
Financial liabilities are classified according to the substance of the
contractual arrangements entered into. Significant financial
liabilities include finance lease obligations, interest-bearing bank
loans and overdrafts, convertible loan notes and trade and other
payables.
Interest-bearing bank loans and overdrafts, and convertible loans
notes are recorded at the proceeds received, net of direct issue
costs. Finance charges, including premiums payable on settlement or
redemption, are accounted for on an accrual basis and are added to the
carrying amount of the instruments to the extent that they are not
settled in the period in which they arise.
Trade and other payables are stated at their nominal value.
Company Group
2003 2002 2003 2002
R R R R
2. Fixed assets
Computer equipment
Carrying value at beginning of year 74,549 19,348 501,958 245,857
----------- ----------- ----------- -----------
At cost 139,174 56,418 1,053,374 540,773
Accumulated depreciation (64,625) (37,070) (551,416) (294,916)
----------- ----------- ----------- -----------
Additions 82,111 82,756 351,664 512,601
Depreciation (42,758) (27,555) (307,183) (256,500)
Scapped - - (12,499) -
Carrying value at end of the year 113,902 74,549 533,940 501,958
----------- ----------- ----------- -----------
At cost 221,285 139,174 1,318,055 1,053,374
Accumulated depreciation (107,383) (64,625) (784,115) (551,416)
----------- ----------- ----------- -----------
Computer Software
Carrying value at beginning of year 27,760 8,338 764,402 42,296
----------- ----------- ----------- -----------
At cost 54,774 23,347 1,077,739 168,793
Accumulated depreciation (27,014) (15,009) (313,337) (126,497)
----------- ----------- ----------- -----------
Additions 15,250 31,427 15,250 908,946
Depreciation (13,694) (12,005) (328,864) (186,840)
Scapped - - (2,496) -
Carrying value at end of the year 29,316 27,760 448,290 764,402
----------- ----------- ----------- -----------
At cost 70,024 54,774 1,032,115 1,077,398
Accumulated depreciation (40,708) (27,014) (583,825) (313,337)
----------- ----------- ----------- -----------
Page 11
RIVERBEND GROUP HOLDINGS (PROPRIETARY) LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
Company Group
2003 2002 2003 2002
R R R R
Furniture and equipment
Carrying value at beginning of year 12,938 21,475 293,476 404,472
----------- ----------- ----------- -----------
At cost 31,760 31,760 556,613 556,613
Accumulated depreciation (18,822) (10,285) (263,137) (152,141)
----------- ----------- ----------- -----------
Additions 3,138 - 8,781 -
Depreciation (7,050) (8,537) (69,507) (110,996)
Scapped - - (48,806) -
Carrying value at end of the year 9,026 12,938 183,945 293,476
----------- ----------- ----------- -----------
At cost 34,898 31,760 413,502 556,613
Accumulated depreciation (25,872) (18,822) (229,557) (263,137)
----------- ----------- ----------- -----------
Leasehold Improvements
Carrying value at beginning of the
year - - 45,000 72,282
----------- ----------- ----------- -----------
At cost - - 173,538 173,538
Accumulated depreciation - - (128,538) (101,256)
----------- ----------- ----------- -----------
Additions - - - -
Depreciation - - (18,000) (27,282)
Carrying value at end of the year - - 27,000 45,000
----------- ----------- ----------- -----------
At cost - - 173,538 173,538
Accumulated depreciation - - (146,538) (128,538)
----------- ----------- ----------- -----------
Total Fixed Assets
Carrying value at beginning of the
year 115,247 49,161 1,604,836 764,907
----------- ----------- ----------- -----------
At cost 225,708 111,525 2,861,264 1,439,717
Accumulated depreciation (110,461) (62,364) (1,256,428) (674,810)
----------- ----------- ----------- -----------
Additions 100,499 114,183 375,695 1,421,547
Depreciation (63,502) (48,097) (723,554) (581,618)
Scapped - - (63,801) -
Carrying value at end of the year 152,244 115,247 1,193,175 1,604,836
----------- ----------- ----------- -----------
At cost 326,207 225,708 2,937,210 2,861,264
Accumulated depreciation (173,963) (110,461) (1,744,035) (1,256,428)
----------- ----------- ----------- -----------
Page 12
RIVERBEND GROUP HOLDINGS (PROPRIETARY) LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
3. Deferred tax assets
Company Group
2003 2002 2003 2002
R R R R
Deferred taxation - - (1,214,009) -
=========== =========== =========== ===========
The balance at the end of the year
comprises:
Excess of tax allowance amortisation
of development costs - - 4,195,418 -
Assessable loss - - (5,345,413) -
Other - - (64,014) -
----------- ----------- ----------- -----------
Total - - (1,214,009) -
=========== =========== =========== ===========
4. Intangible assets
Company Group
2003 2002 2003 2002
R R R R
Development costs 756,021 260,312 11,557,696 6,297,652
Balance at beginning of year 362,550 495,709 5,628,551 5,988,494
Development costs recognised as
an asset - - (1,196,000) (728,450)
Amortisation charge - - - -
----------- ----------- ----------- -----------
Balance at end of year 1,118,571 756,021 15,990,247 11,557,696
----------- ----------- ----------- -----------
Advertising Voucher
Balance at beginning of year - - 5,048,547 3,098,544
Amount exchanged for shares - - - 5,000,000
Initial impairment - - - (2,278,277)
Unwinding of impairment - - 882,210 320,356
Expensed in the year - - (1,486,628) (1,092,076)
----------- ----------- ----------- -----------
Balance at end of year - - 4,444,129 5,048,547
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
1,118,571 756,021 20,434,376 16,606,243
=========== =========== =========== ===========
A R10 000 000 advertising credit was received from
Johnnic Publishing Limited as part settlement of shares
issued by subsidiary Elearning Systems (Pty) Ltd.
This value represents the future value of the benefit.
The present value of this benefit was determined by
projecting the estimated use of the benefit over five
years and discounting using a rate of 15%.
Page 13
RIVERBEND GROUP HOLDINGS (PROPRIETARY) LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
5. Investments in subsidiaries
Company Group
2003 2002 2003 2002
R R R R
Elearning Systems (Pty) Ltd - 34%
formerly Riverbend Learning Systems
(Pty) Ltd
- Shares at cost 882,267 882,267 - -
- Less amounts amortised (441,005) - - -
- Amounts due by/(to) 386,415 (144,704) - -
----------- ----------- ----------- -----------
827,677 737,563 - -
----------- ----------- ----------- -----------
Learning Advantage (Pty) Ltd - 100%
- Shares at cost 120 - - -
- Amounts due by/(to) (120) - - -
----------- ----------- ----------- -----------
- - - -
----------- ----------- ----------- -----------
Learning Strategies (Pty) Ltd - 90%
formerly Open Learning Systems
(Pty) Ltd
- Shares at cost 9,000 9,000 - -
- Amounts due by/(to) (117,774) 39,772 - -
----------- ----------- ----------- -----------
(108,774) 48,772 - -
----------- ----------- ----------- -----------
Reusable Objects (Pty) Ltd - 80%
(2002 - 100%) formerly Riverbend
Technologies (Pty) Ltd
- Shares at cost 80 100 - -
- Amounts due by/(to) 384,702 99,260 - -
----------- ----------- ----------- -----------
384,782 99,360 - -
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
1,103,685 885,695 - -
=========== =========== =========== ===========
The subsidiary companies are all incorporated in
the Republic of South Africa.
Learning Advantage (Pty) Ltd was acquired during
the year at nominal value, and did not trade during
the period under review.
20 share in Reusable objects (Pty) Ltd was sold
for R285 000.
6. Share capital
Authorised 500,000 ordinary shares
of R1.00 each 500,000 10,000 500,000 10,000
=========== =========== =========== ===========
Issued
25 000 ordinary share of R 1.00 each 25,000 10,000 25,000 10,000
=========== =========== =========== ===========
The autorised share capital was increased to 500 000 shares of R1 each.
The directors issued 15 000 ordinary shares of R1 each during the year under
authority from the previous annual general meeting of shareholders.
Page 14
RIVERBEND GROUP HOLDINGS (PROPRIETARY) LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
Company Group
2003 2002 2003 2002
R R R R
7. Share premium
Ordinary shares 100,000 100,000 13,075,000 13,075,000
----------- ----------- ----------- -----------
100,000 100,000 13,075,000 13,075,000
=========== =========== =========== ===========
8. Minority interest
Minority share of capital in
subsidiaries
Balance at beginning of year - - 503 503
Shares issued - - - -
Shareholders loans - - 858,152 858,152
Equity loan - - 10,000,000 10,000,000
Profit for the year - - 889,437 -
Non distributable reserves - - (1,750,953) -
----------- ----------- ----------- -----------
Balance at end of year - - 9,997,139 10,858,655
----------- ----------- ----------- -----------
This equity loan is convertible to
equity in Elearning Systems (Pty)
Ltd in 2005.
The loans are unsecured, interest
free, no fixed repayment terms.
The negative non distributable
reserve represents the balance
of the future value of
intangible assets (Refer note 4)
9. Shareholders loans
Unsecured, interest free,
nom fixed repayment terms 1,863,244 2,199,950 2,427,266 2,199,950
=========== =========== =========== ===========
10. Provisions
Major provisions and movements
during the year are summarised
below
Course Costs
Balance at beginning of year - - 483,585 98,909
Charges to the income statement - - 859,504 384,676
----------- ----------- ----------- -----------
Balance at end of year - - 1,343,089 483,585
----------- ----------- ----------- -----------
Leave Pay
Balance at beginning of year - - 21,698 -
Charges to the income statement - - 42,315 21,698
----------- ----------- ----------- -----------
Balance at end of year - - 64,013 21,698
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
- - 1,407,102 505,283
=========== =========== =========== ===========
Page 15
RIVERBEND GROUP HOLDINGS (PROPRIETARY) LIMITED AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
Company Group
2003 2002 2003 2002
R R R R
11. Profit/(loss) from ordinary
activities
The following items have been
charged in arriving at the
loss from operating activities
Auditors remuneration
- Audit fees 16,500 16,300 134,000 51,300
Amortisation of intangible assets
- Expense - - 1,196,000 728,450
Depreciation
- Expense 63,502 48,097 723,554 581,618
12. Finance income
Interest received on bank
balances 5,383 - 90,470 84,799
Interest paid on bank
balances (5,301) - (35,891) (40,362)
----------- ----------- ----------- -----------
Cash finance income 82 - 54,579 44,437
----------- ----------- ----------- -----------
Interest received on notional
items - - 882,210 320,356
----------- ----------- ----------- -----------
82 - 936,789 364,793
----------- ----------- ----------- -----------
13. Taxation
No provision for taxation is
made as the company has a
calculated loss to be set off
against future taxable income - - - -
=========== =========== =========== ===========
14. Reconciliation of loss before
taxation to cash generated
Net profit/(loss) before
taxation 497,681 (23,902) 1,474,227 1,188,481
Adjust for:
Amortisation of development
costs - - 1,196,000 728,450
Depreciation 63,502 48,097 723,554 581,618
Notional interest - - (882,210) (320,356)
Voucher expense - - 1,486,628 1,092,076
----------- ----------- ----------- -----------
Operating profit before changes
in working capital 561,183 24,195 3,998,199 3,270,269
Working capital changes 684,830 (570,105) (214,034) (1,210,480)
----------- ----------- ----------- -----------
(Increase)/Decrease in
accounts receivable 783,455 (821,014) (3,036,672) (1,981,847)
Increase/(Decrease) in
accounts payable (134,625) 250,909 2,822,638 771,367
----------- ----------- ----------- -----------
Cash flow from operation 1,210,013 (545,910) 3,784,165 2,059,789
=========== =========== =========== ===========
Page 16
RIVERBEND GROUP HOLDINGS (PROPRIETARY) LIMITED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Company Group
2003 2002 2003 2002
R R R R
15. Cash and cash equivalents
Bank balance and cash 5,917 - 259,268 1,933,577
Bank overdrafts (60,666) (106,012) (60,666) (106,012)
----------- ----------- ----------- -----------
(54,749) (106,012) 198,602 1,827,565
=========== =========== =========== ===========
16. Capital commitments
Capital commitments in respect
of development with external
parties:
Contracted for but not
provided for - - 500,000 1,000,000
Authorised but not contracted
for - - 1,000,000 250,000
----------- ----------- ----------- -----------
Total capital commitments - - 1,500,000 1,250,000
=========== =========== =========== ===========
RIVERBEND GROUP HOLDINGS (PTY) LTD.
Consolidated Financial Statements
(In U.S. Dollars)
June 30, 2003
and
June 30, 2002
Riverbend Group Holdings (Pty.) Ltd
Consolidated Balance Sheet
June 30, June 30,
2003 2002
------------ ------------
Assets
------
Current Assets
Cash $ 34,708 $ 186,455
Accounts Receivable 903,122 357,716
Prepaid Expense 606,425 512,688
------------ ------------
Total Current Assets 1,544,255 1,056,859
------------ ------------
Property & Equipment (Note 3)
Furniture & Equipment 393,201 281,262
Accumulated Depreciation (233,471) (126,508)
------------ ------------
Net Property & Equipment 159,730 154,754
------------ ------------
Intangible Asset (Note 4)
Technology-Based Asset 2,458,432 1,252,817
Accumulated Amortization (270,270) (79,113)
------------ ------------
Net Intangible Asset 2,188,162 1,173,704
Deferred Tax Asset (Note 7) 162,519 -
------------ ------------
Total Assets $ 4,054,666 $ 2,385,317
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities
Accounts Payable 411,692 111,424
Accrued Expenses 188,539 48,751
Deferred Compensation 40,576 7,714
------------ ------------
Total Current Liabilities 640,807 167,889
Long Term Liabilities
Notes Payable Related Party (Note6) 284,362 204,427
------------ ------------
Total Long Term Liabilities 284,362 204,427
------------ ------------
Total Liabilities 925,169 372,316
Minority Interest 1,338,317 1,348,319
Stockholders' Equity
Common Stock, 500,000 Shares Authorized at
Rand 1.00 Par Value, 25,000 shares and
10,000 shares outstanding, respectively 3,250 1,242
Capital contributed in excess of par value 1,623,523 1,623,523
Non-distributable reserve (80,597) (255,825)
Retained Earnings 77,837 (76,790)
Other Comprehensive Income 167,167 (627,468)
------------ ------------
Total Stockholders' Equity 1,791,180 664,682
------------ ------------
Total Liabilities and Stockholders' Equity $ 4,054,666 $ 2,385,317
============ ============
The accompanying notes are an integral part of these financial statements.
Riverbend Group Holdings (Pty) Ltd.
Consolidated Statement of Operations
June 30, June 30,
2003 2002
------------ ------------
Revenue
Sales Revenue $ 2,534,640 $ 1,359,009
Cost of Sales 1,292,390 627,624
------------ ------------
Gross Profit 1,242,250 731,385
Operating Expense 1,180,365 640,532
------------ ------------
Income from Operations 61,885 90,853
------------ ------------
Other Income (Expense)
Interest Income 10,418 9,353
Interest Expense (4,133) (4,452)
Amortization of Non-Distributable Reserve 101,586 35,336
------------ ------------
Total Other Income (Expense) 107,871 40,237
------------ ------------
Net Income before Minority Interest and Taxes 169,756 131,090
Minority Interest (102,419) -
Profit from Sale of Shares in Subsidiary 32,818 -
------------ ------------
Net Income Before Taxes 100,155 131,090
Income Tax Credit 139,793 -
------------ ------------
Net Income (Loss) 239,948 131,090
============ ============
Net Loss Per Common Share $ 13.71 $ 13.11
Weighted Average Shares Outstanding 17,500 10,000
The accompanying notes are an integral part of these financial statements.
RIVERBEND GROUP HOLDINGS (PTY.) LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 DESCRIPTION OF BUSINESS
Riverbend Group Holdings ("RGH" or "the Company") is a provider of online
university degrees and other learning services to corporations and
individuals in South Africa. Incorporated in 1998 in South Africa, RGH
operates through four operating subsidiaries. Together, these operating
subsidiaries have developed holistic approaches to technology-enabled
learning, education and training. RGH, 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 RGH
subsidiaries 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 RGH 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.
On September 1, 2003, Trinity Learning Corporation ("Trinity") 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 RGH, a South African company that provides learning services to
corporations and individuals in South Africa. Ayrshire was incorporated in
2003. Trinity also acquired the option to purchase the remaining 49% of
Ayrshire. In consideration for the Ayrshire shares, Trinity 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 Trinity's common stock. 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 Trinity or the failure by Trinity to list its shares of common
stock on a major stock exchange in the United States by December 30, 2006.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Method of Accounting. The Company uses the accrual method of accounting.
Foreign Currency Translation. The Company does business using the South
African rand. The current rate method was used to translate the
consolidated financial statements into US dollars. All assets and
liabilities of the Company are translated at the then current rates.
Equity accounts are translated at the appropriate historical rate. Revenue
and expenses are translated at the weighted-average rate for the year.
Translation gains and losses are recorded as Other Comprehensive Income in
the Equity section of the Balance Sheet.
Consolidation Policies. The consolidated financial statements include the
financial statements of the Company and the subsidiaries controlled by the
Company at June 30, 2003. Control is achieved where the Company has the
power to govern the financial and operating policies of the subsidiary
enterprise so as to obtain benefits from its activities. The results of
subsidiaries acquired or disposed of during the year are included in the
consolidated income statement from the effective date of acquisition or up
the effective date of disposal, as appropriate. Intercompany transactions
and balances have been eliminated in consolidation.
Fixed Assets. Fixed assets are stated at cost less accumulated
depreciation. Costs include all those directly attributable to bringing
the assets to working condition for intended use. Depreciation is
calculated using straight line methods over 3 to 6 years for furniture,
equipment and leasehold improvements and 2 years for software.
Publishing Rights and Licenses. The net present value of expected future
utilization of publishing rights, calculated using an incremental borrowing
rate, is capitalized as an intangible asset and amortized using straight-
line methods over the useful life of the asset, but generally over five
years. The carrying amount of each intangible asset is reviewed annually
and adjusted for impairment where necessary.
Development Costs. Development costs considered to have an enduring
benefit are capitalized and amortized using straight-line methods over five
years. Internal software development costs are generally expensed.
Requirements adopted by the directors for capitalization of development
costs include;
- technical feasibility of completion and the intention to complete
development,
- probability of resulting economic benefit,
- adequacy of available resources to complete development, and
- whether particular cost is measurable.
Revenue. Revenue is recorded in the financial statements at the date the
goods are delivered to customers or services are performed.
Goodwill. Goodwill, being the excess purchase price of shares in
subsidiaries over the net assets acquired, is written off over two years.
The unamortized balance of goodwill is included in technology based
intangible
Impairment. A periodic impairment review of assets is carried out by
comparing the net book value with their fair values. Where the fair value
is less than the net book value, the impairment is charged against income
to reduce the carrying amount of the affected assets to recoverable
amounts.
Accruals. An accrual is recognized when there is a legal or constructive
obligation, as a result of a past event for which it is probable that a
transfer of economic benefits will be required to settle the obligation and
a reliable estimate can be made of the amount of the obligation.
Cash and Cash Equivalents. Cash and Cash equivalents consist of bank
balances, deposits and cash, net of bank overdrafts.
Trade Receivables. Trade receivables are stated at their nominal value as
reduced by allowances for estimated uncollectible amounts of $152,073 and
$52,073 for the year ended June 30, 2003 and 2002 respectively.
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statement and accompanying notes. Actual results could differ from those
estimates.
Income Taxes. The Company uses an asset and liability approach for
financial accounting and reporting for income tax purposes. The Company
has cumulative losses providing a probable future economic benefit. The
resulting deferred tax asset was $162,519 and $-0- at June 30, 2003 and
2002 respectively.
NOTE 3 FIXED ASSETS
The Company capitalizes furniture and equipment purchases in excess of
South African Rand 1,000. Depreciation is calculated using straight line
methods over 3 to 6 years for furniture, equipment and leasehold
improvements and 2 years for software. 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 06/30/2002 06/30/2003 06/30/2002 06/30/2003 06/30/2002
---------- ---------- ---------- ---------- ---------- ----------
Furniture
& Equipment $ 393,201 $ 281,262 $ 83,317 $ 64,152 $ 233,471 $ 126,508
NOTE 4 Technology-Based Intangible Assets
The Company capitalized technology-based intangible assets in its
acquisition of CBL and Riverbend. The amount capitalized is equal to the
difference between the consideration paid for the subsidiaries 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. The technology-based intangible assets are being amortized
over a five-year period using the straight-line method. The value assigned
to the technology-based intangible assets are considered appropriate based
on average annual revenues earned from licensing of these asset over the
two year period prior to the acquisitions and the expectation that future
revenues for the five year period subsequent to the acquisition will equal
or exceed these amounts. Scheduled below is the total asset cost,
amortization expense and accumulated amortization at June 30, 2003.
Amortization Accumulated
Asset Cost Expense Amortization
06/30/2003 06/30/2002 06/30/2003 06/30/2002 06/30/2003 06/30/2002
---------- ---------- ---------- ---------- ---------- ----------
Intangible Asset $2,458,432 $1,252,817 $ 137,719 $ 80,348 $ 279,270 $ 79,113
NOTE 5 OPERATING LEASES
The Company leases office and warehouse facilities South Africa and
equipment under non-cancelable long term leases.
Total Minimum Future Lease Commitments as of June 30, 2003:
Calendar Year Amount
---------- ---------
2003 $ 47,195
2004 205,848
2005 69,010
2006 18,221
Thereafter 9,129
Total $ 349,403
NOTE 6 RELATED PARTY TRANSACTIONS
From time to time, certain employees and shareholders have advanced funds
to RGH. The loans are non-interest bearing, unsecured, interest free and
have no fixed repayment terms.
NOTE 7 INCOME TAXES
The Company uses an asset and liability approach for financial accounting
and reporting for income tax purposes. The Company has cumulative losses
providing a probable future economic benefit. Deferred tax assets and the
valuation account at June 30, 2003 and at June 30, 2002 are as follows:
June June
Deferred Tax Asset 30, 2003 30, 2002
----------- -----------
Excess of tax allowance on amortization of
development costs $ (561,641) $ -
Assessable Loss 715,590 -
Other 8,570 -
----------- -----------
Total $ 162,519 $ -
=========== ===========
NOTE 8 SUBSEQUENT EVENTS
On September 1, 2003, Trinity completed the acquisition of 51% of the
issued and outstanding shares of Ayrshire, a British Virgin Islands company
that owns 95% of RGH, a South African company that provides learning
services to corporations and individuals in South Africa. Ayrshire was
incorporated in 2003. Trinity also acquired the option to purchase the
remaining 49% of Ayrshire. In consideration for the Ayrshire shares,
Trinity 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
Trinity's common stock. 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 Trinity or the failure by Trinity to list
its shares of common stock on a major stock exchange in the United States
by December 30, 2006.
As further consideration for the Ayrshire shares, Trinity 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.
Trinity Learning Corporation
Unaudited Pro Forma Consolidated Financial Statements
June 30, 2003
Trinity Learning Corporation
Unaudited Pro Forma Consolidated Balance Sheet
June 30, 2003
-------------
Assets
------
Current Assets
Cash $ 21,219
Accounts Receivable 945,841
Interest Receivable 41
Prepaid Expense 97,944
-------------
Total Current Assets 1,065,045
-------------
Property & Equipment (Note 3)
Furniture & Equipment 213,115
Accumulated Depreciation (7,824)
-------------
Net Property & Equipment 205,291
-------------
Intangible Asset (Note 4)
Technology-Based Asset 2,195,483
Accumulated Amortization (167,747)
-------------
Net Intangible Asset 2,027,736
Other Assets
Notes Receivable (Note 5) 25,000
Other Assets 94,003
-------------
Other Assets 119,003
-------------
Total Assets $ 3,417,075
=============
Continued
Trinity Learning Corporation
Unaudited Pro Forma Consolidated Balance Sheet
June 30, 2003
-------------
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities
Accounts Payable $ 803,564
Accrued Expenses 458,809
Deferred Compensation 40,576
Interest Payable 63,987
Notes Payable Related Party (Notes 7 & 8) 2,147,151
-------------
Total Current Liabilities 3,514,087
Long Term Liabilities
Notes Payable Related Party (Note 7 & 8) 284,362
-------------
Total Long Term Liabilities 284,362
-------------
Total Liabilities 3,798,449
-------------
Minority Interest 149,562
Stockholders' Equity
Preferred Stock, 10,000,000 Shares at No Par Value;
No Shares Issued and Outstanding -
Common Stock, 100,000,000 Shares Authorized at No
Par Value, 16,956,641 shares and 49,774 shares Issued
and Outstanding, Respectively 10,693,447
Accumulated Deficit (11,188,913)
Subscription Receivable (35,000)
Other Comprehensive Income (470)
Total Stockholders' Equity (530,936)
-------------
Total Liabilities and Stockholders' Equity $ 3,417,075
=============
The accompanying notes are an integral part of these financial statements.
Trinity Learning Corporation
Unaudited Pro Forma Consolidated Statement of Operations
June 30, 2003
-------------
Revenue
Sales Revenue $ 2,702,430
Cost of Sales (1,292,390)
-------------
Gross Profit 1,410,040
Expenses
Salaries & Benefits 1,470,685
Professional Fees 471,630
General & Administrative 484,734
Travel & Entertainment 275,366
Depreciation & Amortization 403,731
Rent 94,340
-------------
Total Expense 3,200,486
-------------
Income (Loss) from Operations (1,790,446)
Other Income (Expense)
Interest Income 9,931
Interest Expense (80,998)
Foreign Currency Gain / (Loss) (4,582)
-------------
Total Other Income (Expense) (75,649)
-------------
Income (Loss) Before Taxes & Minority Interest (1,866,095)
Minority Interest
Minority Interest (180,597)
Profit from Sale of Shares in Subsidiaries 32,818
-------------
Net Income (Loss) Before Tax (2,013,824)
Taxes -
-------------
Net Income (Loss) $ (2,013,824)
Net Loss Per Common Share $ (0.19)
=============
Weighted Average Shares Outstanding 10,364,218
=============
A summary of the components of other comprehensive income for the
transition period from October 1, 2002 to June 30, 2003 is as follows:
June 30, 2003
Before After
Tax Amount Tax Amount
------------- ------------
Net Income (Loss) $ (2,013,824) $ (2,013,824)
Foreign currency translation (470) (470)
------------- ------------
Total Other Comprehensive Income $ (2,014,294) $ (2,014,294)
============= ============
The accompanying notes are an integral part of these financial statements
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.
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 (Pty.) Ltd.
("RGH"), a South African company that provides learning services to
corporations and individuals in South Africa. These companies are
collectively referred to as "Riverbend." 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.
NOTE 2 - Significant Accounting Policies
Method of Accounting. The Company uses the accrual method of accounting.
A. Revenue Recognition - The Company recognizes revenue once it is
realizable and earned. Revenue from sales of products and related
cost of products sold are recognized when persuasive evidence of an
arrangements exists, delivery has occurred, the seller's price is
fixed or determinable and collectibility is reasonably assured.
B. 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.
C. 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.
D. 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.
E. Consolidation Policies. The accompanying consolidated financial
statements include the accounts of the Company and its wholly owned
subsidiaries and the . Intercompany transactions and balances have
been eliminated in consolidation and the subsidiaries controlled by
the Company at June 30, 2003. Control is achieved where the Company
has the power to govern the financial and operating policies of the
subsidiary enterprise so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year
are included in the consolidated income statement from the effective
date of acquisition or up the effective date of disposal, as
appropriate. 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 purchase value of fixed assets purchased in
the acquisition of CBL and Riverbend were 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.
I. Primary Earnings Per Share Amounts are based on the weighted number
of shares outstanding at the dates of the financial statements. Fully
Diluted Earnings Per Share shall be shown on stock option and other
convertible issues that may be exercised within the next ten years.
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 06/30/2002 06/30/2003 06/30/2002 06/30/2003 06/30/2002
---------- ---------- ---------- ---------- ---------- ----------
Furniture &
Equipment $ 213,115 $ 6,151 $ 7,750 $ 80 $ 7,824 $ 80
NOTE 4 Technology-Based Intangible Assets
The Company capitalized technology-based intangible assets in its
acquisition of CBL and Riverbend. The amount capitalized is equal to the
difference between the consideration paid for the subsidiaries 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. The technology-based intangible assets are being amortized
over a five-year period using the straight-line method. The value assigned
to the technology-based intangible assets are considered appropriate based
on average annual revenues earned from licensing of these asset over the
two year period prior to the acquisitions and the expectation that future
revenues for the five year period subsequent to the acquisition will equal
or exceed these amounts. Scheduled below is the total asset cost,
amortization expense and accumulated amortization at June 30, 2003.
Depreciation Accumulated
Asset Cost Expense Depreciation
06/30/2003 06/30/2002 06/30/2003 06/30/2002 06/30/2003 06/30/2002
---------- ---------- ---------- ---------- ---------- ----------
Intangible Asset $2,195,483 $ - $ 167,747 $ - $ 167,747 $-
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 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.
Riverbend leases office and warehouse facilities South Africa and equipment
under non-cancelable long term leases.
Total Minimum Lease Commitments as of June 30, 2003:
Calendar Year Amount
2003 $ 96,986
2004 261,888
2005 100,246
2006 47,828
Thereafter 11,606
------------
Total $ 518,544
============
NOTE 7 Related Party Transactions
From time to time, certain employees and shareholders of Riverbend have
advanced funds to Riverbend. The loans are non-interest bearing,
unsecured, interest free and have no fixed repayment terms.
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 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.
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 $2,431,513. 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, 2003
-------------
Unsecured convertible notes payable due on December 1,
2003, see Note 7. $ 925,000
Unsecured Notes Payable to employees and shareholders of
Riverbend, no fixed maturity, see Note 7. 284,362
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 2,431,513
Less: Current Maturities (2,147,151)
-------------
Long Term Notes Payable 284,362
=============
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).
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.
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.
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.
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 Number Weighted
Range of Number of Average Contractual of Average
Exercise Options Exercise Life 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.
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 11 - 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 including 2,000,000
convertible note shares issued to Riverbend
shareholders at June 30, 2003. 16,956,641
===============
Weighted-average number of common shares including
2,000,000 convertible note shares issued to Riverbend
shareholders used in basic EPS dilutive effect of
options. 10,364,218
===============
Weighted-average number of common shares and dilutive
potential common shares including 2,000,000 convertible
note shares issued to Riverbend shareholders used in
diluted EPS. 10,364,218
===============
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 - 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 No. 72 and 144 and FASB Interpretation No. 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 Financial Accounting Standards Number 148
("SFAS 148"), "Accounting for Stock-Based Compensation Transition and
Disclosure an amendment of FASB Statement No. 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 Derivative 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 14 - 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.
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.
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 September18, 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.
Trinity Learning Corporation
Unaudited Pro Forma Consolidating Financial Statements
June 30, 2003
Trinity Learning Corporation
Unaudited Pro Forma Consolidating Balance Sheet
June 30, 2003
Adjustments
-----------------------
Trinity Riverbend Debits Credits Total
----------- ----------- ----------- ----------- -----------
Assets
------
Current Assets
Cash $ 86,511 $ 34,708 c) 100,000 $ 21,219
Accounts Receivable 42,719 903,122 945,851
Interest Receivable 41 - 41
Prepaid Expense 97,944 606,425 a) 606,425 97,944
----------- ----------- -----------
Total Current
Assets 227,215 1,544,255 1,065,045
----------- ----------- -----------
Property & Equipment
Furniture & Equipment 53,385 393,201 b) 233,471 213,115
Accumulated
Depreciation (7,824) (233,471) b) 233,471 (7,824)
----------- ----------- -----------
Net Property &
Equipment 45,561 159,730 205,291
----------- ----------- -----------
Intangible Asset
Technology-Based
Asset 1,118,312 2,458,432 a) 1,077,171 a)2,458,432 2,195,483
Accumulated
Amortization (167,747) (270,270) b) 270,270 (167,747)
----------- ----------- -----------
Net Intangible
Asset 950,565 2,188,162 2,027,736
Other Asset
Notes Receivable 25,000 - 25,000
Other Asset 94,003 162,519 a) 162,519 94,003
----------- ----------- -----------
Other Asset 119,003 162,519 119,003
----------- ----------- -----------
Total Assets $ 1,342,344 $4,054,666 $ 3,417,075
=========== =========== ===========
Continued
Trinity Learning Corporation
Unaudited Pro Forma Consolidating Balance Sheet
June 30, 2003
Adjustments
-----------------------
Trinity Riverbend Debits Credits Total
----------- ----------- ----------- ----------- -----------
Liabilities &
Stockholders' Equity
--------------------
Current Liabilities
Accounts Payable 391,872 411,692 803,564
Accrued Expenses 270,270 188,539 458,509
Deferred Compensation - 40,576 40,576
Interest Payable 63,987 19,807 63,987
Notes Payable -
Related Party 2,147,151 - 2,147,151
----------- ----------- -----------
Total Current
Liabilities 2,873,280 640,807 3,514,087
----------- ----------- -----------
Long Term Liabilities
Notes Payable -
Related party - 284,362 284,362
----------- ----------- -----------
Total Long Term
Liabilities 284,362 284,362
----------- ----------- -----------
Total Liabilities 2,873,280 925,169 3,798,449
----------- ----------- -----------
Minority Interest - 1,388,317 a) 1,215,554 c) 26,799 149,562
Stockholders' Equity
Preferred Stock - - -
Common Stock 9,693,447 3,250 c) 3,250 c)1,000,000 10,693,447
Additional Paid In
Capital - 1,623,523 c) 1,623,523 -
Accumulated Earnings
(Deficit) (11,188,913) 77,837 a) 972,608 c) 894,771 (11,188,913)
Subscription
Receivable (35,000) (80,597) a) 80,597 (35,000)
Other Comprehensive
Income (470) 167,167 * 167,167 (470)
----------- ----------- -----------
Total Stockholders'
Equity (1,530,936) 1,791,180 (460,936)
----------- ----------- -----------
Total Liabilities
& Stockholders'
Equity $ 1,342,344 $4,054,666 $ 3,417,075
=========== =========== ===========
* Consists of a)$162,519 and c)4,648.
Continued
Trinity Learning Corporation
Unaudited Pro Forma Consolidating Financial Statements
June 30, 2003
a) To adjust Riverbend financial statements to U.S. GAAP financial
statements including the write-off of development costs, the
reclassification of Prepaid Advertising Expense obtained for issuance
of common stock as a Stockholders' Equity - Subscription Receivable
and the adjustment to associated accounts - Minority Interest, Other
Comprehensive Income and Non-Distributable Reserve.
Debits Credits
----------- -----------
Income Statement
----------------
Depreciation & Amortization - Intangible Assets $ 137,719
Amortization of Non-Distributable Reserve 101,586
Tax Credit 139,793
Minority Interest in Net Profit, Current Period 11,955
Accumulated Earnings $ 391,053
Balance Sheet
-------------
Accumulated Amortization - Technology Based Asset $ 270,270
Minority Interest 1,215,554
Accumulated Earnings 391,053
Accumulated Earnings - Prior Period 581,555
Subscription Receivable 687,022
Other Comprehensive Income 162,519
Prepaid Expense $ 606,425
Technology Based Asset 2,458,432
Other Assets 162,519
Non-Distributable Reserve 80,597
b) To record Riverbend fixed assets at their fair market value based on
historical book value less accrued depreciation.
Debits Credits
----------- -----------
Furniture and Equipment $ 233,471
Accumulated Depreciation $ 233,471
C) To record the issuance of 2,000,000 shares of Trinity Learning Common
Stock, No Par Value, at $.50 per share for a total of $1,000,000 the
cancellation of Ayshire's Equity with a 95% ownership in RGH obtained
for $100,000 and the net investment as a Technology Based - Intangible
Asset.
Continued
Trinity Learning Corporation
Unaudited Pro Forma Consolidating Financial Statements
June 30, 2003
Debits Credits
----------- -----------
Income Statement
----------------
Minority Interest in Net Profit, Current Period $ 66,173
Accumulated Earnings $ 66,173
Balance Sheet
-------------
Technology-Based Asset $1,077,171
Common Stock - Riverbend 3,250
Additional Paid in Capital - Riverbend 1,623,523
Other Comprehensive Income - Riverbend 4,648
Accumulated Earnings 66,173
Cash $ 100,000
Minority Interest 26,799
Common Stock 1,000,000
Accumulated Earnings - Prior Period 960,944
Subscription Receivable 687,022
Continued
Trinity Learning Corporation
Unaudited Pro Forma Consolidating Statement of Operations
Trinity Riverbend
----------- -----------
October Fiscal
1, 2002 Year Ended
to June June Acq'n
30, 2003 30, 2003 Entries Total
----------- ----------- ----------- -----------
Revenue
Sales Revenue $ 167,790 $ 2,534,640 $ 2,702,430
Cost of Sales - (1,292,390) (1,292,390)
----------- ----------- -----------
Gross Profit 167,790 1,242,250 1,410,040
----------- ----------- -----------
Expenses
Salaries & Benefits 1,043,123 427,562 1,470,685
Professional Fees 437,836 33,794 471,630
General & Administrative 274,267 210,467 484,734
Travel & Entertainment 182,593 92,773 275,366
Depreciation & Amortization 175,497 365,953 a) 137,719 403,731
Rent 44,524 49,816 94,340
----------- ----------- -----------
Total Expense 2,157,840 1,180,365 3,200,486
----------- ----------- -----------
Income (Loss) from Operations (1,990,050) 61,885 (1,790,446)
----------- ----------- -----------
Other Income (Expenses)
Interest Income (487) 10,418 9,931
Interest Expense (76,865) (4,133) (80,998)
Amortization of
Non-Distributable Reserve - 101,586 a) 101,586 -
Foreign Currency Gain/(Loss) (4,582) - (4,582)
----------- ----------- -----------
Total Other Income (Expense) (81,934) 107,871 (75,649)
----------- ----------- -----------
Income (Loss) Before Taxes (2,071,984) 169,756 (1,866,095)
Tax Credit - 139,793 a) 139,793 -
----------- ----------- -----------
Net Income Before Minority Interest (2,071,984) 309,549 (1,866,095)
----------- ----------- -----------
Minority Interest a) 11,955
Minority Interest - (102,419) c) 66,173 (180,547)
Profit from Sale of Shares in
Subsidiaries - 32,818 32,818
----------- ----------- -----------
Total - (69,601) (69,601)
----------- ----------- -----------
----------- ----------- -----------
Net Income (Loss) $(2,071,984) $ 239,948 $ 2,013,824
=========== =========== ===========
Continued
Trinity Learning Corporation
Unaudited Pro Forma Consolidating Statement of Operations
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 After
Tax Amount Tax Amount
------------ ------------
Net Income (Loss) $ (2,013,824) $ (2,013,824)
Foreign Currency Translation (470) (470)
------------ ------------
Total Other Comprehensive Income $ (2,014,294) $ (2,014,294)
============ ============
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 hereunto duly authorized.
Date: November 26, 2003 By: /S/ DOUGLAS D. COLE
-----------------------------------
Douglas D. Cole
Chief Executive Officer