U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
For the transition period from _________________ to _________________
Commission file number: 0-28471
ENTRADA SOFTWARE, INC.
(Name of small business issuer in its charter)
Nevada 86-0968364
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
7825 E. Gelding Dr., Suite 102 85260
Scottsdale, Arizona (Zip Code)
(Address of principal executive offices)
(480) 607-3535
Issuer's telephone number
Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the
Exchange Act:
Common stock, $.001 par value
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ ] No [X]
Check if there is no disclosure of delinquent filers, in response to Item
405 of Regulation S-B, contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
The registrant's revenues for the year ended December 31, 1999 were
$47,209.
The aggregate market value at December 31, 1999 of the voting and
non-voting common equity held by non-affiliates computed by reference to the
price at which the common equity was sold was approximately $386,324.
The number of shares outstanding of the registrant's common equity as of
February 9, 2000 was 6,905,947.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
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PART I
Except for historical information contained herein, this Form 10-KSB
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Entrada
Software Inc. ("Entrada") intends that such forward-looking statements be
subject to the safe harbors created by these statutes to the extent they apply.
Wherever possible, we have identified these forward-looking statements
by words such as "anticipates," "believes," "estimates," "expects," "intends"
and similar expressions. Forward-looking statements involve risks and
uncertainties and include, but are not limited to, statements of future events
and Entrada's plans and expectations. Our actual results may differ materially
from such statements.
Although we believe that the assumptions underlying the forward-looking
statements herein are reasonable, any of the assumptions could prove inaccurate.
There can be no assurance that the results contemplated in such forward-looking
statements will be realized. The inclusion of such forward-looking information
should not be regarded as a representation by Entrada or any other person that
the future events, plans or expectations contemplated by Entrada will be
achieved.
ITEM 1. DESCRIPTION OF BUSINESS
OVERVIEW
Entrada has developed and recently commenced active marketing of the
Kinnosa suite of "product content" software. Kinnosa is an enterprise-class
software product specifically designed for management of the manufacturing
process. Kinnosa is targeted to large manufacturing companies and is designed to
be compatible with legacy software and hardware. We believe Kinnosa to be a new
category of software in that it is "product-centric," meaning that it focuses on
the product being manufactured instead of the manufacturing business segments
such as procurement, accounting or engineering. Kinnosa can deliver complete
product content information to manufacturers and their suppliers and customers.
This information can be delivered by Intranet or Internet which enables Kinnosa
users to continuously obtain control and analysis information internally and
from their customers and suppliers. This information is globally integrated from
engineering, manufacturing and customer data systems developed during the
history of a Kinnosa managed product.
Kinnosa has been successfully deployed at Motorola for two years.
Kinnosa enabled Motorola's Satellite Communications Group to successfully track
and manage the configuration and status of the more than 80,000 parts in each of
the sixty-six Iridium(TM) communications satellites.
We believe Kinnosa will enable manufacturers to shorten product
development times, introduce and manage product changes more effectively,
integrate product information with suppliers, and configure products to customer
needs. Kinnosa accomplishes these advantages through its product-centric view
which tracks the manufactured product's complete life history. We believe this
view is unprecedented and is not available through any other existing packaged
software application. With use of the Internet and portal technology, Kinnosa
can deliver critical and timely information directly to company users, partners,
suppliers and even to customers.
Kinnosa provides analyses and permits decisions to be made throughout
the product development process - from supplier to customer. This enhances
repeatable engineering designs, product manufacture-ability and product quality,
resulting in a reduction of the manufacturing time cycle.
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An important part of our growth strategy is to become an application
service provider. We can offer all of Kinnosa's capabilities, on a per user
basis, through the Internet. We believe this strategy will become an important
revenue source as manufacturers install Kinnosa, and then require their
suppliers to have the same capabilities.
We believe the Kinnosa suite to be highly functional and that its
acceptance will enable us to meet our business objectives. However, Kinnosa is a
relatively new product that has only been deployed in one application setting,
the manufacture of the Iridium(TM) satellite. Entrada is an early stage company
with no meaningful operating history. Our ability to raise additional capital
and to successfully market and support our Kinnosa product will be critical to
our success.
ORGANIZATION, HISTORY AND DEVELOPMENT
Entrada was incorporated in Nevada in August 1999 as a wholly owned
subsidiary of The Rotherwood Group, Inc. ("TRG"), a non-trading public company
seeking acquisitions. Effective September 1, 1999, TRG was merged into Entrada
solely to adopt the new Entrada name and to change the state of incorporation
from Arizona to Nevada.
TRG was incorporated in Arizona in June 1990 as Benchmark Associates,
Inc. ("BAI"). BAI was formed to continue the software development and
distribution of a business software product suite it had acquired from ShareData
Inc. ("SDI"). SDI sold these rights to BAI for cash and notes. In August 1991,
SDI and BAI settled the note obligation, then in default, by SDI taking control
of BAI and eventually converting the note obligation into approximately 93% of
BAI's outstanding common stock.
In December 1993, SDI filed for protection under Chapter 11 of the
Bankruptcy Code. As part of SDI's Plan of Reorganization, certain shares of
BAI's common stock (representing approximately 9%) and warrants to purchase
shares of BAI common stock were distributed to approximately 300 creditors and
claimants of SDI. The distribution of these securities was exempt from
registration pursuant to Section 145 of the Bankruptcy Code. Upon confirmation
of SDI's Plan of Reorganization by the Bankruptcy Court in December 1995, BAI
become a non-trading public company with approximately 325 shareholders. BAI had
essentially no operations and was continually seeking acquisitions since 1995.
BAI changed its name to TRG in January 1998.
On September 1, 1999, TRG acquired all the outstanding stock of CIMsoft
in exchange for 5,000,008 shares of TRG common stock. CIMsoft became a wholly
owned subsidiary of TRG. CIMsoft was incorporated in Delaware in 1998 to acquire
and market the Kinnosa product line, and commenced limited operations in May
1999. As a result of TRG's acquisition of CIMsoft, the former CIMsoft
stockholders held approximately 77% of TRG's common stock. For financial
accounting purposes, the acquisition was treated as a recapitalization of
CIMsoft, with CIMsoft as the acquirer. On December 15, 1999, CIMsoft merged into
Entrada and the company now operates as a Nevada corporation under the name
Entrada Software, Inc.
THE MARKET
Manufacturing is a critical component of the world economy and has
increasingly become more information intensive and technology oriented in recent
times. According to a September 1997 report by International Data Corp. ("IDC")
the manufacturing sector accounts for 26% of the world's software applications
market, which would result in over $11 billion of software sales annually in the
United States alone. In a January 1998 report IDC predicted the manufacturing
software market to double by 2001.
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Of the two component sectors in manufacturing - discrete and process -
we will target our sales effects to the discrete manufacturing market. Discrete
manufacturing is generally the production of products (such as automobiles,
airplanes and home appliances). The discrete manufacturing software market is
presently a $6.9 billion annual market in the United States according to the
U.S. Department of Commerce 1998 U.S. Industry and Trade Outlook Forecast. The
segments of this market we are initially targeting as potential customers are
the commercial aerospace, transportation and high-technology manufacturing
segments. Within these market segments we have identified some 3,350 companies
in the United States that meet our criteria for potential customers.
THE KINNOSA PRODUCT SUITE
Kinnosa is a powerful enterprise-class software application that
continuously and directly delivers control and analysis information to
manufacturers and their customers and suppliers. This information is integrated
from all engineering, manufacturing, and customer data systems developed during
the complete history of a product. At the center of Kinnosa is a product
information depository, the contents of which carry the complete description of
a product, including early concept studies, design and engineering data,
detailed manufacturing and assembly history, customer service, maintenance and
support information. This product content data is stored in a universal format
that facilitates quick integration with the source systems, regardless of
location. This depository is bi-directional, in that it can receive and
distribute product information with these other systems.
Kinnosa creates a product-centric information view of all product data.
This means that all data related to a specific product, from conception through
the manufacturing process and to customer use, is available from one source. We
believe this view is unprecedented, and is not available through any existing
packaged applications, which deal primarily with processes or document
management.
Kinnosa is also an Internet-enabled software application. Its
application logic is modular, written in Java and delivered through portal
technology tailored specifically for integration with both customers and
suppliers through the Internet. Its application modules provide analysis,
reporting and a current display of product definitions, configuration history,
planned changes, obsolete inventory, product upgrades, spare parts requirements
and product traceability. Portal technology permits the proactive delivery of
targeted and complete product content - including structured database
information, web pages, documents, notes and other pertinent information -
seamlessly through a standard web browser. Kinnosa's modular architecture
contains integration components that connect industry-standard design,
engineering, manufacturing, distribution and support systems. Kinnosa is built
on an open software framework that assembles product data from systems worldwide
in order to deliver complete and targeted product information. Kinnosa is
presently available with off-the-shelf connectivity to selected Product Data
Management, Shop Floor and other information systems. Integration with leading
Enterprise Resource Management, Customer Relationship Management and other
systems is planned for future releases.
MARKET POSITIONING AND STRATEGY
Our strategy is based on the assumption that for manufacturers to
remain competitive, and in some cases, to survive in the global economy, their
products must get to market faster. This requires increased agility that enables
significantly shorter design and development times, in conjunction with higher
product quality and lower costs. Manufacturers invest heavily in enterprise
applications to address these needs. We believe Kinnosa fills critical needs not
addressed by other software applications.
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Our products are in the emerging Product Content Management market. The
Kinnosa product suite is a solution for manufacturers who want to improve their
ability to manage product content information across the product life cycle -
from conception to customer use. Kinnosa is targeted to manufacturers that need
to track product designs, configurations, development status and engineering
changes, and perform analyses on the complete life history of their products.
In addition, Kinnosa is an e-business application, providing
information, through portal technology and the Internet, based on data
integrated from manufacturers, suppliers, and customers.
Kinnosa is a business solution. The target customers are product
development or operations managers in large companies, and operations executives
in smaller companies. Because Kinnosa provides value across the entire product
life cycle, we believe that it will appeal to any functional point in the
business, including marketing, engineering, procurement, manufacturing and
support.
Initial penetration into the targeted market will consist of a
combination of strategic partnerships and direct sales. The main marketing
strategies will be personal introductions, market awareness, references,
conferences and symposia, and direct mail. In cases of strategic importance,
special promotions and offers may be used to gain entry into a targeted account.
We will conduct demonstrations and seminars to broaden product interest and
maximize account coverage.
SERVICES DESCRIPTION
In order to provide complete and comprehensive solutions, we intend to
compliment our products with a complete suite of professional education,
training, implementation, and support services. These services include
product-specific training, installations, custom development and integration,
maintenance and product support.
In addition, we will offer complete Kinnosa solutions as a service.
Through our applications service provider model, we will provide total product
capabilities on a per-seat basis. We believe that this turnkey service will
allow us to introduce Kinnosa to most potential customers, regardless of size,
budget or technology capabilities.
BUSINESS STRATEGIES
We intend to combine the existing product suite, Kinnosa, with solution
sales to high technology, transportation and commercial aerospace manufacturers.
The Kinnosa products are ready for market, and sales efforts commenced at the
end of the fourth quarter of 1999. Direct and indirect sales and services, in
both domestic and international markets, are expected to comprise most of our
revenues. Also, as larger companies already selling in this market realize the
benefits of Kinnosa, we expect to receive partnership opportunities, which we
will evaluate.
We will operate as both a software and services company. At first, we
intend to sell solutions directly to customers in the advanced technology
manufacturing market segment. We will also attempt to develop partner
relationships with consulting firms specializing in providing software and
support solutions for their manufacturing customers. We also expect to sell our
products and services through value-added resellers, also known as VARs.
We expect to offer our applications, and deliver Kinnosa functionality,
to customers as an application service provider. We believe that this is an
important way for manufacturers to obtain an integration and distribution of
product history information with suppliers and customers, who can access Kinnosa
seamlessly through Internet web portals. We plan to offer this service for a
monthly fee per user.
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PRICING STRATEGY
We price Kinnosa products according to the capabilities the customer
needs and the number of users accessing the system. The software modules are
separated into three groups: the Kinnosa core, application modules, and
connectivity to data sources. User licensing is tiered into three classes:
workgroup-class (up to 30 users), division-class (up to 100 users) and
enterprise-class (up to 400 users). Special bundling and pricing will be
available for some customers for volume purchase agreements in excess of 400
users. Early payment terms, leasing and other financing programs will be offered
to customers as well. In addition, per-user licensing is available through our
application service provider program.
Kinnosa is a fully scalable solution. A customer may begin at a
workgroup level and scale up to a division or even enterprise level over time.
The Kinnosa product suite will grow as the customer's requirements grow.
We price our professional services on an hourly basis. These services
are tiered by experience and capability into two levels - consultant and senior
consultant. Education and training services are priced based on standard course
curricula.
Our sales approach will place professional services consultants at a
customer's site early in the process to facilitate the customer's shift to the
product-centric view of their business. This strategy will also enable us to
effectively scope and position the implementation and integration of the Kinnosa
product.
GROWTH STRATEGY
Kinnosa sales are expected to commence with larger customer accounts,
usually at a workgroup level. We believe that reference sales between divisions
and departments of an enterprise will increase sales to the division and
enterprise levels. Strategic alliances with consultants and VARs should add
license revenues in the future. In our second year of operations (2001), we
expect to have international marketing efforts in support of our customers'
overseas divisions and affiliates. Consideration will also be given to growth
through the acquisition of, or affiliation with, competitors or companies that
have related products.
STRATEGIC ALLIANCES
The initial approach for taking Kinnosa to market involves a two-prong
effort using direct sales and system integrators. We believe that the
multi-vendor partnerships that exist in the industry today have failed to
resolve the dilemma of users when choosing to buy the best product available, or
dealing with a single vendor. Forrester Research observes that a new form of
systems integrator, called portfolio assembler, is emerging to sell, implement
and support pre-integrated sets of multi-vendor applications. We will pursue
alliances with systems integrators who are firmly committed in this direction.
PROPRIETARY POSITION
We rely upon copyright, trademark and contractual law to continue to
protect our ownership and proprietary rights to our products. Copyright
protection is in place, and patent applications are being considered, and will
be filed when appropriate. We enter into confidentiality and non-disclosure
agreements with our employees, consultants and others. We also control access to
our confidential information.
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PRODUCT DEVELOPMENT
Kinnosa is a functional product suite today, and has been operating in
a mission critical product application at a customer's manufacturing facility
since 1998. The current product as installed has full functionality and is ready
to be delivered to additional customers in our targeted markets.
Our near-term product development plan is to incorporate portal
technology into the applications architecture and convert all residual X-windows
and Java interfaces to operate in the portal environment. We expect to be
continuously upgrading and expanding our products, with additional components
and connectivity packages ready for release within one year.
COMPETITION
As an enabling enterprise application for an entire business operation,
Kinnosa crosses several vertical software markets. We believe that our products
are complementary to each type of potential competitor. However, due to the
infancy of the product content management market, potential customers will
perceive that our products compete in some way with each type of information
technology provider listed below. Manufacturing software vendors have
traditionally created product functionally around business processes like
engineering, manufacturing and purchasing. As a result of this positioning,
competition can come from several other products, depending on the customer.
PRODUCT DATA MANAGEMEN (PDM) VENDORS. Our most significant competition
will come from the PDM vendors. Their products are essentially document
management and workflow applications which they market as complete PDM
solutions. We believe these vendors have difficulty handling complete product
life cycle data, and utilize a document-centric approach to managing product
change. We expect to successfully compete with PDM vendors in areas of product
data management by offering superior functionality.
ENTERPRISE DATA WAREHOUSING VENDORS. Some competition will also come
from data warehouse applications vendors. Many of these vendors have announced
plans to deliver data warehouse packaged solutions for their enterprise
software. These companies could be formidable competitors, but are in the early
stages of bringing these products to market. We expect to be able to compete
successfully with these companies by enriching data with manufacturing business
content, and by making relevant information available to all users through
portals.
INTERNET SUPPLY CHAIN VENDORS. Competition will also come from the
Internet Supply Chain Management (SCM) vendors. They provide an integrated
approach for planning and controlling the flow of products and information
through a distribution channel from suppliers to end-users. Products from these
vendors are new to the market. We do not intend to compete directly with the SCM
vendors, but to become complimentary. We believe our product-centric data store
and connectivity capabilities can provide useful information and connectivity
for these systems.
FACTORS AFFECTING FUTURE PERFORMANCE
WE HAVE NO RELEVANT OPERATING HISTORY MAKING IT DIFFICULT TO EVALUATE
OUR BUSINESS. We commenced our current operations through the acquisition
CIMsoft in September 1999. CIMsoft has been in business only since May, 1999.
Entrada had a loss of $286,769 for the year ended December 31, 1999. Future
losses are likely to occur. We can give no assurances that our business plan
will be successful or that we will achieve or be able to maintain profitability.
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WE ARE DEPENDENT UPON OUR ABILITY TO RAISE CAPITAL. We have received
limited financing to date and current revenues will be insufficient to fund the
increase in the our operations necessary for us to start selling, installing and
servicing our primary product line. While we are actively seeking additional
investment capital, we may not be successful in attracting additional capital at
favorable rates, or at all. We may not be able to generate sufficient revenues
from our operations to continue our business. If we are unable to raise
additional capital, our operations will be negatively impacted.
WE EXPECT RAPID GROWTH, RESULTING IN SIGNIFICANT MANAGEMENT CHALLENGES.
We anticipate very rapid growth in our operations over the next twelve months.
This growth will place significant pressure on limited resources and
infrastructure. We may not be able to effectively manage this growth. Although
we believe we will have the management and resources to achieve our business
model, our success will depend upon our ability to effectively manage our
growth. We must implement and improve our operational, administrative and
financial systems and controls, and train and manage our employees. If we are
unable to manage our growth effectively, our business reputation, results of
operations and financial condition could be harmed.
OUR LIMITED OPERATING HISTORY MAKES FORECASTING DIFFICULT. We
essentially restarted our operations through the acquisition of CIMsoft in
September 1999. We will encounter numerous risks and difficulties faced by early
stage companies in the rapidly developing enterprise software markets, and we
may not be successful in addressing these risks. Our business strategy may not
be successful. As a result of our limited operating history, it is difficult to
accurately forecast future operations and plan operating expenses. As a result,
we may be unable to timely adjust spending to compensate for any unexpected
revenue shortfall. This inability could cause profitability to be adversely
affected.
WE ARE IN A HIGHLY COMPETITIVE BUSINESS. Within our identified market
space are large, well-established and well-known companies that have
substantially greater financial, technological, promotional and other resources
than we have. We may not be able to compete effectively in this marketplace.
INTELLECTUAL PROPERTY CLAIMS COULD BE EXPENSIVE AND RESULT IN LOSS OF
RIGHTS. Our property rights to our software products are our primary asset. We
plan to protect and enforce our ownership and proprietary rights to our products
through copyright, trademark, and trade secret laws, as well as confidentiality
and non-disclosure agreements and licensing/usage contracts with our customers
and employees. However, these protections may not prevent competitors from
developing similar software that may have more customer acceptance than our
software. While we do not believe that our software products infringe on the
intellectual property rights of third parties, infringement claims may be made.
We may not have sufficient resources to sustain or defend lengthy legal actions
regarding our intellectual property.
WE EXPECT TO RELY UPON A LIMITED NUMBER OF CUSTOMERS AND THE LOSS OF A
MAJOR CUSTOMER COULD ADVERSELY AFFECT REVENUE. Our business model for the next
several years is based on a relatively small number of sales to a few large
customers. If any one sale does not occur, or if sales to any one customer are
less than expected, our expected operations will be materially affected, if
alternative sources of revenue are not found.
WE ARE DEPENDENT UPON CUSTOMER ACCEPTANCE OF OUR PRODUCTS. We have
limited sales of our products to date, and are entering a market that has
numerous competitive products. Our ability to meet our business plan and
projections is dependent on our ability to convince prospective customers that
our products are superior to competing products and that we can successfully
deliver and service our products. Our ability to successfully implement our
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business plan is also dependent on meeting our expected sales cycle. If our
sales cycle is longer than expected, this will have an adverse effect upon our
projected cash flow and operations.
OUR MARKET IS SUBJECT TO RAPID CHANGES AND NEW PRODUCTS. The computer
software industry is characterized by rapid change, frequent new product
introductions, changing customer demands, evolving standards, and many other
uncontrollable and unforeseeable trends and changes. Our future success will
greatly depend upon our ability to timely and effectively address changes
affecting our industry. Failure to effectively respond to these changes could
materially and adversely effect our operations and profitability.
THE LOSS OF SERVICES OF ONE OR MORE OF OUR KEY PERSONNEL COULD HARM OUR
OPERATIONS. We believe our current management resources will enable us to
succeed as planned. However, the loss of one or more of our current officers or
key employees could severely and negatively impact our operations. Future
success depends on the ability to attract, retain and motivate highly skilled
employees. Competition for employees in our industry is intense. We may be
unable to retain key employees, or to attract and keep additional highly
qualified employees in the future.
EXISTING MANAGEMENT EXERCISES SIGNIFICANT CONTROL OVER ENTRADA. A small
number of stockholders, who comprise our executive management, controls Entrada.
These stockholders, when acting together, can elect or otherwise designate all
members of our Board of Directors. This control by management is expected to
continue into the future.
OUR STOCK IS NOT YET TRADED AND COULD BE SUBJECT TO EXTREME VOLATILITY.
While a potential market maker has applied to the NASD to establish a market in
our stock, our stock is not yet traded on any established market or exchange,
and may never be actively traded. If an active market in our common stock does
not develop or continue, holders of our common stock may be unable to readily
liquidate their investment. If a market does develop, it is anticipated that it
will initially be in the over-the-counter market that is characterized by low
volume trading, high volatility and large spreads between bid and ask prices. A
significant amount of common stock coming on the market at any one time could
cause the stock to decline in price. If a market is established, it is likely to
be highly volatile.
ITEM 2. DESCRIPTION OF PROPERTY
We currently lease a 2,700 square foot facility located in an
industrial/commercial park in Scottsdale, Arizona. The lease on the facility is
for a term through August 2002, and the annual rental is approximately $53,000.
We anticipate acquiring additional facilities for expansion before the end of
the current lease term.
ITEM 3. LEGAL PROCEEDINGS
We are not involved in any litigation, nor are we aware of any
potential or threatened litigation, or any asserted claims that may result in
litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
RECENT SALES OF UNREGISTERED SECURITIES
In January and February, 2000, investors exercised warrants for the
purchase of approximately 163,000 shares of common stock at $1.50 per share,
from which Entrada realized $245,000 in new funds.
MARKET FOR COMMON STOCK
Our common stock is not yet traded on any established market or
exchange. A market maker has applied for qualification to trade our stock on the
OTC Bulletin Board. At December 31, 1999, there were approximately 230 Entrada
shareholders.
DIVIDEND POLICY
We have never declared or paid a dividend on our common stock, and we
do not intend to pay dividends in the foreseeable future. We are required to
accrue a 10% ($0.10 per share) cumulative annual dividend for each share of
Series A preferred stock outstanding. This dividend is payable only when
declared by the Board of Directors, and must be paid before any dividends on
common stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
BACKGROUND
Terry L. Simpson, one of CIMsoft's founders and now a major shareholder
of Entrada, began working on the Kinnosa software product, then known as
CIMbase, in 1990. Between 1993 and 1996, he completed development of Kinnosa and
installed the product in several locations as beta sites. In 1996, he joined
Sybase, Inc. in order to sell the Kinnosa product to Motorola, Inc. With the
support of Sybase, in 1997 the Kinnosa product was installed at Motorola's
Satellite Communications Group to assist Motorola in producing Iridium TM
SATELLITES.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999
The following discussion provides information that we believe will help
you understand our financial statements, and should be read along with these
financial statements and related notes. The following discussion also contains
forward-looking information. Actual results will likely be different than
projected results due to many factors.
Our operations commenced on a limited basis in May 1999. The year ended
December 31, 1999 includes the operations of CIMsoft through the date of merger,
and the operations of Entrada Software for the remaining period. CIMsoft had
minimal operations prior to the merger, and continued operations under TRG after
the acquisition. We generated $47,209 of consulting revenue for the period. Our
planned sales of Kinnosa software products had not commenced as of December 31,
1999. Of the $337,864 of operating expenses for the period, approximately
$244,000 was related to salaries and other personnel expenses, and the remainder
of $93,864 was for occupancy, administrative and other costs. We had a net loss
of $286,769 for the year ended December 31, 1999.
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LIQUIDITY AND CAPITAL RESERVES
Since the beginning of operations in May 1999, we had minimal revenues
and generated no significant working capital. Prior to the acquisition of
CIMsoft by Entrada, CIMsoft raised $307,500 from the sale of its common stock.
In connection with the acquisition of CIMsoft, Aztore Holdings, Inc. purchased
$150,000 of our Series A Preferred Stock. This combined equity capital of
$463,500 was used to establish our corporate headquarters, pay the costs of the
merger, and fund the operating deficit for the year.
Subsequent to year-end, investors exercised warrants for the purchase
of approximately 163,000 shares of common stock at $1.50 per share, from which
Entrada realized $245,000 in new funds.
PLAN OF OPERATIONS FOR FISCAL YEAR 2000
We believe that working capital at December 31, 1999, plus the funds
received from the subsequent warrant exercise, will be sufficient to fund our
operations until April 30, 2000. During this period, we plan to hire up to 15
additional employees, and spend significant amounts on our marketing program.
Because planned sales will not generate any significant cash flow before March
2000, we believe we will have to raise $1 million to $1.5 million in additional
funds in order to execute our business plan.
If we are able to raise the additional funds, we believe that we will
have sufficient working capital to reach a level of operations that will
generate a positive cash flow in 2000. Our operating plan for 2000 projects $3.3
million in revenue, which should generate both earnings and positive cash flow
for the year. Upon receiving any additional funding, we will hire the additional
personnel and complete our marketing activities necessary if we are to meet our
business plan.
YEAR 2000 "Y2K" CONSIDERATIONS
We had previously addressed possible remedial efforts in connection
with computer software that could be affected by the Year 2000 "Y2K" problem. We
reviewed all equipment in our business and determined that all critical systems
were Y2K compliant, including the telephone system and computer software. We
incurred no expense to bring systems into compliance, and experienced no events
that had any impact on our business.
Since January 1, 2000 all our systems have functioned normally. Other
entities with which we transact business have experienced no Y2K problems that
affected our business. If these companies should experience serious Y2K events
in the future, it is possible that our business could be adversely affected.
11
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
INDEX
Report of Independent Public Accountants.................................... 13
Balance sheet at December 31, 1999.......................................... 14
Statement of Operations for the year ended December 31, 1999................ 15
Statement of Cash Flows for the year ended December 31, 1999................ 16
Statement of Stockholders' Equity for year ended December 31, 1999.......... 17
Notes to the Financial Statements........................................... 18
12
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and the Board of Directors
of Entrada Software, Inc.
We have audited the accompanying balance sheet of Entrada Software, Inc. (a
Nevada corporation; the "Company") as of December 31, 1999 and the related
statements of operations, stockholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
amounts and disclosures in the 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Entrada Software, Inc. as of
December 31, 1999, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has just commenced
operations, had a loss of $286,000 for the year ended December 31, 1999 and has
limited working capital reserves. The Company expects to face many operating and
industry challenges and will be doing business in a highly competitive industry.
These factors raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans with regard to these matters are discussed
in Note 1. The financial statements do not include any adjustments relating to
the recoverability and classification of asset carrying amounts or the amount
and classification of liabilities that might result should the Company be unable
to continue as a going concern.
KING, WEBER & ASSOCIATES, P.C.
Tempe, Arizona
January 17, 2000
13
<PAGE>
ENTRADA SOFTWARE, INC.
================================================================================
BALANCE SHEET
DECEMBER 31, 1999
ASSETS
Current assets
Cash and cash equivalents $ 211,088
Prepaid expenses and deposits 10,312
---------
Total current assets 221,400
---------
Furniture, fixtures and equipment 37,716
Less accumulated depreciation (1,713)
---------
Net furniture, fixtures and equipment 36,003
---------
Deposits 16,090
Intellectual property, net of accumulated amortization of $260 7,600
---------
Total assets $ 281,093
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 29,871
Deferred revenue 23,334
Note payable to officer 49,100
---------
Total current liabilities 102,305
---------
Other liabilities 5,794
---------
Total liabilities 108,099
---------
Commitments
Stockholders' equity
Serial preferred stock, $.001 par value; authorized
5,000,000 shares Series A convertible preferred stock,
$.001 par value; $1.00 liquidation preference, 250,000
shares authorized, issued and outstanding 250
Common stock; $.001 par value, authorized 70,000,000
shares, 6,730,180 shares issued and outstanding 6,730
Paid in capital 456,520
Accumulated deficit (290,506)
---------
Total stockholders' equity 172,994
---------
Total liabilities and stockholders' equity $ 281,093
=========
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
ENTRADA SOFTWARE, INC.
================================================================================
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
Sales $ 47,209
Selling, general and administrative expenses 337,864
-----------
Loss from operations (290,665)
-----------
Other income (expense)
Interest expense (1,852)
Interest income 5,738
-----------
Total other income 3,886
-----------
Net loss $ (286,769)
===========
Loss per common share
Basic $ (.05)
===========
Diluted $ (.05)
===========
Weighted average number of common shares outstanding
Basic 5,338,998
===========
Diluted 5,338,998
===========
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
ENTRADA SOFTWARE, INC.
================================================================================
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
Cash flows from operating activities:
Net loss $(286,769)
Adjustments to reconcile loss to net cash
used in operating activities:
Depreciation and amortization 1,973
Changes in assets and liabilities:
Accrued consulting fees converted to a note payable 49,100
Prepaid expenses and deposits (26,402)
Deferred revenue 23,334
Payables, accruals and other liabilities 31,928
---------
Net cash used in operating activities (206,836)
---------
Cash flows from financing activities:
Sale of common stock 309,600
Sale of Series A preferred stock 150,000
---------
Net cash provided by financing activities 459,600
---------
Cash flows from investing activities:
Purchase of furniture, fixtures and equipment (37,716)
Cash paid for intangible assets (3,960)
---------
Net cash used in investing activities (41,676)
---------
Net increase in cash 211,088
Cash, beginning of period --
---------
Cash, end of period $ 211,088
=========
Supplemental disclosure of non-cash investing activities:
Stock issued in exchange for technology $ 3,900
=========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,852
=========
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
ENTRADA SOFTWARE, INC.
================================================================================
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
SERIES A
COMMON STOCK PREFERRED STOCK
------------------- ------------------ PAID IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT EQUITY
------ ------ ------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
January 1, 1999 -- -- -- -- -- -- --
Sale of preferred stock -- -- 150,000 $150 $149,850 -- $ 150,000
Sale of common stock 5,400,008 $5,400 -- -- 308,100 -- 313,500
Recapitalization as a
result of merger 1,330,172 1,330 100,000 100 (1,430) -- --
Accrued dividends -- -- -- -- -- (3,737) (3,737)
Net loss -- -- -- -- -- (286,769) (286,769)
--------- ------ ------- ---- -------- --------- ---------
December 31, 1999 6,730,180 $6,730 250,000 $250 $456,520 $(290,506) $ 172,994
========= ====== ======= ==== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
ENTRADA SOFTWARE, INC.
================================================================================
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999
(1) ORGANIZATION AND OPERATIONS:
BACKGROUND AND CURRENT OPERATIONS
Entrada Software, Inc. (a Nevada corporation, the "Company") was
incorporated in Delaware on May 7, 1998 as CIMsoft, Inc., and commenced limited
operations in 1999. The Company had no operations in 1998. The Company has
developed and currently markets software which tracks product content
information for manufacturers and their suppliers and customers. The Company's
software enables manufacturers to shorten product development times, introduce
and manage product changes effectively, integrate product information with
suppliers and configure products to customer needs.
On September 1, 1999 The Rotherwood Group, Inc. ("TRG"), a non-trading
public company with no operations, acquired all the outstanding stock of CIMsoft
in exchange for 5,000,008 shares of TRG common stock. After the acquisition, TRG
reincorporated in Nevada as Entrada Software, Inc. In December 1999 CIMsoft was
merged into the Company, and ceased to exist. As a result of these transactions,
the former CIMsoft stockholders held approximately 77% of the Company's common
stock, and the Company is continuing the business and operations started by
CIMsoft.
MANAGEMENT PLANS
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company has just commenced
operations, had a loss of $290,000 for the year ended December 31, 1999 and has
limited working capital reserves. The Company expects to face many operating and
industry challenges and will be doing business in a highly competitive industry.
In our view, working capital at December 31, 1999 will be sufficient to
fund our operations through February 2000. During this period, we plan to hire
up to five additional employees, and spend significant funds on our marketing
program. Because planned sales will not generate any significant cash flow
before March 2000, we will have to raise additional working capital in order to
execute our business plan. Subsequent to year-end, investors exercised warrants
that generated approximately $245,000 in cash to the Company.
BASIS OF PRESENTATION
For financial accounting purposes, the acquisition of CIMsoft, Inc. was
treated as a recapitalization, with CIMsoft, as the acquirer. The accompanying
financial statements include the operations of CIMsoft for the period January 1,
1999 (the commencement of operations) to September 1, 1999 (when it ceased
operations), and Entrada for the period September 1, 1999 to December 31, 1999.
18
<PAGE>
(2) SIGNIFICANT ACCOUNTING POLICIES:
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and liquid investments with a
maturity of three months or less.
INCOME TAXES
The Company accounts for income taxes under the provisions of Statement
of Financial Accounting Standards (SFAS) No. 109, which requires the use of an
asset and liability approach. The Company had a net operating loss for tax
purposes of approximately $230,000 at December 31, 1999. The effect of
recognizing the tax effect of this loss resulted in a deferred income tax asset
of approximately $73,000, which was fully offset by an equal valuation
allowance.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and the
accompanying notes. Actual results could differ from those estimates.
RESEARCH AND DEVELOPMENT
Research and development costs, which were immaterial for the year
ended December 31, 1999, are charged to operations as incurred.
ADVERTISING COSTS
Advertising costs will be charged to operations when incurred. There
was no advertising expense for the year ended December 31, 1999.
FURNITURE, FIXTURES AND EQUIPMENT
Furniture, fixtures and equipment consists primarily of computer
equipment and office furniture, and is recorded at cost and depreciated using
the straight line method over estimated useful lives of generally five years.
Management has evaluated the carrying value of all long-lived assets in
accordance with SFAS No, 121, and believes that no adjustment of carrying values
is necessary. Depreciation expense for the year ended December 31, 1999 was
$1,713.
INTANGIBLE ASSETS
Intangible assets consist of the cost of acquiring the intellectual
property that is the basis for the Company's software products, and the cost of
registering trademarks on the Company's proprietary names. Intangible assets are
amortized on the straight-line basis over three years.
19
<PAGE>
REVENUE RECOGNITION
Revenue from the sale of software products is generally recognized when
the product has been installed and accepted by the customer. Services revenue is
recognized when the services are preformed. Software support revenue is
generally collected in advance from the customer, and deferred and recognized
ratable over the twelve month term of the support agreement.
LOSS PER SHARE
Net loss per share is calculated using the weighted average number of
shares of common stock outstanding during the year. The Company had convertible
preferred stock, options and warrants outstanding that were potential common
stock at December 31, 1999. However, these securities and the preferred stock
dividends were not considered in the calculation for diluted earnings per share
because the effect would be anti-dilutive.
(3) NOTE PAYABLE:
The Company had a consulting contract with a stockholder and officer of
the Company prior to September 1, 1999. The net amount due the officer, $49,100,
was converted into a 9%, unsecured note payable due August 1, 2000.
(4) STOCKHOLDERS' EQUITY:
PREFERRED STOCK
The Company's Board of Directors divides preferred shares into series
and fixes dividend rates, designations, preferences and privileges.
SERIES A PREFERRED STOCK
The Company designated 250,000 shares as Series A Preferred stock, with
a $1.00 per share liquidation preference and a 10% cumulative dividend. Each
share of the Series A Preferred stock is convertible into 1.06 shares of common
stock. The accrued, but undeclared, dividend on the Series A Preferred stock was
$3,737 at December 31, 1999.
EMPLOYEE STOCK OPTION PLAN
The 1999 Equity Incentive Plan (the "Plan") reserves 2,100,000 shares
of common stock for option and stock grants, and expires September 30, 2009. As
of December 31, 1999, the Company had granted 295,000 options with a four year
vesting period and a $.50 exercise price. 5,000 options were exercisable at
December 31, 1999, and none had been exercised.
The Company accounts for its stock-based compensation plan under
Accounting Principles Board Opinion No. 25 rather than SFAS No, 123. This allows
the Company to present pro forma disclosure of the effects of granting stock
options, rather than record the calculated expense, if any, in the financial
statements. For the year ended December 31, 1999 the Company determined that the
effect of granting options was immaterial.
20
<PAGE>
COMMON STOCK WARRANTS
In connection with the acquisition of CIMsoft, TRG modified the terms
of previously outstanding warrants to group the warrants into 500,000 warrant
units, each consisting of one each of three previous warrant series. Each
warrant unit is exercisable, at $1.50 per unit, for one share of common stock
prior to December 15, 2000. Warrant units are callable by the Company at any
time the average trading price of the Company's common stock exceeds 120% of the
exercise price for five consecutive trading days. Subsequent to year-end,
approximately 163,000 warrant units were exercised.
(5) ACQUISITION OF TECHNOLOGY:
In January 1999 the Company acquired the technology, underlying its
suite of software products, from a founder of the Company in exchange for
3,900,000 shares of CIMsoft, Inc. common stock. The cost of the technology is
being amortized over three years starting in September 1999.
(6) COMMITMENTS:
EMPLOYMENT CONTRACTS
The Company has employment contracts with three executive
officers/stockholders that require exclusive service to the Company in exchange
for up to nine month's salary continuation in certain events of termination.
LEASES
The Company leases its corporate offices for minimum annual rent of
approximately $53,000 through August 2002. The Company also leases computer
equipment under an operating lease that expires in October 2001. Future minimum
lease payments are as follows:
Year ending December 31:
2001 $ 67,034
2002 67,245
2003 38,500
--------
Total $172,779
========
Total rent expense for the year ended December 31, 1999 was $18,880.
(7) CONCENTRATIONS:
Substantially all the Company's revenue for the year was from a single
customer. As the Company commences its planned sales activities, it expects to
significantly broaden its customer base.
The Company's cash balances may at times exceed federally insured
deposit limits. At December 31, 1999, the Company's cash deposits exceeded those
limits by approximately $105,000.
21
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
The directors and executive officers of Entrada are:
NAME AGE POSITION
---- --- --------
Bruce D. Williams 44 Director, President and Chief Executive Officer
Terry L. Simpson 48 Director and Chief Technical Officer
Terry J. Gustafson 54 Chief Financial Officer, Secretary and Treasurer
Michael S. Williams 53 Director
BRUCE D. WILLIAMS, PRESIDENT, DIRECTOR AND CHIEF EXECUTIVE OFFICER. Mr.
Williams was a founder of CIMsoft, Inc., and has served as President, Director
and Chief Executive Officer of Entrada since September 1999. From 1994 to 1999,
Mr. Williams was a Strategic Business Development Manager for Sybase, Inc.,
responsible for developing the handheld and embedded strategic business
relationships between Sybase and major partners, including Motorola, Intermec,
Symbol, 3Com, Sun, SAIC, and others. He also developed the strategic business
relationship between Sybase and Motorola, Inc. Earlier he developed a new
southwestern professional services district based in Phoenix, Arizona, and
performed staff, sales, and delivery management of consulting services. This
involved managing a professional services district with a staff of 40
consultants, practice managers, and district administrators.
From 1978 to 1994, Mr. Williams was a technical manager and systems and
software engineer for Ball Aerospace Systems in Boulder, Colorado. He led the
development, implementation, and integration of information technology solutions
as chief architect for an open-systems client/server environment. He managed a
department of 40 engineers, analysts, and computer scientists who developed
flight and ground software for aerospace applications. He also managed a field
team of engineers developing and testing flight and ground operations software
for the Hubbell Space Telescope.
Mr. Williams received a Master of Engineering, Engineering Management
and Computer Science degree in 1982, and a Bachelor of Science, Physics and
Astrophysics degree in 1978 from the University of Colorado. In addition, he
performed work in Graduate Study, Project and Organizational Management at the
Whiting School of Engineering Johns Hopkins University.
TERRY L. SIMPSON, CHAIRMAN AND CHIEF TECHNICAL OFFICER. Mr. Simpson was
a founder of CIMsoft, Inc., and the inventor of the Kinnosa product suite, and
has served as Chairman of the Board of Directors and Chief Technical Officer of
Entrada since September 1999. From 1996 through 1999 Mr. Simpson was employed by
Sybase, Inc. to manage the implementation of Kinnosa product at Motorola. He was
responsible for successfully planning resources and delivering major consulting
projects on schedule, to successfully put Kinnosa into a production environment.
From 1991 to 1996 Mr. Simpson was a consultant and completed the Kinnosa product
development.
Mr. Simpson holds a Bachelor of Science Degree in Engineering from West
Virginia University.
22
<PAGE>
TERRY J. GUSTAFSON, CHIEF FINANCIAL OFFICER, SECRETARY AND TREASURER.
Mr. Gustafson was a founder of CIMsoft, Inc., and has served as Chief Financial
Officer, Secretary and Treasurer of Entrada since September 1999. From 1993 to
1998 he was Vice President Finance, Chief Financial Officer, Secretary and
Treasurer of Xantel Corporation, a high-tech start-up company he co-founded in
1993. While at Xantel he performed virtually all administrative, finance and
accounting functions for the company until 1998.
Mr. Gustafson has over twenty years experience with KPMG Peat Marwick
where he served as a partner from 1984 until 1991. Mr. Gustafson joined KPMG
Peat Marwick in 1969 in Cleveland, Ohio. While in public accounting, he
specialized in providing accounting, auditing and business advisory services to
high technology companies. Mr. Gustafson left KPMG Peat Marwick in 1979 to
become Chief Financial Officer and Treasurer for Wien Air Alaska, a
publicly-held $150 million regional air carrier, until he rejoined KPMG Peat
Marwick in 1982.
Mr. Gustafson holds a Bachelor of Arts Degree in Business
Administration from Baldwin-Wallace College, Berea, Ohio and a Masters in
Business Administration from Kent State University, Kent, Ohio.
MICHAEL S. WILLIAMS. Mr. Williams served as a Director of Entrada since
September 1999. Since December 1995, Mr. Williams' sole occupation has been as
the CEO and Chief Portfolio Officer of Aztore Holdings, Inc., a public
investment company ("Aztore"). Since 1994, Mr. Williams served in similar
capacities with Bulldog Investment Company, L.L.C. ("Bulldog"), a predecessor to
Aztore. Bulldog and Aztore both act as merchant bankers and specialize in early
stage public companies and companies in turnaround situations. In his capacity
of advising such companies, Mr. Williams has served as an officer and director
for companies that were involved in bankruptcy proceedings. Aztore was the
controlling shareholder of TRG until TRG acquired CIMsoft in September 1999.
From 1990 to 1993, Mr. Williams was the principal of Bucher & Williams,
a company similar to Bulldog. From 1987 to 1990, Mr. Williams was the President,
Chief Financial Officer and a director of ShareData Inc. ("SDI"), a publicly
held software company. Aztore became the successor to SDI after SDI was
reorganized in bankruptcy in December 1995, at which time Mr. Williams became
its CEO.
For the six years prior to 1987, Mr. Williams was continuously employed
in the securities business as an investment banker in Detroit, Michigan.
Mr. Williams obtained a BA degree in History and Political Science from
Pennsylvania State University and received an MBA degree in Strategic Planning
and Corporate Finance from the Wharton Graduate School of the University of
Pennsylvania.
23
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following table reflects all forms of compensation for services to
Entrada for the year ended December 31, 1999. No officer of Entrada received
salary or bonus in excess of $100,000 in this period.
SUMMARY COMPENSATION TABLE
NAME/POSITION YEAR SALARY BONUS OTHER
------------- ---- ------ ----- -----
Bruce D. Williams, CEO 1999 $26,250 -- --
COMPENSATION OF DIRECTORS
The present directors of Entrada are not compensated for their services
as directors.
EMPLOYMENT CONTRACTS
We currently have "at will" employment contracts with Messrs. Bruce
Williams, Simpson and Gustafson, that provide for nine month's salary
continuation in the event of termination of employment under certain conditions,
but do not specify compensation amounts.
STOCK OPTION PLAN
The 1999 Equity Incentive Plan reserves 2,100,000 shares of common
stock for option and stock grants to directors, employees and service providers
to Entrada, and expires September 30, 2009. As of December 31, 1999, Entrada had
granted 295,000 options with a four year vesting period and a $.50 exercise
price. 5,000 options were exercisable at December 31, 1999, and none had been
exercised.
24
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 31, 1999, the ownership
of each person known by us to be the beneficial owner of five percent or more of
Entrada's common stock, each officer and director individually, and all officers
and directors as a group. Entrada has been advised that each person has sole
voting and investment power over the shares listed below unless otherwise
indicated.
NAME AND ADDRESS SHARE AMOUNTS AND PERCENT
OF BENEFICIAL OWNER NATURE OF OWNERSHIP OF CLASS
------------------- ------------------- --------
Terry L. Simpson 3,183,674 47.30% (1)
18775 N. 95th Way
Scottsdale, Arizona 85255
Bruce D. Williams 979,592 14.56% (1)
5201 E. Morning Vista Lane
Cave Creek, Arizona 85331
Terry J. Gustafson 734,694 10.92% (1)
7363 E. Onyx Court
Scottsdale, Arizona 85258
Michael S. Williams 1,537,157 (3) 20.51% (2)
3710 E. Kent Drive
Phoenix, Arizona 85044
Aztore Holdings, Inc. 1,399,037 (3) 18.67% (2)
3710 E. Kent Drive
Phoenix, Arizona 85044
All Directors and Officers
as a Group (4 persons) 6,435,117 85.86% (2)
- ----------
(1) Based on 6,730,180 shares of common stock outstanding.
(2) Based on 7,495,180 shares of common stock, including 6,730,180 shares
outstanding, the assumed exercise of 500,000 common stock warrants, and the
assumed conversion of 250,000 shares of Series A preferred stock.
(3) Includes 74,734 shares of common stock owned by Mr. Williams, plus the
assumed exercise of 63,386 common stock warrants owned by Mr. Williams, and
1,399,037 shares held by Aztore Holdings, Inc. including 1,071,983 shares
of common stock, 62,054 common stock warrants and 250,000 shares of Series
A preferred stock. Mr. Williams is deemed to have beneficial ownership of
the shares held by Aztore Holdings, Inc. due to his power to vote and sell
these shares. Mr. Williams disclaims beneficial ownership except to the
extent of his ownership of Aztore Holdings, Inc.
25
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 15, 1999, CIMsoft was capitalized with $2,100 cash and the
rights to the Kinnosa software in exchange for 4,897,960 shares of common stock.
These shares were issued in the amounts of 3,183,674 to Mr. Simpson, 979,592 to
Mr. Bruce Williams and 734,694 to Mr. Gustafson.
On June 30, 1999 Aztore Holdings, Inc., then the majority shareholder
of TRG, converted $82,820 in debt and assumed an approximate $20,000 liability
of TRG in exchange for 100,000 shares of TRG Series A preferred stock. The
$82,820 debt resulted from advances made to TRG by Aztore.
Effective September 1, 1999, TRG acquired 100% of the outstanding stock
of CIMsoft in exchange for 5,400,008 shares of common stock. These shares were
issued 3,183,674 to Mr. Simpson, 979,592 to Mr. Bruce Williams, 734,694 to Mr.
Gustafson and the remaining 502,048 shares to sixteen other shareholders of
CIMsoft. In conjunction with the acquisition, Aztore Holdings, Inc. purchased
150,000 shares of TRG's Series A preferred stock for $150,000.
In January and February 2000, Aztore Holdings, Inc. and its officers
exercised warrants to purchase approximately 163,000 shares of Entrada's common
stock for $1.50 per share.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
2.1(1) Stock Exchange Agreement by and between TRG and CIMsoft, dated as of
August 4, 1999
3.1(1) Articles of Incorporation of Entrada
3.2(1) Certificate of Designation/Resolution of Designation - Series A 10%
Cumulative Convertible Preferred Stock
3.3(1) Bylaws of Entrada
4.1(1) Specimen common stock certificate of Entrada
10.1(1) Commercial lease dated August 22, 1999
10.2(1) Entrada 1999 Equity Incentive Plan, Effective July 23, 1999
10.3(1) Employment Agreement by and between Entrada and Bruce Williams, dated
as of July 26, 1998
10.4(1) Employment Agreement by and between Entrada and Terry Gustafson, dated
as of September 1, 1998
10.5(1) Employment Agreement by and between Entrada and Terry Simpson, dated as
of August 1, 1998
27.1 Financial Data Schedule
- ----------
(1) Incorporated by reference from Entrada's Form 10-SB filed with the
Securities and Exchange Commission on December 10, 1999.
REPORTS ON FORM 8-K
None.
26
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Entrada Software, Inc.
(Registrant)
By /s/ Bruce D. Williams
-------------------------------------------
Bruce D. Williams, Chief Executive Officer
Date: February 11, 2000
By /s/ Terry J. Gustafson
-------------------------------------------
Terry J. Gustafson, Chief Financial Officer
Date: February 11, 2000
By /s/ Terry L. Simpson
------------------------------------------
Terry L. Simpson, Chairman
Date: February 11, 2000
By /s/ Bruce D. Williams
------------------------------------------
Bruce D. Williams, Director
Date: February 11, 2000
By /s/ Michael S. Williams
------------------------------------------
Michael S. Williams, Director
Date: February 11, 2000
27
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ENTRADA SOFTWARE, INC. FOR THE YEAR ENDED DECEMBER 31,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 211,088
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 221,400
<PP&E> 37,716
<DEPRECIATION> 1,713
<TOTAL-ASSETS> 281,093
<CURRENT-LIABILITIES> 102,305
<BONDS> 0
0
250
<COMMON> 6,730
<OTHER-SE> 456,520
<TOTAL-LIABILITY-AND-EQUITY> 281,093
<SALES> 0
<TOTAL-REVENUES> 47,209
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 337,864
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,852
<INCOME-PRETAX> (286,769)
<INCOME-TAX> 0
<INCOME-CONTINUING> (286,769)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (286,769)
<EPS-BASIC> (.05)
<EPS-DILUTED> (.05)
</TABLE>
