U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10
General Form For Registration of Securities
Pursuant to Section 12(b) or 12(g) of the
Securities Exchange Act of 1934
TRIM A LAWN CORPORATION
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(Exact Name of Registrant as Specified in Its Charter)
NEW YORK 16-1352712
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
807 BROAD STREET, UTICA, NEW YORK 13502
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(Address of Principal Executive Offices) (ZIP Code)
(315) 733-3366
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(Issuer's Telephone Number, Including Area Code)
Securities to be Registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
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Securities to be Registered under Section 12(g) of the Act:
Common Stock
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ITEM 1 - BUSINESS
Trim-A-Lawn Corporation ("Company"), a Delaware corporation, is the surviving
corporation in a plan of reorganization between ANova Capital Corporation, a
Texas corporation ("ANova"), and the UnBlade Company, Inc., a New York
Corporation ("UnBlade") in a change of state incorporation of ANova into the
Company. In January 1989, ANova acquired all of the assets (subject to
liabilities) of UnBlade in exchange for common stock and then merged into the
Company to effect a change in its state of incorporation to Delaware. Prior
to the reorganization described above, UnBlade had permitted certain other
parties, not presently known to the registrant, to use the name "Trim-A-
Lawn". Although the Company has since trademarked its name, other parties
may be currently using the Company's name, without the Company's knowledge,
in reliance on prior arrangements. The executive offices of the Company are
located at 807 Broad Street, Utica, New York 13501.
The Company is engaged in the design, manufacture and sale of lawn
maintenance equipment. The Company has received several patents (described
more fully below) and has applied for, and anticipates receiving, certain
other patents relating to design features of certain of its lawn maintenance
equipment models. The Company has commenced commercial production of three
of its product models known as the Trim-A-Lawn Line Trimmers.
PRODUCTS
The Company markets the products described below.
Four Wheel Walk Behind Trimmer
The Company's primary product is a patented four wheel walk behind lawn
trimmer. The Company sells two models powered by a Tecumseh two-cycle gas
engine as well as a battery powered unit, which can operate for one and one-
half hours on a single battery charge. The battery unit is sold with a
charger. The trimmers may also be utilized as lawn mowers since the four
wheel platform allows for a level and even cut. This attribute particularly
favors owners of homes with small lawns in that the Trim-A-Lawn trimmer
serves two purposes thereby eliminating the need for a trimmer and a mower.
The gas-powered trimming units are lightweight, affordable, and have a
fifteen-inch cut using either the Company's patented cutting line or patented
replacement blades. The walk behind trimmer is principally distinguished
from conventional hand held trimmers because most noise and vibration is
placed at ground level as opposed to the shoulder level height of hand-held
trimmers. In addition, the walk behind trimmer greatly reduces the potential
for back strain normally associated with the hand-held trimmer.
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Quick Change Head for Trimmers
A patented quick change head is sold as both an optional component for both
the gas and battery powered units as well as an aftermarket product for
owners of Trim-A-Lawn trimmers. The quick change head was introduced for the
1997 model year. The significant attribute of the quick change head is that
it utilizes a revolutionary latching system which allows an operator to
change from a cutting blade to a cutting line in under thirty seconds. This
feature allows for a complete range of trimming activities and is not found
with conventional hand held trimmers.
Replacement Lines and Blades
Trim-A-Lawn has patented a highly durable triangular cutting line, which is
used on all trimmer models. The triangular design allows an even cut to be
attained instead of a tearing cut occurring with the use standard round line
frequently used on hand held trimmers.
In 1996, the company developed and patented a plastic encapsulated steel
blade. This blade, in the view of management, has proven to be more durable
than, and to outlast, all competitive blade products currently sold. In
testing it has proven to be as safe as competitive plastic blades sold on the
market today. Further, the blade allows for trimming activities to be
expanded to areas of heavier growth not previously able to be trimmed using a
plastic blade. Also, the blade has been designed to be reversible thereby
allowing for a fresh cutting edge to be used.
OPERATIONS
All sales, manufacturing operations, and administrative functions are
conducted principally within the United States. Foreign sales, primarily
to distributors in the Canadian provinces do not constitute a significant
component of sales.
PRODUCT ASSEMBLY
The Company outsources the manufacture of major components of its products.
The company's facility at 807 Broad Street Utica, New York is the central
assembly and distribution point for all of its products. The Company has
both the operating capacity and facility size necessary to support its
planned sales program in future periods.
The company is primarily an assembler of its products, and most of the
components are commercially available from a number of sources. While the
company is generally not dependent on any one supplier, the largest
component, the engines, are obtained solely from Tecumseh. The Company
believes that in adverse circumstances alternate engine supply arrangements
could be made, although no assurances can be given as to availability, the
impact on product cost, delivery, or any other terms.
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PATENTS
<TABLE>
The Company has been awarded various design and utility patents for its four
wheel walk behind trimmer as well as its cutting head systems, lines and
blades. Significant U.S. patents, trademarks & applications include:
<CAPTION>
Patent Patent
Trimmer On Wheels Patents Date Number
<S> <C> <C>
Utility patent for a power line trimmer on 1/23/90 4,894,980
wheels in which the line extends beyond the 3/20/90 4,909,024
deck 10/16/90 4,962,635
Design patent for a power line trimmer on wheels 7/17/90 309,311
Utility patent for power line trimmer on wheels 7/09/91 1,285,774
(Canadian)
Battery powered trimmers/mower with battery 12/17/96 5,584,723
pack drop load capability.
Cutting Head Patents
Triangular shaped cutting line 3/6/90 4,905,465
Cutting head used on the line trimmer on wheels 9/17/91 5,048,278
Cutting head using line and plastic blades 2/20/96 5,491,962
Blades
Plastic blades with metal edge 2/20/96 5,491,962
Trademarks
Trademark - "Trim-A-Lawn" 11/15/88 1,512,348
Trademark - "Aeroline" 7/14/98 2,172,725
Trademark - "ElecTrim" 6/15/93 1,777,022
Patent Applications
Injection molded cutting line 4/28/97 #6631
The quick-change cutting head 5/23/97 #6635
Trademark Applications
Weed Blaster - (Name for blades) 6/03/96 R-3223
Weed Master - (Head & Blade) 9/10/96 R-3224
Easy Trim 3/24/98 R-3841
</TABLE>
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SEASONALITY
Historically, the domestic outdoor power equipment segment of the lawn and
garden industry has a retail sales season which starts April 1 and ends
between July 31 and August 15. Accordingly, orders are usually received in
the fourth quarter of a calendar year with delivery times for initial orders
ranging from the fourth quarter to the first quarter of the succeeding
period.
The Company is actively seeking to enter international markets, which would
provide contra-seasonal sales in order to balance the domestic sales cycle.
The company's products have a very low labor content. Also, the American made
Tecumseh two cycle gas engine used on the company's trimmer products is less
expensive than foreign two cycle gas engines of similar capability, making
the Company's trimmer products competitive in most foreign markets.
MARKETING AND DISTRIBUTION
The Company presently sells through various channels (see below) to the
retail consumer market. In 1997, the Company sold 2,500 trimmers in what has
been estimated to be a total market of 4.5 million hand held trimmers in the
United States.
The primary end-user market for the Company's products is a middle-age
homeowner who performs his (her) own lawn maintenance and is experiencing
frustration with existing products due to broken blades, tangled cutting line
and misfeeding from the automatic line feeding heads. The targeted market
segment is also believed to be sensitive to the benefit of pushing a trimming
device instead of carrying one.
Trim-A-Lawn sells its products through the following channels.
Mass Merchandisers
The Company currently sells to TruServ Corporation, Ace Hardware, WalMart,
Hechinger's/Builders' Square and other regional mass merchandisers throughout
the country.
Specialty Distributors
Distributors sell to independent outdoor power equipment dealers. The Company
has a distributor base, which provides sales coverage to this group of
retailers.
Dealer Direct
As a component of the marketing to independent outdoor power equipment
dealers, dealer direct programs are also utilized.
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Consumer Direct
Consumer direct programs using television and print media have been
implemented.
Original Equipment Manufacturers
The introduction of the new patented blade products has provided
opportunities for sales to manufacturers of outdoor power equipment who were
previously restricted to the use of cutting line products.
Private Labeling
The Company markets certain of its models of walk-behind trimmers under
private labels.
All sales and marketing efforts are being augmented by a national television
advertising campaign conducted on major cable networks in the first and
second quarters of calendar 1998.
COMPETITION
The Company competes in an industry, which is marked by intense competition.
Many of the Company's direct competitors are financially stronger than the
Company. Competition for the Company's trimmer products are the existing
manufacturers of hand held trimmers as well as manufacturers of "two-
wheel" walk behind trimmers. These walk behind trimmers are marketed
principally by Country Home Products Inc., Troybilt and other smaller
manufacturers. Each of these competitors price their products substantially
higher than the Company's trimmers. The Country Home Products Inc. trimmer
is only sold consumer direct, while the Troybilt unit can be found in mass
merchandisers and other retail outlets.
It is expected that the walk behind trimmer market will expand with a
corresponding decrease in the market of hand held trimmers. This change is
believed likely because of a combination of factors including physical strain
in an aging population, a trend toward smaller lawns, improved (level)
cutting ability, and a shift from two-cycle to four-cycle engine design;
however, there is no assurance that such will be the case.
RESEARCH AND DEVELOPMENT
The company continues to improve its trimmer, blade and line products.
In the spring 1999, the Company plans to introduce a patented drop load
trimmer / mower. The lawn mower replacement cutting head will utilize
patented flail blade technology to introduce a safer alternative to existing
steel lawn mower blades.
In calendar 1999, the Company also plans to introduce a leaf blower
attachment for the gas trimmer, which allows for the dual use of the trimmer
chassis.
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The drop load technology described above allows for the quick charge of a
replacement battery thereby affording an operator the ability for continuous
use of the trimmer without delay for recharge. This feature is expected to
be attractive to commercial landscape professionals who routinely use these
devices for extended periods as opposed to a homeowner who may trim for
periods of short duration.
ITEM 2 - FINANCIAL INFORMATION
FORWARD LOOKING INFORMATION
Forward looking statements and assertions involve risks and uncertainties.
These uncertainties include factors that affect all businesses as well as
those specific to the company in the markets it serves. Particular risks and
uncertainties facing the company at present include changes in the purchasing
practices of mass merchandisers, distributors and consumers. In addition
there are always risks relating to the inability of vendors to supply
critical parts on a timely basis.
The company is also subject to risks and uncertainties facing its industry in
general, including changes in business and the economy in domestic markets,
weather conditions affecting demand, lack of growth in the company's markets,
actions of competitors and the ability to sell both new an existing products
profitably.
The company wishes to caution readers not to place undue reliance on any
forward looking statement and to recognize that such statements are not
predictions of actual future results. Actual results could differ materially
from those anticipated in the forward looking statements and from historical
results, as a result of the risks and uncertainties described, as well as
others not now anticipated.
The company undertakes no obligation to update any forward looking statement
to reflect events or circumstances after the date on which such statement is
made, or to reflect the occurrence of unanticipated events.
Statements that are not historical are forward looking. When used on behalf
of the company, the words expect, anticipate, estimate, believe, intend and
similar expressions generally identify forward looking statements.
LIQUIDITY
The Company has experienced significant liquidity constraints for the past
several years, which have had the effect of inhibiting product development,
operations, and marketing.
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The company began calendar 1997 with a liquidity deficiency, which if left
unremedied would have cast doubt as to whether the company would be able to
continue in business. Cash flows from operations were not sufficient to meet
operating needs in light of the depressed sales together with a strategic
commitment to launch an aggressive marketing plan. The liquidity problems
were addressed by the Company and significantly reduced in the fourth quarter
of 1997 through a sale of common stock, an increase in debt financing and the
conversion of certain debt to equity. Continued funding from equity sources
as well as increased debt funding is expected to be necessary in 1998 until
such time as internally generated cash is sufficient to sustain continued
operations.
RESULTS OF OPERATIONS
For the quarters ended March 31, 1997 and June 30, 1997, the consolidated
results of operations were net losses of $144,296 and $346,237 on sales of
$305,094 and $665,912, respectively
In contrast, for the quarters ended March 31, 1998 and June 30, 1998, the
consolidated results of operations yielded net income of $10,611 and
$105,064 on sales of $1,035,866 and $1,014,251, respectively.
Despite the generally improved results for 1998 described above, the Company
continued to experience degradation of its consolidated net income as a result
of continued unprofitable operations of its majority-owned subsidiary, EKI.
EKI's cost structure relative to its sales was the key factor in these overall
results. In the first quarter of 1998, the Company would have reported net
income of $105,609 absent the $94,998 loss from EKI included in the consol-
idated results. For the first six months, the Company would have reported net
income of $210,673 absent the first quarter EKI loss. Accordingly, the Company
sought to sell its ownership interest in EKI and, in the second quarter 1998,
accomplished this sale (as more fully described in Note 14 to the 1997 fin-
ancial statements). Prospectively, the Company anticipates the sale of the
interest in EKI will have a substantial positive effect on earnings, cash
flow, and overall operating results.
The significant growth in net income and sales from 1997 to 1998 is the
result of the Company's expansion of sales to mass merchandisers supported
by a national television advertising program utilizing all major cable
networks.
All expenses other than the marketing and advertising were relatively
consistent for the 1997 and 1998 periods.
In 1997 sales levels were not sufficient to meet the fixed costs of
operations and administration, and negatively impacted the Company's cash
flow and liquidity. Overall consolidated sales for 1997 were $1,141,564-
compared to $1,267,366 for 1996.
The net loss for 1997 amounting to $1,716,680 included one time charges
aggregating $1.1 million for non-recurring expenses related to writeoff of
organization costs, goodwill and subisidiary software development costs.
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Exclusive of the one-time charges, all other areas of expense remained
consistent with calendar year 1996.
These expense increases were necessary to prepare the company for the planned
growth in 1998.
In 1995, the company recorded a net loss of $271,401 on sales of $699,913.
The Company's core operations (i.e. trimmer equipment) were consistent
between 1996 and 1995 in sales, expenses and substantially all operating
respects. The variation in the financial statements between years primarily
reflects the consolidation of Electronic Kourseware Interactive ("EKI"), a
subsidiary acquired in 1996. (EKI was sold in 1998.)
The Company has been successful, principally through a large-scale
advertising campaign, in gaining commitments from national retail chains to
purchase the Company's products. This advertising was purchased through the
issuance of common stock, as more fully described in Note 2 of the 1997
financial statements (following). This has resulted in a marked increase in
sales in the first quarter of 1998.
Accordingly, with an increase in equity capital (see Liquidity, above) and
the Company's marketing campaign, the Company has positioned itself to
support a multi-million dollar sales program calendar 1998. If successful in
its marketing efforts, the Company can significantly reduce its debt by the
end of 1998.
Inflation was not a factor influencing operations in 1997.
USE OF CAPITAL
In 1998 and in 1997, commitments for capital expenditures were not
significant with the primary costs related to tooling for new products as
well as engineering fees for product design.
During 1997, the company committed to certain tooling expenses for the
production of its trimmer and quick change head. It is not expected that any
significant tooling or product development costs will be required in 1998.
New product development will result in the introduction in 1999 and 2000 of
an entire family of battery powered lawn care devices including trimmers and
edgers and related products.
Additionally, the company was required to provide cash to support the
operations of its majority owned subsidiary. With the sale of the subsidiary
in 1998 the potential for an ongoing responsibility of this nature has been
eliminated.
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YEAR 2000 ISSUES
Management believes that there will be no impact to its business relating to
information processing issues surrounding the advent of the year
2000.However, if the necessary modifications and conversion are not completed
on a timely basis by the Company's suppliers, it is possible that year 2000
compliance may have a material impact on the operations of the company.
Quantitative and Qualitative Disclosures About Market Risk.
None
SUMMARY
In 1998, the Company expects its unconsolidated core business to generate in
excess of $3.0 million in sales (which is a substantial increase over 1997)
with earnings in the range of $300 thousand. The Company is also pursuing
additional debt and equity financing in an aggregate amount up to $2 million.
Together, these are expected to have a favorable impact on the Company's
balance sheet and long-term liquidity.
ITEM 3 - PROPERTIES
The executive offices and assembly facilities are in 30,000 square feet of
leased premises located at 807 Broad Street, Utica, New York 13501, and
management believes that its current facilities are sufficient for current
and foreseeable production needs.
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security ownership of certain beneficial owners.
Name and Amount and
Address of Nature of Percent
Title of class Beneficial Owner Beneficial Ownership of Class
Common Stock Kentfield Group, LTD. 2,650,000 Shares 19.89%
541 Capitola Rd.
Suite 200
Santa Cruz, CA 95062
Common Stock Boyd Schenk 1,102,357 Shares 8.27%
444 North Michigan Ave.
Suite 2900
Chicago, IL 60611
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(b) Security ownership of management.
Name and Amount and
Address of Nature of Percent
Title of class Beneficial Owner Beneficial Ownership of Class
Common Stock Dallas W. Jones 1,323,069 Shares 9.93%
3 White Pine Road
New Hartford, NY 13413
Common Stock Robert J. Salluzzo 752,167 Shares 5.65%
204 South William St.
Johnstown, NY 12095
(c) Changes in control.
No such arrangements are known to the registrant.
ITEM 5 - DIRECTORS AND EXECUTIVE OFFICERS
The list below identifies those persons deemed to be executive officers of
the company, discloses their age and position with the company as of June 30,
1998 and positions held by them during the last five years. Officers are
elected or appointed annually.
Name, Age and Position with Business Experience During the Last
the Company Five Years
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Dallas Jones, 56, President President, Trim A Lawn Corporation
1992 to present
Robert J. Salluzzo, C.P.A., Trim A Lawn Corporation, 1994 to
51, Director of Finance present
Independent Certified Public
Accountant, 1992-1994
Richard P. Nadeau, 48, President, Nadeau Designs, 1992 to
Secretary present
Stephen B. Frost, 62, Trim A Lawn Corporation, 1995 to
Director of Marketing present
Frost Company, Inc., 1992-1995
Al Pacunas, 55, Director Trim A Lawn Corporation, 1995 to
of Sales present
Tecumseh Products, 1992 - 1995
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Antone Clark, 44, Trim A Lawn Corporation, 1995 to
Administration Manager present
National Federation of Ind. Bus.,
1992-1995
Robert G. Buck, 36, Director Trim A Lawn Corporation, 1997 to
of Production Operations present
Incom, 1997
Met Life, 1996-1997
RG Buck Heating & Electric, 1992-1996
Directors of the Corporation are as follows.
Individual Office
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Dallas W. Jones President/Director
Richard P. Nadeau Secretary/Director
Robert J. Salluzzo Treasurer/Director
ITEM 6 - EXECUTIVE COMPENSATION
No officer or director of company received more than $100,000 in any year
since the Company's inception. The four highest compensated officers
(including the Chief Executive Officer) comprising senior management received
less than $225 thousand in the aggregate for the year ended December 31,
1997.
No officer or director has been granted an employment contract or been
provided a future benefit to be received upon separation from service with
the Company.
Members of the Board of Directors do not receive compensation for their
services.
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Continental Marketing Group LLC (CMG) is a shareholder in the Company.
The Company had previously contracted with CMG for marketing services,
however, all contractual relationships for these services were terminated as
of December 31, 1995. However the Company remains a contingent guarantor for
certain of CMG's debt and has assumed $30,000 of debt on behalf of CMG. This
is amount is reflected as a receivable at December 31, 1997.
There are no other relationships or transactions with related parties.
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ITEM 8 - LEGAL PROCEEDINGS
In 1996, the Company eliminated one of its engine manufacturers because of
engine related performance problems. As a consequence, in 1997 the Company
was sued in the Supreme Court of Onondaga County, New York for $140,000 by
the former vendor who had provided engines to the Company for use in its
products. The action alleges that the Company failed to make payments to the
former vendor for engines pursuant to an agreement between the parties.
The Company believes it has meritorious defenses and disputes the claim. The
litigation is at an early stage and, while it is not possible to predict the
outcome, the Company is vigorously defending itself in this action. Also, in
response, the Company has counter-sued the former vendor for a substantially
greater amount citing the former vendor's negligence and faulty product
manufacture related to the subject engines, which resulted in significant
losses to the Company.
ITEM 9 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
At June 30, 1998 the Company's common stock was approved for listing on the
OTC Electronic bulletin board. Prior to that date the stock was traded on an
unsolicited basis at varying prices. The most recent bid information for 1997
(1996 data is not readily available) is reflected below (such over-the-
counter market quotations reflect inter-dealer prices, without retail markup,
markdown or commission and may not necessarily represent actual
transactions).
1997 High Low
First Quarter $5.00 $1.00
Second Quarter $6.00 $ .25
Third Quarter $6.50 $1.00
Fourth Quarter $1.13 $ .25
1998 High Low
First Quarter $ .50 $ .11
Second Quarter $ .75 $ .11
The company has not paid any dividends to date. The Company's current policy
is to utilize any earnings and cash flow to facilitate the growth and
expansion of its operations. In making future dividend decisions, the
Company's Board of Directors will evaluate, along with standard business
considerations, the financial condition of the Company, the degree of
competitive pressure on prices for the Company's products, the level of
available cash flow and other strategic considerations.
At June 30, 1998, there were 232 holders of the Company's Common Stock.
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ITEM 10 - RECENT SALES OF UNREGISTERED SECURITIES
In 1996, the Company accomplished a one-for-three reverse stock split.
The number of common shares in all transactions prior to the reverse
stock split described in this Item 10 have been reclassified for clarity
and comparative purposes.
Recent sales of the Company's Stock comprise the following:
JANUARY 1, 1998 - JUNE 30, 1998:
During 1998, the Company sold an aggregate 586,800 shares of common stock for
cash to private and corporate investors. The Company received approximately
$300 thousand, which has been used principally to fund the new product
development and patent applications. The Company sold the shares of common
stock in reliance on an exemption from registration contained in Rule 504 of
Regulation D of the Securities Act of 1933, as amended ("Rule 504").
During 1998, the Company also sold 1,700,000 shares of its common stock to a
single corporate investor. The Company received approximately $835 thousand,
which has been used principally to fund the working capital needs of the
Company. The Company sold the shares of common stock in a non-public
transaction in reliance on section 4(2) of the Securities Act of 1933, as
amended.
In April 1998, the Company issued a total of 150,000 shares of common
stock in the course of converting preexisting debt amounting to $75 thousand
to equity. No proceeds were received in this transaction, and the Company
issued the shares in a non-public transaction in reliance on section 4(2)
of the Securities Act of 1933, as amended.
During 1998, the also Company issued 136,000 shares of its restricted common
stock to vendors in consideration for goods and services rendered. No proceeds
were received in this transaction, and the Company issued these shares in non-
public transactions in reliance on section 4(2) of the Securities Act of 1933,
as amended.
In February 1998, the Company issued 810,000 shares of its common stock
to employees. The Company issued these shares in non-public transactions
in reliance on rule 701 under the Securities Act of 1933, as amended.
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CALENDAR YEAR 1997:
During the period from June to December 1997, the Company sold an
aggregate of 870,000 shares of common stock to individual and corporate
private investors. The Company received approximately $435 thousand in
aggregate cash proceeds, which has been used principally to fund the
Company's product development, growth and operations. The Company sold
the shares in reliance on an exemption from registration contained in
Rule 504.
During the period from August to December 1997 the Company sold an
aggregate of 800,000 shares of Common Stock to a single corporate investor.
The Company received approximately $400,000 in cash proceeds, which were
used to fund the Company's marketing and advertising development. The
Company issued these shares in non-public transactions in reliance on
Section 4(2) of the Securities Act of 1933, as amended.
During calendar 1997, the Company issued an aggregate 609,824 shares of
its common stock in the course of converting certain of its long-term
debt to equity. There were no additional proceeds to the Company; the
aggregate amount of debt that was eliminated totaled $169,912. The
Company issued these shares in non-public transactions in reliance on
Section 4(2) of the 1933 Securities Act, as amended.
During Calendar 1997, the Company issued an aggregate 1,626,176 shares to
certain of Company's vendors for services. No proceeds were received in this
transaction, and the The Company issued these shares in non-public transactions
in reliance on Section 4(2) of the 1933 Securities Act, as amended.
CALENDAR YEAR 1996:
During 1996 the Company issued 300,000 shares of Common Stock and 100,000
shares of Preferred Stock in exchange for the intellectual and operating
assets of a software development corporation. This transaction was
completed in a tax-free exchange utilizing the issuer's subsidiary.
(Refer to the notes to the attached financial statements for the year
ended December 31, 1996.) The subsidiary was sold in 1998. The issuance
was made in reliance on section 4(2) of the Securities Act of 1933, as
amended.
During the calendar 1996 the Company issued an aggregate 135,825 shares of
its Common Stock in the course of converting certain of its long-term debt
to equity. There were no cash proceeds to the Company. The total
debt eliminated amounted to $135,825. The Company issued these shares in
reliance on Section 4(2) of the Securities Act of 1933, as amended.
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During calendar 1996, the Company issued 119,000 shares of Common Stock in
consideration for services rendered to the Company. The Company issued these
shares in non-public transactions in reliance on Section 4(2) of the Securities
Act of 1933, as amended.
During the period November through December 1996 the Company sold in the
aggregate 84,000 shares of Common Stock to a corporate investor. The
Company received $42,000, which was used to fund Company operations. The
Company sold the shares of Common Stock in reliance on an exemption from
registration contained in Rule 504 of Regulation D of the Securities Act
of 1933, as amended.
CALENDAR YEAR 1995:
During calendar 1995, the Company issued an aggregate 473,840 shares of
its common stock in the course of converting certain of its long-term
debt to equity. There were no additional proceeds to the Company; the
aggregate amount of debt that was eliminated totaled $655 thousand. The
Company issued these shares in non-public transactions in reliance on
Section 4(2) of the 1933 Securities Act, as amended.
During Calendar 1995, the Company issued an aggregate 1,938,138 shares to
Company employees in return for personal guarantees by these employees of
certain of the Company's debt. There were no additional proceeds to the
Company, and the Company issued these shares in non-public transactions
in reliance on Section 4(2) of the 1933 Securities Act, as amended.
ITEM 11 - DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The Company has two classes of capital stock: common and convertible
preferred.
The common stock is voting stock (one vote per share), and there are no
cumulative or other rights with respect to this stock.
The convertible preferred stock has rights and attributes as follows:
Voting rights - The convertible preferred stock has voting rights equal to
one vote per share.
Liquidation Preference - The holders of the convertible preferred stock are
entitled to receive a distribution from the Company's assets equal to $10 for
each share upon liquidation together with any declared and unpaid dividends.
Dividends - Convertible Preferred shareholders are entitled to dividends only
if declared by the Board of Directors of the Company. The right to receive
dividends is not cumulative. The annual amount of the dividend is equal to
7%, if declared.
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<PAGE>
Conversion Rights - At any time before liquidation, termination or winding up
the Corporation, the holders of Convertible Preferred Stock have the right to
convert all or any portion of their shares into common shares of the
corporation at the rate of three common shares for each preferred share.
The Company anticipates that in 1998 a second class of preferred stock will
be added as a result of a planned conversion of $250,000 of debt into equity.
(See Note 10 of the Notes to the Financial Statements.)
ITEM 12 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of Delaware provides that a
corporation may indemnify any person who was or is a party or is threatened
to be made a party to any action, suit or proceeding, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgements, fines and amounts paid in settlement, actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interest of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. No indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable
to the corporation unless and only to the extent that the Court of Chancery
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses which the Court of Chancery or such other
court shall deem proper.
The Company's bylaws provide that the Company will indemnify the officers and
directors of the Company to the fullest extent permitted under the laws of
the State of Delaware. In that regard, the Company is obligated to indemnify
officers and directors of the Company from and against any and all
judgements, fines, amounts paid in settlement, and reasonable expenses,
including attorneys' fees, actually and necessarily incurred by an officer or
director as a result of any action or proceeding, or any appeal therein, to
the extent such amounts may be indemnified under the laws of Delaware; and to
pay any officer or director of the Company in advance of the final
disposition of any civil or criminal proceeding, the expenses incurred by
such officer or director in defending such action or proceeding. The
Company's obligation to indemnify its officers and directors continues to
individuals who have ceased to be officers or directors of the Company, and
to the heirs and personal representatives of former officers and directors
the Company.
17
<PAGE>
ITEM 13 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
TRIM A LAWN CORPORATION
BALANCE SHEET
UNAUDITED
<CAPTION>
March 31, March 31, June 30 June 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash -- -- $18,597 --
Accounts Receivable $641,979 $233,995 583,934 $105,150
Inventory 724,939 372,201 516,608 392,140
Prepaid Expenses 3,161,442 18,399 3,171,561 4,151,584
Other Receivables -- -- 310,652 102,343
Other Receivables - Related Party 48,924 76,006 52,997
------------- ------------- ------------- -------------
4,577,284 700,601 4,654,349 4,751,217
------------- ------------- ------------- -------------
Property and Equipment, Net 400,386 204,881 198,502 215,292
------------- ------------- ------------- -------------
Other Assets
Organization and Development Costs 367,323 1,207,639 510,916 354,242
Developed and Purchased Intellectual Pro -- 1,429,778 -- 666,449
Patents, Trademarks and
Other Intangibles 188,803 187,837 186,918 494,640
Software Source Codes 642,135 642,135
Other Long Term Receivable 1,012,154
Less: Accumulated Amortization (164,399) (374,713) (235,383) (395,713)
------------- ------------- ------------- -------------
1,033,862 2,450,541 1,474,605 1,761,753
------------- ------------- ------------- -------------
Total Assets $6,011,532 $3,356,023 $6,327,456 $6,728,262
============= ============= ============= =============
</TABLE>
18
<PAGE>
<TABLE>
TRIM A LAWN CORPORATION
BALANCE SHEET
UNAUDITED
<CAPTION>
March 31, March 31, June 30 June 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Bank Overdrafts $15,289 $44,517 $17,983
Accounts Payable 703,160 522,693 622,822 685,054
Bank Line of Credit 274,881 369,827 181,794 344,245
Other Accrued Liabilities -- 170,457 12,348
Other Short Term Debt -- -- 20,000 --
Current Portion of Long Term Debt -- -- -- 507,567
------------- ------------- ------------- -------------
993,330 1,107,494 824,616 1,567,197
------------- ------------- ------------- -------------
Loans and Notes Payable 237,014 482,050 747,635 63,275
Loans and Notes Payable - Related Parties 362,014 229,430 268,500
Accrued Interest Payable 54,620 62,104 74,899
------------- ------------- ------------- -------------
653,648 773,584 747,635 406,674
------------- ------------- ------------- -------------
Total Liabilities 1,646,978 1,881,078 747,635 1,973,871
Stockholders' Equity
7% Non-Cumulative Preferred Stock
$10 Par Value; Authorized - 500,000
shares;
Issued and Outstanding - 100,000 share 1,000,000 1,000,000 1,000,000 5,000,000
at June 30, 1998
Common Stock - $.0001 Par Value
$.0001 Par Value; Authorized -
50,000,000 shares;
Issued and Outstanding -11,361,509
shares
at June 30, 1998 2,248 1,805 2,248 1,805
Paid In Surplus 8,080,836 3,579,605 7,774,228 2,869,635
Retained Deficit (4,668,240) (3,106,465) (3,918,481) (3,307,406)
Less - Treasury Stock (50,290) -- (102,790) (22,790)
Minority Interest -- -- -- 213,147
------------- ------------- ------------- -------------
Total Stockholders' Equity 4,364,554 1,474,945 4,755,205 4,754,391
------------- ------------- ------------- -------------
Total Liabilities and Stock-
holders' Equity $6,011,532 $3,356,023 $6,327,456 $6,728,262
============= ============= ============= =============
</TABLE>
19
<PAGE>
<TABLE>
TRIM A LAWN CORPORATION
STATEMENT OF INCOME,
EXPENSE, AND CHANGE
IN RETAINED DEFICIT
UNAUDITED
<CAPTION>
Three Months Three Months Three Months Three Months Six Months Six Months
Ended March 31 Ended March 31 Ended June 30 Ended June 30 Ended June 30 Ended June 30
1998 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Net Sales $1,035,866 $305,094 $1,014,251 $665,912 $2,050,117 $971,006
Cost of Goods Sold 627,645 160,782 765,591 356,081 1,393,236 516,863
Gross Profit ------------- ------------- ------------- ------------- ------------- -------------
408,221 144,312 248,660 309,831 656,881 454,143
------------- ------------- ------------- ------------- ------------- -------------
Marketing and Sales Expense 143,322 71,867 47,546 162,569 190,868 234,436
General and Administrative
Expenses 221,845 156,313 84,195 328,748 306,040 485,061
Depreciation and Amortization 5,093 14,900 3,396 64,400 8,489 79,300
Interest and Finance Costs 25,925 43,514 19,923 96,663 45,848 140,177
Interest Income -- -- (12,164) -- (12,164) --
Provision for Income Taxes 1,425 2,014 700 3,688 2,125 5,702
------------- ------------- ------------- ------------- ------------- -------------
Net Income / (Loss) $10,611 ($144,296) $105,064 ($346,237) 115,675 (490,533)
============= ============= ============= ============= ============= =============
Retained Deficit - Beginning of Period 4,678,849 2,962,162 4,668,238 3,106,465 9,347,087 6,068,627
------------- ------------- ------------- ------------- ------------- -------------
Retained Deficit - End of Period $4,668,238 $3,106,458 $4,563,174 $3,452,702 9,231,412 6,559,160
============= ============= ============= ============= ============= =============
Weighted Shares of Common Stock 10,276,684 5,730,037 11,021,009 6,153,183 10,648,847 5,941,610
Net Income - Per Share $0.001 ($0.025) $0.010 ($0.056) $0.011 ($0.081)
</TABLE>
20
<PAGE>
<TABLE>
TRIM A LAWN CORPORATION
STATEMENT OF CASH FLOWS
UNAUDITED
<CAPTION>
Three Months Three Months Six Months Six Months
Ended March 31 Ended March 31 Ended June 30 Ended June 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net Income (Loss), including subsidiary ad $10,609 ($144,296) $115,675 ($345,237)
Adjustments to Reconcile Net Loss to Net
Cash Used By Operating Activities
Depreciation and Amortization Net of Dispositions
and Writedowns (221,576) 303,167 (10,186) 64,400
Decrease (Increase) in Operating Assets
Accounts Receivable (557,032) (98,137) (498,987) 30,708
Inventory (234,712) (53,808) (26,381) (73,747)
Other Receivables (20,352) (108,804) (102,343)
Prepaid Expenses (98,685) 87,462 (4,045,723)
Loans Receivable- Related Parties (11,396) (39,070) (15,469) 55,654
Increase (Decrease) in Operating Liabilities
Accrued Interest Payable (5,032) 7,599 (59,652) 88,490
Accounts Payable and Accrued Expense 148,438 96,586 68,100 22,355
------------- ------------- ------------- -------------
Net Cash Used By Operations (969,386) 139,151 (535,704) (4,305,443)
------------- ------------- ------------- -------------
Cash Flows From Investing Activities
Investment in EKI (1,322,806)
Equipment, Furniture and Fixtures (42,429) 801 178,302 (9,409)
Purchase of Tooling (30,498) (40,609) (37,329) (57,100)
Trademarks and Patents (5,235) 147,205 (3,350)
Purchase of Leasehold Improvements (8,475) 72,722 (16,175)
Capitalized Software Source Codes (1,262,643) 642,135 (98,871)
Capitalized Value of Customer Lists (71,053)
Organization and Development Costs (214,646)
------------- ------------- ------------- -------------
Net Cash Used by Investing Activities (157,690) (1,082,524) (773,869) (165,380)
------------- ------------- ------------- -------------
Cash Flows From Financing Activities
Bank Line of Credit (72,821) 582 (165,908) 17,980
Bank Overdrafts (6,760) 44,517 (22,049) (25,000)
Long Term Loans and Notes Payable (236,259) 341,601 294,362 130,393
Notes Payable- Related Parties 192,514 (169,500)
Short Term Debt 1,277,507 (88,977) (78,590)
Additional Paid in Capital 642,116 1,470,870 145,293
Purchase of Treasury Stock (27,500) (80,000) (22,790)
Issuance of Preferred Stock 4,000,000
Common Stock Issuance 395 291 395 291
------------- ------------- ------------- -------------
Net Cash Provided by Financing Activities 1,127,076 940,130 1,328,170 4,167,577
------------- ------------- ------------- -------------
Net Increase/(Decrease) in Cash 0 (3,243) 18,597 (483,103)
Cash Beginning of Period 0 3,243 0 3,243
------------- ------------- ------------- -------------
Cash, End of Period $0 $0 $18,597 $0
============= ============= ============= =============
Supplemental Disclosures of Cash Flow Information
Cash Paid During the Year For:
Interest 30,405 30,707 51,561 62,712
------------- ------------- ------------- -------------
Income Taxes 0 0 0 325
------------- ------------- ------------- -------------
</TABLE>
21
<PAGE>
Notes to Interim Period Financial Statements
1. The unaudited interim period financial statements have been prepared on
the same basis as the audited financial statements prepared at year end. In
the opinion of management, such unaudited interim period financial statements
include all adjustments necessary to present fairly the results for the
interim periods noted. Operating results for interim periods are not
necessarily indicative of the operating results for a full fiscal year.
2. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions which affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
3. In April 1998, Trim-A-Lawn Corporation received and accepted an offer to
sell its majority interest in Electronic Kourseware Interactive Inc. See
note 14 to the 1997 financial statements for a complete description of the
transaction.
22
<PAGE>
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT
Board of Directors
Trim-A-Lawn Corporation
We have audited the accompanying consolidated balance sheet of Trim-A-
Lawn Corporation and Subsidiary as of December 31, 1997, and the related
consolidated statements of operations, changes in shareholders' equity
and cash flows for the year then ended. These consolidated financial
statements are the representation of the management. Our responsibility
is to express an opinion on these consolidated financial statements based
on our audit.
The audit was conducted in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Trim-A-Lawn Corporation and Subsidiary as of December 31,
1997, and the consolidated results of their operations and their cash
flows for the year then ended in conformity with generally accepted
accounting principles.
Van Buren & Hauke, LLC
New York, New York
April 28, 1998
23
<PAGE>
<TABLE>
TRIM-A-LAWN CORPORATION and Subsidiary
Consolidated Balance Sheet
December 31, 1997
<CAPTION>
<S> <C>
ASSETS
Current Assets
Accounts Receivable, net $84,947
Inventory 490,227
Prepaid Advertising Expense 3,050,000
Prepaid Expenses - Other 12,757
Other Receivables-Related Party 37,528
---------
Total Current Assets 3,675,459
---------
Property and Equipment
Leasehold Improvements, net of
accumulated depreciation ($2,231) 1,752
Equipment, net of accumulated
depreciation ($145,582) 92,617
Tooling, net of accumulated
depreciation ($201,857) 109,458
---------
Total Property and Equipment 203,827
---------
Other Assets
Organization and Development Costs 60,104
Software Source Codes 642,135
Developed and Purchased Intellectual
Property, net of accumulated
amortization ($175,660) 60,506
Trademarks and Patents, net of
accumulated amortization ($33,838) 32,877
Goodwill, net of accumulated
amortization ($61,320) 55,533
---------
Total Other Assets 851,155
---------
Total Assets $4,730,441
==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
<TABLE>
TRIM-A-LAWN CORPORATION and Subsidiary
Consolidated Balance Sheet
December 31, 1997
<CAPTION>
<S> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Bank Overdrafts $22,049
Accounts Payable 487,832
Accrued Expenses Payable 66,890
Loans and Notes Payable - Current Portion 82,680
Bank Line of Credit 347,702
Accrued Interest Payable - Current Portion 6,743
---------
Total Current Liabilities 1,013,896
Long-term Liabilities
Loans and Notes Payable 390,593
Loans and Notes Payable- Related Parties 169,500
Accrued Interest Payable 52,909
Total Long-term Liabilities 613,002
---------
Total Liabilities 1,626,898
---------
Commitments and Contingencies
Shareholders' Equity
7% Non-Cumulative Convertible Preferred Stock
$10 par value
Authorized- 500,000 shares;
Issued and outstanding 100,000 shares 1,000,000
Common Stock
$.0001 par value
Authorized - 50,000,000 shares;
Issued and Outstanding 9,678,709 shares 1,853
Paid-in Capital 6,726,696
Accumulated Deficit (4,678,849)
Treasury Stock (22,790)
Minority Interest 76,633
---------
Total Shareholders' Equity 3,103,543
---------
Total Liabilities and Shareholders' Equity $4,730,441
=========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
<TABLE>
TRIM-A-LAWN CORPORATION and Subsidiary
Consolidated Statement of Operations
For the Year Ended December 31, 1997
<CAPTION>
<S> <C>
Sales, Net of Returns
Trim-A-Lawn Corporation $450,191
Electronic Kourseware Interactive 691,373
---------
1,141,564
---------
Cost of Sales
Trim-A-Lawn Corporation 362,337
Electronic Kourseware Interactive 188,757
---------
551,094
---------
Gross Profit 590,470
---------
Expense
Sales 258,005
Marketing 195,178
Salaries and related costs 385,879
Insurance 79,116
Rent 60,944
Utilities 8,291
Other General and Administrative 749,326
---------
Total Sales, General and Administrative
Expense 1,736,739
---------
Depreciation and Amortization 365,123
---------
(Loss) From Operations (1,511,392)
---------
Other Expense
Funding Charges 15,861
Interest Expense and Finance Costs 119,922
Non Trade Bad Debt Expense 52,977
Corporation and Franchise Taxes 16,528
---------
Total Other Expense 205,288
---------
Net (Loss) For the Period ($1,716,680)
===========
Net (Loss) Per Common Share Outstanding ($0.22)
===========
Weighted Average Number of
Common Shares Outstanding 7,557,228
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
<TABLE>
TRIM-A-LAWN CORPORATION and Subsidiary
Consolidated Statement of Changes in Shareholders' Equity (Deficit)
For the Year Ended December 31, 1997
<CAPTION>
Preferred Common Treasury Preferred Common Paid In Accumulated
Shares Shares Stock Par Value Par Value Capital Deficit
Totals
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
Balances December 31, 1996 100,000 5,472,709 0 $1,000,000 $1,514 $2,637,487 ($2,962,169)
$676,832
Convertible Preferred
Shares Issued
For Purchase of National
Advertising 400,000
Shares Converted (400,000) 1,200,000 0 0 120 3,999,880 0
$4,000,000
Common
Shares Issued
Private Placement 0 1,670,000 0 0 167 836,229 0
$836,396
For Services 0 693,176 0 0 69 346,519 0
$346,588
Debt Conversion 0 609,824 0 0 20 169,892 0
$169,912
For Purchase of National
Advertising 0 933,000 0 0 93 2,999,907 0
$3,000,000
Shares Cancelled
Cancellation of Advertising
Agreement 0 (1,200,000) 0 0 (120) (3,970,084) 0
($3,970,204)
Shares Returned 0 (100,000) 0 0 (10) 0 0
($10)
Offering Costs 0 0 0 0 0 (216,500) 0
($216,500)
Purchase of Treasury Stock 0 0 ($22,790) 0 0 0 0
($22,790)
Net Loss For the Period 0 0 0 0 0 0 (1,716,680)
($1,716,680)
Balances December 31, 1997 100,000 9,278,709 ($22,790) $1,000,000 $1,853 $6,803,330 ($4,678,849)
$3,103,544
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
<TABLE>
TRIM-A-LAWN CORPORATION and Subsidiary
Consolidated Statement of Cash Flows
For the Year Ended December 31, 1997
<CAPTION>
<S> <C>
Cash Flows From Operating Activities:
Net Loss, including subsidiary adjustment ($1,716,680)
Adjustments to Reconcile Net Loss to Net
Cash Used By Operating Activities
Depreciation and Amortization Net of
Dispositions and Writedowns 255,271
Decrease (Increase) in Operating Assets
Accounts Receivable 50,911
Inventory (171,834)
Other Receivables 18,126
Prepaid Expenses (2,956,896)
Loans Receivable- Related Parties (99,000)
Increase (Decrease) in Operating Liabilities
Accrued Interest Payable 5,147
Accounts Payable and Accrued Expense (41,842)
Net Cash Used By Operations (4,656,797)
Cash Flows From Investing Activities
Equipment 3,775
Purchase of Tooling (97,410)
Trademarks and Patents 151,474
Purchase of Leasehold Improvements (1,118)
Capitalized Software Source Codes 207,865
Capitalized Value of Customer Lists 325,000
Organization and Development Costs (453)
Research and Development 24,043
Charge off of Goodwill 381,700
Net Cash Provided by Investing Activities 994,876
Cash Flows From Financing Activities
Payments on Bank Line of Credit (21,543)
Proceeds of Bank Overdrafts 22,049
Proceeds of Long Term Loans and Notes Payable 243,847
Proceeds From Additional Paid in Capital 3,436,776
Purchase of Treasury Stock (22,790)
Common Stock Issuance 339
Net Cash Provided by Financing Activities 3,658,678
Net Decrease in Cash ($3,243)
Cash Beginning of Period 3,243
Cash, End of Period $0
Supplemental Disclosures of Cash Flow Information
Cash Paid During the Year For:
Interest 114,775
Income Taxes 0
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
TRIM-A-LAWN CORPORATION and Subsidiary
Notes to Consolidated Financial Statements
For the Year Ended December 31, 1997
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
The accounting and reporting policies of Trim-A-lawn Corporation (TAL), the
"Company" and its majority owned subsidiary, Electronic Kourseware
Interactive, conform with generally accepted accounting principles and
practices within their respective industries. The policies that materially
affect the financial position and results of operations are summarized below.
Nature of Operations
The Company is a Delaware corporation located in Utica, New York which
operates in principally one business segment, that being the outdoor power
equipment market. Its products are sold to mass merchandisers as well as
through distributors to dealers specializing in lawn and garden equipment
sales and support. The Company also engages in the consumer direct marketing
of its products using both print and television media.
Electronic Kourseware International, Inc. (EKI) a majority owned subsidiary
d/b/a Electronic Kourseware Interactive, is a Delaware corporation that
develops, produces, and markets a line of educational software products and
electronic kits for the secondary education school market, including
vocational educational training. The company is located in Orem, Utah.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its majority-owned subsidiary. All material intercompany accounts and
transactions have been eliminated in consolidation. The minority interest
noted relates to the common stock not owned by the Trim-A-Lawn Corporation.
Method of Accounting
The company employs the accrual method of accounting in accordance with
generally accepted accounting principles which require that income be
recorded when earned and expenses recognized as they are incurred.
Capital Structure
The company has two classes of stock authorized, common and convertible
preferred.
Common Stock
The Common stock authorized is voting common with one vote per share. There
are no cumulative or special rights which inure to this issue.
Convertible Preferred
The attributes of the preferred stock authorized are as follows.
29
<PAGE>
Voting Rights
The convertible preferred stock has voting rights equal to one vote per
share.
Liquidation Preference
The holders of the preferred stock are entitled to receive a distribution
from the corporation's assets equal to $10 for each share upon liquidation
together with any declared and unpaid dividends.
Dividends
Preferred shareholders are entitled to dividends only if declared by the
Board of Directors of the company. The right to receive dividends is not
cumulative. The annual amount of the dividend would be 7% if declared.
Conversion Rights
At any time before liquidation, termination or winding up the corporation,
the holders of preferred stock have the right to convert all or any portion
of their shares into common shares of the corporation at the rate of three
common shares for each preferred share.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
which affect the reported amounts of assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Fair Value of Financial Instruments
In management's opinion, as of December 31, 1997, the carrying amounts of
accounts receivable, inventory, prepaids, other receivables, accounts
payable, accrued expenses, notes and loans payable and other short and long
term debt approximate fair value.
Accounts Receivable
Accounts receivable are recorded net of any reserve for doubtful accounts.
For the period ended December 31, 1997 there were no doubtful accounts.
Inventory
Inventory for the Company and its majority owned subisidary consists
substantially of raw materials and component parts which are valued at the
lower of cost or market on a first-in-first-out basis. The company and its
subsidiary are engaged in the assembly of products from components
manufactured by other entities. As such, inventory amounts include only the
cost of the products acquired for assembly. At statement date, work-in-
progress and finished goods were insignificant.
30
<PAGE>
Property and Equipment
Property and equipment are stated at cost. Depreciation is recorded on a
straight line basis over estimated useful lives from five to ten years. Upon
disposition of any equipment, both cost and accumulated depreciation are
removed with any resulting gain or loss recorded in the period of sale or
disposition.
Source Codes
Software source codes have been internally developed and are recorded at the
cost of development and relate to educational software which will be marketed
in 1998. Annual amortization will be taken on a percentage basis of annual
sales compared to an overall estimated sales amount over the expected sales
life of the software. The estimated future sales will be reviewed annually
with adjustments to be made as required.
Developed and Purchased Intellectual Property
Developed and purchased software is recorded at cost and purchased cost.
These amounts are being amortized in a manner similar to that described above
relating to source codes.
Trademarks and Patents
Trademarks and patents are recorded at cost and amortized on a straight line
basis over seventeen years.
Goodwill
Goodwill has been recognized as the result of the excess of fair market value
of shares exchanged for assets in transactions completed in 1989.
Amortization charges are being made over a fifteen year period.
Net Loss Per Common Share Outstanding
Net loss per common share outstanding is calculated by dividing the net loss
for the period by the weighted average number of common shares outstanding
during the period.
2) PREPAID ADVERTISING
In November and December of 1997 Trim-A-Lawn purchased 200,000 advertising
spots on major television networks for $2,000,000. In a similar fashion 2,500
radio advertising spots were purchased on a nationally recognized radio
network. This purchase amounted to $1,000,000.
The television time was purchased for cash, a percentage of sales resulting
from the advertising and common stock. The cash and percentage of sales
component of the purchase is limited to $300,000. TAL also exchanged 600,000
shares of its common stock for the balance of the purchase.
31
<PAGE>
The valuation of the television advertising time for financial statement
purposes, has been made at the confirmed cash cost of the time. This seller
buys unutilized advertising time for cash from major networks and remarkets
this time to end users under varying purchase methods including those noted
above. The cost to the seller is substantially below rate card values, these
being the normal measure of valuation in a transaction
of this type.
The radio advertising time was procured directly from the network in exchange
for 333,000 restricted shares of TAL common stock. The valuation for
financial statement purposes was made at an average rate card value of $400.
The network charges from $200 to $700 a spot depending on the time of the
broadcast day that advertising is aired. TAL has purchased a "run of the
station" mix of advertising time in which to air the 2,500 spots purchased.
Accordingly, an average cost per spot of $400 has been utilized to value the
time purchased.
Both the radio and television advertising time will be aired over a two year
period beginning in 1998.
Prior to these transactions, TAL had purchased $4,000,000 of television
advertising time on secondary television networks. In April 1998, TAL
exercised its rights to cancel this contract. To enhance financial statement
meaningfulness, the effect of the cancellation has been recorded as of
December 31, 1997. The $4,000,000 previously recorded as prepaid advertising
has been written off as of December 31, 1997.
3) RELATED PARTY TRANSACTIONS
The financial statements include the following related party transactions.
There were no significant amounts accrued or unpaid at statement date for
personal services performed by any officer, director or shareholder of the
corporation.
The Continental Marketing Group LLC (CMG) is a shareholder in TAL. TAL had
previously contracted with CMG for marketing services. All contractual
relationships for these services were terminated as of December 31, 1995.
TAL, however, remains as contingent guarantor for CMG's debt as reflected in
Note 11. The Company as a guarantor has assumed $30,000 of debt on behalf
of CMG. This amount is reflected as a receivable at December 31, 1997.
32
<PAGE>
4) BANK LINE OF CREDIT
The Company's line of credit with BSB Bank and Trust of Binghamton, New York
expired on June 30, 1997. The note was renewed in August 1997 for a one year
term during which payments of principal of $5,000 per month inclusive of
interest will be made. It is expected that the note will be renewed for an
additional twelve month period at the end of the initial note term. At
December 31, 1997, $217,617 was owed on this note.
Electronic Kourseware International , d/b/a Electronic Kourseware Interactive
has an operating line of credit arrangement with a financial institution,
under which it may borrow the lesser of $125,000 or 75% of eligible accounts
receivable. The loan has exceeded the borrowing base by $78,977 as of
December 31, 1997. Amounts drawn under this line of credit bear interest at
prime plus 2% and are payable on demand. The line is secured by inventory
and accounts receivable.
EKI has at the bank's request entered into a repayment program to reduce the
outstanding amount. Payments of $35,000 have been made subsequent to year
end to reduce the outstanding liability.
5) SUMMARY OF INVESTMENT IN SUBSIDIARY
TRIM-A-LAWN CORPORATION agreed in June 1996 to acquire substantially all of
the assets and operations of EKI for common and preferred stock valued at
$2,090,000. This value was subsequently written down to $1,025,435
reflecting reduction in carrying value to fair market as well as an
elimination of goodwill in the amount of $300,000. The assets acquired are
now valued as noted below.
Category Amount
Inventory $ 220,000
Equipment 155,000
Furniture and Fixtures 8,300
Software Sources Codes 642,135
Total $1,025,435
The transaction is considered non-taxable pursuant to Section 368 of the
Internal Revenue Code. EKI has been a software development and distribution
company selling products primarily within the educational field.
Certain EKI shareholders were also shareholders in Trim-A-Lawn Corporation at
the date of acquisition.
On June 30, 1997, Exclaim Productions Inc. was merged into Jackson Technology
Inc. The Company retained an 82% interest in the merged entity with an 18%
interest being retained by previous ownership and management. The name of the
merged entity has been changed to Electronic Kourseware International, Inc.
33
<PAGE>
The consolidated financial statements present the financial position, results
of operations and cash flows of Trim-A-Lawn Corporation and Electronic
Kourseware Interactive, Inc. as if they were a single entity. All
intercompany transactions have been eliminated. The values used in the
acquisition of assets noted above approximate the historical cost of the
assets immediately prior to the acquisition.
In April 1998 the management of EKI purchased TAL's interest for $1,000,000.
See note 15 for additional reference.
6) LOANS AND NOTES PAYABLE
At statement date the Company was indebted on a long term basis as follows.
Lender Amount
City of Utica Revolving Loan Fund, maturing
in October, 1998 with interest at 9%. Secured
by a second security position in all corporate
assets and the personal guarantee of company
officers. Principal and interest payments
of $1,129 are due monthly. $69,875
Rome Industrial Development Corporation maturing
October 1998 with interest at 6.75%. Principal
and interest payments of $975 are due monthly
through the maturity date. This loan is unsecured
and is guaranteed by a corporate officer. 27,312
Smead Family Trust, note payable with interest
at 15% per year payable quarterly on the unpaid
balance. The note is a demand note secured by an
interest in certain patents and trademarks. 5,000
Richard A. Reed, note payable with interest at
15% per year payable quarterly on the unpaid
balance. The note is a demand note secured by
certain patents and trademarks. 1,500
Lynda M. Eyrich, note payable with interest
at 15% per year payable quarterly on the unpaid
balance. The note is a demand note secured by
an interest in certain patents and trademarks. 22,000
John W. and Helen R. Boone Trust, note payable
with interest at 15% per year payable quarterly
on the unpaid balance. The note is a demand
note secured by an interest in certain patents
and trademarks. 4,000
34
<PAGE>
Montgomery County Economic Development
Corporation with an interest rate of 7% payable
at the time of loan repayment. 40,000
Charles and Julian Fetter Trust, note payable
with interest at 15% per year payable quarterly
on the unpaid balance. The note is a demand
note secured by an interest in certain patents
and trademarks. 4,000
Kentfield Group LTD., note payable with interest
at 6% per annum. The note is a thirty six month
note with a provision that allows Kentfield to
convert the note into $1 per share preferred stock. 250,000
Plymouth Partners L.P. ninety day note maturing
in October 1997 with interest at 6% per annum
payable at the end of the term. Note is
convertible into common stock at $1.25 per share
at lenders option. 49,586
Total Loans and Notes Payable $473,273
Less Current Portion (82,680)
Long Term Portion $290,593
Debt payments will be due in future periods as follows.
December 31, 1998 $82,680
December 31, 1999 $290,593
7) NOTES RELATED PARTIES
Note payable related party is as follows. Each of the individuals noted is a
shareholder.
Lender Amount
Boyd Schenk, note payable with interest
at 10% per annum $119,500
Jim R. Clare note payable with interest
at 10% per annum 25,000
Don Valverde note payable with interest
at 10% per annum 25,000
Total $169,500
Interest is accrued at statement date.
35
<PAGE>
8) ACCRUED INTEREST PAYABLE
Interest has been accrued on all loans outstanding with $50,509 of the total
of $59,652 being owed to related parties. The Company expects to exchange
its stock for the underlying debt which will in effect eliminate this
liability.
9) NON-MONETARY TRANSACTIONS
All non-monetary transactions consisted of the issuance of either company
preferred or common stock in exchange for liabilities or services.
10) CAPITAL TRANSACTIONS
During the year ended December 31, 1997 the following capital
transactions occurred.
Common Stock
Shares of common stock have been issued through statement date in the
following manner.
Purpose Number of Shares
Purchase of Advertising Time 933,000
Pursuant to Rule 504 private placement 1,670,000
For Services 693,176
Debt conversion 609,824
Total issued 3,906,000
Shares issued for the private placement as well as for services have been
valued at $.50 per share.
Rule 504 Private Placement
Through issue date the Company has completed the raising of equity capital
amounting to $1,000,000 pursuant to the Rule 504 Private Placement. The
costs of the placement totaling $216,500, have been deducted from paid-in-
capital. The placement costs have been accumulated over a two year period.
They have been deducted against paid-in-capital in 1997, which is deemed to
be the period in which all placements were deemed to be substantially
completed.
Convertible Preferred Stock
Four hundred thousand shares of convertible preferred stock were issued as
noted previously for the acquisition of national television advertising.
These were converted to 1,200,000 shares of common stock in August, 1997.
Treasury Stock
On April 4, 1997, the company purchased on the open market 13,000 shares of
its stock at $1.75 per share.
36
<PAGE>
New Issue $1-Preferred Stock
The Company expects to issue to the Kentfield Group LTD. Preferred stock in
exchange for the $250,000 in debt reflected in Note 6.
The significant attributes of this issuance are as follows:
Each preferred share will be entitled to one vote on any matters which
holders of common stock may vote.
Each share will be able to be converted into two shares of common stock.
The issue will have a redemption provision which will require any original
investment of Kentfield to be repaid after thirty three months in the event
that certain valuation levels are not met.
Issue is to be secured by patents of the company.
(11) COMMITMENT AND CONTINGENCIES
The Company leases 30,000 square feet of assembly and office space on a
month-to-month basis. In February, 1998 an eighteen month lease was signed.
This lease requires monthly payments of $2,500. TAL has the right to renew
for an additional eighteen month period.
TAL is a contingent guarantor on a loan in the amount of $120,000 owed to the
Montgomery County New York Revolving Loan Fund by the Continental Marketing
Group LLC. Previously, the loan fund has been a guarantor to BSB Bank and
Trust of Binghamton, New York the original lender. The Company was also a
guarantor to BSB Bank and Trust on a loan in the amount of $30,000. This
loan has been assumed by Trim-A-Lawn Corporation and is reflected at December
31, 1997 as a receivable due from a related party.
Continental Marketing Group has entered into a five year repayment program
commencing September, 1997, to repay the amounts owed the Revolving Loan
Fund. TAL remains as a guarantor.
12) LEGAL PROCEEDINGS
Trim-A-Lawn has been sued for $140,000 by a former vendor who had provided
engines to the Company. Trim-A-Lawn has counter sued for an amount in excess
of $1,000,000 citing negligence and other claims citing faulty product
manufacture. No actions have occurred beyond the filing of initial
notifications.
37
<PAGE>
13) INCOME TAXES
No provision has been made for federal income taxes as the Company has
incurred net operating losses on which no tax liability needs to be
reflected. These losses are available to offset future periods' income tax
liabilities. These losses will expire between 2005 and 2010 if not utilized
sooner.
A provision of $12,000 has been made for Delaware and New York State
franchise taxes.
14) SUBSEQUENT EVENTS
In April 1998, Trim-A-Lawn Corporation received and accepted an offer to sell
its majority interest in Electronic Kourseware Interactive Inc. The buying
group includes the president of EKI. This group had no ownership in EKI or
Trim-A-Lawn Corporation prior to this transaction.
The purchase price agreed upon is $1,000,000 payable in installments over a
ten year period with interest only at 10% for a period of up to forty eight
months. The purchasers are required to begin principal payments in the forty
ninth month and have the balance of principal completely paid at the end of
one hundred and twenty months.
The principal amortization will be accelerated upon the attainment in any
twelve month period of $2,000,000 in sales. In addition, management
compensation has been restricted until this sales level has been reached.
TAL has agreed to accept EKI common stock at $1 per share in satisfaction of
an intercompany debt of approximately $300,000.
TAL has as of December 31, 1997 written down to $1,000,000, the carrying
value of its holdings in EKI.
38
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders of Trim-A-Lawn Corporation:
I have audited the accompanying consolidated balance sheet of Trim-A-Lawn
Corporation a Delaware corporation and Exclaim Production, Inc., its
subsidiary as of December 31, 1996, and the related consolidated
statements of operations, shareholders' equity, and cash flows for the
years ended December 31, 1996 and 1995. These consolidated financial
statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these consolidated financial
statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audit provides a reasonable
basis for my opinion.
In my opinion, the consolidated financial statements referred to above
present fairly, in all material respects the financial position of Trim-
A-Lawn Corporation and subsidiary as of December 31, 1996, and the
results of their operations and their cash flows for the years ended
December 31, 1996 and 1995 in conformity with generally accepted
accounting principles.
Kerry Ann Molloy, CPA
Bronxville, New York
May 7, 1997
39
<PAGE>
<TABLE>
TRIM-A-LAWN CORPORATION and Subsidiary
Consolidated Balance Sheet
December 31, 1996
<CAPTION>
<S> <C>
ASSETS
Current Assets
Cash $3,243
Accounts Receivable and Factored Reserve 135,858
Inventory 318,393
Prepaid Expense 105,861
Loans Receivable Related Party 55,654
-------
Total Current Assets 619,009
-------
Property and Equipment
Leasehold Improvements 2,865
Equipment 251,383
Tooling 213,905
Less Accumulated Depreciation (291,580)
-------
Net Property and Equipment 176,573
-------
Other Assets
Software Source Codes 850,000
Customer Lists 325,000
Developed and Purchased Intellectual Property 260,209
Organization and Development Costs 395,152
Trademarks and Patents 218,189
Goodwill 498,553
Less Accumulated Amortization (83,046)
---------
Total Other Assets 2,464,057
---------
Total Assets $3,259,639
=========
</TABLE>
See Independent Accountant's Audit Report
The Accompanying Notes are an Integral Part of the Financial Statements
40
<PAGE>
<TABLE>
TRIM-A-LAWN CORPORATION and Subsidiary
Consolidated Balance Sheet
December 31, 1996
<CAPTION>
<S> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable $596,564
Bank Line of Credit 369,245
Other Short Term Debt 48,977
Short Term Note 40,000
Loans and Notes Payable - Current Portion 17,237
---------
Total Current Liabilities 1,072,023
---------
Long Term Liabilities
Loans and Notes Payable - Long Term Portion 123,212
Loans and Notes Payable - Related Parties 268,500
Accrued Interest Payable 54,505
-------
Total Long Term Liabilities 446,217
-------
Total Liabilities 1,518,240
----------
Shareholders' Equity
Common Stock 1,514
$.0001 Par Value
Authorized - 50,000,000 Shares;
Issued and Outstanding 5,472,709 Shares
Preferred Stock 1,000,000
$10 Par Value
Authorized - 5,000,000 Shares;
Issued and Outstanding 100,000 Shares
Paid In Capital 3,702,054
Accumulated Deficit (2,962,169)
----------
Total Shareholders' Equity 1,741,399
----------
Total Liabilities and Shareholders' Equity $3,259,639
==========
</TABLE>
See Independent Accountant's Audit Report
The Accompanying Notes are an Integral Part of the Financial Statements
41
<PAGE>
<TABLE>
TRIM-A-LAWN CORPORATION and Subsidiary
Consolidated Statement of Operations
For the Years Ending December 31, 1996 and 1995
<CAPTION>
1996 1995
<S> <C> <C>
Sales, Net of Returns $1,267,366 $699,913
Cost of Sales 896,420 529,897
--------- ---------
Gross Profit 370,946 170,016
--------- ---------
Other Sales, General and Administrative Expenses 671,120 347,324
Depreciation and Amortization 108,507 25,278
--------- ---------
Total Sales, General and Administrative Expenses 779,627 372,602
-------- ---------
Other Income or (Expense)
Research and Development (12,884) 0
Funding Charges (17,504) 0
Interest Expense and Finance Costs (85,323) (68,815)
-------- ---------
Total Other Income or (Expense) (115,711) (68,815)
-------- ---------
Net Loss for the Period ($524,392) ($271,401)
======== =========
Net Loss Per Common Share Outstanding ($0.10) ($0.02)
</TABLE>
See Independent Accountant's Audit Report
The Accompanying Notes are an Integral Part of the Financial Statements
42
<PAGE>
<TABLE>
TRIM-A-LAWN CORPORATION and Subsidiary
Statement of Cash Flows
For the Years Ended December 31, 1996 and 1995
<CAPTION>
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss ($524,392) ($271,401)
Prior Period Adjustment (44,715) 0
Adjustments to Reconcile Net Loss to Net
Cash Used By Operating Activities
Depreciation and Amortization 108,506 25,278
Decrease (Increase) in Operating Assets
Accounts Receivable (117,984) 11,439
Inventory (118,199) (144,573)
Due from Equity Transactions - Net 300,000 0
Accounts Receivable - Due from Investment
Banker 0 (300,000)
Loans Receivable - Related Parties (18,515) (32,739)
Prepaid Expenses (13,861) (92,000)
Increase (Decrease) in Operating Liabilities
Accrued Interest Payable 16,487 (41,278)
Accounts Payable and Accrued Expenses 381,505 165,007
Other Liabilities (99,366) (146,958)
-------- ---------
Net Cash Used by Operations (130,534) (827,225)
-------- ---------
43
<PAGE>
Cash Flows From Investing Activities
Purchase of Equipment (230,572) (16,493)
Purchase of Tooling (33,600) 0
Software Source Codes (850,000) 0
Customer List (325,000) 0
Goodwill (381,700) 0
Purchase of Trademarks and Patents (157,661) (16,162)
Organization Costs (164,167) 0
Capitalized Prototype Research (13,204) 0
Capitalized Product Development and
Marketing 0 (61,332)
Capitalized Costs of Development of (81,478) 0
Financing Plan
Capitalization of Startup Costs (36,432) 0
Engineering Costs (18,671) 0
Video Productions (19,868) 0
Purchase of Intellectual Property (260,209) 0
Leasehold Improvements (841) 0
--------- --------
Net Cash Used by Investing Activities (2,573,403) (93,987)
--------- --------
Cash Flows from Financing Activities
Proceeds from Bank Loans 169,245 0
Proceeds of Long Term Loans and Notes 14,445 58,736
Payable
Proceeds of Loans and Notes Related 218,500 0
Parties
Proceeds from Other Short Term Loans Notes 68,477 200,000
Payable
Proceeds from Additional Paid In Capital 1,235,766 0
Principal Payment on Loans and Notes Payable 0 (289,994)
Proceeds from Additional Paid In Capital 0 954,172
Preferred Stock Issuance 1,000,000 0
Common Stock Issuance 64 537
--------- --------
Net Cash Provided by Financing Activities 2,706,497 923,451
--------- --------
Net Decrease in Cash 2,560 2,239
Cash Beginning of Period 683 (1,556)
--------- --------
Cash End of Period $3,243 $ 683
========= ========
Supplemental Disclosures of Cash Flow
Information
Cash Paid During The Year For:
Interest $ 85,323 $ 29,422
Income Taxes $ 325 $ 1,014
</TABLE>
See Independent Accountant's Audit Report
The Accompanying Notes are an Integral Part of the Financial Statements
44
<PAGE>
<TABLE>
TRIM-A-LAWN CORPORATION and Subsidiary
Statement of Shareholders' Equity (Deficit)
For the Year Ended December 31, 1996
<CAPTION>
Common
Preferred Common Preferred Par Paid In Accumulated
Shares Shares Par Value Value Capital Deficit Totals
<S> <C> <C> <C> <C> <C> <C> <C>
Balances December 31, 1995 0 14,501,651 0 $1,450 $2,466,288 ($2,393,062) $74,676
Effect of Three for One Reverse 0 4,833,884 0 0 0 0 0
Stock Split
Shares Issued For Purchase of 100,000 300,000 $1,000,000 30 1,089,970 0 $2,090,000
Subsidiary
Conversion of Debt to Equity 0 135,825 0 14 135,816 0 $135,830
New Shares Issued 0 203,000 0 20 26,980 0 $27,000
Prior Period Adjustment 0 0 0 0 (17,000) (44,715) ($61,715)
Net Loss for the Period 0 0 0 0 0 (524,392) ($524,392)
Balances December 31, 1996 100,000 5,472,709 $1,000,000 $1,514 $3,702,054 ($2,962,169) $1,741,399
</TABLE>
See Independent Accountant's Audit Report
The Accompanying Notes are an Integral Part of the Financial Statements.
45
<PAGE>
TRIM-A-LAWN CORPORATION And Subsidiary
Notes to Financial Statements
December 31, 1996
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
The accounting and reporting policies of Trim-A-Lawn Corporation (TAL) (The
"Company") and its subsidiary conform with generally accepted accounting
principles and practices within their respective industries. The policies
that materially affect the financial position and results of operations are
summarized below.
Nature of Operations
The Company is a manufacturing company located in Utica, New York and
operates in principally one business segment, that being the outdoor power
equipment market. Its products are sold predominantly through distributors
to dealers specializing in lawn and garden equipment sales and support as
well as mass merchandisers. The Company also engages in the consumer direct
marketing of its products using both print and television media.
Exclaim Productions, Inc. a wholly owned subsidiary d/b/a, Electronic
Kourseware Interactive, is a Nevada corporation which was organized for the
purpose of developing, producing, and marketing a line of educational
software products and electronic and courses kits for the secondary education
school market, including vocational educational training. The company is
located in Orem, Utah.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary. All material intercompany accounts and
transactions have been eliminated in consolidation.
Method of Accounting
The Company employs the accrual method of accounting in accordance with
generally accepted accounting principles which requires that income be
recorded when earned and expenses recognized as they are incurred.
Accounts Receivable
Accounts receivable are recorded net of any reserve for bad debts. For the
period ended December 31, 1996 and 1995 there were no bad debts.
Inventory
Inventory consists of completed products and related component parts which
are valued at the lower of cost or market on a first in first out basis.
46
<PAGE>
Equipment
Property and equipment are stated at cost. Depreciation is recorded on a
straight line basis over estimated useful lives from five to ten years.
Upon sales or other disposition of any equipment, both cost and accumulated
depreciation are removed with any resulting gain or loss recorded in the
period of sale or disposition.
Trademarks and Patents
Trademarks and patents are recorded at cost and amortized on a straight line
basis over seventeen years.
Goodwill
Goodwill has been recognized as the result of the combination of 1989 of the
UnBlade Corporation with the ANova Corporation whose name was later changed
to TRIM-A-LAWN CORPORATION. The combination was treated as a purchase for
financial statement purposes resulting in an excess of fair market values of
the shares exchanged over the underlying market value of the assets of the
UnBlade being treated as goodwill which is amortized over fifteen years.
Other Intangibles
The Company has incurred engineering costs for the development of new
products to be introduced in 1997 and 1998. These new products include
improvement to the environmentally sensitive battery powered units as well as
new cutting head technology. In addition, a plastic cutting blade with a
steel edge and molded cutting line have been developed which will be usable
on both company products as well as hand held trimmers sold by other
manufacturers.
In prior periods costs were incurred for the development of videos to be used
in television advertising as well as other direct marketing efforts. These
costs have been capitalized and are being amortized over a three year period.
Account Payable
Accounts payable consist of amounts owed trade vendors for goods or services
used in the ordinary course of business.
2) ACCOUNTS RECEIVABLE AND FACTORED RESERVE
In June 1996, the company entered into a factoring agreement with PCF
Funding, Inc. of Rochester, New York a financing organization PCF purchases
accounts receivable from TRIM-A-LAWN. For any receivable so purchased, TRIM-
A-LAWN receives an immediate seventy percent of the value of the receivable
less finance charges. This amount is paid directly to BSB Bank and Trust to
reduce the outstanding line of credit. The balance of any receivable, once
collected is then remitted to the company. BSB relends against the company's
line of credit upon the presentation of purchase orders acceptable to the
bank. An intercreditors agreement is in place between the bank and PCF with
respect to any accounts receivable purchased. At statement date the amount
of receivables purchased by PCF was $38,665.
47
<PAGE>
3) INVESTMENT IN SUBSIDIARY
TRIM-A-LAWN CORPORATION agreed in June 1996 to acquire substantially all of
the assets and operations of Lectio Corporation, (EKI) for common and
preferred stock valued at $2,090,000. The assets acquired were valued as
noted below.
Category Amount
Inventory $ 220,000
Equipment 155,000
Furniture and Fixtures 8,300
Customer List 325,000
Goodwill 381,700
Software Source Codes 850,000
Trademarks and Copyrights 150,000
Total $2,090,000
The purchase was effected through a newly created subsidiary Exclaim
Productions, Inc. The transaction is considered non-taxable pursuant to
Section 368 of the Internal Revenue Code. Lectio has been a software
development and distribution company selling its products primarily within
the educational field.
Certain Lectio shareholders were also shareholders in TRIM-A-LAWN
CORPORATION.
The consolidated financial statements present the financial position, results
of operations and cash flows of Trim-A-Lawn Corporation and Exclaim as if
they were a single entity. All the intercompany transactions have been
eliminated. As a result of the consolidation, all assets acquired from
Lectio are reflected at the historical cost of the acquisition.
4) RELATED PARTY TRANSACTIONS
The financial statements include the following related party transactions.
There were no amounts accrued or unpaid at statement date for personal
services performed by any officer, director or shareholder in the
corporation.
The Continental Marketing Group LLC (CMG) is a shareholder in TAL. TAL had
previously contracted with CMG for marketing services. All contractual
relationships for these services were terminated as of December 31, 1995.
TAL however remains as contingent guarantor for CMG on a line of credit it
has with a lending institution as reflected in Note 10.
48
<PAGE>
Loans receivable related party represents amounts owed by a former officer
and employee for advances made between 1994 and 1995.
5) BANK LINE OF CREDIT
The Company has $200,000 line of credit with BSB Bank and Trust of
Binghamton, New York. Interest on the line is calculated at 2% over prime
which at statement date amounted to 11.25%. The line is secured by a first
security position in all company assets in addition to being personally
guaranteed by corporate officers. The principal balance owed by December 31,
1996 was $200,000. The facility was renewed in April 1997.
Exclaim Productions Inc. d/b/a Electronic Kourseware Interactive has an
operating line of credit arrangement with a financial institution, under
which it may borrow the lesser of $125,000 or 75% of eligible accounts
receivable. The loan has exceeded the borrowing base by $44,245 as of
December 31, 1996. Amounts drawn under this line of credit bear interest at
prime plus 2% and are payable on demand. The line is secured by inventory
and accounts receivable.
Exclaim has at the bank's request entered into a repayment program which will
reduce the outstanding amount to $75,000 by the fall of 1998. Payments have
begun to effect this program.
6) LOANS AND NOTES PAYABLE
At statement date the Company was indebted on a long term basis as follows.
Lender Amount
City of Utica Revolving Loan Fund, maturing
in October 1998 with interest at 9%. Secured
by a second security position in all corporate
assets and the personal guarantee of company
officers. Principal and interest payments of
$1,129 are due monthly. Loan Proceeds were used
to meet working capital needs. $ 75,000
Rome Industrial Development Corporation maturing
October 1998 with interest at 6.75%. Principal
and interest payments of $975 are due monthly through
the maturity date. This loan is unsecured and is
guaranteed by a corporate officer. Loan proceeds
were used to meet working capital needs. 28,949
Smead Family Trust, note payable with interest at
15% per year on the unpaid balance. The note is
secured by an interest in certain patents and
trademarks. 5,000
49
<PAGE>
Richard A. Reed, note payable with interest at 15%
per year on the unpaid balance. The note is secured
by an interest in certain patents and trademarks. 1,500
Lynda M. Eyrich, note payable with interest at 15%
per year on the unpaid balance. The note is secured
by an interest in certain patents and trademarks. 22,000
John W. and Helen R. Boone Trust with interest at 15%
per year on the unpaid balance. The note is secured
by an interest in certain patents and trademarks. 4,000
Charles and Julian Fetter Trust, note payable with
interest at 15% per year on the unpaid balance. The
note is secured by an interest in certain patents
and trademarks. 4,000
Total Loans and Notes Payable $140,449
Less Current Portion (17,237)
Long Term Portion $123,212
At statement date the company was indebted on a short term basis to the
Montgomery County Economic Development Corporation in the amount of $40,000
with an interest rate of 7%.
7) NOTE RELATED PARTIES
Note payable related party is as follows. Each of the individuals noted is a
shareholder.
Lender Amount
Clark Kerr, note payable with interest at 12%
per year on the unpaid balance. The note is
secured by an interest in certain patents and
trademarks. $117,000
Tom Kerr, note payable with interest at 12%
per year on the unpaid balance. The note is
secured by an interest in certain patents and
trademarks. 4,000
Boyd Schenk, note payable, with interest at 10.5%
per year on the unpaid balance. 97,500
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Jim R. Clare note payable with interest at 10% 25,000
Don Valverde note payable with interest at 10% 25,000
Total $268,500
Interest is accrued at statement date.
8) ACCRUED INTEREST PAYABLE
Interest has been accrued on all loans outstanding with $30,416 of the total
of $54,505 being owed to related parties. The Company expects to exchange
its stock for the underlying debt which will in effect eliminate this
liability.
9) NON-MONETARY TRANSACTIONS
All non-monetary transactions consisted of the issuance of either company
preferred or common stock in exchange for debt or assets.
10) COMMITMENT AND CONTINGENCIES
The Company leases 5,000 square feet of manufacturing and office space under
a three year lease commitment which expires, June 30, 1997. The minimum non-
cancelable lease commitments are as follows.
1997 $3,000
The Company utilizes an additional 5,000 square feet of manufacturing and
storage space under a month to month lease arrangement. There are no non-
cancelable lease commitments on this space.
TAL is a contingent guarantor of a $150,000 line of credit of the Continental
Marketing Group LLC. This line is owed to the BSB Bank and Trust of
Binghamton, New York. A primary guarantor of the note is the Montgomery
County, New York Revolving Loan Fund which has provided an 80% guarantee to
the bank. Guarantors of the remaining 20% include corporate officers of TAL
and the president of the Continental Marketing Group LLC.
The line expired in September, 1996. BSB has exercised its option under its
loan agreement to request that Montgomery County provide payment for its 80%
share of the loan. CMG has asked Montgomery County for a structured
repayment program to amortize any amounts paid on behalf of CMG under the
guarantee. TAL will continue its guarantee under any new loan program and
may be required to participate in any program which may be structured.
Should this occur, TAL will take back a commensurate number of shares of TAL
stock held by CMG.
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11) SUBSEQUENT EVENTS
Subsequent to statement date, the events outlined below have occurred.
TRIM-A-LAWN and its subsidiary at December 31, 1996 had negative working
capital. Through issuance date new working capital of $468,000 has been
secured through a combination of debt and stock sales. The company is in the
process of raising additional equity funds through the sale of its stock
pursuant to Rule 504 of Regulation D of the Securities Regulations.
Exclaim Productions Inc. has been merged into Jackson Technology Inc., a
publically traded company. The merged entities will operate using the name
Electronic Kourseware Interactive (EKI). TAL received an 82% interest in
Jackson with the previous ownership of Jackson and the management of TAL
retaining the difference.
At merger date, eight million shares representing the total outstanding stock
of the merged entity were issued. Jackson trades using the symbol JAKT.
Management will use the public standing of the newly merged companies to meet
the working capital needs of Exclaim.
In April 1997, both TAL and Exclaim purchased, using their stock, significant
amounts of national television advertising time. This advertising time will
be used to promote nationally, the product lines of each company.
The significant attributes of the purchase agreement are that the seller has
agreed to vote its shares with management, both companies retain the right to
exchange any unused advertising for a proportionate amount of stock used to
acquire the asset and that the advertising time acquired may be freely sold
or transferred.
TRIM-A-LAWN, acquired in two separate transactions of four and five million
dollars of advertising time in exchange for 400,000 shares of preferred and
1,500,000 common stock respectively.
In a similar fashion, Exclaim acquired ten million dollars of advertising
time in exchange for 3,120,000 of common stock. After this transaction,
Exclaim had 11,120,000 shares outstanding of which TAL owns 6,443,000 shares.
For reporting purposes, TAL and Exclaim have recorded the asset, prepaid
advertising, at a discount of forty percent to reflect an estimated net
realizable value based upon a disposition in a manner other than utilization
in the implementation of a national advertising campaign.
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12) INCOME TAXES
No provision has been made for federal or state income taxes as the Company
has incurred operating losses on which no tax liability needs to be
reflected. These losses are available to offset future periods' income tax
liabilities. These losses will expire, if not used, over a period beginning
with the year 2005 and ending in the year 2010.
ITEM 14 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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ITEM 15 - FINANCIAL STATEMENTS AND EXHIBITS
(a)1. Attached are the following exhibits and financial statements.
Reference Page
- ------------------------------------------------------ ----
1998 FIRST AND SECOND QUARTER FINANCIAL STATEMENTS-
Balance Sheet - Unaudited 18-19
Statement on Income, Expense and Retained 20
Deficit - Unaudited
Statement of Cash Flows 21
Notes to Financial Statements 22
1997 FINANCIAL STATEMENTS-
Independent Certified Public Accountants' Report 23
Consolidated Balance Sheet 24-25
Consolidated Statement of Operations 26
Consolidated Statement of Changes in Shareholders'
Equity (Deficit) 27
Consolidated Statement of Cash Flows 28
Notes to Consolidated Financial Statements 29-38
1996 AND 1995 FINANCIAL STATEMENTS-
Independent Auditor's Report 39
Consolidated Balance Sheet 40-41
Consolidated Statements of Operations 42
Statement of Cash Flows 43-44
Statement of Shareholders' Equity (Deficit) 45
Notes to Financial Statements 46-53
(a)3. Exhibits
(3)(i) Certificate of Incorporation 56-68
(3)(ii) By-Laws 69-81
(21) Subsidiaries of the Registrant 82
(27) Financial Information 83
(b). Reports of Form 8-K.
None --
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
TRIM A LAWN CORPORATION
--------------------------------
(Registrant)
Dated: September___, 1998
/s/ Dallas Jones
-----------------------
Dallas Jones
President
/s/ Robert J. Salluzzo
-----------------------
Robert J. Salluzzo
Director of Finance
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
- ---------------------------------------------------------------------
Signature Title Date
- ---------------------------------------------------------------------
/s/Dallas W. Jones Director September , 1998
- --------------------
Dallas W. Jones
/s/Richard P. Nadeau Director September , 1998
- --------------------
Richard P. Nadeau
/s/ Robert J. Salluzzo Director September , 1998
- --------------------
Robert J. Salluzzo
55
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Exhibit 3(i)
CERTIFICATE OF INCORPORATION OF TRIM-A-LAWN CORPORATION
1. The name of the Corporation is:
TRIM-A-LAWN CORPORATION
2. The address of its registered office in the State of
Delaware is 1013 Centre Road, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address
is CORPORATION SERVICE COMPANY.
3. The nature of the business or purposes to be conducted or
promoted is:
To engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation
shall have authority to issue is Fifty Million (50,000,000)
shares, having a par value of $.0001 per share, an aggregate
capital of $5,000.
5. The name and mailing address of the incorporator is as
follows:
NAME MAILING ADDRESS
Eric Newlan 4835 Lyndon B. Johnson Freeway
Suite 825
Dallas, Texas 75244
6. The Corporation is to have perpetual existence.
7. In furtherance of and not in limitation of the powers
conferred by statute, the Board of Directors is expressly
authorized:
To make, alter or repeal the Bylaws of the Corporation.
8. Elections of directors need not be by written ballot unless
the Bylaws of the Corporation shall so provide.
Meetings of stockholders may be held within or without the State
of Delaware, as the Bylaws may provide. The books of the
Corporation may be kept (subject to any provision contained in
the statutes) outside the state of Delaware at such place or
places as may be designated from time to time by the Board of
Directors or in the Bylaws of the Corporation.
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9. The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are
granted subject to this reservation.
10. Directors of the Corporation shall not be liable to the
Corporation or its stockholders for damages for breach of
fiduciary duty, unless such breach involves a breach of duty of
loyalty, acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law or involve
unlawful payment of dividends or unlawful stock purchases or
redemptions, or involve a transaction from which the director
derived an improper personal benefit.
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to the General
Corporation Law of the State of Delaware, do make this
certificate, hereby declaring and certifying that this is my act
and deed and the facts herein stated are true, and accordingly
have hereunto set my hand this 26th day of January, 1989.
Eric Newlan
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STATE OF DELAWARE
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
FIRST: That at a meeting of the Board of Directors of Trim-A-
Lawn Corporation resolutions were duly adopted setting forth a
proposed amendment of the Certificate of Incorporation of said
corporation, declaring said amendment to be advisable and calling
a meeting of the stockholders of said corporation for
consideration thereof. The resolution setting forth the proposed
amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this
corporation be amended by changing the Article thereof number "4"
so that, as Amended, said Articles shall be and read as follows:
"4. The Corporation is authorized is issue two (2) classes of
shares as follows:
(a) Common stock having a total number of Fifty Million
(50,000,000) shares and a par value of $.0001 per share.
(b) Preferred Stock having a total number of 500,000 shares
and a par value of $10.00 per share.
(c) The preference and privileges granted to and restrictions
imposed upon each class of shares, or the holders of these shares
are as follows:
(1) Voting Rights
"The Common Stock and the Preferred Stock shall have full voting
rights on all matters to come before the Corporation. Each of
the aforesaid classes of shares shall have one vote per share.
(2) Priority of the Preferred Stock in the Event of
Dissolution (i.e., "Liquidation Preference").
The Preferred Stock shall be preferred over the Common Stock of
the Corporation and any class or series of stock ranking junior
to the Preferred Stock as to distribution of assets in the event
of any liquidation, dissolution or winding up of the Corporation
and, in that event, subject to the provisions of applicable law,
the holder thereof shall be entitled to receive, out of the
assets of the Corporation available for distribution to its
shareholders, Ten Dollars ($10.00) per share of Preferred Stock,
together with the amount of any dividends accrued or unpaid as of
the date of liquidation (the "Liquidation Preference"). Upon any
liquidation, dissolution or winding up of the Corporation, after
payment shall have been made in full on any other securities
which are senior as to distribution of assets to Preferred Stock,
and after payment shall have been made in full on the Preferred
Stock as provided in this paragraph (2) but not prior thereto,
the holders of all the remaining capital stock including the
Common Stock or any other series or class of stock ranking junior
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to the Preferred Stock as to distribution of assets shall,
subject to the respective terms and provisions of the Certificate
of Incorporation of the Corporation, if any, applying thereto, be
entitled to receive any and all assets remaining to be paid or
distributed, and the holders of the Preferred Stock shall not be
entitled to share therein. The merger or consolidation of the
Corporation with another corporation and/or the sale, lease,
pledge or mortgage of all or substantially all of the assets of
the Corporation shall not be deemed to be a liquidation,
dissolution or winding up of the Corporation for the purpose of
this paragraph (2).
(3) Right of Conversion into Shares of Common Stock of the
Corporation.
(a) General. Any share or shares of Preferred Stock may be
converted, provided that such shares have not been redeemed, at
any time, at the option of the holder, in the manner hereinafter
provided, into fully paid and nonassessable shares of Common
Stock of the Corporation; provided, however, that upon any
liquidation, dissolution or winding up of the Corporation, the
right of conversion shall terminate at the close of business on
the date prior to the date fixed for the initial payment of
distributable amounts on the Preferred Stock.
(b) Conversion Rate. Each share of Preferred Stock may be
converted, subject to the terms and provisions of this paragraph
(3) three (3) shares of the Corporation's Common Stock. Each
share of Preferred Stock shall be convertible into Common Stock
by surrender to the Corporation of the certificate representing
such shares of Preferred Stock to be converted by the Holder and
by giving written notice to the Corporation of the Holder's
election to convert.
The Corporation shall, as soon as practicable after receipt of
such written notice and the proper surrender to the Corporation
of the certificate or certificates representing shares of
Preferred Stock to be converted in accordance with the above
provisions, issue and deliver for the benefit of the holder at
the office of the Corporation's duly appointed transfer agent
(the "Transfer Agent") to the holder for whose account such
shares of Preferred Stock were so surrendered or to such Holder's
nominee or nominees, certificates for the number of shares of
Common Stock to which the holder shall be entitled. The
certificates of Common Stock of the Corporation issued upon
conversion shall bear such legends as may be required by state or
federal laws. Such conversion shall be deemed to have been
effective immediately prior to the close of business on the date
on which the Corporation shall have received both such written
notice and the properly surrendered certificates for shares of
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<PAGE>
Preferred Stock to be converted (the "Conversion Date") and at
such time the rights of the holder shall cease and the person or
persons entitled to receive the shares of Common Stock issuable
upon the conversion of such shares of Preferred Stock shall be
deemed to be, and shall be treated for all purposes as, the
record holder or holders of such Common Stock on the Conversion
Date. The Corporation shall not be required to convert, and no
surrender of shares of Preferred Stock or written notice of
conversion with respect thereto shall be effected for that
purpose, while the stock transfer books of the Corporation are
closed for any reasonable business purpose for any reasonable
period of time, but the proper surrender of shares of Preferred
Stock for conversion while such books are so closed shall become
effective for conversion immediately upon the reopening of such
books. During the period in which the stock transfer books of
the Corporation are closed, the Corporation may neither declare a
dividend, declare a record date for payment of dividends nor make
any payment of dividends.
(c) Cancellation. Preferred Stock converted into Common
Stock pursuant to the provisions of this paragraph (3) shall be
retired and canceled by the Corporation and given the status of
authorized and unissued preferred stock.
(d) Reissuance if Conversion is Partial. In the case of any
certificate representing shares of Preferred Stock which is
surrendered for conversion only in part, the Corporation shall
issue and deliver to the holder a new certificate or certificates
for Preferred Stock of such denominations as requested by the
holder in the amount of Preferred Stock equal to the unconverted
shares of the Preferred Stock represented by the certificate so
surrendered.
(e) Transfer Taxes. The issuance of certificates for share
of Common Stock upon the conversion of share of Preferred Stock
shall be made without charge to the converting shareholder for
any tax in respect of the issuance of such certificates;
provided, however, that the Corporation shall not be required to
pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate
representing shares of Common Stock in a name other than that of
the holder, and the Corporation shall not be required to issue or
deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the
Corporation the amount of such tax or shall have established to
the satisfaction of the Corporation that such tax has been paid.
(f) Reservations of Shares. The Corporation shall, at all
times during which shares of Preferred Stock may be converted
into Common Stock as provided in this paragraph (3) reserve and
keep available out of any Common Stock held as treasury stock or
out of its authorized and unissued Common Stock, or both, solely
for the purpose of delivery upon conversion of the shares of
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Preferred Stock as herein provided, such number of shares of
Common Stock as shall then be sufficient to affect the conversion
of all shares of Preferred Stock from time to time outstanding,
and shall take such action as may from time to time be necessary
to ensure that such shares of Common Stock will, when issued upon
conversion of Preferred Stock, be fully paid and nonassessable.
(g) Adjustment of Conversion Rate. The Conversion Rate
provided in subdivision (b) of this paragraph (3), in respect of
Preferred Stock, shall be subject to adjustment from time to time
as follows:
i) While any shares of Preferred Stock shall be outstanding,
in case the Corporation shall subdivide the outstanding shares of
Common Stock into a greater number of shares of Common Stock or
combine the outstanding shares of Common Stock into a smaller
number of shares of Common Stock, or issue, by reclassification
of its shares of Common Stock, any shares of the Corporation, the
Conversion Rate in effect immediately prior thereto shall be
adjusted so that the holder shall be entitled to receive the
number of shares which it would have owned or been entitled to
receive after the happening of any of the events described above,
had such share of Preferred Stock been converted immediately
prior to the happening of such event, such adjustment to become
effective immediately after the opening of business on the day
following the day upon which such subdivision or combination or
reclassification, as the case may be, becomes effective.
ii) In case the Corporation shall be consolidated with, or
merge into, any other corporation, and the Corporation does not
survive, proper provisions shall be made as a part of the terms
of such consolidation or merger, whereby the holder shall
thereafter be entitled, upon exercise of such Holder's conversion
rights, to receive the kind and amount of shares of stock or
other securities of the Corporation resulting from such
consolidation or merger, or such other property, as the holder
would have received if such conversion rights were exercised
immediately prior to the effectiveness of such merger or
consolidation.
iii) In the event the Corporation at any time, or from time to
time makes or issues, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a
dividend or other distribution payable in additional shares of
Common Stock or Common Stock Equivalents (as defined herein)
without a corresponding dividend or other distribution to the
holder, based upon the number of shares of Common Stock into
which the Preferred Stock is convertible, then and in each such
event the Conversion Rate then in effect will be increased as of
the time of such issuance or, in the event such a record date
shall have been fixed, as of the close of business on such record
date, by multiplying such Conversion Rate by a fraction:
(A) the numerator of which will be the total number of shares
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of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record
date plus the number of shares of Common Stock issuable in
payment of such dividend or distribution (which, in the case of
Common Stock Equivalent, shall mean the maximum number of shares
of Common Stock issuable with respect thereto, as set forth in
the instrument relative thereto without regard to any provisions
for subsequent adjustment); and
(B) the denominator of which will be the total number of
shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such
record date;
iv) Provided, however, that if such record date is fixed and
such dividend is not fully paid or if such distribution is not
fully made on the date fixed therefor, the Conversion Rate will
be recomputed accordingly as of the close of business on such
record date, and thereafter such Conversion Rate will be adjusted
pursuant to this subparagraph (iii) as of the time of actual
payment of such dividends or distributions.
v) In the event the Corporation at any time or from time to
time makes or issues, or fixes a record date for the
determination of holders of Common Stock entitled to receive a
dividend or other distribution payable to all holders of Common
Stock in securities of the Corporation which are Common Stock
Equivalents, then, upon making such dividend or distribution,
provisions will be made so that the holder will receive the
amount of securities of the Corporation which it would have
received had its Preferred Stock been converted into Common Stock
on the date of such event.
vi) In the event the Corporation sells or issues any Common
Stock, or sells or issues Common Stock Equivalents which can be
converted into Common Stock, at a per share consideration (as
defined below in this subparagraph (vi) of paragraph (c)(7)) less
than the then fair market value as determined under paragraph
(viii), then the Holder shall be entitled to purchase from the
Corporation in cash (for the same per share consideration at
which such Common Stock was issued or the per share price at
which a share of Common Stock is acquirable upon exercise or
conversion of Common Stock Equivalents) that additional number of
shares of Common Stock which when added to the number of shares
of Common Stock acquirable by the Holder upon conversion of any
shares of Preferred Stock outstanding and held by such holder
immediately before such issue or sale ("the Acquirable Shares"),
will equal a percentage of the number of shares of Common Stock
Deemed Outstanding (as defined herein) immediately after such
sale or issuance that is the same as the percentage of the number
of shares of Common Stock Deemed Outstanding immediately before
such issuance or sale represented by the Acquirable Shares. This
right shall exist for a forty-five-day period following the sale
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or issuance of shares of Common Stock or Common Stock
equivalents, and thereafter shall cease to exist.
For the above purposes, the per share consideration with respect
to the sale or issuance of Common Stock will be the price per
share received by the Corporation, prior to the payment of any
expenses, commissions, discounts and other applicable costs.
With respect to the sale or issuance of Common Stock Equivalents
which are convertible into or exchangeable for Common Stock
without further consideration, the per share consideration will
be determined by dividing the maximum number of shares of Common
Stock issuable with respect to such Common Stock Equivalents (as
set forth in the instrument relating thereto without regard to
any provisions contained therein for subsequent adjustment of
such number) into the aggregate consideration receivable by the
Corporation upon the sale or issuance of such Common Stock
Equivalents. With respect to the issuance of other Common Stock
Equivalents, the per share consideration will be determined by
dividing the maximum number of shares of Common Stock issuable
with respect to such Common Stock Equivalents into the total
aggregate consideration received by the Corporation upon the sale
or issuance of such Common Stock Equivalents plus the minimum
aggregate amount of additional consideration received by the
Corporation upon the conversion or exercise of such Common Stock
Equivalents. In connection with the sale or issuance of Common
Stock and/or Common Stock Equivalents for non-cash consideration,
the amount of consideration will be the fair market value of such
consideration as determined in good faith by the Board of
Directors of the Corporation.
vii) As used herein, the term "Common Stock Equivalent: means
any securities (whether debt or equity securities) or rights
issued by the Corporation convertible into or entitling the
holder thereof to receive shares of, or securities convertible
into, Common Stock. The number of shares of "Common Stock Deemed
Outstanding" at any date shall equal the sum of the number of
shares of Common Stock then outstanding plus the number of shares
of Common Stock then obtainable pursuant to Common Stock
Equivalents.
viii) In the event the Corporation declares any dividend or
distribution payable to holders of this Common Stock (other than
dividends payable out of the Corporation's retained earnings or
earned surplus and dividends payable in shares of Common Stock or
in securities convertible into or exchangeable for shares of
Common Stock or rights or warrants to purchase Common Stock or
securities convertible into or exchangeable for shares of Common
Stock or any other securities issued by the Corporation), the
Conversion Rate in effect immediately prior to the record date
for such dividend or distribution shall be proportionately
adjusted so that the holder shall be entitled to receive the
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number of shares of Common Stock into which such shares of
Preferred Stock was convertible immediately prior to such record
date multiplied by a fraction, the numerator of which is the fair
market value of a share of Common Stock on such record date and
the denominator of which is such per share fair market value of a
share of Common Stock on such record date less the fair market
value on such record date of the securities or other property
which are distributed as a dividend or other distribution. The
term "fair market value" of a share of Common Stock or of any
other security or other type of property on any date means (A) in
the case of Common Stock or any other security (I) if the
principal trading market for such Common Stock or other security
is an exchange or the NASDAQ national market on such date,
provided, if trading of such Common Stock or other security is
listed on any consolidated tape, the fair market value shall be
the closing price set forth on such consolidated tape on such
date, or (II) if the principal market for such Common Stock or
other security is the over-the-counter market (other than the
NASDAQ national market) the mean between the closing bid and
asked prices on such date as set forth by NASDAQ or (B) in the
case of Common Stock or any other security for which the fair
market value cannot be determined pursuant to clause (A) above or
of any other security or type of property, the fair market value
thereof on such date as determined in good faith by the Board of
Directors.
ix) The Corporation will not, by amendment of its Certificate
of Incorporation or through any reorganization, transfer of
assets, merger, dissolution, issuance or sale of securities or
any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed
hereunder by the Corporation, but at all times in good faith will
assist in the carrying out of all the provisions of this
paragraph and in the taking of all such action as may be
necessary or appropriate in order to protect the conversion
rights of the holder against impairment.
x) No adjustment in the Conversion Rate shall be required,
unless such adjustment would require an increase or decrease of
at least one-tenth (0.10) share of Common Stock in the Conversion
Rate of one share of Preferred Stock, provided that all
adjustments which do not meet this minimum requirement shall be
cumulated and the adjustment will be made when the cumulated
total is sufficient to require an adjustment. All calculations
made pursuant to this subparagraph (xi) of paragraph (3)(g) shall
be made to the nearest one-tenth (1/10th) of a share of Common
Stock.
(h) Fractional Shares. No fractional shares of Common Stock
or scrip representing fractional shares of Common Stock may be
issued at the option of the Corporation upon any conversion of
shares of Preferred Stock but, in lieu thereof, there shall be
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paid an amount in cash equal to the same fraction of the current
market price of a whole share of Common Stock on the day
preceding the day of conversion.
(i) Statement to Transfer Agent. Whenever the Conversion
Rate for shares of Preferred Stock shall be adjusted pursuant to
the provisions of paragraph (3)(g) hereof, the Corporation shall
forthwith maintain at its office and, if applicable, file with
the Transfer Agent for shares of Preferred Stock and for shares
of Common Stock, a statement signed by the President or a Vice
President of the Corporation and its Treasurer or an Assistant
Treasurer, stating the adjusted Conversion Rate and setting forth
in reasonable detail the method of calculation and the facts
requiring such adjustment, such calculations to be confirmed by
the Corporation's independent auditors, and stating the facts on
which the calculation is based. Each adjustment shall remain in
effect until a subsequent adjustment hereunder is required.
(4) Dividends
The holders of the Preferred shares shall be entitled, for a
period of thirty-six (36) months beginning on the date of issue,
in any fiscal year to receive dividends, when and as declared by
the Board of Directors, out of any funds legally available for
the payment of dividends, paid in cash at the rate of $.70 per
Preferred share, before any dividend is paid on Common shares.
This dividend may be payable quarterly or otherwise as the Board
of Directors may from time to time determine. Dividends may be
declared and paid on Common shares in any fiscal year of the
Corporation only if dividends shall have been paid to or declared
and set apart on all Preferred shares at that annual rate for
each quarter of the fiscal year of the Corporation, including the
quarter in which dividends on Common shares are declared. The
right to dividends on Preferred shares shall not be cumulative,
and no right shall accrue to the holders of Preferred shares by
reason of the fact that dividends on those shares are not
declared in any prior year, nor shall any undeclared or unpaid
dividend bear or accrue interest.
(5) Redemption of Preferred Shares
(a) Subject to the provisions of statute and to any other
applicable restrictions on the right of a Corporation to redeem
its own shares, the Corporation, at the option of the Board of
Directors, may, beginning on the thirty-seventh (37th) month
after issue and continuing indefinitely thereafter, at any time
or from time to time redeem the whole or any part of the
outstanding Preferred shares.
(b) On redemption, the Corporation shall pay each share
redeemed, cash in the amount of $10.00 per share plus an amount
equal to all dividends on Preferred shares declared but unpaid on
the date fixed for redemption (referred to as the "redemption
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price"). In case of the redemption at the option of the
Corporation of a part only of the outstanding Preferred shares,
the Corporation may designate pro rata or by lot the shares to be
redeemed. Less than all of the Preferred shares at any time
outstanding may not be redeemed until full dividends for the then
current dividend period on all Preferred shares then outstanding,
other that the shares to be redeemed, shall have been paid or
declared and the full amount set apart for payment.
(c) At least sixty (60) days prior to the date fixed for
redemption, the Corporation shall mail notice of the redemption
to the holders of record of the Preferred shares to be redeemed
as of the date of mailing or as of a record date lawfully fixed
by the Corporation. The notice shall be mailed by first-class
mail, postage prepaid to each of those shareholders at the
address of that holder appearing on the books of the Corporation
or given by that holder to the Corporation for the purpose of
notice, of it no such address appears or is so given, at the
place where the principal office of the Corporation is located.
The notice shall state the date fixed for redemption, the
redemption price, the then current conversion price (as defined
with respect to those convertible shares) and the date of
termination or the right to convert and shall require the holder
to surrender to the Corporation on the date fixed and at the
place designated in the notice, the holder's certificate or
certificates representing the shares to be redeemed if those
shares are certificated. On or after the date fixed for
redemption, each holder or Preferred shares called for redemption
shall, if those shares are certificated, (unless the holder has
previously exercised its option to convert preferred shares as
provided in paragraph three (3) hereof, surrender the certificate
evidencing the shares to the Corporation at the place designated
in the redemption notice and shall at that time be entitled to
receive payment of the redemption price. If less than all the
shares represented by any surrendered certificate are redeemed, a
new certificate for the unredeemed shares shall be issued. If
the redemption notice is duly given and if sufficient funds are
available on the date fixed for redemption to pay the redemption
price, then, whether or not the certificates evidencing the
Preferred shares to be redeemed are surrendered, the dividends
with respect to the shares so called for redemption shall cease
to accrue after the date fixed for redemption and all rights with
respect to those shares so called for redemption shall cease and
terminate as of the date fixed for redemption, except the right
of the holders to receive the redemption price, without interest,
on surrender of their certificates, if those Preferred shares are
certificated.
(d) If, on or prior to any date fixed for redemption of
Preferred shares, the Corporation deposits with any bank or trust
company, as a trust fund: (a) a sum sufficient to redeem, on the
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date fixed for redemption, the shares called for redemption; (b)
in the case of the redemption of any uncertificated securities,
an officer's certificate (defined below) setting forth the
holders of the shares called for redemption, registered on the
books of the Corporation and the number of shares held by each;
and (c) irrevocable instructions and authority to the bank or
trust company to give the notice of redemption (or to complete
the giving of notice if commenced) and to pay, on and after the
date fixed for redemption or prior to that time, the redemption
price of the shares to their respective holders on surrender of
their share certificates (for certificated securities), then from
and after the date of deposit, even though the date may be prior
to the date fixed for redemption, the shares so called shall be
redeemed and dividends on those shares shall cease to accrue
after the date fixed for redemption. "Officer's certificate", as
used in the preceding sentence, means a certificate signed and
verified by the Board Chairman or the President or any Vice
President, and by the Secretary, the Chief Financial Officer, the
Treasurer, or any assistant secretary or assistant treasurer of
the Corporation. The deposit shall constitute full payment for
the shares to their holders, and from and after the date of the
deposit, the shares shall no longer be outstanding, and the
holders of those shares shall cease to be shareholders with
respect to those shares and shall have no rights with respect to
them, except the right to receive from the bank or trust company
payment of the redemption price of the shares, without interest,
on surrender of their certificates if the shares redeemed are
certificated and without surrender if the shares redeemed are
uncertificated, and the right to convert those shares as provided
in paragraph three (3) at any time up to but not after the close
of business on the sixtieth (60th) day prior to the date fixed
for redemption of those shares. Any moneys so deposited on
account of the redemption price of Preferred shares converted
after the making of the deposit shall be repaid to the
Corporation immediately on the conversion of the Preferred
shares. Any interest accrued on any funds so deposited shall be
the property of, and paid to, the Corporation. If the holders of
Preferred shares so called for redemption shall not, at the end
of six years from the date fixed for redemption, have claimed any
funds to deposited, the bank or trust company shall pay over to
the Corporation the unclaimed funds, and the bank or trust
company shall thereafter be relieved of all responsibility to
those holders and those holders shall look only to the
Corporation for payment of the redemption price."
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, a special meeting of the stockholders of said
corporation was duly called and held, upon notice in accordance
with Section 222 of the General Corporation Law of the State of
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Delaware at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law of
the State of Delaware.
FOURTH: That the capital of said corporation shall not be
reduced under or by reason of said amendment.
IN WITNESS WHEREOF, said Trim-A-Lawn Corporation has caused this
certificate to be signed by Dallas W. Jones, an Authorized
Officer, this 10 day of May, 1996.
By: Dallas W. Jones
Authorized Officer
17646AAC
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Exhibit 3 (ii)
TRIM-A-LAWN CORPORATION BY-LAWS
ARTICLE I - STOCKHOLDERS
Section 1. Annual Meeting
An annual meeting of the stockholders, for the election of
directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before
the meeting, shall he held at such place on such date, and at
such time as the Board of Directors shall each year fix, which
date shall be within thirteen months subsequent to the later of
the date of incorporation or the last annual meeting of
stockholders.
Section 2. Special Meetings
Special meetings of the stockholders, for any purpose or purposes
prescribed in the notice of the meeting, may be called by the
Board of Directors or the chief executive officer and shall be
held at such place, on such date, and at such time as they or he
shall fix.
Section 3. Notice of Meetings
Written notice of the place, date, and time of all meetings of
the stockholders shall be given, not less than ten nor more than
sixty days before the date on which the meeting is to be held, to
each stockholder entitled to vote at such meeting, except as
otherwise provided herein or required by law (meaning, here and
hereinafter, as required from time to time by the General
Corporation Law of the State of Delaware or the Certificate of
Incorporation).
When a meeting is adjourned to another place, date or time,
written notice need not be given of the adjourned meeting if the
place, date, and time thereof are announced at the meeting at
which the adjournment is taken; provided, however, that if the
date of any adjourned meeting is more than thirty days after the
date for which the meeting was originally noticed, or if a new
record date is fixed for the adjourned meeting, written notice of
the place, date, and time of the adjourned meeting shall be given
in conformity herewith. At any adjourned meeting, any business
may be transacted which might have been transacted at the
original meeting.
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Section 4. Quorum
At any meeting of the stockholders, the holders of a majority of
all of the shares of the stock entitled to vote at the meeting,
present in person or by proxy, shall constitute a quorum for all
purposes, unless or except to the extent that the presence of a
larger number may be required by law.
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of the stock
entitled to vote who are present, in person or by proxy, may
adjourn the meeting to another place, date, or time.
If a notice of any adjourned special meeting of stockholders is
sent to all stockholders entitled to vote thereat, stating that
it will be held with those present constituting a quorum, then
except as otherwise required by law, those present at such
adjourned meeting shall constitute a quorum, and all matters
shall be determined by a majority of the votes cast at such
meeting.
Section 5. Organization
Such person as the Board of Directors may have designated or, in
the absence of such a person, the highest ranking officer of the
corporation who is present shall call to order any meeting of the
stockholders and act as chairman of the meeting. In the absence
of the Secretary of the corporation, the secretary of the meeting
shall be such person as the chairman appoints.
Section 6. Conduct of Business
The chairman of any meeting of stockholders shall determine the
order of business and the procedure at the meeting, including
such regulation of the manner of voting and the conduct of
discussion as seem to him in order.
Section 7. Proxies and Voting
At any meeting of the stockholders, every stockholder entitled to
vote may vote in person or by proxy authorized by an instrument
in writing filed in accordance with the procedure established for
the meeting.
Each stockholder shall have one vote for every share of stock
entitled to vote which is registered in his name on the record
date for the meeting, except as otherwise provided herein or
required by law.
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All voting, except on the election of directors and where
otherwise required by law, may be by a voice vote; provided,
however, that upon demand therefor by a stockholder entitled to
vote or his proxy, a stock vote shall be taken. Every stock vote
shall be taken by ballots, each of which shall state the name of
the stockholder or proxy voting and such other information as may
be required under the procedure established for the meeting.
Every vote taken by ballots shall be counted by an inspector or
inspectors appointed by the chairman of the meeting.
All elections shall be determined by a plurality of the votes
cast, and except as otherwise required by law, all other matters
shall be determined by a majority of the votes cast.
Section 8. Stock List
A complete list of stockholders entitled to vote at any meeting
of stockholders, arranged in alphabetical order for each class of
stock and showing the address of each such stockholder and the
number of shares registered in his name, shall be open to the
examination of any such stockholder, for any purpose germane to
the meeting, during ordinary business hours for a period of at
least ten (10) days prior to the meeting, either at a place
within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting
during the whole time thereof and shall be open to the
examination of any such stockholder who is present. This list
shall presumptively determine the identity of the stockholders
entitled to vote at the meeting and the number of shares held by
each of them.
ARTICLE II - BOARD OF DIRECTORS
Section 1. Number and Term of Office
The number of directors who shall constitute the whole board
shall be such number not less than two nor more than twenty as
the Board of Directors shall at the time have designated. Each
director shall be elected for a term of one year and until his
successor is elected and qualified, except as otherwise provided
herein or required by law.
Whenever the authorized number of directors is increased between
annual meetings of the stockholders, a majority of the directors
then in office shall have the power to elect such new directors
for the balance of a term and until their successors are elected
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and qualified. Any decrease in the authorized number of
directors shall not become effective until the expiration of the
term of the directors then in office unless, at the time of such
decrease, there shall be vacancies on the board which are being
eliminated by the decrease.
Section 2. Vacancies
If the office of any director becomes vacant by reason of death,
resignation, disqualification, removal or other cause, a majority
of the directors remaining in office, although less than a
quorum, may elect a successor for the unexpired term and until
his successor is elected and qualified.
Section 3. Regular Meetings
Regular meetings of the Board of Directors shall be held at such
place or places, on such date or dates, and at such time of times
as shall have been established by the Board of Directors and
publicized among all directors. A notice of each regular meeting
shall not be required.
Section 4. Special Meetings
Special meetings of the Board of Directors may be called by one-
third of the directors then in office or by the chief executive
officer and shall be held at such place, on such date, and at
such time as they or he shall fix. Notice of the place, date and
time of each such special meeting shall be given each director by
whom it is not waived by mailing written notice not less than
three days before the meeting or by telegraphing the same not
less than eighteen hours before the meeting. Unless otherwise
indicated in the notice thereof, any and all business may be
transacted at a special meeting.
Section 5. Quorum
At any meeting of the Board of Directors, one-third of the total
number of the whole board, but not less than two, shall
constitute a quorum for all purposes. If a quorum shall fail to
attend any meeting, a majority of those present may adjourn the
meeting to another place, date, or time, without further notice
or waiver thereof.
Section 6. Participation in Meeting by Conference Telephone
Members of the Board of Directors, or of any committee thereof,
may participate in a meeting of such board or committee by means
of conference telephone or similar communications equipment that
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enables all persons participating in the meeting to hear each
other. Such participation shall constitute presence in person at
such meeting.
Section 7. Conduct of Business
At any meeting of the Board of Directors, business shall be
transacted in such order and manner as the board may from time to
time determine, and all matters shall be determined by the vote
of a majority of the directors present, except as otherwise
provided herein or required by law. Action may be taken by the
Board of Directors without a meeting if all members thereof
consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board of Directors.
Section 8. Powers
The Board of Directors may, except as otherwise required by law,
exercise all such powers and do all such acts and things as may
be exercised or done by the corporation, including, without
limiting the generality of the foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with
law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form
as it may determine, of written obligations of every kind,
negotiable or non-negotiable, secured or unsecured, and to do all
things necessary in connection therewith;
(4) To remove any officer of the corporation with or without
cause, and from time to time to devolve the powers and duties of
any officer upon any other person for the time being;
(5) To confer upon any officer of the corporation the power to
appoint, remove and suspend subordinate officers and agents;
(6) To adopt from time to time such stock, option, stock
purchase, bonus or other compensation plans for directors,
officers and agents of the corporation and its subsidiaries as it
may determine;
(7) To adopt from time to time such insurance, retirement, and
other benefit plans for directors, officers and agents of the
corporation and its subsidiaries as it may determine; and,
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(8) To adopt from time to time regulations, not inconsistent
with these by-laws, for the management of the corporation's
business and affairs.
ARTICLE III - COMMITTEES
Section 1. Committees of the Board of Directors
The Board of Directors, by a vote of a majority of the whole
board, may from time to time designate committees of the board,
with such lawfully delegable powers and duties as it thereby
confers, to serve at the pleasure of the board and shall, for
those committees and any others provided for herein, elect a
director or directors to serve as the member or members,
designating, if it desires, other directors as alternative
members who may replace any absent or disqualified member at any
meeting of the committee. Any committee so designated may
exercise the power and authority of the Board of Directors to
declare a dividend or to authorize the issuance of stock if the
resolution which designates the committee or a supplemental
resolution of the Board of Directors shall so provide. In the
absence or disqualification of any member of any committee and
any alternate member in his place, the member or members of the
committee present at the meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may by
unanimous vote appoint another member of the Board of Directors
to act at the meeting in the place of the absent or disqualified
member.
Section 2. Conduct of Business
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith,
except as otherwise provided herein or required by law. Adequate
provision shall be made for notice to members of all meetings;
one-third of the members shall constitute a quorum unless the
committee shall consist of one or two members, in which event one
member shall constitute a quorum; and all matters shall be
determined by a majority vote of the members present. Action may
be taken by any committee without a meeting if all members
thereof consent thereto in writing, and the writing or writings
are filed with the minutes of the proceedings of such committee.
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ARTICLE IV - OFFICERS
Section 1. Generally
The officers of the corporation shall consist of a president, one
or more vice-presidents, a secretary, a treasurer and such other
subordinate officers as may from time to time be appointed by the
Board of Directors. Officers shall be elected by the Board of
Directors, which shall consider that subject at its first meeting
after every annual meeting of stockholders. Each officer shall
hold his office until his successor is elected and qualified or
until his earlier resignation or removal. The President shall be
a member of the Board of Directors. Any number of offices may be
held by the same person.
Section 2. President
The President shall be the chief executive officer of the
corporation. Subject to the provisions of these by-laws and to
the direction of the Board of Directors, he shall have the
responsibility for the general management and control of the
affairs and business of the corporation and shall perform all
duties and have all powers which are commonly incident to the
office of chief executive or which are delegated to him by the
Board of Directors. He shall have power to sign all stock
certificates, contracts and other instruments of the corporation
which are authorized. He shall have general supervision and
direction of all of the other officers and agents of the
corporation.
Section 3. Vice-Presidents
Each vice-president shall perform such duties as the Board of
Directors shall prescribe. In the absence or disability of the
President, the Vice-President who has served in such capacity for
the longest time shall perform the duties and exercise the powers
of the President.
Section 4. Treasurer
The Treasurer shall have the custody of all monies and securities
of the corporation and shall keep regular books of account. He
shall make such disbursements of the funds of the corporation as
are proper and shall render from time to time an account of all
such transactions and of the financial condition of the
corporation.
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Section 5. Secretary
The Secretary shall issue all authorized notices for, and shall
keep minutes of, all meetings of the stockholders and the Board
of Directors. He shall have charge of the corporate books.
Section 6. Delegation of Authority
The Board of Directors may from time to time delegate the powers
or duties of any officer to any other officers or agents,
notwithstanding any provision hereof.
Section 7. Removal
Any officer of the corporation may be removed at any time, with
or without cause, by the Board of Directors.
Section 8. Action with Respect to Securities of Other Corporations
Unless otherwise directed by the Board of Directors, the
President shall have power to vote and otherwise act on behalf of
the corporation, in person or by proxy, at any meeting of
stockholders of or with respect to any action of stockholders of
any other corporation in which this corporation may hold
securities and otherwise to exercise any and all rights and
powers which this corporation may possess by reason of its
ownership of securities in such other corporation.
ARTICLE V - RIGHT OF INDEMNIFICATION OF DIRECTORS, OFFICERS AND
OTHERS
Section 1. Right to Indemnification
Each person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative
("proceeding"), by reason of the fact that he or she or a person
for whom he or she is the legal representative is or was a
director or officer, employee or agent of the corporation or is
or was serving at the request of the corporation as a director or
officer, employee or agent of another corporation, or of a
partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans, whether the basis
of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity
while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the corporation to the fullest
extent authorized by the Delaware General Corporation Law, as the
same exists or may hereafter be amended (but, in the case of any
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such amendment, only to the extent such amendment permits the
corporation to provide broader indemnification right than said
law permitted the corporation to provide prior to such amendment)
against all expenses, liability and loss (including attorneys'
fees, judgments, fines, ERISA excise taxes or penalties and
amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith. Such right
shall be a contract right and shall include the right to be paid
by the corporation expenses incurred in defending any such
proceeding in advance of its final disposition; provided,
however, that the payment of such expenses incurred by a director
or officer of the corporation in his or her capacity as a
director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or
officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of such
proceeding, shall be made only upon delivery to the corporation
of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it should be determined
ultimately that such director or officer is not entitled to be
indemnified under this section or otherwise.
Section 2. Right of Claimant to Bring Suit
If a claim under Section 1 is not paid in full by the corporation
within 90 days after a written claim has been received by the
corporation, the claimant may at any time thereafter bring suit
against the corporation to recover the unpaid amount of the
claim, and if successful in whole or in part, the claimant shall
be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition
where the required undertaking has been tendered to the
corporation) that the claimant has not met the standards of
conduct which make it permissible under the Delaware General
Corporation Law for the corporation to indemnify the claimant for
the amount claimed, but the burden of proving such defense shall
be on the corporation. Neither the failure of the corporation
(including its Board of Directors, independent legal counsel, or
its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant
is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the corporation
(including its Board of Directors, independent legal counsel, or
its stockholders) that the claimant had not met such applicable
standard of conduct, shall be a defense to the action or create a
presumption that claimant had not met the applicable standard of
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conduct.
Section 3. Non-Exclusivity of Rights
The rights conferred by Sections 1 and 2 shall not be exclusive
of any other right which such person may have or hereafter
acquire under any statute, provision of the Certificate of
Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 4. Insurance
The corporation may maintain insurance, at its expense, to
protect itself and any such director, officer, employee or agent
of the corporation or another corporation, partnership, joint
venture, trust or other enterprise against any such expense,
liability or loss, whether or not the corporation would have the
power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
ARTICLE VI - STOCK
Section 1. Certificates of Stock
Each stockholder shall be entitled to a certificate signed by, or
in the name of the corporation by, the President or a vice-
president, and by the secretary or an assistant secretary, or the
treasurer or an assistant treasurer, certifying the number of
shares owned by him. Any of or all the signatures on the
certificate may be facsimile.
Section 2. Transfers of Stock
Transfers of stock shall be made only upon the transfer books of
the corporation kept at an office of the corporation or by
transfer agents designated to transfer shares of the stock of the
corporation. Except where a certificate is issued in accordance
with Section 4 of Article VI of these by-laws, an outstanding
certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued
therefor.
Section 3. Record Date
The Board of Directors may fix a record date, which shall not be
more than 60 nor less than 10 days before the date of any meeting
of stockholders, nor more than 60 days prior to the time for the
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other action hereinafter described, as of which there shall be
determined the stockholders who are entitled: to notice of or to
vote at any meeting of stockholders or any adjournment thereof;
to express consent to corporate action in writing without a
meeting; to receive payment of any dividend or other distribution
or allotment of any rights; or to exercise any rights with
respect to any change, conversion or exchange of stock or with
respect to any other lawful action.
Section 4. Lost, Stolen or Destroyed Certificates
In the event of the loss, theft or destruction of any certificate
of stock, another may be issued in its place pursuant to such
regulations as the Board of Directors may establish concerning
proof of such loss, theft or destruction and concerning the
giving of a satisfactory bond or bonds of indemnity.
Section 5. Regulations
The issue, transfer, conversion and registration of certificates
of stock shall be governed by such other regulations as the Board
of Directors may establish.
ARTICLE VII - NOTICES
Section 1. Notices
Whenever notice is required to be given to any stockholder,
director, officer, or agent, such requirement shall not be
construed to mean personal notice. Such notice may in every
instance be effectively given by depositing a writing in a post
office or letter box, in a postpaid, sealed wrapper, or by
dispatching a prepaid telegram, addressed to such stockholder,
director, officer, or agent at his or her address as the same
appears on the books of the corporation. This time when such
notice is dispatched shall be the time of the giving of the
notice.
Section 2. Waivers
A written waiver of any notice, signed by a stockholder,
director, officer, or agent, whether before or after the time of
the event for which notice is to be given, shall be deemed
equivalent to the notice required to be given to such
stockholder, director, officer, or agent. Neither the business
nor the purpose of any meeting need be specified in such a
waiver.
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ARTICLE VIII - MISCELLANEOUS
Section 1. Facsimile Signature
In addition to the provisions for the use of facsimile signatures
elsewhere specifically authorized in these by-laws, facsimile
signatures of any officer or officers of the corporation may be
used whenever and as authorized by the Board of Directors or a
committee thereof.
Section 2. Corporate Seal
The Board of Directors may provide a suitable seal, containing
the name of the corporation, which seal shall be in charge of the
secretary. If and when so directed by the Board of Directors or
a committee thereof, duplicates of the seal may be kept and used
by the treasurer or by the assistant secretary or assistant
treasurer.
Section 3. Reliance Upon Books, Reports, and Records
Each director, each member of any committee designated by the
Board of Directors, and each officer of the corporation shall, in
the performance of his duties, be fully protected in relying in
good faith upon the books of account or other records of the
corporation, including reports made to the corporation by any of
its officers, by an independent certified public accountant, or
by an appraiser selected with reasonable care.
Section 4. Fiscal Year
The fiscal year of the corporation shall be as fixed by the Board
of Directors.
Section 5. Time Periods
In applying any provision of these Bylaws which requires that an
act be done or not done a specified number of days prior to an
event or that an act be done during a period of a specified
number of days prior to an event, calendar days shall be used,
the day of the doing of the act shall be excluded, and the day of
the event shall be included.
ARTICLE IX - AMENDMENTS
These Bylaws may be amended or repealed by the Board of Directors
at any meeting or by the stockholders at any meeting.
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CERTIFICATE
The undersigned, being the duly elected and acting Secretary of
TRIM-A-LAWN Corporation, a Delaware corporation, hereby certifies
that the foregoing Bylaws constitute the Bylaws of such
corporation duly adopted by its Board of Directors.
Richard P. Nadeau
Secretary
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Exhibit 21
Subsidiaries of the Registrant
Electronic Kourseware International, Inc. (EKI) was a majority owned
subsidiary during calendar year 1997 d/b/a/ Electronic Kourseware
Interactive, and is a Delaware corporation that develops, produces, and
markets a line of educational software products and electronic kits for the
secondary education school market, including vocational educational training.
The company is located in Orem, Utah.
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENT OF INCOME AND
CONSOLIDATED STATEMENT OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-END] JUN-30-1998
[BOOK-VALUE] PER-BOOK
<CASH-AND-CASH-ITEMS> 18597
<MARKETABLE-SECURITIES> 0
<NOTES-AND-ACCOUNTS-RECEIVABLE-TRADE> 583934
<ALLOWANCES-FOR-DOUBTFUL-ACCOUNTS> 0
[INVENTORY] 516608
[TOTAL-CURRENT-ASSETS] 4654349
<PROPERTY-PLANT-AND-EQUIPMENT> 198502
<ACCUMULATED-DEPRECIATION> 0
[TOTAL-ASSETS] 6327456
<TOTAL-CURRENT-LIABILITIES> 842616
<BONDS-MORTGAGES-AND-SIMILAR-DEBT> 747635
0
<COMMON-STOCK> 5755205
<OTHER-STOCKHOLDERS-EQUITY> 1000000
<TOTAL-LIABILITIES-AND-STOCKHOLDERS-EQUITO 6327456
<NET-SALES-OF-TANGIBLE-PRODUCTS> 2050117
[TOTAL-REVENUES] 2050117
<COST-OF-TANGIBLE-GOODS-SOLD> 1393236
<TOTAL-COSTS-AND-EXPENSES-APPLICABLE-TO-TOTAL-COSTS-AND-EX 306040
<OTHER-COSTS-AND-EXPENSES> 8489
<PROVISION-FOR-DOUBTFUL-ACCOUNTS-AND-NOTPR 0
<INTEREST-AND-AMORTIZATION-OF-DEBT-DISCOINT 0
<INCOME-BEFORE-TAXES-AND-OTHER-ITEMS> 117800
[INCOME-TAX-EXPENSE] 2125
<INCOME/LOSS-CONTINUING-OPERATIONS> 115675
<DISCONTINUED-OPERATIONS> 0
<EXTRAORDINARY-ITEMS> 0
<CUMULATIVE-EFFECT-CHANGES-IN-ACCOUNTINGCUMULATIVE- 0
<NET-INCOME-OR-LOSS> 115675
<EARNINGS-PER-SHARE-PRIMARY> .01
<EARNINGS-PER-SHARE-FULLY-DILUTED> .01
83
<PAGE>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-END] DEC-31-1997
[BOOK-VALUE] PER-BOOK
<CASH-AND-CASH-ITEMS> 0
<MARKETABLE-SECURITIES> 0
<NOTES-AND-ACCOUNTS-RECEIVABLE-TRADE> 84947
<ALLOWANCES-FOR-DOUBTFUL-ACCOUNTS> 0
[INVENTORY] 490227
[TOTAL-CURRENT-ASSETS] 3675459
<PROPERTY-PLANT-AND-EQUIPMENT> 553497
<ACCUMULATED-DEPRECIATION> 349670
[TOTAL-ASSETS] 4730441
<TOTAL-CURRENT-LIABILITIES> 1013896
<BONDS-MORTGAGES-AND-SIMILAR-DEBT> 613002
0
<COMMON-STOCK> 6728549
<OTHER-STOCKHOLDERS-EQUITY> -4265006
<TOTAL-LIABILITIES-AND-STOCKHOLDERS-EQUI
</SEC-DOCUMENT>
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