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): March 5, 2004
(December 22, 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 Offices) (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 January 6, 2004, is the pro forma financial information giving effect to
the divestiture of this entity for the six months ended December 31, 2003
and the nine month transition period ended June 30, 2003.
-2-
Trinity Learning Corporation
Pro Forma Consolidated Financial Statements
Six Months Ended December 31, 2003
and
Nine Month Transition Period Ended June 30, 2003
-3-
Trinity Learning Corporation
Pro Forma Consolidated Balance Sheet
December June
31, 2003 30, 2003
------------ ------------
Assets
------
Current Assets
--------------
Cash $ 2,249,467 $ 570,103
Accounts Receivable 3,750,685 -
Interest Receivable - 41
Prepaid Expense & Other Current Assets 834,945 81,115
------------ ------------
Total Current Assets 6,835,097 651,259
------------ ------------
Property & Equipment (Note 4)
-----------------------------
Furniture & Equipment 1,104,500 -
Accumulated Depreciation (109,162) -
------------ ------------
Net Property & Equipment 995,338 -
------------ ------------
Intangible Asset (Note 5)
-------------------------
Technology-Based Asset 6,192,050 -
Accumulated Amortization (243,936) -
------------ ------------
Net Intangible Asset 5,948,114 -
------------ ------------
Other Assets
------------
Notes Receivable (Note 6) - 25,000
Other Assets 817,479 94,003
------------ ------------
Total Other Assets 817,479 119,003
------------ ------------
Total Assets $ 14,596,028 $ 770,262
============ ============
Continued
-4-
Trinity Learning Corporation
Pro Forma Consolidated Balance Sheet
December June
31, 2003 30, 2003
------------ ------------
Liabilities, Minority Interest and Stockholders' Equity
-------------------------------------------------------
Liabilities
-----------
Accounts Payable $2,304,384 $374,217
Accrued Expenses 1,152,314 130,270
Interest Payable 102,327 -
Deferred Revenue 214,036 -
Notes Payable (Notes 9 & 10) 15,715 -
Notes Payable Related Party (Notes 9 & 10) - 925,000
------------ ------------
Total Current Liabilities 3,788,776 1,429,487
Notes Payable Related Party (Notes 9 & 10) 2,642,496 -
Notes Payable Long Term Portion 243,074 -
------------ ------------
Total Liabilities 6,674,346 1,429,487
------------ ------------
Minority Interest 2,739,458 -
----------------- ------------ ------------
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, 11,956,641 shares and
23,270,401 shares Issued and Outstanding,
Respectively (Notes 9 & 10) 15,457,694 9,618,447
Conditionally Redeemable Stock, 4,500,000
and 0 Shares, Respectively 2,250,000 -
Accumulated Deficit (12,404,268) (10,242,672)
Subscription Receivable (35,000) (35,000)
Other Comprehensive Income (88,202) -
------------ ------------
Total Stockholders' Equity 5,182,224 (659,225)
------------ ------------
Total Liabilities and Stockholders' Equity $ 14,596,028 $ 770,262
============ ============
The accompanying notes are an integral part of these financial statements.
-5-
Trinity Learning Corporation
Consolidated Statement of Operations
Transition
Six Period
Months October
Ended 1, 2002
December to June
31, 2003 30, 2003
------------ ------------
Revenue
Sales Revenue $ 2,994,482 $ -
Cost of Goods Sold (1,049,378) -
------------ ------------
Gross Profit 1,945,104 -
Expenses
--------
Salaries & Benefits 1,947,252 439,572
Professional Fees 517,324 310,380
Selling, General & Administrative 1,269,782 364,261
Depreciation & Amortization 340,744 -
------------ ------------
Total Expense 4,075,102 1,114,213
------------ ------------
Income (Loss) from Operations (2,129,998) (1,114,213)
------------ ------------
Other Income (Expense)
----------------------
Interest Income (Expense) 4,704 (11,529)
Foreign Currency Gain / (Loss) (724) -
------------ ------------
Total Other Income (Expense) 3,980 (11,529)
------------ ------------
Income (Loss) Before Minority Interest & Taxes (2,126,018) (1,125,743)
------------ ------------
Minority Interest (35,578) -
----------------- ------------ ------------
Income (Loss) Before Taxes (2,161,396) (1,125,743)
------------ ------------
Taxes - -
------------ ------------
Net Income (Loss) $(2,161,396) $(1,125,743)
============ ============
Net (Loss) Per Common Share $ (0.11) $ (0.21)
============ ============
Weighted Average Shares Outstanding 20,008,287 5,364,218
============ ============
Continued
-6-
Trinity Learning Corporation
Consolidated Statement of Operations
A summary of the components of other comprehensive income for the six month
period ended December 31, 2003 is as follows:
Six Months Ended
December 31, 2003
Before After
Tax Amount Tax Amount
------------ ------------
Net Income (Loss) $(2,161,396) $(2,161,396)
Foreign currency translation (88,202) (88,202)
------------ ------------
Total Other Comprehensive Income $(2,249,598) $(2,249,598)
============ ============
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) $(1,125,743) $(1,125,743)
Foreign currency translation - -
------------ ------------
Total Other Comprehensive Income $(1,125,743) $(1,125,743)
============ ============
The accompanying notes are an integral part of these financial statements
-7-
Trinity Learning Corporation and Subsidiaries
Notes to the Pro Forma (Unaudited) Financial Statements
December 31, 2003
NOTE 1 - Overview
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. 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.
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 September 12, 2003, we filed a Complaint in the United States District
Court for the District of Utah, Central Division, against CBL Global (f/k/a
CBL Acquisition Corporation), and Robert Stephen Scammell, the sole
shareholder of CBL-California, (Case No. 2:03CV00798DAK) alleged, 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 alleged causes of action for violations of Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated there under, for
violations of Section 20(a) of the Securities Exchange Act of 1934, for
declaratory relief and breach of contract, for common law fraud, and for
negligent misrepresentation.
On December 22, 2003, we sold our interests in CBL Global and its
Australian subsidiaries (collectively "CBL") to the former owners of CBL.
In conjunction with the management buyout, we entered into a Settlement
Agreement with respect to our litigation with CBL. Pursuant to the terms
of the agreement, we conveyed all of our interest in CBL back to the former
owners in exchange for surrender and cancellation of 3,000,000 shares of
Company stock issued to them in connection with acquisition of CBL and the
cancellation of $1,000,000 in convertible notes payable to them. Also, as
a result of the divestiture, $222,151 owed by CBL Global to Messrs. Kennedy
and Scammell is no longer an obligation of the Company.
-8-
NOTE 2 - Significant Accounting Policies
A. Method of Accounting. The Company uses the accrual method of
accounting.
B. Revenue and Expense Recognition. Revenues and directly related
expenses are recognized in the financial statements in the period when
the goods are shipped to the customer.
C. Cash and Cash Equivalents. The Company considers all short-term,
highly liquid investments that are readily convertible within three
months to known amounts, as cash equivalents.
D. Depreciation and Amortization. The cost of property and equipment is
depreciated over the estimated useful lives of the related assets.
The cost of leasehold improvements is amortized over the lesser of the
length of the lease of the related assets or the estimated lives of
the assets. Depreciation and amortization is computed on the
straight-line method.
E. Use of Estimates. The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
F. Consolidation Policies. The accompanying consolidated financial
statements include the accounts of the Company and its wholly owned
subsidiaries. Intercompany transactions and balances have been
eliminated in consolidation.
G. Foreign Currency Translation/Remeasurement Policy. Assets and
liabilities that occur in foreign currencies are recorded at
historical cost and translated at exchange rates in effect at the end
of the reporting period. Statement of Operations accounts are
translated at the average exchange rates for the year. Translation
gains and losses are recorded as Other Comprehensive Income in the
Equity section of the Balance Sheet.
H. Purchase Accounting. The cost of fixed assets purchased in the
acquisition of CBL was determined based on their historical value less
accumulated depreciation. All other assets were valued at their
current value and a technology-based intangible asset was recorded.
NOTE 3 Acquisitions and Divestitures
On October 1, 2002, we 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.
-9-
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
and July, 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 October 1,
2003, we advanced $150,000 to pay off a loan payable to a bank, which was
guaranteed by the Small Business Administration.
On September 1, 2003, we completed the acquisition of all of the issued and
outstanding shares of RMT, an Australian company that is in the business of
providing workplace training programs for various segments of the food
production industry, including viticulture and horticulture. In
consideration for the shares of RMT we issued 700,000 restricted shares of
our common stock, of which 350,000 shares are subject to the terms of an
escrow agreement as collateral for the indemnification obligations of the
former RMT shareholders. We also loaned US$49,000 to RMT for the purpose
of repaying outstanding loans advanced to RMT by its former shareholders.
On September 1, 2003, we completed the acquisition of 51% of the issued and
outstanding shares of Ayrshire that owns 95% of Riverbend Group Holdings
(Proprietary) Limited ("Riverbend"), a South African company that provides
learning services to corporations and individuals in South Africa. We also
acquired the option to purchase the remaining 49% of Ayrshire. In
consideration for the Ayrshire shares, we issued a convertible non-
interest-bearing promissory note in the amount of $20,000, which amount is
convertible from time to time but no later than December 30, 2006 into a
maximum of 2,000,000 shares of our common stock, which has been recorded as
conditionally redeemable common stock in stockholders' equity at $0.50 per
share. 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 of the acquisition and $700,000 was advanced on
November 3, 2003. We may exercise an option to acquire the remaining 49%
of Ayrshire in consideration for the issuance of 1,500,000 shares of our
common stock, subject to certain adjustments.
-10-
On December 1, 2003, we completed the acquisition of all the issued and
outstanding shares of Danlas, a British Virgin Islands Company that owns
51% of IRCA (Proprietary) Limited ("IRCA"), a South African company
specializing in corporate learning, certification and risk mitigation in
the area of safety, health environment and quality assurance ("SHEQ").
IRCA operates in South Africa, England and the United States through
various operating subsidiaries. Danlas also holds options to acquire the
remaining 49% of IRCA. In consideration for the Danlas shares, the Company
(i) issued three convertible promissory notes in the aggregate principal
amount of $40,000 and convertible under certain conditions into a maximum
of 4,500,000 shares of the Company's common stock, (ii) agreed to advance
$500,000 in cash to establish an international sales force, (iii) provided
$500,000 for certain bank guarantees and, (iv) provided certain future
profit thresholds are met, agreed to issue up to an additional 1,000,000
shares of the Company's common stock. The first promissory note for
$20,000 convertible to 2,500,000 shares has been classified as
conditionally redeemable common stock at $0.50 per share. The remaining
$20,000 in promissory notes has been classified as intercompany note
payable and eliminated in the consolidation of the Company and its
subsidiaries at December 31, 2003.
Purchased Intangible Assets
Of the total purchase price paid for the TouchVision acquisition,
approximately $1,292,970 has been allocated to purchase intangible assets,
which include software, and is being amortized on a straight line basis
over a useful life of five years.
Of the total purchase price paid for the RMT acquisition, approximately
$390,630 has been allocated to purchase intangible assets, which include
software, and is being amortized on a straight line basis over a useful
life of five years.
Of the total purchase price paid for the Riverbend acquisition,
approximately $1,000,000 has been allocated to purchase intangible assets,
which include software, and is being amortized on a straight line basis
over a useful life of five years.
Of the total purchase price paid for the Danlas acquisition, approximately
$1,250,000 has been allocated to purchased intangible assets, which include
software, and is being amortized on a straight line basis over a useful
life of five years.
Divestitures
On December 22, 2003, we sold our interests in CBL Global Corporation ("CBL
Global") and its Australian subsidiaries (collectively "CBL") to Messrs.
Scammell and Kennedy, the former owners of CBL. In conjunction with the
management buyout, we entered into a Settlement Agreement with respect to
our litigation with CBL. Pursuant to the terms of the agreement, we
conveyed all of our interest in CBL back to the former owners in exchange
for surrender and cancellation of 3,000,000 shares of Company stock issued
to them in connection with acquisition of CBL and the cancellation of
$1,000,000 in convertible notes payable to them. Also as a result of the
divestiture, $222,151 owed by CBL Global to Messrs. Kennedy and Scammell is
no longer an obligation of the Company.
-11-
NOTE 4 - Fixed Assets
The Company capitalizes furniture and equipment purchases in excess of
$5,000 or at lower amounts based on local jurisdiction. Capitalized
amounts are depreciated over the useful life of the assets using the
straight-line method of depreciation. Scheduled below are the assets,
cost, and accumulated depreciation at December 31, 2003 and June 30, 2003,
respectively and depreciation expense for the six months ended December 31,
2003 and for the nine month transition period ended June 30, 2003,
respectively.
Depreciation Accumulated
Asset Cost Expense Depreciation
12/31/2003 06/30/2003 12/31/2003 06/30/2003 12/31/2003 06/30/2003
---------- ---------- ---------- ---------- ---------- ----------
Furniture
& Equipment $1,104,500 $ 0 $ 74,085 $ 0 $ 109,162 $ 0
NOTE 5 Technology-Based Intangible Assets
The Company capitalized technology-based intangible assets in its
acquisitions of CBL, TouchVision, RMT, Danlas and Ayrshire
("acquisitions"). The amounts capitalized were equal to the difference
between the consideration paid for acquisitions including any liabilities
assumed and the value of the other assets acquired. Other assets were
valued at the current value at the date of the acquisitions including the
net value of fixed assets, historical price less accumulated depreciation,
of $1,002,10002,743. The technology-based intangible assets are being
amortized over a five-year period using the straight-line method. The
values assigned to the technology-based intangible assets are considered
appropriate - until the Company receives independent valuations - based on
average annual revenues earned from licensing of these assets over the two
year period ended September 30, 2003 and December 31, 2003, respectively,
and the expectation that future revenues for the five year period
subsequent to the acquisition will equal or exceed this amount. Scheduled
below is the asset cost and accumulated amortization at December 31, 2003
and June 30, 2003, respectively, and amortization expense for the six
months ended December 31, 2003 and for the nine month transition period
ended June 30, 2003, respectively:
Depreciation Accumulated
Asset Cost Expense Depreciation
12/31/2003 06/30/2003 12/31/2003 06/30/2003 12/31/2003 06/30/2003
---------- ---------- ---------- ---------- ---------- ----------
Intangible Asset $6,192,050 $ 0 $ 266,659 $ 0 $ 243,936 $ 0
-12-
NOTE 6 Commitments and Contingencies
Total rental expense included in operations for operating leases for the
six months ended December 31, 2003 and the nine month transition period
ended June 30, 2003 amounted to $148,156 and $2,383, respectively. Certain
lease rentals are subject to renewal options and escalation based upon
property taxes and operating expenses. These operating lease agreements
expire at varying dates through 2008.
Total Minimum Lease Commitments as of December 31, 2003:
Calendar Year Amount
------------- -------------
2004 $ 639,640
2005 526,520
2006 364,189
2007 257,893
Thereafter 662,412
-------------
Total $ 2,450,654
=============
NOTE 7 Legal Proceedings
On September 12, 2003, we filed a Complaint in the United States District
Court for the District of Utah, Central Division, against CBL Global (f/k/a
CBL Acquisition Corporation), and Robert Stephen Scammell, the sole
shareholder of CBL-California, (Case No. 2:03CV00798DAK) alleged, 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 alleged causes of action for violations of Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated there under, for
violations of Section 20(a) of the Securities Exchange Act of 1934, for
declaratory relief and breach of contract, for common law fraud, and for
negligent misrepresentation.
The First Amended Complaint alleged, 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 alleged
that new restated financial statements were issued on September 19, 2002.
The First Amended Complaint alleged, however, that the restated financial
statements were not provided to us prior to the October 1, 2002 closing of
the merger.
In December, 2003, we sold our interests in CBL Global and its Australian
subsidiaries (collectively "CBL") to the former owners of CBL. In
conjunction with the management buyout, we entered into a Settlement
Agreement with respect to our litigation with CBL. Pursuant to the terms
of the agreement, we conveyed all of our interest in CBL back to the former
owners in exchange for surrender and cancellation of 3,000,000 shares of
Company stock issued to them in connection with acquisition of CBL and the
cancellation of $1,000,000 in convertible notes payable to them. Also, as
a result of the divestiture, $222,151 owed by CBL Global to Messrs. Kennedy
and Scammell is no longer an obligation of the Company.
-13-
NOTE 8 Notes Receivable
On June 5, 2003, we agreed to lend TouchVision $50,000 in two equal
installment of $25,000 each. Interest accrued on the unpaid principal
amount of the note at a rate equal to six percent per year. Interest
accrued under the note is paid annually, with the first payment due June 5,
2004. All unpaid principal and interest are due June 29, 2005. At June
30, 2003, $25,000 had been advanced to TouchVision and accrued interest
totaled $41. Subsequent to the TouchVision acquisition on September 1,
2003, this note receivable along with accrued interest thereon was
reclassified to intercompany notes receivable and intercompany notes
payable. Accordingly, these balances are eliminated in consolidation of
the Company and its subsidiaries at December 31, 2003.
NOTE 9 Related Party Transactions
From time to time, Ms. McPherson and Ms. Hayman, officers of RMT, have
advanced funds to RMT. The current balance of $15,379 is due December 31,
2004 and accrues interest at a rate of 6% per annum.
From time to time, certain shareholders of IRCA have advanced funds to
IRCA. Of the current balance of $2,301,573, $750,000 is non-interest
bearing and due June 30, 2004; $20,000 is non-interest bearing and has no
fixed terms of repayment and the remaining amount due of $1,531,573 has no
fixed terms of repayment and bears interest at a Republic of South Africa
Bank prime rate.
On December 17, 2003, we entered into an agreement with Titan Aviation Ltd
("Titan"), a Guernsey company, for the purpose of having Titan act as our
representative in our acquisition of IRCA. Mr. Martin Steynberg, a member
of our board of directors, is the managing director of Titan. Mr.
Steynberg is a shareholder in IRCA Investments (Proprietary) Limited which
owns 49% of IRCA. Under the terms of the agreement, we will pay Titan four
million rand or approximately $612,668 on March 1, 2004.
From time to time certain shareholders of Riverbend have advanced funds to
Riverbend. The current balance of $325,544 is non-interest bearing and
there are no fixed terms for repayment.
On July 15, 2002, Trinity entered in a two-year Advisory Agreement with
Granite Creek Partners, LLC ("GCP") (formerly Kings Peak Advisors, LLC)
with automatic renewal for a 12-month period. Under the terms of the
Advisory Agreement, GCP agreed to provide the Company with general
corporate, financial, business development and investment advisory services
on a non-exclusive basis. GCP is a private company whose principals are
Douglas Cole and Edward Mooney, who are officers and directors of Trinity,
and Mr. Swindells. The Advisory Agreement was suspended in August 2003.
-14-
The Advisory Agreement provided that GCP would 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, payable, at GCP'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 GCP, as well as
any fees which may be due to GCP 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 GCP, 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 GCP 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 GCP for prior services
rendered since April 1, 2002 in the amount of $30,000, up to 50% of which
amount is payable, at GCP'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 GCP under the Advisory Agreement may not exceed 4,400,000 shares.
Through December 31, 2003, GCP had earned a total of $315,000 under the
Advisory Agreement, $110,000 of which was converted into 4,400,000 shares
of common stock in March 2003. Of the balance of $205,000, $187,087 has
been paid to GCP, leaving a balance owing at December 31, 2003 of $17,913.
On July 31, 2002, we entered into a Advisory Agreement with European
American Securities, Inc. ("EAS") pursuant to which EAS agreed to provide
financial advisory and investment banking services to the Company in
exploration of the following strategic alternatives: (a) a private
placement of the Company's convertible promissory notes, (b) a private
placement of the Company's common or preferred stock, and (c) one or more
possible purchase transactions by the Company. In exchange for such
services, we agreed to pay EAS a retainer fee of $5,000 per month and a
commission ranging from 5% to 7% based on the type of transaction
consummated. Such fees to be paid in cash or our common stock, at EAS'
option. Through December 31, 2003, EAS had earned a total of $734,773
under the Advisory Agreement. Of the balance of $734,773, $429,773 has
been paid to EAS, leaving a balance owing at December 31, 2003 of $305,000,
of which, $125,000 or 250,000 shares was paid to EAS in the Company's
common stock in January 2004.
-15-
On 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, comprising Messrs. Cole,
Mooney, Swindells and EAS. 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 December 31, 2003,
3,200,000 shares of our common stock had been issued pursuant to the terms
of the GMA Note.
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. 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. In November 2003, the remaining balance of
$425,000 was converted in to 850,000 shares of common stock and issued to
Mr. Swindells.
NOTE 10 - Notes Payable
On December 31, 2003, notes payable to accredited investors and related
parties totaled $2,901,285 as compared with $925,000 at June 30, 2003. The
notes bear interest between the rates of 0% and 12% per annum, some of
which are secured by our common stock. Certain notes are convertible into
the Company's common stock.
-16-
The Company has the following notes payable obligations:
December June
31, 2003 30, 2003
----------- -----------
Note payable to related parties; see Note 8 for due date,
plus interest payable at 7% per annum. $ 15,379 $ -
Unsecured note payable to a related party, IRCA investments,
non-interest bearing, see Note 9 for due dates. 750,000 -
Unsecured note payable to a related party, IRCA investments,
non-interest bearing and no fixed terms of repayment,
see Note 9. 20,000 -
Unsecured notes payable to a related party, IRCA Investments,
has no fixed terms of repayment and bears interest at a rate
of prime. See Note 9. 1,531,573 -
Unsecured notes payable, due to Riverbend shareholders, has
no fixed terms of repayment and is non-interest bearing.
See Note 9. 325,544 -
Borrowings under revolving line of credit issued by a bank,
plus interest payable at prime plus 2.625%. 99,950 -
Borrowings under revolving line of credit issued by a bank,
plus interest payable at prime plus 6.75%. 34,076 -
Borrowings under revolving line of credit issued by a third
party creditorbank, plus interest payable at prime plus 1.99%. 15,003 -
Notes payable to third party individuals, due September 1,
2006, plus interest payable at 10% per annum. 94,045 -
Unsecured convertible notes payable due on December 1, 2003,
see Note 9. - 925,000
Note payable to bank due October 29, 2004, plus interest
payable annually at 9.5%, secured by vehicle. 15,715 -
----------- -----------
Total Notes Payable 2,901,285 925,000
Less: Current Maturities 15,715 (925,000)
----------- -----------
Long Term Notes Payable $ 2,885,570 $ -
=========== ===========
NOTE 10 - Stockholders' Equity
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.
-17-
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 December 2, 2002, at a special meeting of our shareholders, the 2002
Stock Plan was approved. The Plan allowed for a maximum aggregate number
of shares that may be optioned and sold under the plan of (a) 3,000,000
shares, plus (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. On December 30,
2003, the board of directors amended the 2002 Stock Plan to allow for a
maximum aggregate number of shares that may be optioned and sold under the
plan of (a) 6,000,000 shares, plus (b) an annual 1,000,000 increase to be
added on the last day of each fiscal year beginning in 2004 unless a lesser
amount is determined by the board of directors. Options granted under the
plan vest 25% on the day of the grant and the remaining 75% vests monthly
over the next 36 months. As of December 31, and June 30, 2003, 4,047,000
and 2,447,000 options, respectively, have been granted at prices ranging
from $0.05 per share to $0.50 per share of which 1,453,390 and 963,625 were
vested as of December 31 and June 30, 2003, respectively.
Between January and April 2003, we received subscriptions to our December
2002 Private Placement Memorandum totaling $250,000 from outside investors
to purchase 250,000 units at a price of $1.00 per unit. Each unit entitles
the holder to two shares of our common stock and two three year warrants,
each to purchase an additional share of common stock for $1.00 per share.
If all warrants are fully exercised by the holder of such warrants, a bonus
warrant will be issued entitling the holder to purchase one additional
share of common stock for $2.00.
Between June and October 2003, we received subscriptions to our May 2003
Private Placement Memorandum ("May 2003 PPM") totaling $5,073,300 from
outside investors to purchase 5,073,300 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 200,050 shares of our common stock.
On July 31, 2002, we entered into an Advisory Agreement with EAS pursuant
to which EAS agreed to provide financial advisory and investment banking
services to the Company. Through December 31, 2003, EAS had earned a total
of $734,773 under the Advisory Agreement. Of the balance of $734,773,
$429,773 has been paid to EAS, leaving a balance owing at December 31, 2003
of $305,000 of which, $125,000 or 250,000 shares was paid to EAS in the
Company's common stock in January 2004.
-18-
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. Under the terms of our agreement, 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. In
November 2003, the remaining balance of $425,000 was converted into 850,000
shares of common stock and issued to Mr. Swindells.
On September 1, 2003, the Company issued 1,250,000 and 650,000 shares of
its common stock in conjunction with the acquisitions of TouchVision, Inc.
and River Murray Training, respectively. See Note 3 for further
information.
On December 22, 2003, we sold our interests in CBL Global Corporation and
its Australian subsidiaries (collectively "CBL") to Messrs. Scammell and
Kennedy, the former owners of CBL. Pursuant to the terms of the sale, we
cancelled 3,000,000 shares of Company stock issued to them in connection
with the acquisition. See Note 3 for further information.
Finally, 100,000 shares of the Company's common stock were issued to Mr.
Posner for finders' fees and for the Riverbend transaction.
NOTE 11 Stock Option Plan
On December 2, 2002, at a special meeting of our shareholders, the 2002
Stock Plan was approved. The Plan allowed for a maximum aggregate number
of shares that may be optioned and sold under the plan of (a) 3,000,000
shares, plus (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. On December 30,
2003, the board of directors amended the 2002 Stock Plan to allow for a
maximum aggregate number of shares that may be optioned and sold under the
plan of (a) 6,000,000 shares, plus (b) an annual 1,000,000 increase to be
added on the last day of each fiscal year beginning in 2004 unless a lesser
amount is determined by the board of directors. 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 six months ended
December 31, 2003.
2002 STOCK PLAN
Weighted
Average
Number of Exercise
Shares Price
----------- -----------
Outstanding at June 30, 2003 2,447,000 $0.23
Options Granted 1,660,000 0.50
Options Exercised - -
Options Canceled 565,000 0.24
Options Outstanding at December 31, 2003 3,542,000 $0.36
Options Exercisable at December 31, 2003 1,448,938 $0.30
-19-
In accordance with Statement of Financial Accounting Standards Number 123,
"Accounting for Stock-Based Compensation," option expense of $41,835 and
$100,569 was recognized for the three months and six months ended December
31, 2003, respectively:
December 31, 2003
Five-Year Risk Free Interest Rate 3.27%
Dividend Yield Nil
Volatility Nil
Average Expected Term (Years to Exercise) 5
Stock options outstanding and exercisable under 2002 Stock Plan as of
December 31, 2003 are as follows:
Average
Weighted Remaining Weighted
Range of Number of Average Contractual Number Average
Exercise Options Exercise Life of Options Exercise
Price Outstanding Price (Years) Vested Price
------------ ------------ ------------ ------------ ------------ ------------
$0.05 600,000 $0.05 3.8 334,110 $0.05
$0.25 1,049,000 $0.25 3.9 540,164 $0.25
$0.50 1,893,000 $0.50 4.7 574,664 $0.50
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 funding through senior convertible bridge notes
to raise sufficient funds to continue operations and fund its
ongoing development, merger and acquisition activities. In
January 2004, we commenced a $3,000,000 offering of senior
convertible bridge notes to accredited investors, 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
offering, we have engaged various financial advisory firms and
other finders to identify prospective investors.
-20-
(b) 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
(c) Identify prospective acquisition targets with sufficient cash
flow to fund subsidiary operations, as well as potentially
generating operating cash flow that may sustain corporate
administrative expenses.
Trinity's future capital requirements will depend on its ability to
successfully implement these initiatives and other factors, including our
ability to maintain our existing customer base and to expand our customer
base into new geographic markets, and overall financial market conditions
in the United States and other countries where we will seek prospective
investors.
NOTE 13 Subsequent Events
On March 1, 2004, we acquired Virtual Learning Partners SA ("VILPAS"), a
learning services company headquartered in Oslo, Norway. Among its various
business development initiatives, VILPAS is majority owner of FunkWeb, also
headquartered in Oslo. FunkWeb is a leading provider of workplace training
and retraining for disabled persons. In conjunction with national and
local employment programs, FunkWeb has a successful track record in
providing disabled persons with skills, certifications and job placement
services primarily related to information technologies, web-based systems,
and computing. The minority partner in FunkWeb is the Norwegian Federation
of Functionally Disabled People, a non-government organization (NGO)
representing many of the country's associations and programs for the
disabled.
Through March 2004, we had received subscriptions to our January 2004
offering of Senior Convertible Bridge Notes (the "Notes") totaling
$955,000. The Notes will mature in twelve months plus accrued interest at
a rate of 7% per annum. The Notes will be convertible at 80% of the "Next
Equity Financing" offering price. The Next Equity Financing shall mean a
common stock equity financing in which proceeds equal or exceed $5,000,000,
which shall include any principal or interest accrued under the Notes. The
Company expects to complete the Next Equity Financing in early 2004. In
addition, for each $1.00 invested, the investor shall receive a 5 year
warrant to purchase a share of the Company's common stock at $1.00 per
share.
On February 23, 2004, Trinity Learning we announced that we had entered
into an Agreement and Plan of Merger (the "Merger Agreement") with
ProsoftTraining, a Nevada corporation ("Prosoft"), and MTX Acquisition
Corp., a Utah corporation and a wholly-owned subsidiary of Prosoft (the
"Merger Sub"), pursuant to which the Merger Sub will be merged with and
into the Company, with the Company continuing as the surviving corporation
wholly-owned by Prosoft (the "Merger"). Upon completion of the Merger,
holders of Company common stock will be entitled to receive one (1) share
(the "Exchange Ratio") of Prosoft common stock for each share of Company
common stock held by them. Prosoft will assume all outstanding options to
purchase shares of Company common stock, which will become exercisable to
purchase the number of shares of Prosoft common stock at the exercise price
as adjusted by the Exchange Ratio. The Merger is intended to be a tax-free
reorganization under Section 368(a) of the Internal Revenue Code of 1986,
as amended. The consummation of the Merger is subject to the approval of
the stockholders of each of the Company and Prosoft, effectiveness of the
Form S-4 Registration Statement to be filed by Prosoft, regulatory
approvals, satisfactory agreements with certain creditors and other
customary closing conditions.
-21-
NOTE 14 - New Technical Pronouncements
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.
-22-
Trinity Learning Corporation
Unaudited Pro Forma Financial Statements
Six Months Ended June 30, 2003
and
Nine Month Transition Period Ended December 31, 2003
-23-
Trinity Learning Corporation
Unaudited Pro Forma Consolidating Balance Sheet
June 30, 2003
Adjustments Trinity
-------------------------- without
Trinity Debits Credits CBL
------------ ------------ ------------ ------------
Assets
------
Current Assets
Cash $ 86,511 b) 538,086 a) 54,594 $ 570,103
Accounts Receivable 42,719 a) 42,719 -
Interest Receivable 41 41
Prepaid Expenses &
Other Current Assets 97,944 a) 16,829 81,115
------------ -----------
Total Current Assets 227,215 651,259
------------ -----------
Property & Equipment
Furniture & Equipment 53,385 a) 53,385 -
Accumulated Depreciation (7,824) a) 7,824 -
------------ -----------
Net Property & Equipment 45,561 -
------------ -----------
Intangible Assets
Technology-Based Assets 1,118,312 a) 1,118,312 -
Accumulated Amortization (167,747) a) 167,747 -
------------ -----------
Net Intangible Assets 950,566
------------
Other Assets
Notes Receivable 25,000 25,000
Other Assets 94,003 94,003
------------ -----------
Total Other Assets 119,003 119,003
------------ -----------
Total Assets $ 1,342,344 $ 770,262
============ ===========
Continued
-24-
Trinity Learning Corporation
Unaudited Pro Forma Consolidating Balance Sheet
June 30, 2003
Adjustments Trinity
-------------------------- without
Trinity Debits Credits CBL
------------ ------------ ------------ ------------
Liabilities, Minority Interest and Equity
-----------------------------------------
Current Liabilities
Accounts Payable $ 391,872 a) 17,656 $ 374,217
Accrued Expense 270,270 a) 140,000 130,270
Interest Payable 63,987 a) 63,987 -
Deferred Revenue - - -
Notes Payable - - -
Notes Payable -
Related Party 2,147,151 a) 1,222,151 925,000
------------ -----------
Total Current Liabilities 2,873,280 1,429,487
------------ -----------
Long Term Liabilities
Notes Payable -
Related Party - -
------------ -----------
Total Long Term
Liabilities 2,873,280 1,429,486
------------ -----------
Minority Interest - -
------------ -----------
Stockholders' Equity
Preferred Stock - -
Common Stock 9,693,447 b) 75,000 9,618,447
Conditionally Redeemable
Stock - -
Accumulated Earnings
(Deficit) (11,188,913) a) 946,241 (10,242,672)
Subscription Receivable (35,000) (35,000)
Other Comprehensive Income (470) a) 470 -
------------ -----------
Total Stockholders'
Equity (1,530,936) (659,225)
------------ -----------
Stockholders' Equity $ 1,342,344 $ 770,262
============ ===========
Continued
-25-
Trinity Learning Corporation
Pro Forma Consolidated Balance Sheet
December 31, 2003
Adjustments Trinity
-------------------------- without
Trinity Debits Credits CBL
------------ ------------ ------------ ------------
Assets
------
Current Assets
Cash $ 1,470,152 c) 779,315 $ 2,249,467
Accounts Receivable 3,750,685 3,750,685
Interest Receivable - -
Prepaid Expense &
Other Current Assets 834,945 834,945
------------ ------------
Total Current Assets 6,055,782 6,835,097
------------ ------------
Property & Equipment
Furniture & Equipment 1,104,500 1,104,500
Accumulated Depreciation (109,162) (109,162)
------------ ------------
Net Property & Equipment 995,338 995,338
------------ ------------
Intangible Assets
Technology-Based Assets 6,192,050 6,192,050
Accumulated Amortization (243,936) (243,936)
------------ ------------
Net Intangible Assets 5,948,114 5,948,114
------------ ------------
Other Assets
Notes Receivable - -
Other Assets 817,479 817,479
------------ ------------
Total Other Assets 817,479 817,479
------------ ------------
Total Assets $ 13,816,713 $ 14,596,028
============ ============
Continued
-26-
Trinity Learning Corporation
Pro Forma Consolidated Balance Sheet
December 31, 2003
Adjustments Trinity
-------------------------- without
Trinity Debits Credits CBL
------------ ------------ ------------ ------------
Liabilities, Minority Interest and Equity
-----------------------------------------
Current Liabilities
Accounts Payable $ 2,304,384 $ 2,304,384
Accrued Expense 1,152,314 1,152,314
Interest Payable 102,327 102,327
Deferred Revenue 214,036 214,036
Notes Payable 15,715 15,715
------------ ------------
Total Current Liabilities 3,788,776 3,788,776
------------ ------------
Long Term Liabilities
Notes Payable 243,074 243,074
Notes Payable -
Related Party 2,642,496 2,642,496
------------ ------------
Total Long Term
Liabilities 2,885,570 2,885,570
------------ ------------
Total Liabilities 6,674,346 6,674,346
------------ ------------
Minority Interest 2,739,458 2,739,458
------------ ------------
Stockholders' Equity
Preferred Stock - -
Common Stock 15,972,583 e) 514,583 15,457,694
Conditionally Redeemable
Stock 2,250,000 2,250,000
Accumulated Earning
(Deficit) (13,718,545) c) 1,314,277 (12,404,268)
Subscription Receivable (35,000) (35,000)
Other Comprehensive
Income (66,129) c) 20,073 (86,202)
------------ ------------
Total Stockholders' Equity 4,402,909 5,182,224
------------ ------------
Total Liabilities,
Minority Interest &
Stockholders' Equity $ 13,816,713 $ 14,596,028
============ ============
Continued
-27-
Trinity Learning Corporation
Unaudited Pro Forma Consolidated Financial Statements
June 30, 2003 and December 31, 2003
a) To eliminate CBL assets and liabilities at June 30, 2003:
Debits Credits
------------ ------------
Balance Sheet
-------------
Accumulated Depreciation $ 7,824
Accumulated Amortization - Technology Based Assets 167,747
Accounts Payable 17,656
Accrued Expense 140,000
Interest Payable 63,987
Notes Payable - Related Party 1,222,151
Intercompany Payable/Receivable 613,086
Cash $ 54,494
Accounts Receivable 42,719
Other Current Assets 16,829
Furniture & Equipment 53,385
Technology Based Assets 1,118,312
Accumulated Deficit 946,241
Other Comprehensive Income 470
b) To eliminate intercompany receivable from CBL at June 30, 2003. Receivable results
from the issuance of stock to the former owners of CBL and funds advanced to CBL for
day-to-day operations.
Debits Credits
------------ ------------
Cash $ 538,086
Common Stock 75,000
Intercompany Payable/Receivable $ 613,086
c) To eliminate the impact of the divestiture entry at December 31, 2003 on common
stock and to eliminate the results of CBL operations included in the accumulated
deficit for the six month period ended December 31, 2003.
Debits Credits
------------ ------------
Cash $ 779,315
Common Stock 514,889
Other Comprehensive Income 20,073
Accumulated Deficit $ 1,314,277
Continued
-28-
Trinity Learning Corporation
Unaudited Pro Forma Consolidating Statement of Operations
Nine Month Transition Period Ended June 30, 2003
Trinity
without
Trinity Less: CBL CBL
------------ ------------ ------------
Revenue
-------
Sales Revenue $ 253,751 $ 253,751 $ -
Cost of Sales (85,961) (85,961) -
------------ ------------ ------------
Gross Profit 167,790 167,790 -
------------ ------------ ------------
Expenses
--------
Salaries & Benefits 1,043,123 603,551 439,572
Professional Fees 437,836 127,456 310,380
Selling, General & Administrative 501,384 137,123 364,261
Depreciation & Amortization 175,497 175,497 -
------------ ------------ ------------
Total Expenses 2,157,840 1,043,627 1,114,213
------------ ------------ ------------
Income (Loss) from Operations (1,990,050) (875,837) (1,114,213)
------------ ------------ ------------
Other Income (Expense)
----------------------
Interest Income (Expense) (77,352) (65,823) (11,529)
Foreign Currency Gain/(Loss) (4,582) (4,582) -
------------ ------------ ------------
Total Other Income (Expense) (81,934) (70,405) (11,529)
------------ ------------ ------------
Net Income (Loss) Before Minority
Interest & Taxes $(2,071,985) $ (946,242) $(1,125,743)
============ ============ ============
Continued
-29-
Trinity Learning Corporation
Unaudited Pro Forma Consolidating Statement of Operations
Six Month Period Ended December 31, 2003
Trinity
without
Trinity Less: CBL CBL
------------ ------------ ------------
Revenue
-------
Sales Revenue $ 3,162,344 $ 167,862 $ 2,994,482
Cost of Sales (1,049,378) - (1,049,378)
------------ ------------ ------------
Gross Profit 2,112,966 167,862 1,945,104
------------ ------------ ------------
Expenses
Salaries & Benefits 2,218,447 271,195 1,947,252
Professional Fees 560,686 43,362 517,324
Selling, General & Administrative 1,331,963 62,181 1,269,782
Depreciation & Amortization 456,120 115,376 340,744
------------ ------------ ------------
Total Expenses 4,567,216 492,114 4,075,102
------------ ------------ ------------
Income (Loss) from Operations (2,454,250) (324,252) (2,129,998)
------------ ------------ ------------
Other Income (Expense)
----------------------
Interest Income (Expense) (34,822) (39,526) 4,704
Foreign Currency Gain (Loss) (4,982) (4,258) (724)
------------ ------------ ------------
Total Other Income (Expense) (39,804) (43,784) 3,980
------------ ------------ ------------
Income (Loss) Before Minority Interest
& Taxes (2,494,054) (368,036) (2,126,018)
Minority Interest (35,578) - (35,378)
----------------- ------------ ------------ ------------
Income (Loss) Before Taxes (2,529,632) - (2,161,396)
Income Taxes - - -
------------ ------------ ------------
Net Income (Loss) $(2,529,632) $ (368,036) $(2,161,396)
============ ============ ============
See accompanying notes to financial statements.
-30-
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.
TRINITY LEARNING CORPORATION
Date: March 5, 2004 By: /S/ Douglas D. Cole
------------------------ ----------------------------------
Douglas D. Cole
Chief Executive Officer
-31-