<PAGE>2
As filed with the Securities and Exchange Commission on
October 10, 1996 Commission File Number 333-11009
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
TRINITY WORKS, INC.
TEXAS 94-6615349
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdictions Classification Code Number) Indemnification Number)
of incorporation
or organization)
12201 Technology Boulevard
Suite 145
Austin, Texas 78727
Telephone: (512) 249-1099
(Address and telephone number of registrant's
principal executive offices and principal place of business.)
Mark Castleman
12201 Technology Boulevard
Suite 145
Austin, Texas 78727
Telephone: (512) 249-1099
(Name, address and telephone number of agent for service.)
with copies to:
Jody M. Walker
Attorney At Law
7841 South Garfield
Way Littleton, Colorado 80122
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 133, check the following box: | x |
<PAGE 3>
<TABLE>
CALCULATION OF REGISTRATION FEE
===================================================
<CAPTION>
Title of each Proposed Proposed Amount of
class of Amount to be offering aggregate registration
securities registered price offering price fee,<F3>
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares,<F1>
$.001 par value 104,000 $2.50 $260,000 $89.66
A Warrants 100,000 $.001<F2> $100 $3.45
Common Shares<F4>
100,000 $4.00 $400,000 $137.93
B Warrants 100,000 $.001<F2> $100 $.03
Common Shares <F4>
100,000 $6.00 $600,000 $206.90
C Warrants 250,000 $.001<F2> $250 $.09
Common Shares <F4>
250,000 $10.00 $1,000,000 $344.83
Common Shares<F5>
1,208,984 $2.50 $3,022,460 $1,042.23
- ------------------------------------------------------------------------
Total $5,282,910 $1,825.12
===================================================
<FN>
<F1>Represents Common Shares necessary to effect the
distribution described in the Registration Statement.
<F2>Estimated solely for purposes of calculating the registration
fee. <F3>Represents 1/29 of 1% of the value of the Common Shares
being registered.
<F4>Represents Common Shares underlying the A, B, and C Warrants
being registered hereunder on behalf of the Selling Security Holders.
<F5>Represents Common Shares being registered hereunder on behalf of
the Selling Security Holders.
</TABLE>
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting pursuant to
said Section 8(a), may determine.
<PAGE> 4
<TABLE>
<CAPTION>
TRINITY WORKS, INC.
Cross Reference Sheet between Items of Form S-1
and Prospectus Pursuant to 501(b) of Regulation S-K.
<S> <C>
Items in Form S-1 Location in
Prospectus
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus Outside Front Cover Page.
2. Inside Front and Outside Back Inside Front Cover Page;
Cover Pages of Prospectus Outside Back Cover Page;
3. Summary Information & Risk Factors Prospectus Summary;
Risk Factors.
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Selling Security Holders
8. Plan of Distribution Inside Front Cover Page;
Prospectus Summary; The
Distribution
9. Description of Common Stock Outside Front Cover Page
to be Registered Prospectus Summary;
Description of Securities
10. Interest of Named Experts Interest of Named Experts
and Counsel and Counsel.
11. Information with Respect to The Corporation; Legal
the Registrant Proceedings; Market
Information of Common
Shares; Financial Statements;
Selected Financial Data;
Management's Discussion and
Analysis of Financial
Condition, Management;
Certain Relationships and
Related Transactions;
Principal Shareholders.
12. Statement as to Indemnification Management - Indemnification.
</TABLE>
<PAGE> 5
PRELIMINARY PROSPECTUS DATED OCTOBER 9, 1996
SUBJECT TO COMPLETION
104,000 Common Shares to be distributed
1,208,894 Common Shares on behalf of Selling Security Holders
100,000 A Warrants
100,000 Common Shares underlying the A Warrants
100,000 B Warrants
100,000 Common Shares underlying the B Warrants
250,000 C Warrants
250,000 Common Shares underlying the C Warrants
TRINITY WORKS, INC.
Common Stock ($.001 Par Value)
As more fully set forth herein, Pratt, Wylce & Lords, Ltd., a Nevada
corporation ("Pratt"), proposes to distribute (the "Distribution") as soon as
practicable after the effective date of this registration statement
as a dividend to its shareholders of record at the close of business on
January 5, 1996 (the "Record Date"), one share of the common stock, par
value $.001 per share (the "Common Shares") of Trinity Works,
Inc., a Texas corporation (the "Corporation"), for each twenty shares of
Pratt common stock, par value $.001 per share (the "Pratt Common
Stock"), held by each Pratt shareholder on the Record Date. Pratt will
distribute 104,000 Common Shares (29.89% of the 348,000 shares of
Common Stock owned by it), which represents 4.21% of the
Corporation's outstanding Common Stock on the Record Date. The
Distribution will be made by Pratt without the payment of
any consideration by its shareholders. No fractional shares will be
distributed. See "The Distribution." The Common Shares of the
Corporation owned by Pratt that are not being distributed are being
registered for sale by Pratt as a selling shareholder. The expenses of the
Distribution are estimated to be $34,825.12 and are to be paid by the
Corporation.
Additionally, the Corporation is registering 1,208,984 Common Shares on
behalf of its selling security holders. The Corporation is
registering 100,000 A and B Warrants and the stock underlying said A and
B Warrants on behalf of its selling security holders. The A and B
Warrants are exercisable into one Common Share each at the purchase
price of $4.00 and $6.00, respectively. The A and B Warrants shall be
effective for a period of two years from the date of issuance and shall be
redeemable by the Corporation at $.001 per A and B Warrant upon thirty
days notice. The Corporation is registering 250,000 C Warrants and the
stock underlying said C Warrants on behalf of its selling security holders.
The C Warrants are exercisable into one Common Share each at the
purchase price of $10.00. The C Warrants shall be effective for a period of
three years from the date of issuance and shall be redeemable by the
Corporation at $.001 per C Warrant upon thirty days notice.
Prior to the date hereof, there has been no trading market for the Common
Stock of the Corporation. The Corporation has agreed to use its best
efforts to apply for the quotation of its Common Stock on the National
Association of Securities Dealers Automated Quotation System
<PAGE>6
("NASDAQ"). There can be no assurance, however, that the Common
Stock will be quoted, that an active trading and/or a liquid market will
develop or, if developed, that it will be maintained.
There are material risks in connection with the purchase of the securities.
See Risk Factors, page 12
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE
ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an offer
to sell or the solicitation of an offer to buy nor shall there be any sales
of these securities in any State in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of any state.
Available Information
The Corporation has filed with the Securities and Exchange Commission
(the "Commission"), Washington, D.C. office, a Registration Statement on
Form S-1 (Registration No. 333-11009) under the Securities Act of 1933,
as amended (the "Securities Act"), for the registration of the securities
offered hereby. This Prospectus omits certain of the information contained
in the Registration Statement, and reference is hereby made to the
Registration Statement and exhibits and schedules relating thereto for
further information with respect to the Corporation and the securities to
which this Prospectus relates. Statements contained herein concerning the
provisions of any document are not necessarily complete and, in each
instance, reference is made to the copy of such document filed as an exhibit
to the Registration Statement. Each such statement is qualified in its
entirety by such reference. Items of information omitted from this
Prospectus but contained in the Registration Statement may be inspected
without charge at the Public Reference Room of the Commission, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and copies of such
material can be obtained from the Public Reference Section of the
Commission,
Washington, D.C. 20549 at prescribed rates.
Upon consummation of this offering and the Distribution, the Corporation
will become subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith file reports
and other information with the Securities and Exchange Commission. The
<Page 7>
reports and other information filed by the Corporation can be inspected and
copied at the public reference facilities maintained by the Commission in
Washington, D.C. and at the Chicago Regional Office, Northwestern
Atrium Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois
60621-2511 and the New York Regional Office, 7 World Trade Center,
New York, New York 10048. Copies of such material can be obtained
from the Public Reference Section of the Commission, Washington, D.C.
20549 at prescribed rates.
Reports to Security Holders
The Corporation will furnish to shareholders: (i) an annual report
containing financial information examined and reported upon by its certified
public accountants; (ii) unaudited financial statements for each of the first
three quarters of the fiscal year; and (iii) additional information
concerning the business and operations of the Corporation deemed
appropriate by the Board of Directors.
The approximate date on which this Prospectus is first being sent to
holders of Pratt Common Stock is , 1996.
<PAGE> 8
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
TABLE OF CONTENTS
- ---------------------------------------------------------------------------
<S> <C>
PROSPECTUS SUMMARY 9
RISK FACTORS 13
THE DISTRIBUTION 17
SELLING SECURITY HOLDERS 19
USE OF PROCEEDS 22
THE CORPORATION 22
BUSINESS ACTIVITIES 24
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION 27
Trends and Uncertainties
Capital and Source of Liquidity
Results of Operations
CERTAIN TRANSACTIONS 30
MANAGEMENT 31
Officers and Directors
Remuneration
Indemnification
SHARES ELIGIBLE FOR FUTURE SALE 35
NASDAQ LISTING 36
PRINCIPAL SHAREHOLDERS 37
DESCRIPTION OF SECURITIES 39
LEGAL MATTERS 41
LEGAL PROCEEDINGS 41
EXPERTS 41
INTERESTS OF NAMED EXPERTS AND COUNSEL 41
</TABLE>
<PAGE> 9
- --------------------------------------------------------------------------
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------
The following summary is qualified in its entirety by the more detailed
information, financial statements and notes to the financial statements
including the notes thereto appearing elsewhere in this Prospectus.
THE CORPORATION. The Corporation was incorporated in
Texas on August 1, 1994. The
Corporation currently manufactures
a variety of productivity
enhancement products for desktop
computer systems and networks.
Multiple product lines exist covering
200 million compatible systems.
In the personal computer (PC)
market, the Corporation offers the
Trinity PowerStacker line of CPU
upgrades. These upgrades are
capable of delivering increased
performance to their targeted systems
with 100% compatibility for most 486
and all Pentium based PCs. These
products range from the Trinity
PowerStacker 5x86 133 Mhz to the
Trinity PowerStacker 686 180/200
Mhz Pentium upgrades. For the
Macintosh, the Corporation offers
CPU (Central Processing Unit) clock
booster product line known as the
Trinity PowerPak TM and the Trinity
PowerTrip. See Business Activities.
The Corporation was initially
capitalized through a loan from one of
its directors and established a
relationship with CompUSA
Superstores, a large computer reseller,
to continue the development of one of
its products, Trinity PowerPak TM,
a low-cost, clock-oscillator upgrade
for Macintosh systems and the
PowerStacker line of PC upgrades.
In 1995, the Corporation marketed its
products through national mail-order
companies and regional distributors.
The Corporation had three employees
in its first year and received only
sufficient revenue to meet its
expenses. Additional funding
<PAGE>10
through private placement of the
Corporation's securities was obtained
in the fourth quarter of 1995 and the
first quarter of 1996. The Corporation
added four additional employees in the
second quarter of 1996. The
PowerStacker PC product line was
introduced in March 1996. These
5x86 and Pentium upgrades are now
widely available across the nation and
internationally through CompUSA,
Computer City, Radio Shack
International and other resellers.
Additionally, 50,000 Value Added
Resellers (VARs) in the United States
have access to all of the Corporation's
product through TechData Corporation,
a large computer distributor throughout
the United States and the world.
The Corporation's executive offices are
located at 12201 Technology
Boulevard Suite 145, Austin, Texas
78727. Telephone No. (512) 249-1099.
See "The Corporation".
THE DISTRIBUTION
<TABLE>
<S> <C>
Securities Being Distributed 104,000 of the Corporation's
Common Shares.
Purpose of Distribution To enhance the Corporation's
ability to raise additional
capital, if necessary,
in the future.
Shares of Common Stock
Outstanding
After Distribution 2,760,602 Common Shares.
Distributing Corporation Pratt, Wylce & Lords, Ltd., a
Nevada corporation.
Distribution Ratio One Common Share for
approximately every twenty five
shares of Pratt Common Stock
owned of record on January 5,
1996 (the "Record Date").
<PAGE>11
USE OF PROCEEDS The securities to which this
Prospectus relates are being
distributed to holders of Pratt
Common Stock as a dividend
and neither the Corporation nor
Pratt will receive any cash or
other proceeds in connection
with the Distribution.
Additionally this Prospectus
relates to securities being
registered on behalf of selling
security holders and the
Corporation will not receive
any cash or other proceeds in
connection with the subsequent
sale. Any proceeds received
from the subsequent exercise of
the A, B and C Warrants shall
be used as working capital and
to expand operations.
RISK FACTORS There are material risks, such as
no diversification, uncertainty of future
financial results, liquidity dependent on
additional capital and debt financing and
lack of experience of management in the
computer industry with the purchase of the
securities. See "Risk Factors."
MARKET FOR COMMON STOCK
AND A WARRANTS. Prior to the date hereof, there has been
no trading market for the Common
Stock or A, B, or C Warrants of the
Corporation. The Corporation has agreed to
use its best efforts to apply for the
quotation of its Common Stock on the
Small Cap of the National Association
of Securities Dealers Automated
Quotation System
("NASDAQ"). The Corporation currently
cannot meet either the net equity or the
total asset test for qualification on
NASDAQ. There can be no assurance
that the Common Stock will be quoted,
that an active trading and/or a liquid
market will develop or, if developed, that
it will be maintained. See "Risk
Factors" and "NASDAQ Listing."
<PAGE>12
RESALES BY SELLING
SHAREHOLDERS. This Prospectus relates to 1,208,984
Common Shares being registered on
behalf of selling securityholders.
The Corporation will not receive any
cash or other proceeds in connection
with the subsequent sale.
DIVIDEND POLICY The Corporation does not currently
intend to pay regular cash dividends
on its Common Stock; such policy
will be reviewed by the Corporation's
Board of Directors from time to time
in light of, among other things, the
Corporation's earnings and financial
position. See "Risk Factors."
TRANSFER AGENT The Corporation shall act as its
own Transfer Agent until after
completion of the Distribution.
SELECTED FINANCIAL INFORMATION. The selected financial
information presented below under the captions and "Balance Sheet" as of
the years ended January 31, 1996 and 1995 and "Statement of Operations"
for the years ended January 31, 1996 and 1995 are derived from the audited
financial statements of the Corporation. The selected financial
information present below under the captions "Balance Sheet" as of July 31,
1996 and the Statement of Operations for the three and six months ended
July 31, 1996 and 1995 is derived from the unaudited financial statements
of the Corporation.
The Balance Sheet and Statement of Operations have not been audited by
independent certified public accountants however, in the opinion of
management, all adjustments (which include only normal recurring
adjustments) have been made in order to present fairly the operations for
this period. See "Management's Discussion and Analysis of Financial
Condition" and "Financial Statements."
</TABLE>
<TABLE>
BALANCE SHEET
<CAPTION>
January 31, January 31, July 31,
1996 1995 1996
<S> <C> <C> <C>
Total Assets $521,668 $132,748 $973,436
------------ ----------- -----------
Total Liabilities $211,075 $173,056 $174,525
<PAGE>13
Total Stockholders'
Equity (Deficit) $310,593 $(40,308) $798,911
------------ ------------ -----------
Total Liabilities &
Stockholders' Equity $521,668 $608,614 $973,436
============ ============ ==========
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For Six For Six
For Year For Year Months Months
Ended Ended Ended Ended
Jan. 31 Jan 31, July 31, July 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues from continuing
operations $203,015 $7,519 $779,454
$89,099
Income (Loss) from
continuing operations
(920,208) (36,308) (117,155) (21,136)
Nonoperating Income
(Expense) (10,795) (5,000) (5,867) (6,000)
Provision (Credit) For
Income Taxes - - - -
Net income (loss)
(931,003) (41,308) $(123,022) (27,136)
Net income (loss) per common
share of outstanding stock
$ (0.53) $ (0.03) $(0.05) $(0.02)
</TABLE>
- -------------------------------------------------------------------------
RISK FACTORS
- -------------------------------------------------------------------------
In analyzing this offering, prospective investors should read this entire
Prospectus and carefully consider, among other things, the following Risk
Factors:
No Diversification. The Corporation manufactures and sells performance
and productivity enhancement products for desktop computer systems and
networks. Therefore, the Corporation's financial viability depends
almost exclusively on its ability to generate revenues from its operation,
and the Corporation will not have the benefit of reducing its financial risks
by relying on revenues derived from other operations.
<PAGE>14
Uncertainty of Future Financial Results. The Corporation has experienced
accumulated losses from operations to date and future financial results are
uncertain. As such, there can be no assurance that the Corporation can be
operated in a profitable manner. Profitability depends upon many factors,
including the success of the Corporation's marketing program, the
maintenance or reduction of expense levels and the success of the
Corporation's business activities. The Corporation has accumulated losses
from operations as of April 30, 1996 of $830,059. Lacking future
profitable operations, the Corporation will require additional capital. Even
if the Corporation obtains future financing or revenues to expand
operations, increased production or marketing expenses would adversely
affect liquidity of the Corporation. See FINANCIAL STATEMENTS.
Liquidity Dependent on Additional Capital and Debt Financing. On a long
term basis, liquidity is dependent on increased revenues from operations
and additional infusions of capital and debt financing. The Corporation
believes that additional capital and debt financing in the short term will
allow the Corporation to increase its marketing and sales efforts and
thereafter result in increased revenue and greater liquidity in the long term.
However, there can be no assurance that the Corporation will be able to
obtain additional equity or debt financing in the future, if at all.
Lack of Experience of Management. The financial success of the
Corporation is partly dependent upon the management expertise and
judgment of its officers regarding the promotion of its products. The
current officer has prior management experience with large and small
businesses, however, does not have prior experience in the specific type of
products being promoted by the Corporation. . Michael Castleman, Jr., a
Director has limited prior experience in the specific type of products being
promoted by the Corporation. The officers and directors will have the
exclusive authority to manage and control and make all decisions regarding
the business and affairs of the Corporation. There can be no assurance that
management will be able to successfully conduct the operations of the
Corporation due to this lack of experience.
The current officer of the Corporation devotes all of his time to the affairs
of the Corporation. The remaining director spend as much time as deemed
necessary on the corporate business affairs (estimated to be approximately
60% of his time) but are not required nor expected to devote his entire
time or efforts to the Corporation's business and affairs.
No Ability to Control Affairs of the Corporation. The majority
shareholders and the officers and directors of the Corporation as a group
own over 65% of all of the outstanding common shares of the Corporation.
As a result, these individuals have the ability to control the affairs of the
Corporation. See MANAGEMENT and PRINCIPAL SHAREHOLDERS.
Dependence on Key Individuals. The future success of the Corporation is
highly dependent upon the Corporation's ability to attract and retain
qualified key employees. The Corporation has not yet entered into
definitive employment agreements with any such individuals. The inability
<PAGE>15
to attract and retain these individuals for the long term would have a
material impact upon the business of the Corporation. See
CORPORATION - Employees and MANAGEMENT.
Conflicts of Interest. Some of the directors of the Corporation are
currently principals of other businesses. As a result, conflicts of interest
may arise. The directors shall immediately notify the other directors of any
possible conflict which may arise due to their involvement with other
businesses. The interested directors in any conflict shall refrain from
voting on any matter in which a conflict of interest has arisen. The
Corporation has adopted a policy that any transactions with directors,
officers or entities of which they are also officers or directors or in which
they have a financial interest, will only be on terms which are fair and
reasonable to the Corporation and approved by a majority of the
disinterested directors of the Corporation's Board of Directors. For further
discussion see Management - Conflicts of Interest Policy. There can be no
assurance that such other activities will not interfere with the officers' and
directors' ability to discharge their obligation herein.
Competition. There is significant competition in the computer industry.
The Corporation will be competing with established companies and other
entities (many of which may possess substantially greater resources than
the Corporation). Almost all of the companies with which the Corporation
competes are substantially larger, have more substantial histories,
backgrounds, experience and records of successful operations, greater
financial, technical, marketing and other resources, more employees and
more extensive facilities than the Corporation now has, or will have in the
foreseeable future. It is also likely that other competitors will emerge in
the near future. The Corporation shall compete on the basis of quality and
on public taste in addition to a price basis. Inability to compete successfully
might result in increased costs, reduced yields and additional risks to the
investors herein. See THE CORPORATION - Competition.
Benefit to Management. Although currently the officers and directors have
received minimal compensation and common shares for their services, the
Corporation may, in the future, compensate the Corporation's management
with substantial salaries and other benefits. Even though no compensation
plan has been proposed or agreed upon, the payment of future salaries and
the costs of these benefits may be a burden on the Corporation and may be
a factor in limiting or preventing the Corporation from achieving
profitable operations in the future. However, the Corporation would not
continue to compensate management with such substantial salaries and other
benefits under circumstances where to do so would have a material negative
effect on the Corporation's financial condition. See MANAGEMENT -
Remuneration.
Arbitrarily Determined Warrant Exercise Price. The exercise price of the A,
B and C Warrants being registered on behalf of the Selling Security holders
was established arbitrarily by the Corporation with no direct relationship
to the original offering price or the Corporation's assets, book value,
<PAGE>16
shareholder's equity or any other recognized criterion of value.
Accordingly, the A, B and C Warrants can be considered to have little or no
value at the present time.
No Assurance of Public Market for Securities. There is no market for the
securities of the Corporation and there can be no assurance that an
established trading market (or any public market) will develop at the
conclusion of this offering, or that if developed, it would be sustained, or
that the securities distributed hereunder may be resold at their original
book value price or at any other price. Any market for the securities of the
Corporation that may develop will, in all likelihood, be a substantially
limited one.
Effect of Future Sales of Common Shares and Uncertainty of Market
Development. Upon completion of the distribution and a successful
completion of the registration of warrants herein the Corporation will
have 2,760,602 common shares outstanding, of which the A, B and C
Warrants and underlying Shares registered in this offering will be freely
tradable without restriction or further registration under the Securities Act of
1933 (the "Securities Act"). Upon the effective date of this Registration
Statement, 1,312,984 of the currently 2,760,602 restricted Shares subject
to certain limitations of Rule 144 of the Securities Act will become
available for public sale. This does not include any Common Shares
underlying the A, B or C Warrants. No assurance can be given that the
availability of such Common Shares for sale will not have an adverse impact
on the market price of the Corporation's Common Shares, should one
develop.
Prior to this offering, there has been no public market for any securities
of this Corporation. Management of the Corporation cannot predict to what
extent a secondary market in the Common Shares will develop and provide
liquidity for holders of the Common Shares. See SALE OF SHARES
PURSUANT TO RULE 144 and MARKET INFORMATION ON
COMMON SHARES.
Possible Restrictions to Sales of Corporation Securities. Until the
Corporation obtains a listing on NASDAQ, if ever, the Corporation's
securities may be covered by a Rule 15c2-6 under the Securities Exchange
Act of 1934 that imposes additional sales practice requirements on
broker dealers who sell such securities to persons other than established
customers and accredited investors (generally institutions with assets in
excess of $5,000,000 or individuals with net worth in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 jointly with
their spouse). For transactions covered by the rule, the broker-dealer must
make a special suitability determination of the purchaser and have received
the purchaser's written agreement to the transaction prior to the sale. In
order to approve a person's account for transactions in designated
securities, the broker or dealer must (i) obtain information concerning the
person's financial situation, investment experience and investment
objectives; (ii) reasonably determined, based on the information required by
paragraph (i) that transactions in designated securities are suitable for the
person and that the person has sufficient knowledge and experience in
<PAGE>17
financial matters that the person reasonably may be expected to be capable
of evaluating the rights of transactions in designated securities; and (iii)
deliver to the person a written statement setting forth the basis on which the
broker or dealer made the determination required by paragraph (ii) in this
section, stating in a highlighted format that it is unlawful for the broker or
dealer to effect a transaction in a designated security subject to the
provisions of paragraph (ii) of this section unless the broker or dealer has
received, prior to the transaction, a written agreement to the transaction from
the person; and stating in a highlighted format immediately preceding the
customer signature line that the broker or dealer is required to provide the
person with the written statement and the person should not sign and return
the written statement to the broker or dealer if it does not accurately reflect
the person's financial situation, investment experience and investment
objectives and obtain from the person a manually signed and dated copy of
the written statement. A designated security means any equity security
other than a security (i) registered, or approved for registration upon
notice of issuance on a national securities exchange that makes transaction
reports available pursuant to 17 CFR 11Aa3-1 (ii) authorized or approved
for authorization upon notice of issuance, for quotation in the NASDAQ
system; or . . . (iv) whose issuer has net tangible assets in excess of
$2,000,000 demonstrated by financial statements dated less than fifteen
months previously that the broker or dealer has reviewed and has a
reasonable basis to believe are true and complete in relation to the date
of the transaction with the person. Consequently, the rule may affect the
ability of broker-dealers to sell the Corporation's securities and also may
affect the ability of purchasers in this offering to sell their shares in the
secondary market. See NASDAQ Listing - Broker-Dealer Sales of
Corporation's Securities.
Lack of Dividends. There can be no assurance that the continued operations
of the Corporation will result in any further revenues or will be profitable.
At the present time, the Corporation intends to use any earnings which may
be generated to finance the growth of the Corporation's business.
Accordingly, while payment of dividends rests within the discretion of the
Board of Directors, the Corporation does not presently intend to pay
dividends and there can be no assurance that dividends will ever be paid.
See DIVIDEND POLICY.
Vulnerability to Fluctuations in Economy. Demand for the Corporation's
proposed products is dependent on, among other things, general economic
conditions which are cyclical in nature. Prolonged recessionary periods
may be damaging to the Corporation.
- ----------------------------------------------------------------------------
THE DISTRIBUTION
- ----------------------------------------------------------------------------
On October 25, 1995, the Corporation entered into a consulting agreement
on with Pratt, Wylce & Lords, Ltd. ("Pratt") to assist the Corporation in its
capitalization and the obtainment of additional financing. To date, Pratt
<PAGE>18
provided consulting services regarding capital structuring, initial equity
financing, and preparation of a registration statement. The term of the
agreement is for one year from October 25, 1995, unless extended.
Subsequent to the effective date of this registration statement, Pratt shall
assist the Corporation in its financial and public relations and shall be paid
an amount yet to be negotiated on a month to month basis. See "The
Corporation" and "Certain Transactions."
After careful study and review and pursuant to the terms of the consulting
agreement, the Board of Directors of Pratt determined
that it would be in the best interests of Pratt and its shareholders to
distribute a portion of the Corporation's Common Shares held by Pratt to
its shareholders. In addition, the Corporation and Pratt determined that
such a distribution would be in the best interests of the Corporation.
Pratt shareholder's may realize economic benefits from the sale of any
Common Stock distribution if a market for the Corporation's Common
Stock develops, although there can be no assurances that any such market
will result. Pratt and the Corporation believe that the distribution to
Pratt's shareholders, which will result in an increased shareholder base of
the Corporation, will be an advantage to the Corporation at such time as
the Corporation may require additional capital and/or make application to
NASDAQ. The increased shareholder base of approximately 1,321
shareholders represents an increase in potential future purchasers of
additional stock in any subsequent offering or in the stock market if these
individuals are satisfied with the performance of the Corporation's
operations.
Accordingly, after obtaining the approval of the independent directors on
Pratt's Board of Directors, the Board of Directors of Pratt declared a
dividend pursuant to which, as soon as practicable after the effective date of
this registration statement 104,000 shares of the issued and outstanding
Common Stock of the Corporation, constituting 29.89% of the shares of
Common Stock owned by Pratt, will be distributed to the shareholders of
record of Pratt as of January 5, 1996 on the basis of one share of Common
Stock for each twenty five shares of Pratt Common Stock held. The
Common Shares are being distributed by Pratt as a dividend to holders of
Pratt Common Stock and neither the Corporation nor Pratt will receive any
cash or other proceeds in connection with the Distribution. No fractional
Common Shares will be issued. Pratt had approximately 1,321 shareholders
of record on the Record Date. The Pratt Common Stock is quoted on over-
the-counter under the symbol "PWLS".
In order to comply with certain provisions of Texas corporate law, on
August 1, 1996 (the "Payment Date') Pratt deposited the Common Shares to
be distributed with Florida Atlantic Stock Transfer, Inc. (the "Depositary").
The Depositary will hold such Common Shares for the benefit of Pratt
shareholders on the Record Date. The terms of the agreement with the
Depositary provides that the Common Shares will be released promptly after
the Registration Statement to which this Prospectus relates is declared
effective by the Commission. However, if the Registration Statement is
not declared effective prior to July 31, 1997, then, unless such date
<PAGE>19
is changed by notice to the Depositary from the Corporation, the
Depositary shall return all such Common Shares to Pratt without effecting
the distribution.
- ---------------------------------------------------------------------------
SELLING SECURITY HOLDERS
- ---------------------------------------------------------------------------
The Corporation shall register pursuant to this prospectus 1,208,984
Common Shares currently outstanding for the account of the following
individuals or entities. The percentage owned prior to and after the
offering reflects all of the then outstanding common shares. The amount
and percentage owned after the offering assumes the sale of all of the
Common Shares being registered on behalf of the selling shareholders.
<TABLE>
<CAPTION>
Name Amount Total % Owned Amount % Owned
Being Number Prior to Owned After
Registered of Shares Offering After Offering
Offering
<S> <C> <C> <C> <C> <C>
John Baer 3,000 3,000 .11% 0 0%
Steve Bell 3,000 3,000 .11% 0 0%
Tom Brennan 15,000 15,000 .61% 0 0%
Ed Carlow 5,000 5,000 .20% 0 0%
Sue Castleman 8,333 8,333 .30% 0 0%
Pagogh Cho 3,000 3,000 .11% 0 0%
Jonathan Ceck
Al Damalak 7,000 7,000 .25% 0 0%
Pauline Darosa 4,000 4,000 .145% 0 0%
William DeMayo
Murray Trachter 3,000 3,000 .11% 0 0%
Gerald Dooher 5,000 5,000 .20% 0 0%
Terrence Dooher 5,000 5,000 .20% 0 0%
Del/Peggy Dugan 3,000 3,000 .11% 0 0%
John Dunbar 3,000 3,000 .11% 0 0%
Stuart Dupe 3,000 3,000 .11% 0 0%
James Early 16,667 16,667 .60% 0 0%
Ora Elliott 3,000 3,000 .11% 0 0%
Charles & Judith Franklin
3,000 3,000 .11% 0 0%
Randall Geist 9,000 9,000 .33% 0 0%
Dr. Bob Gerner 10,000 10,000 .36% 0 0%
Lynn Gjertsen 3,000 3,000 .11% 0 0%
Charles Gluck 3,000 3,000 .11% 0 0%
All American Way, Inc.
Profit Sharing Plan
12,000 12,000 .435% 0 0%
Ken Gregory 3,000 3,000 .11% 0 0%
James Haines 3,334 3,334 .12% 0 0%
Kim & Gavin Hart 3,000 3,000 .11% 0 0%
Richard Hinkle 3,000 3,000 .11% 0 0%
<PAGE>20
Brian Hughes 1,000 1,000 .036% 0 0%
Robert & Eleanor Hughes
6,000 6,000 .217% 0 0%
Robert Hunt IRA 3,000 3,000 .11% 0 0%
Cliff Jaebker 6,200 6,200 .225% 0 0%
Grant Johnson 3,000 3,000 .11% 0 0%
Virginia Junkin 4,000 4,000 .145% 0 0%
Alan/Patti Katz 3,000 3,000 .11% 0 0%
Larry Konfirst 6,000 6,000 .11% 0 0%
John Lawson 15,000 15,000 .543% 0 0%
Rosella Lawson 3,000 3,000 .11% 0 0%
Kevin McGarry 3,000 3,000 .11% 0 0%
John McKissach
John Santry 3,000 3,000 .11% 0 0%
Ronald Montano 7,334 7,334 .266% 0 0%
Blake Mosher 20,000 20,000 .724% 0 0%
Bowman Najmi 7,000 7,000 .25% 0 0%
Johathan Pace 8,000 8,000 .29% 0 0%
E. & W. Paton 9,000 9,000 .326% 0 0%
Scott/M. Rader 3,000 3,000 .11% 0 0%
Al Ridenger 35,000 35,000 1.27% 0 0%
Al Ridenger, Jr. 3,000 3,000 .11% 0 0%
Jerry & Sarah Robertson
3,000 3,000 .11% 0 0%
Jay Rydman 4,000 4,000 .145% 0 0%
Manuez Sanchez 7,000 7,000 .25% 0 0%
Carol Sarwar 4,000 4,000 .145% 0 0%
P. & S. Schaefer 7,000 7,000 .25% 0 0%
Mary Jane & Vic Sohle
1,000 1,000 .036% 0 0%
Derek Steele
Rick Pease 3,000 3,000 .18% 0 0%
Nancy Stiehl 3,000 3,000 .11% 0 0%
Karyn Sussman 7,000 7,000 .25% 0 0%
Mitsao Tatsugawa<F1> 3,000 3,000 .11% 0 0%
William Taylor 6,000 6,000 .24% 0 0%
L. & L. Turrel 60,000 60,000 2.17% 0 0%
John Watson 6,000 6,000 .24% 0 0%
Harry Welch 40,000 40,000 1.45% 0 0%
2422 Brazoria 3,000 3,000 .11% 0 0%
John Wilson 27,000 27,000 .98% 0 0%
Howard Witzel 40,000 40,000 1.45% 0 0%
Johnny Wong 3,000 3,000 .11% 0 0%
Shane Yost 3,734 3,734 .135% 0 0%
Breaux Castleman32,000 32,000 1.16% 0 0%
James Early 20,000 20,000 .724% 0 0%
<PAGE>21
Dick Galley 80,000 80,000 2.90% 0 0%
Kent Bradshaw<F2>
32,300 323,000 11.70% 290,700 10.53%
Mark Castleman<F3>
96,246 962,464 34.86% 866,218 31.38%
Mike Castleman<F4>
32,300 323,000 11.70% 290,700 10.53%
Clint Clark<5>
87,000 87,000 3.15% 0 0%
Darrell Daugherty
6,536 6,536 .24% 0 0%
Darrell Hughes 40,000 40,000 1.45% 0 0%
Jonathan Avedikian
20,000 20,000 .724% 0 0%
Matt Casteman 20,000 20,000 .724% 0 0%
David Avedikian 2,000 2,000 .036% 0 0%
Pratt, Wylce &
Lords, Ltd.<F6>
244,000 244,000 8.84% 0 0%
<FN>
<F1>Mitsuo Tatsugawa is a Director and 10% shareholder of Pratt.
<F2>Kent Bradshaw was previously a Director of the Corporation.
<F3> Mark Castleman is currently the sole officer and a Director of
the Corporation.
<F4> Mike Castleman is currently a Director of the Corporation.
<F5>Clint Clark received a finders fee regarding the consulting agreement
between Pratt and the Corporation.
<F6> Pratt, Wylce & Lords, Ltd. is a consultant to the Corporation and
currently owns over 12% of the Common Shares of the Corporation. In
addition to the 244,000 Common Shares being registered on behalf of Pratt
as a selling shareholder, Pratt is also distributing 104,000 of its common
shares to its shareholders. These common shares are being registered
in this offering
The Corporation shall register pursuant to this prospectus the common
shares underlying 100,000 A Warrants, 100,000 B Warrants and 250,000
C Warrants currently outstanding for the account of the following
individuals or entities. The percentage owned prior to and after the
offering reflects all of the then outstanding warrants. The amount and
percentage owned after the offering assumes the sale of all of the A, B and
C Warrants and does not include any Common Shares underlying the A, B
and C Warrants being registered on behalf of the selling security holders.
<PAGE>22
</TABLE>
<TABLE>
<CAPTION>
Name and Amount Total Number Of % Amount %
Being Registered Warrants Owned Owned Owned
Registered Owned Prior to After After
Offering Offering Offering
<S> <C> <C> <C> <C>
Mark Castleman<F1>
- 60,000 A Warrants 60,000 60% 0 0%
- 60,000 B Warrants 60,000 60% 0 0%
- 150,000 C Warrants 150,000 60% 0 0%
Kent Bradshaw<F2>
- - 20,000 A Warrants 20,000 20% 0 0%
-20,000 B Warrants 20,000 20% 0 0%
-50,000 C Warrants 50,000 20% 0 0%
Mike Castleman<F3>
- - 20,000 A Warrants 20,000 20% 0 0%
-20,000 B Warrants 20,000 20% 0 0%
-50,000 C Warrants 50,000 20% 0 0%
</TABLE>
[FN]
<F1> Mark Castleman is currently the sole officer and a Director of
the Corporation.
<F2>Kent Bradshaw was previously a Director of the Corporation.
<F3> Mike Castleman is currently a Director of the Corporation.
- ------------------------------------------------------------------------
USE OF PROCEEDS
- ------------------------------------------------------------------------
The securities to which this Prospectus relates are being distributed to
holders of Pratt Common Stock as a dividend and neither the Corporation
nor Pratt will receive any cash or other proceeds in connection with the
Distribution.
Additionally, securities are being registered on behalf of the selling
security holders and the Corporation will not receive any cash or other
proceeds in connection with the subsequent sale. Any proceeds received
from the subsequent exercise of the A, B or C Warrants shall be used as
working capital and to expand operations. If all of the A, B or C
Warrants are exercised, the proceeds shall be utilized over a twelve month
period.
- --------------------------------------------------------------------------
THE CORPORATION
- --------------------------------------------------------------------------
The Corporation was incorporated in Texas on August
1, 1994. The Corporation currently manufactures a variety of
productivity enhancement products for desktop computer systems and
networks. Multiple product lines exist covering 200 million compatible
systems. In the personal computer (PC) market, the Corporation offers
the Trinity PowerStacker line of CPU upgrades. These upgrades are
capable of delivering increased performance to their targeted systems with
100% compatibility for most 486 and all Pentium based PCs. These
products range from the Trinity PowerStacker 5x86 133 Mhz to the Trinity
PowerStacker 686 180/200 Mhz Pentium upgrades. For the Macintosh,
the Corporation offers CPU (Central Processing Unit) clock booster
product line known as the Trinity PowerPak TM and the Trinity PowerTrip.
<PAGE> 23
The Corporation was initially capitalized through a $150,000 loan from one
of its directors and established a relationship with CompUSA Superstores, a
large computer reseller, to continue the development of one of its products,
Trinity PowerPak TM, a low-cost, clock-oscillator upgrade for Macintosh
systems and the PowerStacker line of PC upgrades. In 1995, the
Corporation marketed its products through national mail-order companies
and regional distributors. The Corporation had three employees in its first
year and received only sufficient revenue to meet its expenses. In October,
1995, the Corporation entered into a consulting agreement with Pratt, Wylce
& Lords, Ltd. ("Pratt") to assist the Corporation in its capitalization and the
obtainment of additional financing. Additional funding of approximately
$1,200,000 through private placement of the Corporation's securities was
obtained in the fourth quarter of 1995 and the first quarter of 1996. The
Corporation added four additional employees in the second quarter of 1996.
The PowerStacker PC product line was introduced in March 1996. These
5x86 and Pentium upgrades are now widely available across the nation and
internationally through CompUSA, Computer City, Radio Shack
International and other resellers. Additionally, 50,000 Value Added
Resellers (VARs) in the United States have access to all of the
Corporation's product through TechData Corporation, a large computer
distributor throughout the United States and the world.
The Corporation's executive offices are located at 1931 E. Ben White
Boulevard, Suite 900, Austin, Texas 78741. Telephone No. (512) 249-
1099. These offices consist of 2,997 square feet on a month to
month lease for $2,216 per month.
Employees. As of the date of this prospectus, the Corporation has nine full
time employees and no part time employees The Corporation will, as
operations demand, sub-contract the balance of its personnel through
independent contractors or hire additional employees.
Competition. There is significant competition in the computer industry,
The Corporation will be competing with established companies and other
entities (many of which may possess substantially greater resources than
the Corporation). Almost all of the companies with which the Corporation
competes are substantially larger, have more substantial histories,
backgrounds, experience and records of successful operations, greater
financial, technical, marketing and other resources, more employees and
more extensive facilities than the Corporation now has, or will have in the
foreseeable future. It is also likely that other competitors will emerge in
the near future. The Corporation shall compete on the basis of quality and
on public taste in addition to a price basis.
Consulting Agreement. On October 25, 1995, the Corporation entered into
a consulting agreement with Pratt, Wylce & Lords, Ltd. ("Pratt"), an
unaffiliated entity, to assist the Corporation in its capitalization and the
obtainment of additional financing. To date, Pratt provided consulting
services regarding capital structuring, initial equity financing, and
preparation of a registration statement. The term of the agreement is for one
<PAGE>24
year from October 25, 1995, unless extended. Subsequent to the effective
date of this registration statement, Pratt shall assist the Corporation in its
financial and public relations and shall be paid an amount yet to be
negotiated on a month to month basis. To date, Pratt has received
348,000 Common Shares valued at $1.50 per common share which
represents 12.61% of the currently outstanding common stock of the
Corporation. As a result, Pratt would be deemed to be an affiliate of the
Corporation. Pratt has not advanced (nor will it advance) any monies to
the Corporation. None of the principals of Pratt have been, are or will be
principals, officers or directors of the Corporation or its affiliates.
Subsequent to the distribution pursuant to this registration statement,
Pratt shall be a nonaffiliate owning 8.84% (244,000) of the total
outstanding common shares of the Corporation. Pratt intends to sell all of
the 244,000 common shares of the Corporation owned by it and which are
being registered on its behalf in this registration statement. In addition,
Pratt will receive total cash compensation of $95,000, of which $75,000
has been received to date. The following individuals were compensated by
Pratt in the amounts shown, (i) Clinton Clark, $17,500 and (ii) Alan Filson,
$20,000 and 25,000 Shares. Mr. Filson is currently a director of Pratt,
though he was not a director at the time he was compensated pursuant to the
consulting agreement. Clinton Clark, an affiliate of Pratt, received a
finder's fee of 87,000 Common Shares pursuant to the consulting
agreement.
- --------------------------------------------------------------------------
BUSINESS ACTIVITIES
- --------------------------------------------------------------------------
General. The Corporation manufactures and sells performance and
productivity enhancement products for desktop computer systems.
Products.
The Trinity PowerPak . The Trinity PowerPak is currently offered
for several Power Macintosh (PowerPC) and 68040 (Motorola) based
systems. The PowerPak is a customizable module capable of stacking
over an existing clock signal to the CPU. This enables the CPU to
operate at a higher rate or frequency. The level off acceleration varies
depending upon the CPU type and relative marking for acceleration existing
within the individual microprocessors.
The Trinity PowerPak exists in two forms. The Trinity PowerStacker
5x86TM 133MHZ processor upgrade for 486-based systems is a system
upgrade which replaces the existing 486 processor and operates a new
clock-quadrupled process in its place. Designed for Windows 95, the
PowerStacker 5x86 features 16kb internal cache, a built-in math
coprocessor, and 32-bit internal and external processing The
PowerStacker 5x86 is marketed as a convenient, high-performance
solution for increasing the computer's CPU speed 250% over its current
486 processor at a fraction of the cost of a new system. This upgrade is
100% compatible with all existing software and hardware. The retail price
of this line is $149.
<PAGE>25
The Trinity PowerStacker 686 TM 133 Mhz processor upgrade for
Pentium-based systems is a system upgrade which replaces the existing
Pentium 60/66, 75, 90, 100, 120, 133 MHZ processor and operates a new
high-speed Pentium class 120/133, 150, 166, 180/200 Mhz processor in its
place. Designed for Windows 95, the PowerStacker 686 features a built-in
math coprocessor, and 64-bit internal and external processing and
Superscalar Architecture allowing for dynamic instruction processing. The
PowerStacker 686 is the convenient, high-performance solution for
increasing the computer's CPU speed 250% over its current Pentium
processor at a fraction of the cost of new system. This upgrade is 100%
compatible with all existing software and hardware. The retail prices of
this line of products ranges from $279 to upgrade a Pentium 60/66 Mhz
system to $925 to upgrade the Pentium 90, 100, 120 and 133.
The structural and active components of the PowerPaks comply with the
applied patent technology. The Corporation designed all of these
components parts and the dies and molds for these parts are all wholly
owned by the Corporation. Availability of these parts is immediate from
several suppliers and the cost (after tooling) is inexpensive.
Only one part in the fixed speed PowerPak is not directly produced by the
Corporation which represents one of the twelve parts in the PowerPak. On
site production serves to protect product availability. The Corporation
has been successful in maintaining sales relationships because the
Corporation is capable of producing high quantities on demand without
concern for the availability of component parts in the market.
CPU Stacker. The CPU Stacker is compliant with the applied patent
technology. It has a customized connector socket designed by the
Corporation which stacks on top of the existing microprocessor in the
targeted system whether PowerPC or Intel based. Through this interface,
the Stacker is able to override the existing CPU and operate a new more
powerful CPU or multiple CPUs in its place. The CPU Stacker varies in
its secondary level components such as cache RAM (Random Access
Memory).
On top of the socket interface, the Stacker has a PCB to redirect
signal traces and accommodate the new microprocessor and other system
level components. The socket and PCB are manufactured by the
Corporation while some of the board level components are purchased
in the market.
The PowerPC components are available through two sources: IBM
Microelectronics and Motorola Semiconductor Group. X86 compatible
components are available from Intel, AMD, Cyrix, IBM and NEXGen. All
of these companies offer or are currently developing Pentium compatible
microprocessors.
<PAGE>26
Advertising. The Corporation's advertising campaign specifically
targets the potential users of upgrade systems. Current advertisements for
the Trinity PowerPak appear in MacWorld, MacUser and MacWeek
magazines. Retail outlets include Comp USA, Computer City and Radio
Shack Intl. and mail order publications like MacMall and MacZone also
market the Corporation's product.
While the PC market is drastically different in comparison to the Macintosh
market, the relative approach to the market through the trade publications
is similar. The Corporation places advertisements in relevant industry
publications like PCWeek, PC Computing, etc. In addition, the PC mail
order catalogs are offered by the mail-order firms currently marketing the
Corporation's product. PCMall, PCZone, and PC Connection represent
several catalogs which carry the PCStacker products.
Distribution. Distribution for the current products occurs through national
distributors, TechData Corporation and Micro Central, Inc. Product is
readily available to the smallest retail center in the most remote
region of the market as well as the larger "superstore" chains. Higher
volume resellers purchase product directly through the Corporation.
Servicing. The Corporation trains and authorizes major and minor
resellers in the installation of the Corporation's product. Authorized
installation centers are identified for the end user. The end users
receive direct financial incentive in the form of an installation
voucher for having the product installed by an authorized installation site.
The Corporation uses this option to reduce the quantity of failed
installations by inadequately trained end users.
The direct servicing of the product on the component level is
performed by the Corporation at on-site facilities. Field Technicians and
Application Engineers are made available to volume resellers for
specific training in value added features and on site technical repair for
OEM (Original Equipment Manufacturers).
Sales. The Corporation employs an inside sales group and strategic
sales team. The inside sales group responds to the needs of the VARs
(Value Added Resellers) which operate on a local level, and the distributors
that will channel the product to these resellers. This group delivers
necessary technical information to the distributors, independent resale
outlets and the individual outlets of the national channels. The members
of this team possess significant consumer knowledge for the specified
market and partner with the marketing team to understand the local market at
the point of purchase. Inside sales make sure that the channels of
distribution are operating efficiently and effectively for the resale
outlets.
<PAGE> 27
The strategic sales group interfaces with the nationally established
outlets as well as local VARs, respond to their sales needs, and develop
sales strategies specific to the their national or local goals. This team is
responsible for generating sales forecasts and understanding national sales
trends.
The Corporation made sales in excess of 10% of its net sales to unrelated
parties for the year ended January 31, 1996 to two companies aggregating
$128,105 (63%). Additionally, the Corporation had open uncollateralized
accounts receivable from these customers aggregating $12,445 January 31,
1996. The Corporation's major customers in 1996 consist of mail order
companies who include a description of the Corporation's products in
their advertisements in various computer related publications. The
Corporation is charged for its share of the advertising costs and such
billings are offset against accounts receivable from sales to these customers.
- --------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------
Trends and Uncertainties. Inasmuch as a major portion of the
Corporation's activities is the manufacture and sale of performance and
productivity enhancement products for desktop computer systems and
networks, the Corporation's business operations may be adversely
affected by competitors and prolonged recessionary periods. The sale
of the Corporation's products is not considered seasonal.
The continuation of obtaining additional types of new business and
markets is uncertain and the continued success of any of the
Corporation's new marketing strategies for generating revenue is
uncertain.
In addition, the future exercise of any of the A, B or C Warrants is
uncertain based on the current financial condition of the Corporation. The
lack of future exercise of the A, B or C Warrants registered hereunder
would negatively impact the Corporation's ability to successfully expand
operations.
Capital and Source of Liquidity. The Corporation currently has no
material commitments for capital expenditures.
Plan of Operation. The Corporation has planned capital expenditures as
discussed in "Business Activities". The Corporation intends to use future
revenue and proceeds from future sales of its equity securities. There can
be no guarantee that the Corporation will be able to obtain the additional
funds from any of the sources listed and will not make the proposed
acquisitions if said funds are not available.
<PAGE> 28
Based on its established channels of distribution, its recent marketing and
current and projected sales levels, the Corporation should begin to have
positive cash flow from operations in the fourth quarter of 1996 and
management is of the opinion that the Corporation will be able to generate
sufficient cash flows to support these operations during fiscal year 1996.
In October, 1995, the Corporation entered into a consulting agreement with
Pratt to assist in its capitalization and the obtainment of additional
financing. To date, Pratt has received $75,000 (of total cash compensation
of
$95,000) and 348,000 Common Shares. Clinton Clark, an affiliate of
Pratt's
received 87,000 Common Shares as a finder's fee. Subsequent to the
effective date of the registration statement, the Corporation will utilize Pratt
to assist with its financial and public relations. Pratt shall be paid an
amount yet to be determined, on a month to month basis. Payment of these
amounts will have a negative effect on the cash flow of the Corporation.
The Corporation has recently raised $1,219,403 in the private placement of
its Common Shares. The Corporation is currently financing its sales with
cash generated from internal operations. The Corporation is seeking to
obtain a line of credit of approximately $2,000,000. The Corporation shall
pursue additional equity or debt financing, if necessary, to continue or
expand operations.
For the six months ended July 31, 1996, the Corporation purchased
$26,956 of equipment. As a result, the Corporation had net cash used in
investing activities of $26,956 for the six months ended July 31, 1996.
For the year ended January 31, 1996, the Corporation utilized $14,705
in the purchase of plant and equipment. This resulted in net cash used in
investing activities of $14,705 for the year ended January 31, 1996.
For the year ended January 31, 1995, the Corporation utilized $43,404 in
the purchase of plant and equipment and had an increase in intangible
assets of $13,664. This resulted in net cash used in investing activities
of $57,068 for the year ended January 31, 1995.
For the six months ended July 31, 1996, the Corporation repaid loans from
Mark Castleman of $50,633. The Corporation repaid capital leases of
$3,122. For the six months ended July 31, 1996, the Corporation pursued
the private placement of its common stock and received funds of $590,000.
This resulted in cash provided by financing activities of $536,245.
For the year ended January 31, 1996, the Corporation received $629,404
from the sale of its Common Shares and repaid $967 of a loan made by
Mark Castleman, an officer of the Corporation. As a result, the
Corporation had net cash provided by financing activities of $628,437 for
the year months ended January 31, 1996.
For the year ended January 31, 1995, the Corporation received $1,000
from the sale of its Common Shares and had an increase in officer loans of
$1,600. Additionally, the Corporation received $150,000 in proceeds from
investor notes. As a result, the Corporation had net cash provided by
financing activities of $152,600 for the year ended January 31, 1995.
<PAGE>29
On a long term basis, liquidity is dependent on increased revenues from
operations and additional infusions of capital and debt financing. The
Corporation believes that additional capital and debt financing in the
short term will allow the Corporation to increase its marketing and sales
efforts and thereafter result in increased revenue and greater liquidity in
the long term. However, there can be no assurance that the Corporation
will be able to obtain additional equity or debt financing in the future,
if at all.
Results of Operations. The Corporation had a net loss from operations
of $(117,155) for the six months ended July 31, 1996. Sales increased
from $89,099 for the six months ended July 31, 1995 to $779,454 for
the same period in 1996 due to the increase demand for the Corporation's
products generated by its advertising with mail order companies in their
advertisements in various computer related publications. Cost of sales
increased from $24,558 to $361,092 for those same period due to the
increased demand for product. General and administrative costs increased
from $85,617 for the six months ended July 31, 1995 to $535,417 for the
six months ended July 31, 1996 due to wages of $145,984, advertising and
marketing of $146,417, legal and professional fees of $66,870, engineering
of 39,305, office expense of 34,375, commissions of 28,861, telephone of
5,843, rent of 12,620, research and development of 3,548, utilities of
3,520 and other miscellaneous expenses of 48,174. As a result, the
Corporation had net cash used in operations of $(724,437) for the six
months ended July 31, 1996 compared to net cash provided by operations
of $4,270 for the six months ended July 31,1995.
The Corporation made sales in excess of 10% of its net sales to unrelated
parties for the year ended January 31, 1996 to two companies aggregating
$128,105 (63%). Additionally, the Corporation had open uncollateralized
accounts receivable from these customers aggregating $12,445 January 31,
1996. The Corporation's major customers in 1996 consist of mail order
and "superstore" companies who include a description of the Corporation's
products in their advertisements in various computer related publications.
The Corporation is charged for its share of the advertising costs and such
billings are offset against accounts receivable from sales to these customers.
The Corporation had a net loss from operations of $920,208 for the year
ended January 31, 1996 compared to a net loss of $36,308 for the year
ended January 31, 1995. Sales increased from $7,519 for the year ended
January 31, 1995 to $203,015 for the year ended January 31, 1996. Cost
of sales increased from $3,501 for the year ended January 31, 1995 to
$81,052 for the year ended January 31, 1996 due to increased operations.
General and administrative costs increased substantially from $35,092 for
the year ended January 31, 1995 to $1,026,134 for the year ended January
31, 1996 mainly due legal and consulting fees of $779,916 and to
increased operations. Research and development increased from $5,234
for the year ended January 31, 1995 to $16,037 for the year ended January
31, 1996. The Corporation had no major customers during the year ended
January 31, 1995.
The Corporation is seeking to lower its operating expenses while
expanding operations and increasing its customer base and operating
revenues. The Corporation is focusing on maintaining a low level of
administrative costs. However, increased marketing expenses will
probably occur in future periods as the Corporation attempts to further
increase its marketing and sales efforts.
<PAGE>30
- --------------------------------------------------------------------------
CERTAIN TRANSACTIONS
- --------------------------------------------------------------------------
Related Party Transactions. During the year ended January 31, 1995, an
officer and director of the Corporation made advances to the Corporation
aggregating $1,600. During the year ended January 31, 1996, $967 of this
debt was repaid in cash.
Consulting Agreement. The Corporation has entered into a consulting
agreement with Pratt, Wylce & Lords, Ltd. ("Pratt") to assist the
Corporation in its capitalization and the obtainment of additional financing.
As partial payment for consulting services, the Corporation issued
348,000 of its Common Shares to Pratt, of which 104,000 Common Shares
are to be registered and distributed to Pratt shareholders. Additionally,
87,000 Common Shares were issued to Clinton Clark, an affiliate of Pratt
as a finder's fee. In addition, Pratt has received cash compensation of
$75,000.
Distribution of Securities. On October 15, 1995, the Board of Directors
authorized the distribution of 100,000 each of A and B and 250,000 C
Warrants exercisable as follows:
$4.00 plus one A Warrant for each Common Share;
$6.00 plus one B Warrant for each Common Share; and
$10.00 plus one C Warrant for each Common Share.
The A and B Warrants are exercisable for a period of two years from the
date of issuance and the C Warrants are exercisable for a period of three
years from the date of issuance. All of the Warrants are callable with
30 days notice at a price of $.001 per Warrant.
These distributions were made to the owners of record of Common Shares
on the books of the Corporation as of October 15, 1995.
The A, B and C Warrants and the Common Shares underlying said A, B
and C Warrants are being registered in this offering.
Lockup Agreement. Pursuant to a written agreement on August, 1996,
the principal shareholders and officer and directors (Mark Castleman, Kent
Bradshaw and Michael Castleman) who received A, B and C Warrants
issued them pursuant to the Special Meeting of the Board of Directors held
on October 15, 1995 have agreed as follows:
In the event the shareholder exercises any warrants, the stock issued to the
shareholder pursuant to the exercise shall be locked in and restricted from
trading for a period of two years. A notice is to be placed on the face of
each stock certificate covered by the terms of the Agreement stating that the
transfer of the stock evidenced by the certificate is restricted until twenty
four (24) months from the date of issuance. The shareholder also agrees
not to sell or otherwise transfer their interest in the warrants except to an
underwriter or other market makers in the stock once a market is
established. The shareholder further agrees that the total value in cash, or
other consideration, paid by the buyer to the seller shall not exceed $.01 per
warrant.
<PAGE>31
- ---------------------------------------------------------------------------
MANAGEMENT
- ----------------------------------------------------------------------------
Officers and Directors. Pursuant to the Articles of Incorporation, each
Director shall serve until the annual meeting of the stockholders, or until
his successor is elected and qualified. It is the intent of the Corporation
to support the election of a majority of "outside" directors at such meeting.
<PAGE> 28
Directors may only be removed for "cause". The term of office of each
officer of the Corporation is at the pleasure of the Corporation's Board.
The principal executive officers and directors of the Corporation will be as
follows:
<TABLE>
<CAPTION>
Name Position Term(s) of Office
<S> <C> <C>
Mark Castleman, age 27 President, Secretary Inception to
Treasurer and Director present
Michael Castleman, Jr., Director Inception to
age 30 present
</TABLE>
Resumes:
Mark Castleman. Mr. Castleman is currently President, Secretary and a
Director of the Corporation. Mr. Castleman received a B.S. in
Architecture from the University of Texas, Austin in 1993. From 1993 to
December, 1994, Mr. Castleman served as facilities project manager for
Advanced Micro Devices, Inc. where he worked as an architect.
Michael Castleman, Jr. Mr. Castleman received his bachelor's degree from
the University of Colorado in 1991. From 1991 to 1994, Mr. Castleman
managed the Dallas/Fort Worth office of American Metro Study. American
Metro Study maintains the largest database of residential real estate
information in the United States. From June, 1994 to present, Mr.
Castleman has been vice-president of Business Solutions, Inc. and is
responsible for business development and marketing.
Remuneration. Since inception, other than Mark Castleman who receives
a monthly salary of $5,000 per month, no cash compensation has been paid
by the Corporation to its officer and directors, during which there were one
(1) officer and three (3) directors (Kent Bradshaw resigned as a Director in
early 1996 to pursue other business opportunities):
<PAGE>32
The Board of Directors and shareholders have approved a Non-Statutory
Stock Option Plan to attract and retain persons of experience and ability
and whose services are considered valuable and to encourage the sense of
proprietorship in such persons and to stimulate the active interest of such
persons in the development and success of the Corporation.
1. Persons Eligible to Participate in Non-Statutory Stock Option Plan.
The persons eligible for participation in the Plan as recipients of Non
statutory Stock Options ("NSOs") shall include full-time and part-time
employees (as determined by the Committee) and officers of the
Corporation or of an Affiliated Corporation. In addition, directors of
the Corporation or any Affiliated Corporation who are not employees of the
Corporation or an Affiliated Corporation and any attorney, consultant or
other adviser to the Corporation or any Affiliated Corporation shall be
<PAGE> 29
eligible to participate in the Plan. For all purposes of the Plan, any
director who is not also a common law employee and is granted an option
under the Plan shall be considered an "employee" until the effective date of
the director's resignation or removal from the Board of Directors, including
removal due to death or disability. The Committee shall have full power
to designate, from among eligible individuals, the persons to whom NSOs
may be granted. A person who has been granted an NSO hereunder may be
granted an additional NSO or NSOs, if the Committee shall so determine.
The granting of an NSO shall not be construed as a contract of employment
or as entitling the recipient thereof to any rights of continued employment.
2. Common Shares Reserved for the Plan. Subject to adjustment, a
total of 500,000 Common Shares, $.001 par value of the Corporation shall
be subject to the Plan. The Common Shares subject to the Plan shall
consist of unissued shares or previously issued shares reacquired and
held by the Corporation or any Affiliated Corporation, and such amount of
shares shall be and is hereby reserved for sale for such purpose. Any of
such shares which may remain unsold and which are not subject to
outstanding NSOs at the termination of the Plan shall cease to be reserved
for the purpose of the Plan, but until termination of the Plan, the
Corporation shall at all times reserve a sufficient number of shares to
meet the requirements of the Plan. Should any NSO expire or be canceled
prior to its exercise in full, the unexercised shares theretofore subject
to such NSO may again be subjected to an NSO under the Plan.
3. Option Price. The purchase price of each Common Share placed
under NSO shall not be less than Eighty Five percent (85%) of the fair
market value of such share on the date the NSO is granted. The fair market
value of a share on a particular date shall be deemed to be the average of
either (i) the highest and lowest prices at which shares were sold on the date
of grant, if traded on a national securities exchange, (ii) the high and low
prices reported in the consolidated reporting system, if traded on a "last
sale reported" system, such as NASDAQ, for over the counter securities, or
(iii) the high bid and high asked price for other over-the-counter securities.
If no transactions in the Common Shares occur on the date of grant, the fair
market value shall be determined as of the next earliest day for which
<PAGE>33
reports or quotations are available. If the common shares are not then
quoted on any exchange or in any quotation medium at the time the option is
granted, then the Board of Directors or Committee will use its discretion in
selecting a good faith value believed to represent fair market value based on
factors then known to them. The cash proceeds from the sale of Common
Shares are to be added to the general funds of the Corporation.
4. Exercise Period. (a) The NSO exercise period shall be a term of
not more than ten (10) years from the date of granting of each NSO and
shall automatically terminate:
(i) Upon termination of the optionee's employment with the
Corporation for cause;
(ii) At the expiration of twelve (12) months from the date of
termination of the optionee's employment with the Corporation for any
reason other than death, without cause; provided, that if the optionee dies
within such nine-month period, subclause (iii) below shall apply; or
(iii) At the expiration of fifteen (15) months after the date of
death of the optionee.
(b) "Employment with the Corporation" as used in the Plan
shall include employment with any Affiliated Corporation, and NSOs
granted under the Plan shall not be affected by an employee's transfer of
employment among the Corporation and any Parent or Subsidiary thereof.
An optionee's employment with the Corporation shall not be deemed
interrupted or terminated by a bona fide leave of absence (such as
sabbatical leave or employment by the Government) duly approved, military
leave or sick leave.
Board of Directors Compensation. Members of the Board of Directors may
receive an amount yet to be determined annually for their participation and
will be required to attend a minimum of four meetings per fiscal year. All
expenses for meeting attendance or out of pocket expenses connected
directly with their Board representation will be reimbursed by the
Corporation. Director liability insurance may be provided to all members of
the Board of Directors. No differentiation is made in the compensation of
"outside directors" and those officers of the Corporation serving in that
capacity.
Indemnification. The Corporation shall indemnify to the fullest extent
permitted by, and in the manner permissible under the laws of the State of
Texas, any person made, or threatened to be made, a party to an action or
proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that he is or was a director or officer of the
Corporation, or served any other enterprise as director, officer or employee
at the request of the Corporation. The Board of Directors, in its
discretion, shall have the power on behalf of the Corporation to indemnify
any person, other than a director or officer, made a party to any action,
suit or proceeding by reason of the fact that he/she is or was an employee of
the Corporation.
<PAGE>34
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Corporation,
the Corporation has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Corporation of expenses incurred or paid by a director, officer or
controlling person of the Corporation in the successful defense of any
action, suit or proceedings) is asserted by such director, officer, or
controlling person in connection with any securities being registered, the
Corporation will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issues.
INDEMNIFICATION OF OFFICERS OR PERSONS CONTROLLING
THE CORPORATION FOR LIABILITIES ARISING UNDER THE
SECURITIES ACT OF 1933, IS HELD TO BE AGAINST PUBLIC
POLICY BY THE SECURITIES AND EXCHANGE COMMISSION
AND IS THEREFORE UNENFORCEABLE.
Conflicts of Interest Policy. The Corporation has adopted a policy that any
transactions with directors, officers or entities of which they are also
officers or directors or in which they have a financial interest, will only be
on terms fair and reasonable to the Corporation (based on competitive bids,
if appropriate, or on terms similar contracts with the Corporation by
unaffiliated entities) and approved by a majority of the disinterested
directors of the Corporation's Board of Directors. The Board of Directors
resolved that the Bylaws of the Corporation shall be amended to provide
that no such transactions by the Corporation shall be either void or voidable
solely because of such relationship or interest of directors or officers or
solely because such directors are present at the meeting of the Board of
Directors of the Corporation or a committee thereof which approves such
transactions, or solely because their votes are counted for such purpose if:
(i) the fact of such common directorship or financial interest is disclosed
or known by the Board of Directors or committee and noted in the minutes,
and the Board or committee authorizes, approves or ratifies the contract or
transaction in good faith by a vote for that purpose without counting the
vote or votes of such interested directors; or (ii) the fact of such common
directorship or financial interest is disclosed to or known by the
shareholders entitled to vote and they approve or ratify the contract or
transaction in good faith by a majority vote or written consent of
shareholders holding a majority of the Common Shares entitled to vote (the
<PAGE>35
votes of the common or interested directors or officers shall not be counted
in any such vote of shareholders), or (iii) the contract or transaction is
fair and reasonable to the Corporation based on competitive bids, if
appropriate, and/or on terms consistent with similar contracts with the
Corporation by unaffiliated entities at the time it is authorized or approved.
In addition, interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors of the Corporation or a
committee thereof which approves such transactions.
Currently, there are only two directors. The directors are brothers
who are also majority shareholders. As a result, until such time as
additional directors are appointed or elected to the Board of Directors, and
even though the directors are aware of their fiduciary duty to the
shareholders, there can be no assurance that the utilization of the policy
will result in the resolution of any conflict of interest.
- --------------------------------------------------------------------------
SHARES ELIGIBLE FOR FUTURE SALE
- --------------------------------------------------------------------------
Upon completion of the Distribution, the Corporation will have 2,760,602
Common Shares outstanding, 1,208,984 of which are being registered
on behalf of selling security holders in this offering. This does not
include any Common Shares issued upon exercise of the A, B or C
Warrants currently being registered on behalf of selling security holders. Of
these shares, 104,000 shares distributed in the Distribution will be freely
tradable without restriction or further registration under the Securities
Act, except for any shares purchased by an existing "affiliate" of the
Corporation, which will be subject to the resale limitations of Rule 144
under the Securities Act. The remaining shares, as well as other securities
which may be issued, in the future, in private transactions pursuant to an
exemption from the Securities Act are "restricted securities" and may be sold
in compliance with Rule 144 adopted under the Securities Act of 1933, as
amended. Rule 144 provides, in essence, that a person who has held
restricted securities for a period of two years may sell every three months
in a brokerage transaction or with a market maker an amount equal to the
greater of 1% of the Corporation's outstanding shares or the average weekly
trading volume, if any, of the shares during the four calendar weeks
preceding the sale. The amount of "restricted securities" which a person
who is not an affiliate of the Corporation may sell is not so limited:
nonaffiliates may each sell without limitation shares held for three years.
Sales under Rule 144 may, in the future, depress the price of the
Corporation's Common Shares in the over-the-counter market, should a
market develop.
Prior to this offering there has been no public market for the Common
Shares of the Corporation. The effect, if any, of a public trading market
or the availability of shares for sale at prevailing market prices cannot
be predicted. Nevertheless, sales of substantial amounts of Common
Shares in the public market could adversely effect prevailing market prices.
<PAGE>36
- --------------------------------------------------------------------------
NASDAQ LISTING
- --------------------------------------------------------------------------
Criteria for NASDAQ Listing. Prior to the date hereof, there has been no
trading market for the Common Shares of the Corporation. The
Corporation has agreed to use its best efforts to apply for the quotation of its
Common Shares on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"). The Corporation will not meet
the proposed criteria as of the completion of the offering. In order to obtain
the NASDAQ listing, the Corporation must meet the following criteria:
(i) have total assets in excess of $4,000,000; (ii) have net equity in excess
of $2,000,000; (iii) become a reporting Corporation under the Securities
Exchange Act of 1934; (iv) have a minimum of 300 shareholders; (v) have a
public float of at least 100,000 shares and (vi) have a bid price of $3.00.
The Corporation hopes to meet (i) and (ii) upon the exercise of the Warrants
being registered in this offering. There can be no assurance that any
Warrants will, in fact, be exercised. Additionally, the Corporation shall
file a Form 8-A under the Securities Exchange Act of 1934 immediately
after the effective date of this registration statement to meet the requirements
of (iii). After the effective date of this registration statement, the
Corporation shall meet the criteria in (iv). Immediately after the effective
date of this registration statement, the Corporation shall apply for the
quotation of its Common Shares on the over-the-counter market. There can
be no assurance, however, that the Common Shares will be quoted, that an
active trading and/or a liquid market will develop or, if developed, that it
will be maintained. The Corporation does not intend to apply for quotation
of its Common Shares on NASDAQ until it meets the above criteria.
Broker-Dealer Sales of Corporation Securities. Until the Corporation
successfully obtains a listing on the NASDAQ quotation system, if ever, the
Corporation's securities may be covered by Rule 15c2-6 under the
Securities Exchange Act of 1934 that imposes additional sales practice
requirements on broker-dealers who sell such securities to persons other
than established customers and accredited investors (generally
institutions with assets in excess of $5,000,000 or individuals with net
worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouse). For transactions covered by the rule,
the broker-dealer must make a special suitability determination of the
purchaser and have received the purchaser's written agreement to the
transaction prior to the sale. In order to approve a person's account for
transactions in designated securities, the broker or dealer must (i) obtain
information concerning the person's financial situation, investment
experience and investment objectives; (ii) reasonably determine, based on
the information required by paragraph (i) that transactions in designated
securities are suitable for the person and that the person has sufficient
knowledge and experience in financial matters that the person reasonably
may be expected to be capable of evaluating the rights of transactions in
designated securities; and (iii) deliver to the person a written statement
setting forth the basis on which the broker or dealer made the determination
<PAGE>37
required by paragraph (ii) in this section, stating in a highlighted format that
it is unlawful for the broker or dealer to effect a transaction in a designated
security subject to the provisions of paragraph (ii) of this section unless the
broker or dealer has received, prior to the transaction, a written agreement to
the transaction from the person; and stating in a highlighted format
immediately preceding the customer signature line that the broker or dealer
is required to provide the person with the written statement and the person
should not sign and return the written statement to the broker or dealer if it
does not accurately reflect the person's financial situation, investment
experience and investment objectives and obtain from the person a manually
signed and dated copy of the written statement. A designated security
means any equity security other than a security (i) registered, or approved
for registration upon notice of issuance on a national securities exchange
that makes transaction reports available pursuant to 17 CFR 11Aa3-1 (ii)
authorized or approved for authorization upon notice of issuance, for
quotation in the NASDAQ system; or . . . (iv) whose issuer has net tangible
assets in excess of $2,000,000 demonstrated by financial statements dated
less than fifteen months previously that the broker or dealer has reviewed
and has a reasonable basis to believe are true and complete in relation to the
date of the transaction with the person. Consequently, the rule may affect
the ability of broker-dealers to sell the Corporation's securities and also may
affect the ability of purchasers in this offering to sell their shares in the
secondary market.
- ----------------------------------------------------------------------------
PRINCIPAL SHAREHOLDERS
- ----------------------------------------------------------------------------
There are currently 2,760,602 Common Shares outstanding. The following
tabulates holdings of shares of the Corporation by each person who, subject
to the above, at the date of this Prospectus, holds of record or is known by
management to own beneficially more than 5.0% of the Common Shares
and, in addition, by all directors and officers of the Corporation
individually and as a group.
<TABLE>
<CAPTION>
Shareholdings at Date of
This Prospectus
Amount
Amount of Common
Name and Address of of Common Shares Owned
Beneficial Owner Shares Owned % Offering %
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mark Castleman 962,464 34.86% 866,218 31.38%
12201 Technology Boulevard
Suite 145
Austin, Texas 78727
<PAGE>38
Michael Castleman 323,000 11.70% 290,700 10.53%
12201 Technology Boulevard
Suite 145
Austin, Texas 78727
Kent Bradshaw 323,000 11.70% 290,700 10.53%
12201 Technology Boulevard
Suite 145
Austin, Texas 78727
Pratt, Wylce & Lords 348,000 10.26% 244,000 8.84%
10 Office Park Road, #22
Hilton Head Island, SC 29938
All Directors & Officers
as a group (2 persons) 1,285,464 46.56% 1,156,918 41.91%
</TABLE>
There are currently 100,000 A Warrants outstanding. The following
tabulates holdings of A Warrants of the Corporation by each person who,
subject to the above, at the date of this Prospectus, holds of record or
is known by management to own beneficially more than 5.0% of the
Common Shares and, in addition, by all directors and officers of the
Corporation individually and as a group.
<TABLE>
<CAPTION>
Name Total Number Of % Amount %
A Warrants Owned Owned Owned
Owned Prior to After After
Offering Offering Offering
<S> <C> <C> <C> <C>
Mark Castleman 60,000 60% 0 0%
Michael Castleman 20,000 20% 0 0%
Kent Bradshaw 20,000 20% 0 0%
All Officers and
Directors
As a Group (two) 80,000 80% 0 0%
</TABLE>
There are currently 100,000 B Warrants outstanding. The following
tabulates holdings of B Warrants of the Corporation by each person who,
subject to the above, at the date of this Prospectus, holds of record or
is known by management to own beneficially more than 5.0% of the
Common Shares and, in addition, by all directors and officers of the
Corporation individually and as a group.
<PAGE>39
<TABLE>
<CAPTION>
Name Total Number Of % Amount %
B Warrants Owned Owned Owned
Owned Prior to After After
Offering Offering Offering
<S> <C> <C> <C> <C>
Mark Castleman 60,000 60% 0 0%
Michael Castleman 20,000 20% 0 0%
Kent Bradshaw 20,000 20% 0 0%
All Officers and
Directors
There are currently 250,000 C Warrants outstanding. The following
tabulates holdings of C Warrants of the Corporation by each person who,
subject to the above, at the date of this Prospectus, holds of record or
is known by management to own beneficially more than 5.0% of the
Common Shares and, in addition, by all directors and officers of the
Corporation individually and as a group.
<PAGE>36
</TABLE>
<TABLE>
<CAPTION>
Name Total Number Of % Amount %
C Warrants Owned Owned Owned
Owned Prior to After After
Offering Offering Offering
<S> <C> <C> <C> <C>
Mark Castleman 150,000 60% 0 0%
Michael Castleman 50,000 20% 0 0%
Kent Bradshaw 50,000 20% 0 0%
All Officers and
Directors
As a Group (two) 200,000 70% 0 0%
</TABLE>
- --------------------------------------------------------------------------
DESCRIPTION OF SECURITIES
- --------------------------------------------------------------------------
Qualification. The following statements constitute brief summaries of the
Corporation's Certificate of Incorporation and Bylaws, as amended. Such
summaries do not purport to be complete and are qualified in their entirety
by reference to the full text of the Certificate of Incorporation and Bylaws.
<PAGE>40
The Corporation's Articles of Incorporation authorize it to issue up to
50,000,000 Common Shares, $.001 par value per Common Share .
Common Shares purchased in this offering will be fully paid and non-
assessable.
Common Stock. Holders of Common Shares of the Corporation are
entitled to cast one vote for each share held at all shareholders meetings
for all purposes. Upon liquidation or dissolution, each outstanding
Common Share will be entitled to share equally in the assets of the
Corporation legally available for distribution to shareholders after the
payment of all debts and other liabilities. Common Shares are not
redeemable, have no conversion rights and carry no preemptive or other
rights to subscribe to or purchase additional Common Shares in the event of
a subsequent offering. All outstanding Common Shares are, and the
Common Shares offered hereby will be when issued, fully paid and non-
assessable.
There are no limitations or restrictions upon the rights of the Board of
Directors to declare dividends out of any funds legally available therefor.
The Corporation has not paid dividends to date and it is not anticipated
that any dividends will be paid in the foreseeable future. The Board of
Directors initially may follow a policy of retaining earnings, if any, to
finance the future growth of the Corporation. Accordingly, future
dividends, if any, will depend upon, among other considerations, the
Corporation's need for working capital and its financial conditions at the
time.
A Warrants. The Board of Directors of the Corporation has authorized
a dividend distribution of 100,000 A Warrants on a pro rata basis to the
shareholders of record as of October 15, 1995. The A Warrants are
exercisable for a period of two years from issuance. The A Warrants
shall be exercisable into Common Shares of the Corporation at the
exercise price of $4.00 per Common Share. The A Warrants will be callable
with 30 days notice for a price of $.001 per A Warrant.
B Warrants. The Board of Directors of the Corporation has authorized a
dividend distribution of 100,000 B Warrants on a pro rata basis to the
shareholders of record as of October 15, 1995. The B Warrants are
exercisable for a period of two years from issuance. The B Warrants
shall be exercisable into Common Shares of the Corporation at the
exercise price of $6.00 per Common Share. The B Warrants will be callable
with 30 days notice for a price of $.001 per B Warrant.
C Warrants. The Board of Directors of the Corporation has authorized a
dividend distribution of 250,000 C Warrants on a pro rata basis to the
shareholders of record as of October 15, 1995. The C Warrants are
exercisable for a period of three years from issuance. The C Warrants
shall be exercisable into Common Shares of the Corporation at the
exercise price of $10.00 per Common Share. The C Warrants will be
callable with 30 days notice for a price of $.001 per C Warrant.
<PAGE>41
Transfer Agent. The Corporation shall act as its own transfer agent until
after the completion of the offering.
- ---------------------------------------------------------------------------
LEGAL MATTERS
- ---------------------------------------------------------------------------
The due issuance of the Common Shares offered hereby will be opined
upon for the Corporation by Jody M. Walker, Attorney At Law in which
opinion Counsel will rely on the validity of the Certificate and Articles of
Incorporation issued by the State of Texas, as amended and the
representations by the management of the Corporation that appropriate
action under Texas law has been taken by the Corporation.
- -------------------------------------------------------------------------
LEGAL PROCEEDINGS
- -------------------------------------------------------------------------
The Corporation is not involved in any legal proceedings as of the date
of this Prospectus.
- -------------------------------------------------------------------------
EXPERT
- -------------------------------------------------------------------------
The audited financial statements included in this Prospectus have been so
included in reliance on the report of Winter, Scheifley & Associates
P.C., Certified Public Accountants, on the authority of such firm as
experts in auditing and accounting.
- -------------------------------------------------------------------------
INTERESTS OF NAMED
EXPERTS AND COUNSEL
- -------------------------------------------------------------------------
None of the experts or counsel named in the Prospectus are affiliated
with the Corporation.
<PAGE> 42
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Trinity Works, Inc.
We have audited the accompanying balance sheets of Trinity Works,
Inc. as of January 31, 1996 and 1995 the related statements of
operations, stockholders' equity, and cash flows for each of the
two years then ended. These financial statements are the
responsibility of the Corporation's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
Trinity Works, Inc. as of January 31, 1996 and 1995, and the
results of its operations, and its cash flows for each of the two
years then ended, in conformity with generally accepted accounting
principles.
Winter, Scheifley & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
March 15, 1996
<PAGE> 43
Trinity Works, Inc.
Balance Sheet
January 31, 1996 and 1995
ASSETS
Current assets: 1996 1995
Cash $ 317,029 $ -
Accounts receivable, trade 24,870 7,055
Inventories 123,696 74,145
---------- --------
-Total current assets 465,595 81,200
Property and equipment, at cost, net of
accumulated depreciation of $18,935 and $5,374 42,471 38,030
Intangible assets, net of accumulated
amortization of $1,512 and $146 12,152 13,518
Deposits 1,450 -
---------- --------
$ 521,668 $132,748
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Equipment leases payable $ 917 $ -
Accounts payable 38,508 14,889
Accrued expenses 18,637 6,567
Advances from officer 633 1,600
---------- ----------
Total current liabilities 58,695 23,056
Equipment leases - non-current 2,380 -
Notes payable - directors 150,000 150,000
Commitments (Note 5)
Stockholders' equity:
Common stock, $.001 par value,
50,000,000 shares authorized,
2,469,602 issued and outstanding 2,470 1,615
Additional paid-in capital 474,901 (615)
Accumulated deficit (166,778) (41,308)
---------- ----------
310,593 (40,308)
---------- ----------
$ 521,668 $132,748
========== ==========
See accompanying notes to financial statements.
<PAGE> 44
Trinity Works, Inc.
Statements of Operations
For The Years Ended January 31, 1996 and 1995
1996 1995
Sales $ 203,015 $ 7,519
Cost of sales 81,052 3,501
---------- ----------
Gross profit 121,963 4,018
Other costs and expenses:
General and administrative 1,026,134 35,092
Research and development 16,037 5,234
---------- ----------
1,042,171 40,326
---------- ----------
Income (loss) from operations (920,208) (36,308)
Other income and (expense):
Interest expense (12,000) (5,000)
Other 1,205 -
---------- ----------
(10,795) (5,000)
---------- ----------
Net income (loss) $ (931,003) $(41,308)
========== ==========
Earnings (loss) per share:
Net income (loss) $ (0.53) $ (0.03)
========== ==========
Weighted average shares outstanding 1,758,717 1,615,000
==========
See accompanying notes to financial statements.
<PAGE> 45
Trinity Works, Inc.
Statement of Changes in Stockholders' Equity
For The Years Ended January 31, 1996 and 1995
<TABLE>
<CAPTION>
Additional
Common Paid -in Accumulated
ACTIVITY Shares Amount Capital (Deficit)
Total
<S> <C> <C> <C> <C> <C>
Initial capitalization at
August 1, 1994 1,615,000 $ 1,615 $ (615) $ -
$1,000
Net (loss) for the year (41,308) (41,308)
----------- ---------- ---------- ---------- --------
Balance, January 31, 1995 1,615,000 1,615 (615) (41,308)
(40,308)
Sale of shares for cash at $1.50
419,602 42 628,984 629,404
Stock issued for services 435,000 435 652,065 652,500
Reclass of S corporation deficit
to paid-in capital (805,533) 805,533
Net (loss) for the year (931,003) (931,003)
----------- ---------- ----------- ----------- ---------
Balance, January 31, 1996 2,469,602 2,470 $ 474,901
$(166,778) $ 310,593
=========== ========== ===========
=========== ==========
See accompanying notes to financial statements.
<PAGE> 46
Trinity Works, Inc.
Statements of Cash Flows
For The Years Ended January 31, 1996 and 1995
1996 1995
Net income (loss) $ (931,003) $(41,308)
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 14,927 5,520
Stock issued for services 652,500
Changes in assets and liabilities:
(Increase) decrease in receivables (17,815) (7,055)
(Increase) decrease in inventory (49,551) (74,145)
(Increase) decrease in other assets (1,450)
Increase (decrease) in accounts payable
and accrued expenses 35,689 21,456
---------- ---------
Total adjustments 634,300 (54,224)
Net cash (used in) operations (296,703) (95,532)
Cash flows from investing activities:
Increase in intangible assets (13,664)
Acquisition of plant and equipment (14,705) (43,404)
---------- ---------
Net cash (used in) for investments (14,705) (57,068)
Cash flows from financing activities:
Common stock sold for cash 629,404 1,000
Increase in officer loans 1,600
Repayment of officer loans (967)
Proceeds from investor notes 150,000
---------- ---------
Net cash provided by financing 628,437 152,600
--------- ----------
Increase (decrease) in cash 317,029 -
Cash, beginning of period
---------- ---------
Cash, end of period $ 317,029 $ -
========== ==========
See accompanying notes to financial statements.
<PAGE> 47
Trinity Works, Inc.
Statements of Cash Flows
For The Years Ended January 31, 1996 and 1995
1996 1995
Supplemental cash flow information:
Cash paid for interest $ - $ -
Cash paid for income taxes $ - $ -
Supplemental disclosure of non-cash transactions:
Common stock issued for services $ 652,500 $ -
Increase in leased equipment $ 3,297 $ -
See accompanying notes to financial statements.
<PAGE> 48
Trinity Works, Inc.
Notes to Financial Statements
Note 1 - Accounting policies
Organization
Trinity Works, Inc. is a manufacturer of computer related
products incorporated under the laws of the State of Texas during
August 1994. The Corporation's customers to date have been mail order
companies that stock its products and end user purchasers.
Inventories
Inventories, consisting principally of raw materials and finished
goods, are valued at the lower of cost or market on a first in -
first out basis.
Fixed assets
Fixed assets are stated at cost, less accumulated depreciation.
Depreciation is calculated under the straight line method over
the expected useful lives of the assets of from three to seven
years.
Net loss per share:
The net loss per share is computed by dividing the net loss for
the period by the weighted average number of common shares
outstanding for the period. Common stock equivalents are excluded
from the computation as their effect would be anti-dilutive.
Cash
For purposes of the statement of cash flows the Corporation considers
all highly liquid debt instruments purchased with a maturity of 3
months or less to be cash equivalents. At January 31, 1996 the
Corporation maintained $317,029 on deposit at one bank which exceeded
the $100,000 deposit insurance limit by $217,029.
Revenue recognition
The Corporation recognizes revenue upon shipment of goods to its
customers.
Patents and trademarks
The Corporation has applied for patents for certain of its products.
Patents and trademarks are amortized using the straight line
method over a period of ten years and are stated net of
accumulated amortization of $1,075 at January 31, 1996.
<PAGE>49
Estimates
The preparation of the Corporation's financial statements requires
management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying
notes. Actual results could differ from these estimates.
Advertising costs
Advertising costs are charged to operations when the advertising
first takes place. Advertising costs charged to operations were
$141,915 and $13,409 in 1996 and 1995.
Note 2 - Inventories
Inventories consisted of the following at January 31, 1996 and
1995:
1996 1995
Raw materials $ 89,920 $ 67,063
Finished goods 33,776 7,082
-------- --------
$123,696 $ 74,145
Note 3 - Fixed assets
Fixed assets consist of the following at January 31 1996 and
1995:
1996 1995
Furniture and equipment $ 5,889 $ 1,085
Computer equipment 15,410 11,718
Computer equipment (leased) 3,297 -
Molds and dies 35,816 30,601
Leasehold improvements 995 -
-------- ------ -61,677
43,404
Less: accumulated depreciation 18,935 5,374
-------- ------
$42,472 $38,030
Depreciation expense was $13,561 and $5,374 for the years ended
January 31, 1996 and 1995.
<PAGE>50
Note 4 - Notes payable - directors
During November 1994 the Corporation borrowed $75,000 from each of
two of the Corporation's directors, one of whom is an immediate family
member with the Corporation's president. The identical
uncollateralized notes bear interest at prime plus 2% and are to
be repaid from operating profits of the Corporation beginning after
January 31, 1997.
Note 5 - Commitments
Operating leases
During March 1996, the Corporation entered into a lease in Austin,
Texas for its corporate office and manufacturing facility. The
lease provides for various escalation based on cost of living,
real estate taxes, etc.
Future minimum rentals under the lease are as follows:
1997: $19,442
1998: $23,330
1999: $23,330
2000: $3,888
Rent expense was $4,128 and $131 for the years ended January 31,
1996 and 1995, respectively.
Capital leases
The Corporation is the lessee of computer equipment under a capital
lease that expires in January 1999. The assets and liability under
the capital lease are recorded at the lower of the present value
of the minimum lease payments or the fair value of the assets.
The assets are depreciated over a three year period. Depreciation
of the assets ($75) is included in depreciation expense for the
year ended January 31, 1996.
Minimum future lease payments under the lease as of January 31,
1996 for each of the next three years and in the aggregate are as
follows.
Year ended Amount
January 31, 1997 $1,416
January 31, 1998 1,416
January 31, 1999 1,416
------
4,248
Less interest amount (951)
------
Present value of minimum payment $3,927
<PAGE>51
The interest rate on the lease amounts to 17.3% per annum.
During February 1996, the Corporation leased additional equipment
under similar lease terms having a fair value of $6,240.
Note 6 - Stockholders equity
At inception, (August 1, 1994) the Corporation issued 1,615,002
shares of its $.001 par value common stock to three of its
officers and directors in exchange for cash of $1,000.
During October 1995 the Corporation entered into a one year consulting
agreement with an entity whereby the entity would provide to the
Corporation financial consulting services. Pursuant to the agreement
the entity agreed to assist the Corporation in preparing a private
placement memorandum to obtain equity or debt financing in the
amount of $600,000 and to assist the Corporation in completing the
offering. In exchange for these services the Corporation agreed to pay
$92,630 in cash and to issue 323,000 shares of its $.001 par value
common stock valued at $484,500. These amounts have been included
in general and administrative expenses in 1996 in the accompanying
Statement of Operations.
During October 1995, the Corporation authorized the issuance of
100,000 each of A, B, and 250,000 of C stock purchase warrants
exercisable as follows:
$ 4.00 plus one A warrant for each share of common stock
$ 6.00 plus one B warrant for each share of common stock
$10.00 plus one C warrant for each share of common stock
The warrants are exercisable for a period of 24 months from the date
of issue for the A and B warrants and 48 months for the C warrants,
and are callable with 30 days notice at a price of $.001 per warrant.
During December, 1995 the Corporation began offering shares of its
common stock at $1.50 per share pursuant to a private placement. The
private placement was completed in January 1996 and the Corporation
issued 419,602 shares of common stock for net cash proceeds aggregating
$629,404.
During the periods covered by these financial statements the Corporation
issued shares of common stock without registration under the
Securities Act of 1933. Although the Corporation believes that the sales
did not involve a public offering of its securities and that the
Corporation did comply with the safe harbor exemptions from
registration under section 4(2), it could be liable for recision of
the sales if such exemptions were found not to apply.
<PAGE>52
Note 7 - Income taxes
The Corporation had elected to be treated as an "S" corporation under the
provisions of the Internal Revenue Code and state statutes. Under
these provisions, no income tax is normally incurred at the corporate
level. Instead the shareholder includes his pro rata share of the
corporations income or loss on his personal tax returns. During
January 1996 the number of shareholders of the Corporation exceeded the
maximum number of shareholders allowed for an S corporation and the
election was terminated. In addition, the Corporation used December 31,
as its year end for income tax purposes. Effective January 1, 1996
the Corporation adopted Financial Accounting Standards Board Statement
No. 109, Accounting for Income Taxes.
Of the loss for the year ended January 31, 1996 approximately
$166,778 will be available as an operating loss carryforward for the
Corporation expiring during 2011, and the balance will be allocated to
the shareholders.
The accumulated loss through the termination of the "S" election of
$805,533 has been reclassified to paid in capital in the accompanying
financial statements.
The Corporation is unable to predict future taxable income that would
enable it to utilize the deferred tax asset arising from the future
value of the net operating loss and therefore the deferred tax
asset of approximately $56,705 related thereto is fully reserved.
Note 8 - Related party transactions
During the year ended January 31, 1995 an officer and director of the
made advances to the Corporation aggregating $1,600. During the year
ended January 31, 1996 $967 of this debt was repaid in cash.
Note 9 - Sales to major customers
The Corporation made sales in excess of 10% of its net sales to unrelated
parties for the year ended January 31, 1996 to two companies
aggregating $128,105 (63%). Additionally, the Corporation had open
uncollateralized accounts receivable from these customers aggregating
$12,445 January 31, 1996. The Corporation had no major customers
during the year ended January 31, 1995.
The Corporation's major customers in 1996 consist of mail order companies
who include a description of the Corporation's products in their
advertisements in various computer related publications. The Corporation
is charged for its share of the advertising costs and such billings
are offset against accounts receivable from sales to these customers.
<PAGE>53
Note 10 - Stock option plan
During 1995, the Corporation adopted a non-statutory stock option plan
which provides for granting to the Corporation's officers, directors,
employees and certain other individuals who consult with or advise
the Corporation, options to acquire up to 500,000 shares of the
Corporation's
common stock. The shares issuable under the plan are at a price not
less than 85% of the fair market value of the stock on the date of
grant. The exercise periods of the options are not to exceed ten
years. No options have been granted pursuant to the plan as of
January 31, 1996.
<PAGE>54
Trinity Works, Inc.
Balance Sheet
July 31, 1996
ASSETS
Current assets:
Cash $ 101,881
Accounts receivable, trade 705,004
Inventories 86,491
-----------
Total current assets 893,376
Property and equipment, at cost, less
accumulated depreciation of $28,799 65,141
Intangible assets, net of accumulated
amortization of $2,196 11,468
Deposits 3,451
-----------
$ 973,436
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Equipment leases payable $ 2,644
Accounts payable 44,582
Accrued expenses 24,190
-----------
Total current liabilities 71,416
Equipment leases - non-current 3,109
Notes payable - directors 100,000
Stockholders' equity:
Common stock, $.001 par value,
50,000,000 shares authorized,
2,469,602 shares issued and
outstanding 2,71
Additional paid-in capital 1,891,530
Accumulated deficit (1,095,333)
-----------
798,911
-----------
$ 973,436
===========
See accompanying notes to financial statements.
<PAGE>55
Trinity Works, Inc.
Statements of Operations
For the Three Months and Six Ended July 31, 1996 and 1995
Three Months Three Months Six Months
Six Months
Ended Ended Ended
Ended
July 31 July 31 July 31
July 31
1996 1995 1996
1995
-------- -------- -------- --------
Sales $ 287,698 $ 62,510 $ 779,454
$ 89,099
Cost of sales 209,654 19,449 361,092
24,558
---------- ----------- ---------- --------
- --
Gross profit (loss) 78,044 43,061 418,362
64,541
Other costs and expenses:
General and administrative 340,818 64,373
535,517 85,677
---------- ----------- ---------- --------
- --
340,818 64,373 535,517
85,677
---------- ----------- ----------- -------
- ----
Income (loss) from operations (262,774) (21,312)
(117,155) (21,136)
Other income and (expense):
Interest expense (2,500) (3,000) (5,867)
(6,000)
---------- ----------- ---------- --------
- --
(2,500) (3,000) (5,867)
(6,000)
---------- ----------- ----------- -------
- ----
Income (loss) before income taxes (265,274) (24,312)
(123,022) (27,136)
Provision for income taxes - - -
- - -
---------- ----------- ---------- --------
- --
Net income (loss) $ (265,274) $ (24,312) $
(123,022) $ (27,136) $ (142,252)
========== ===========
========== ==========
Earnings (loss) per share:
Net income (loss) $ (0.10) $ (0.02) $ (0.05)
$ (0.02)
========== ===========
========== ==========
Weighted average shares outstanding 2,635,471 1,615,000
2,552,537 1,615,000
========== ===========
========== ==========
See accompanying notes to financial statements.
<PAGE>56
Trinity Works, Inc.
Statements of Cash Flows
For the Six Ended July 31, 1996 and 1995
Six Months Six Months
Ended Ended
July 31, July 31,
1996 1995
-------- --------
Net cash provided by (used in)
operating activities $ (724,437) $ 4,270
Cash flows from investing activities:
Purchase of equipment (26,956) (3,717)
----------- -----------
Net cash provided by (used in)
financing activities (26,956) (3,717)
Cash flows from financing activities:
Increase (repayment) of officer loans (50,633) (553)
Repayment of capital leases (3,122)
Common stock issued for cash 590,000
----------- -----------
Net cash provided by (used in)
financing activities 536,245 (553)
----------- -----------
Increase (decrease) in cash (215,148) -
Cash and cash equivalents,
beginning of period 317,029 -
----------- -----------
Cash and cash equivalents,
end of period $ 101,881 $ -
=========== ===========
See accompanying notes to financial statements.
<PAGE>57
Trinity Works, Inc.
Notes to Financial Statements
Basis of presentation
The accompanying condensed unaudited financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
provisions of Regulation SX. Accordingly, they do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair
presentation have been included.
The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the full
year. The accompanying financial statements should be read in
conjunction with the Company's annual financial statements
included elsewhere herein.
Income (loss) per share was computed using the weighted average
number of common shares outstanding.
During May 1996 the Company issued an aggregate of 8,536 shares
of its common stock for services provided which have been valued
at $2.50 per share. Additionally, during June 1996 the Company
completed a private placement of 236,000 shares of its common
stock valued at $2.50 per share and received aggregate proceeds
of $590,000 therefrom.
<PAGE>58
PART II
INFORMATION NOT REQUIRED BY PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Other expenses in connection with this offering which will be paid
by Trinity Works, Inc. (hereinafter in this Part II referred to as
the "Corporation") are estimated to be substantially as follows:
</TABLE>
<TABLE>
<CAPTION>
Amount
Payable
Item By
Corporation
<S> <C>
S.E.C. Registration Fees $ 1,825.12
State Securities Laws (Blue Sky) Fees and Expenses 1,500.00
Printing and Engraving Fees 5,000.00
Legal Fees 15,000.00
Accounting Fees and Expenses 10,000.00
Transfer Agent's Fees 1,500.00
Total $34,825.12
</TABLE>
Item 14. Indemnification of Officers and Directors.
Indemnification. The Corporation shall indemnify to the fullest extent
permitted by, and in the manner permissible under the laws of the State of
Texas, any person made, or threatened to be made, a party to an action or
proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that he is or was a director or officer of the
Corporation, or served any other enterprise as director, officer or employee
at the request of the Corporation. The Board of Directors, in its
discretion, shall have the power on behalf of the Corporation to indemnify
any person, other than a director or officer, made a party to any action,
suit or proceeding by reason of the fact that he/she is or was an employee of
the Corporation. The extent of the indemnification shall be determined on a
case by case basis and will be dependent on the nature of the action, suit
or proceeding and the specific facts and circumstances surrounding the
situation.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Corporation,
the Corporation understands that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Corporation of expenses incurred or paid by a director, officer or
controlling person of the Corporation in the successful defense of any
action, suit or proceedings) is asserted by such director, officer, or
controlling person in connection with any securities being registered, the
Corporation will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.
Item 15. Recent Sales of Unregistered Securities.
In August, 1994, the Corporation issued 1,615,000 common shares to its
officers and directors (Mark Castleman - 969,000, Michael Castleman -
323,000 and Kent Bradshaw - 323,000) for the aggregate cash
consideration of $1,615.
<PAGE>58
On May 16, 1995, the Corporation issued 348,000 common shares to Pratt,
Wylce & Lords, Ltd. and 87,000 common shares to Clinton Clark for
consulting services pursuant to the terms of a consulting agreement filed as
an exhibit to the registration statement. Note, pursuant to the agreement,
Mr. Alan Filson received 25,000 of the 348,000 common shares owned by
Pratt, Wylce & Lords, Ltd.
In the fourth quarter of 1995, the Corporation pursued a private placement
at $1.50 per common shares and issued a total of 419,602 to the following
individuals. These issuances were made in compliance with Rule
505, Regulation D of the Securities Act of 1933 by Registrant's
management, consultants and selected broker/dealers. No commissions or
other remuneration was paid to anyone other than a NASD selected
broker/dealer. No general solicitation was utilized. There was less
than 35 nonaccredited investors. The determination of whether an
investor was accredited or nonaccredited was based on the responses in the
subscription agreement filled out by each investor.
<TABLE>
<CAPTION>
Date Amount of Amount
Issued Name Common Stock Paid
- -------- -------- ------------- --------
<S> <C> <C> <C>
12-20-95 John Baer 3,000 $4,500
12-21-95 Steve Ball 3,000 $4,500
11-30-95 Tom Brennan 15,000 $22,500
1-3-96 Ed Carlow 5,000 $7,500
Sue Castleman 8,333
12-20-95 Pagogh Cho 3,000 $4,500
Jonathan Ceck
12-13-95 Al Damalak 7,000 $10,500
12-18-95 Pauline Darosa 4,000 $6,000
6-2-96 William DeMayo 3,000 $4,500
Murray Trachter
12-15-95 Gerald Dooher 5,000 $7,500
12-2-95 Terrence Dooher 5,000 $7,500
12-16-95 Del/Peggy Dugan 3,000 $4,500
12-21-95 John Dunbar 3,000 $4,500
1-2-96 Stuart Dupee 3,000 $4,500
12-21-95 James Early 16,667
12-19-95 Ora Elliott 3,000 $4,500
12-15-95 Charles & Judith Franklin 3,000 $4,500
12-20-95 Randall Geist 9,000 $13,500
12-18-95 Dr. Bob Gerner 10,000 $15,000
12-19-95 Lynn Gjertsen 3,000 $4,500
1-1-96 Charles Gluck 3,000 $4,500
12-18-95 All American Way, Inc.
Profit Sharing Plan 12,000 $18,000
<PAGE>59
12-19-95 Ken Gregory 3,000 $4,500
12-11-95 James Haines 3,334 $5,000
12-20-95 Kim & Gavin Hart 3,000 $4,500
12-7-95 Richard Hinkle 3,000 $4,500
12-28-95 Brian Hughes 1,000 $1,500
12-14-95 Robert & Eleanor Hughes 6,000 $9,000
12-29-95 Robert Hunt IRA 3,000 $4,500
12-12-95 Cliff Jaebker 6,200
1-4-95 Grant Johnson 3,000 $4,500
12-7-95 Virginia Junkin 4,000 $6,000
12-29-95 Alan/Patti Katz 3,000 $4,500
12-6-95 Larry Konfirst 6,000 $9,000
12-21-95 John/Rosella Lawson 15,000 $22,500
12-21-95 Rosella Lawson 3,000 $4,500
12-22-95 Kevin McGarry 3,000 $4,500
12-13-95 John McKissach
12-1-95 John Santry 3,000 $4,500
1-2-96 Ronald Montano 7,334 $10,667
12-13-95 Blake Mosher 20,000 $30,000
12-12-95 Bowman Najmi 7,000 $10,500
12-6-95 Jonathan/Melissa Pace 8,000 $12,000
12-20-95 Elaine & William Paton 9,000 $13,500
12-4-95 Scott/Marcia Rader 3,000 $4,500
12-8-95 Al Ridenger 15,000 $22,500
Al Ridenger, Jr. 3,000 $4,500
12-21-95 Jerry & Sarah Robertson 3,000 $4,500
12-10-95 Jay Rydman 4,000 $6,000
12-17-95 Manuez Sanchez 7,000 $10,500
1-2-96 Carol Sarwar 4,000 $6,000
12-11-95 Paula/Steve Schaefer 7,000 $10,500
12-11-95 Mary Jane & Vic Sohle 1,000 $1,500
Derek Steele
12-21-95 Rick Pease 3,000 $4,500
12-22-95 Nancy Stiehl 3,000 $4,500
12-20-95 Karen Sussman 7,000 $10,500
12-22-95 Mitsao Tatsugawa 3,000 $4,500
12-6-95 William Taylor 6,000 $9,000
12-5-95 Larry/Lori Turrel 40,000 $60,000
1-10-96 John Watson 6,000 $9,000
12-13-95 Harry Welch 20,000 $30,000
12-26-95 2422 Brazoria 3,000 $4,500
12-8-95 John Wilson 3,000 $4,500
12-14-95 Howard Witzel 20,000 $30,000
12-23-95 Johnny Wong 3,000 $4,500
12-11-95 Shane Yost 3,734 $5,601
The Corporation issued Common Shares to the following employees as
partial compensation valued at $1.50 per Common Share.
1-1-96 Darrell Hughes 40,000 $60,000
1-1-96 Jonathan Avedikian 20,000 $30,000
1-1-96 Matt Casteman 20,000 $30,000
4-1-96 David Avedikian 2,000 $3,000
<PAGE>60
The Corporation issued 6,536 Common Shares to Darrell Daugherty for
services on May 22, 1996 valued at $1.50 per Common Share.
During June, 1996, the Corporation received $590,000 by privately issuing
the following Common Shares at $2.50 per Common Share.
Breaux Castleman 32,000 $80,000
James Early 20,000 $50,000
Dick Galley 80,000 $200,000
Al Ridenger 20,000 $50,000
Larry Turel 20,000 $50,000
Howard Witzel 20,000 $50,000
John Wilson 24,000 $60,000
Harry Welch 20,000 $50,000
</TABLE>
Due to the integration rules of Section 502(a), all of the above issuances of
common stock would be deemed to be integrated and deemed to be part of
the same Regulation D offering (Section 505). As a result, the Corporation
obtained subscription agreements from all investors which indicated
whether or not the investors were accredited. There were a total
of 33 non-accredited investors. All of the above sales were made without
general solicitation. No commissions were paid to anyone other than
registered NASD broker-dealers. The total aggregate value of all of the
issuances were substantially less than $5,000,000.
<TABLE>
<CAPTION>
Exhibit Index.
<S> <C>
(1) Not Applicable
(2) Not Applicable
(3) Articles of Incorporation, Amendments and Bylaws
incorporated by reference to registration statement on
Form S-1, S.E.C. file number 333-11009
(4) Specimen certificate for Common Stock - to be filed
by amendment
(5) Consent and Opinion of Jody M. Walker, Attorney At Law
regarding legality of securities registered under this
Registration Statement and to the references to such
attorney in the Prospectus
filed as part of this Registration Statement
(6) Not Applicable
(7) Not Applicable
(8) Not Applicable
(9) Not Applicable
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
<PAGE>61
(15) Not Applicable
(16) Not Applicable
(17) Not Applicable
(18) Not Applicable
(19) Not Applicable
(20) Not Applicable
(21) Not Applicable
(22) Not Applicable
(23) Not Applicable
(24) Consent of Winter, Scheifley & Associates, P.C.,
Certified Public Accountants for the Corporation
(25) Not Applicable
(26) Not Applicable
(27) Financial Data Schedule
(28) Not Applicable
(99.1) Consulting Agreement with Pratt, Wylce & Lords, Ltd.
incorporated by reference to registration statement on
Form S-1, S.E.C. file number 333-11009
(99.2) Form of Lock Up Agreement
</TABLE>
Item 17. Undertaking.
The undersigned registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the formation set forth in the Registration
Statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
<PAGE>62
(b) Delivery of Certificates.
The undersigned registrant hereby undertakes to provide to the
Transfer Agent at the closing, certificates in such denominations and
registered in such names as are required by the Transfer Agent to permit
prompt delivery to each purchaser.
(c) Indemnification.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions set forth in
the Corporation's Articles of Incorporation or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange
Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
<PAGE> 63
Signatures
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-1 as amended to be
signed on its behalf by undersigned, thereunto duly authorized, in the city
of
Austin, State of Texas on the 9th day of October, 1996.
Trinity Works, Inc.
/s/ Mark Castleman
--------------------
By: Mark Castleman,
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
on Form S-1 as amended has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
<S> <C> <C>
/s/ Mark Castleman 10/9/96
- --------------------------- Chief Executive Officer ----------------
Mark Castleman Chief Financial Officer
Controller/Director
/s/ Michael Castleman 10/9/96
- --------------------------- Director ----------------
Michael Castleman
</TABLE>
<PAGE>1
Jody M. Walker
Attorney At Law
7841 South Garfield Way
Littleton, Colorado 80122
Telephone: (303) 850-7637
Facsimile: (303) 220-9902
October 7, 1996
Re: OPINION RE: LEGALITY AND CONSENT OF COUNSEL TO
USE OF NAME IN THE REGISTRATION STATEMENT ON FORM S-1
OF TRINITY WORKS, INC.
I am securities counsel for the above mentioned corporation and I have
prepared the registration statement on Form S-1 and any amendments
thereto. I hereby consent to the inclusion and reference to my name in the
Registration Statement on Form S-1 for Trinity Works, Inc. and any
amendments thereto.
It is my opinion that the securities of the Trinity Works, Inc. and which are
registered with the Securities and Exchange Commission pursuant to Form
S-1 Registration Statement of Trinity Works, Inc. have been legally issued
and will be, when distributed and/or sold, legally issued, fully paid and
non-assessable.
Very truly yours,
/s/ Jody M. Walker
- --------------------------------------------
Jody M. Walker
<PAGE>1
REPORT OF INDEPENDENT CERTIFIED ACCOUNTANT
We consent to the use, in this Registration Statement of Trinity Works,
Inc., our report dated March 15, 1996 appearing in the prospectus, which is
a part of such Registration Statement.
/s/ Winter, Scheifley & Associates, P.C.
-------------------------------------------------
Winter, Scheifley & Associates, P.C.
Dated: October 8, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> JUL-31-1996
<CASH> 101,881
<SECURITIES> 0
<RECEIVABLES> 705,004
<ALLOWANCES> 0
<INVENTORY> 86,491
<CURRENT-ASSETS> 893,376
<PP&E> 93,940
<DEPRECIATION> 28,799
<TOTAL-ASSETS> 973,436
<CURRENT-LIABILITIES> 71,446
<BONDS> 0
<COMMON> 2,714
0
0
<OTHER-SE> 796,197
<TOTAL-LIABILITY-AND-EQUITY> 973,197
<SALES> 779,454
<TOTAL-REVENUES> 779,454
<CGS> 361,092
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 535,517
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,867
<INCOME-PRETAX> (123,022)
<INCOME-TAX> 0
<INCOME-CONTINUING> (123,022)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (123,022)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
Warrant LockUp Agreement
This agreement is by and between Trinity Works, Inc. (the "Corporation")
and the undersigned shareholders as agreed to on the day of March, 1995.
The purpose of this agreement is to define the agreed upon
rights and responsibilities of the principal shareholders, officers and
directors in relation to the Warrants distributed to them upon the
effectiveness of the Registration Statement on Form S-1 to be filed with the
Securities and Exchange Commission (SEC).
The undersigned shareholders agree that the Warrants distributed to them
are intended to support the capitalization of the Corporation and were not
intended to be used for immediate personal gain or to stabilize the market as
per Section 10(b)(6) or 10(b)(7) under the SEC Act of 1934. Therefore,
the undersigned shareholders do hereby agree to the following:
In the event the undersigned shareholders exercise any Warrants, the
common stock issued to the undersigned shareholders upon said exercise
shall be locked in and restricted from trading for a period of thwo years.
Upon exercise, a notice shall be placed on the face of each stock certificate
stating that the transfer of the common stock evidenced by said certificate is
restricted in accordance with the conditions set forth on the reverse sid of
each common stock certificate; and a typed legend shall be placed on the
reverse side of each common stock certificate which states that the sale or
the transfer of the ocmmon shares as evidenced by the certificate is subject
to certain restrictions until two years from the date of issuance pursuant to
this Agreement between the shareholders of the Corporation (whether
beneficial or of record) and the Corporation. This agreement shall be on
file with the Corporation and the transfer agent and a copy shall be available
upon request and without charge.
The undersigned shareholders agree not to sell or otherwise transfer their
interest in the Warrants except to an underwriter or other market maker in
the common stock once a market is established. The undersigned
shareholders further agree that the total value in cash or other consideration,
paid by the underwriter/market maker to the undersigned shareholders shall
not exceed $.001 per Warrant.
In witness whereof, the parties hereto have duly executed this agreement as
of the above mentioned date:
Holder of Warrants
- ----------------------------------- ----------------
Holder of Warrants
- ----------------------------------- ----------------
Holder of Warrants
- ----------------------------------- ----------------
