Strictly Confidential Memorandum No.
Private Offering Memorandum
TRAVEL DYNAMICS, INC.
$1,500,000
Offering of 400,000 to 3,000,000 Units
Offering of $200,000 Minimum to $1,500,000 Maximum
Minimum Subscription: $50,000 for 100,000 Units
(Each Unit Consists of a Warrant for one share of Common Stock
per Unit and a Commitment Fee)
Travel Dynamics, Inc., a Nevada corporation (the "Company"), is
hereby offering to accredited investors ("Investors") a minimum
of 400,000 Units and a maximum of 3,000,000 Units. Each Unit
consists of one Warrant ("Warrant") that entitles the holder to
purchase one (1) share of Common Stock, $.001 par value ("Common
Stock") at an exercise price of $.50 per share of Common Stock
and a Commitment Fee as described herein in exchange for the
Investor issuing an Irrevocable Letter of Credit (the "Letter of
Credit") as provided herein. The Company will use Letters of
Credit as security for a revolving line of credit or other type
of loan (the "Line of Credit") from a financial institution.
This offering is hereinafter referred to as the "Offering."
Minimum subscription is 100,000 Units for $50,000. The Company
reserves the right to accept subscriptions from a limited number
of Investors for less than 100,000 Units.
If subscriptions for at least 400,000 Units ("Minimum Offering")
have not been accepted by the Company on or prior to November 30,
2000 (unless such date is extended one or more times by the
Company provided that such date may not be extended beyond
December 31, 2000), the Offering will terminate and all Letters
of Credit will be promptly returned to the respective Investors
without interest and no Investors will have the right to receive
a Commitment Fee. If the Minimum Offering is timely achieved,
the Offering will continue until the earlier of (i) acceptance of
subscriptions for 3,000,000 Units (the "Maximum Offering") or
November 30, 2000 (unless such date is extended one or more times
by the Company, provided that such date may not be extended
beyond December 31, 2000). Notwithstanding the foregoing, the
Company may terminate the Offering at any time in its sole
discretion. See "PLAN OF OFFERING." The Company will not use the
Letters of Credit until or unless the Minimum Offering of Units
is subscribed for before the Offering terminates, in which case,
the Letters of Credit will be returned to the Investors and the
subscriptions will be terminated and no Investors will have the
right to receive a Commitment Fee.
The Company's amended and restated 10-KSB/A Report (Amendment No.
1) for the fiscal year ended June 30, 1999 and the Form 10-QSB
for the third quarter ended March 31, 2000, are incorporated
herein by reference and provide additional material information.
The Company's 10-KSB for the fiscal year ended June 30, 2000
should be available on or about September 28, 2000. The Company
recommends that each prospective Investor review such documents
prior to investment in this Offering. These reports are
electronically filed with the SEC at its office at 450 Fifth
Street N.W., Washington, D.C. 20549 and may be obtained from its
office or its website at www.sec.gov. The Company also will make
copies available upon written request.
THESE ARE SPECULATIVE SECURITIES WHICH INVOLVE A HIGH DEGREE OF
RISK AND IMMEDIATE AND SUBSTANTIAL DILUTION. THEY SHOULD ONLY BE
PURCHASED BY PERSONS WHO CAN ADEQUATELY ASSESS THE RISKS INVOLVED
AND WHO DO NOT REQUIRE A HIGH DEGREE OF LIQUIDITY. SEE "RISK
FACTORS" AND "DILUTION." TRANSFERABILITY OF THE UNITS IS
RESTRICTED. SEE "TRANSFER RESTRICTIONS."
<PAGE>
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT" OR THE
"ACT"), OR THE SECURITIES LAW OF ANY STATE, AND ARE BEING OFFERED
AND SOLD IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS. NEITHER THE SECURITIES AND EXCHANGE
COMMISSION (THE "COMMISSION") NOR ANY STATE SECURITIES
ADMINISTRATOR HAS APPROVED OR DISAPPROVED THE SECURITIES OR
PASSED UPON THE ADEQUACY OR ACCURACY OF THIS MEMORANDUM. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE COMMISSION DOES NOT PASS UPON THE MERITS OF OR GIVE ITS
APPROVAL TO ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING,
NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY
MEMORANDUM OR OFFERED SELLING LITERATURE. THE SECURITIES ARE
OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE
COMMISSION; HOWEVER, THE COMMISSION HAS NOT MADE ANY INDEPENDENT
DETERMINATION THAT THE SECURITIES OFFERED HEREUNDER ARE EXEMPT
FROM REGISTRATION.
Warrant Exercise Amount Available
Price(2) to
Company(3)
-------------- ----------------
Per Unit (1) $ .50 $ .50
Minimum Offering $ 200,000.00 $ 200,000.00
(400,000 Units)
Maximum Offering $1,500,000.00 $1,500,000.00
(3,000,000 Units)
Footnotes:
(1) Each Investor will be required to subscribe for at least one
hundred thousand (100,000) Units for a price of $50,000, provided
that the Company may accept a limited number of subscriptions for
less than one hundred thousand Units. See "SUBSCRIPTION FOR
UNITS." Offers and sales of Units will be effected on a best
efforts basis by officers and directors of the Company who will
not be compensated for their selling activities. They may be
reimbursed for reasonable out of pocket expenses, such as
postage, telephone, and mileage, incurred in connection with such
selling activities. See "PLAN OF OFFERING."
(2) This represents the amount the Company would receive if the
Investors exercise all of their Warrants, if any, for cash.
(3) This represents the amount that the Company may be eligible
to borrow under the Line of Credit before deduction of Offering
expenses and any Commitment Fees. Offering expenses connected
with this Offering (including, without limitation, printing
costs, attorneys' and accountants' fees, filing fees, origination
fees and costs associated with the Line of Credit) are expected
to total approximately $30,000 for the Minimum Offering and
$142,500 for the Maximum Offering. Such Offering expenses will
be paid by the Company from the Line of Credit or other funds.
See "ESTIMATED USE OF PROCEEDS."
Travel Dynamics, Inc.
4150 N. Drinkwater Blvd.
5th Floor
Scottsdale, AZ 85251
(480) 949-9500
The date of this Private Offering Memorandum is August 21, 2000
<PAGE>
INVESTMENT IN THE UNITS IS AVAILABLE ONLY TO PERSONS ARE WHO
ACCREDITED INVESTORS AND MEET CERTAIN CRITICAL SUITABILITY
STANDARDS IN TERMS OF INVESTMENT EXPERIENCE, INCOME AND NET
WORTH. SEE "SUITABILITY STANDARDS" TO DETERMINE INVESTOR
QUALIFICATIONS.
THE DELIVERY OF THIS PRIVATE OFFERING MEMORANDUM SHALL NOT
CONSTITUTE AN OFFER OR SOLICITATION TO ANYONE IN
ANY JURISDICTION IN WHICH SUCH AN OFFER
OR SOLICITATION IS NOT AUTHORIZED.
THE INFORMATION REPRESENTED IN THIS PRIVATE OFFERING MEMORANDUM
(THE "OFFERING MEMORANDUM" OR "MEMORANDUM") CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS AND ASSUMPTIONS THAT ARE BASED ON THE
JUDGMENTS AND EXPECTATIONS OF MANAGEMENT. ACTUAL RESULTS MAY
DIFFER MATERIALLY FROM SUCH INFORMATION.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN
THOSE CONTAINED HEREIN, AND, IF MADE OR GIVEN, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON.
A PROSPECTIVE INVESTOR SHOULD NOT CONSTRUE THE CONTENTS OF THIS
MEMORANDUM OR ANY PRIOR OR SUBSEQUENT COMMUNICATIONS AS LEGAL OR
TAX ADVICE. TO FULLY PROTECT AN INVESTOR'S BEST INTERESTS, AN
INVESTOR SHOULD CONSULT AN ATTORNEY, ACCOUNTANT AND/OR OTHER
ADVISOR AS TO THE LEGAL, TAX AND RELATED MATTERS CONCERNING THIS
INVESTMENT.
THIS MEMORANDUM HAS BEEN PREPARED SOLELY FOR THE BENEFIT OF
INVESTORS INTERESTED IN THE PROPOSED OFFERING OF UNITS DESCRIBED
HEREIN. ANY REPRODUCTION OR DISTRIBUTION OF THIS MEMORANDUM, IN
WHOLE OR IN PART, WITHOUT THE PRIOR WRITTEN CONSENT OF THE
COMPANY IS PROHIBITED.
BY ACCEPTING DELIVERY OF THIS MEMORANDUM, A PROSPECTIVE INVESTOR
AGREES TO RETURN IT WITH ALL ENCLOSED DOCUMENTS TO THE COMPANY,
IF SUCH PROSPECTIVE INVESTOR DOES NOT UNDERTAKE TO PARTICIPATE,
AND AGREES NOT TO DISCLOSE ANY CONFIDENTIAL INFORMATION CONTAINED
THEREIN.
DURING THE COURSE OF THE TRANSACTION AND PRIOR TO SALE, EACH
PROSPECTIVE INVESTOR AND HIS OR HER INVESTMENT ADVISOR(S), IF
ANY, ARE INVITED TO ASK QUESTIONS OF THE COMPANY'S DIRECTORS AND
OFFICERS CONCERNING THE TERMS AND CONDITIONS OF THIS OFFERING,
THE BUSINESS AND OPERATIONS OF THE COMPANY AND ANY OTHER MATTER
DISCUSSED IN THIS MEMORANDUM, AND TO OBTAIN ADDITIONAL
INFORMATION, TO THE EXTENT THE DIRECTORS AND OFFICERS POSSESS
SUCH INFORMATION OR CAN ACQUIRE IT WITHOUT UNREASONABLE EFFORT OR
EXPENSE, NECESSARY TO VERIFY THE ACCURACY OF THE INFORMATION SET
FORTH HEREIN. PROSPECTIVE INVESTORS OR ADVISORS MAY CONTACT THE
DIRECTORS AND OFFICERS AT THE ADDRESS AND TELEPHONE NUMBER SET
FORTH ON THE COVER PAGE OF THIS MEMORANDUM. NEITHER THE DELIVERY
OF THIS MEMORANDUM NOR ANY SALES MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE MATTERS DISCUSSED HEREIN SINCE THE DATE HEREOF.
<PAGE>
TABLE OF CONTENTS
Page
RISK FACTORS 1
GENERAL RISKS 1
LIMITED HISTORY AND CHANGE OF COMPANY OPERATIONS 1
EXPANSION 2
DEPENDENCE ON KEY MANAGEMENT 2
PROPRIETARY RIGHTS 2
COMPETITION 3
GOVERNMENT REGULATION 3
CUSTOMER DEVELOPMENT 3
INDEBTEDNESS 4
FLUCTUATIONS IN OPERATING RESULTS 4
COMPANY FILINGS 4
RECISSION OFFERING 5
OTHER FACTORS 5
RISKS ASSOCIATED WITH TECHNOLOGY 6
ACQUISITIONS AND INVESTMENTS 7
RESTRICTIONS ON TRANSFERABILITY; LIMITED MARKET 8
DETERMINATION OF THE OFFERING PRICE 9
FORWARD LOOKING STATEMENTS 9
BEST EFFORTS OFFERING 9
DILUTION 9
LACK OF DIVIDENDS 10
ESTIMATED USE OF LINE OF CREDIT AND PROCEEDS 10
DILUTION 11
CAPITALIZATION 13
DESCRIPTION OF UNITS, COMMON STOCK AND WARRANTS 14
UNITS 14
COMMON STOCK 14
WARRANTS 14
PREFERRED STOCK 16
LINE OF CREDIT 16
LETTERS OF CREDIT 16
PLAN OF OFFERING 17
TRANSFER RESTRICTIONS 18
SUITABILITY STANDARDS 21
SUBSCRIPTION FOR UNITS 22
LEGAL MATTERS 22
ADDITIONAL INFORMATION 22
<PAGE>
RISK FACTORS
Unless the context may otherwise require, "we," "us," "our" and
similar terms, as well as references to "Travel Dynamics" and the
"Company" refer to Travel Dynamics, Inc. and its sole wholly-
owned operating subsidiary, Tru Dynamics, Inc.
An investment in the Company involves certain risks, including,
among others, the Company's lack of significant prior operating
history and the fact that there will be restrictions on transfer
or limitations on liquidity for securities issued in this
Offering. In addition to other information contained in this
Memorandum and the materials or information incorporated by
reference herein, prospective Investors should carefully consider
the following:
GENERAL RISKS
Travel Dynamics, Inc. is a Nevada corporation (the "Parent") and
has a wholly-owned operating subsidiary known as Tru Dynamics,
Inc., formerly known as Travel Dynamics Services, Inc., (the
"Subsidiary"). The Parent previously was known as Greenway
Environmental Systems, Inc. The Parent adopted its current name
when it acquired the Subsidiary as its sole wholly-owned
subsidiary in September 1998 through a reorganization. Prior to
being acquired by the Parent, the Subsidiary originally was
organized as an Arizona limited liability company in March 1998
and was reorganized as a newly-formed Nevada corporation in July
1998. The Parent's common stock currently trades on the OTC
Bulletin Board under the symbol TDNM. Therefore, because the
Company's reorganization is fairly recent, the results of
operations to date are unlikely to be an accurate predictor of
future operations.
The Company presently believes that the Line of Credit, in
conjunction with operating revenues and available financing, will
provide sufficient capital to support operations and certain
expansions of the Company for a period of at least 12 months.
There can be no assurance that sufficient capital will be raised,
that the Company will be able to repay the Line of Credit or that
future product sales will meet the Company's growth expectations.
Should either of these fail to occur, the Company may elect to
(i) reduce the expansion to a level consistent with a slower
growth plan, or (ii) pursue financing and other alternatives.
Implementation of either of the foregoing options could delay or
diminish the Company's growth and adversely affect its
profitability. See "Estimated Use of Proceeds."
LIMITED HISTORY AND CHANGE OF COMPANY OPERATIONS
As described above, the Company went through a reorganization in
September 1998. The Company realized net operating losses
following the reorganization and until its quarter ending
September 30, 1999 and December 31, 1999, when it realized small
profits in both quarters. The quarter ending March 31, 2000
recognized a loss. The recognition of a loss for the quarter
ended March 31, 2000 is attributable to a decrease in revenue due
to the fact that the Company does not hold any seminars in the
third fiscal quarter. In addition, the Company incurred
additional expenses relating to the promotion of its name as "Tru
Dynamics" and additional development and promotional expenses for
the launch of the Company's web-site and Internet products. After
reorganization, the Company began further developing and
expanding its business activities and focusing on services for
home-based businesses. Much of the recent activities have
involved expanding the Company's electronic commerce activities
and broadening its services and products for home-based
businesses. This has required the investment of substantial
capital by the Company with only a limited period in which to
realize or assess the benefits of such activities. Therefore,
the results of operations to date are unlikely to be an accurate
predictor of future operations.
EXPANSION
The Company intends further expansion and development to support
its electronic commerce business, including the development of a
call center and international expansion. A substantial portion
of the funds from the Line of Credit is intended to fund such
expansion. The ability of the Company to successfully expand its
<PAGE>
operations will depend on a variety of factors, including factors
not within the sole control of the Company. No assurances can be
given that the Company will be able to conduct its electronic
commerce or expansion program successfully or that the operations
of the Company will be profitable. In addition, the Company
reserves the right to alter or change its proposed business plan.
DEPENDENCE ON KEY MANAGEMENT
The Company's development is dependent to a large degree upon
James Piccolo, President and Chief Executive Officer, Dean
Robinson, Director of Compliance, Ross Denny, Vice President of
Marketing and Richard Miller, Chief Financial Officer. It is
impossible to predict with certainty the Company's ability to
retain the services of those persons and to obtain new personnel
to continue the Company's planned development. James Piccolo
signed an employment agreement that will expire October 1, 2001.
Dean Robinson signed an employment agreement that will expire
January 1, 2002. Richard Miller signed an employment agreement
that will expire May 30, 2002. The Company has entered into
written agreements with other key employees. All the agreements
include non-compete covenants. The loss to the Company of the
services of Mr. Piccolo, Mr. Robinson, Mr. Denny and Mr. Miller
or certain other key persons could have a material adverse affect
on the Company.
PROPRIETARY RIGHTS
The Company has developed (i) proprietary programs used in the
marketing of its travel packages as well as employed to audit and
account for independent sales associates selling the Company's
products and services, (ii) a tax management program for home-
based businesses, and (iii) a website. The Company continues to
develop and enhance new products and services that include the
Tru Dynamics e-Mall containing dozens of world renowned retail
stores and an innovative website development package that enables
distributors and their customers to build Internet storefronts
from which to promote their products and services.
The Company believes that its method of promoting, advertising
and engaging independent contractors to sell the products on a
mark-up basis constitutes a unique and proprietary business plan
and procedure. However, such a process may be difficult to
protect and it is possible that other companies may replicate
substantially the plan and activities and become a competitive
factor.
The Company relies on a combination of trade secrets, copyright
and trademark laws, nondisclosure and other contractual
arrangements and procedural measures to protect the confidential
information, and proprietary rights relating to the Company's
marketing plans, strategies and website content, and its other
products and services. Such protections may not preclude
competitors from developing similar systems, products or services
competitive with the Company. The Company intends to vigorously
prosecute claims against persons infringing on its rights. The
Company does not believe that its system, products or services or
other confidential and proprietary rights infringe upon the
proprietary rights of third parties. There can be no assurance,
however, that third parties will not assert infringement claims
against the Company in the future. The successful assertion of
rights and the defense of infringement claims could have a
material adverse affect on the Company's business and financial
condition.
COMPETITION
The travel business, electronic commerce and related business
operations of the Company are subject to intense competition.
Many of the competitors have greater sales, financial strength,
production capacity, distribution systems, and marketing
resources. There can be no assurance that new competitors will
not enter the industry since there are fairly low barriers to
entry.
Competition could take several different forms, including
competitors offering new products, extending existing products,
reducing prices or competing for internet sales. There may also
be competition for qualified personnel and capital, which may be
necessary for future products, electronic commerce markets and
expansion.
<PAGE>
GOVERNMENT REGULATION
Various aspects of the Company's industry have been subject to
government regulation such as regulation by the Federal Trade
Commission (FTC), securities authorities, as well as other
national and local governmental agencies. Specifically, the
Company is often subject to state licensing and regulation as a
direct marketing enterprise that solicits new participants.
Various changes by regulatory agencies, or the tax treatment of
the Company or its applications, could have significant adverse
impacts on the Company and its profitability.
CUSTOMER DEVELOPMENT
Most of the Company's current and target customers are home-based
businesses and individuals. Percentages of the various sources of
the Company's revenues are as follows:
Source As of March 31,
2000
--------------------- ---------------
Travel Package Sales 28%
Seminars 53%
E-Commerce Sales, New 19%
Independent Sales
Associate Enrollment and Other
The Company's current and projected revenues may be affected by a
lack of continued growth and marketability to home-based
businesses. The Company's expansion into e-commerce through its
web-site is too new to determine the impact on customer
development and revenues. The Company does not rely on any one
customer for a source of income, but rather has a large customer
base from which it derives its revenues. Therefore, factors that
can influence this large customer base can have a substantial
effect on the Company's financial health. In addition, the
Company is dependent upon the efforts of the Company's
independent sales associates of which there is no assurance of
continuation or success.
INDEBTEDNESS
The Company presently has some indebtedness. As of June 30,
1999, after giving pro forma effect to the issuance of certain
convertible debt issued June 30, 1999, the Company would have had
long-term indebtedness of approximately $731,113. The Company at
any time and from time to time may incur both secured and
unsecured debt in the future.
FLUCTUATIONS IN OPERATING RESULTS
The Company reported a net loss of $966,718 for the fiscal year
June 30, 1999 based on audited financial statements. At the
ending of the first three quarters, September 30, 1999, December
31,1999 and March 31, 2000, the Company reported unaudited net
income (loss) of $14,888 and $42,459 and ($613,687) respectively.
The recognition of a loss for the quarter ended March 31, 2000 is
attributable to a decrease in revenue due to the fact that the
Company does not hold any seminars in the third fiscal quarter.
In addition, the Company incurred additional expenses relating to
the promotion of its name as "Tru Dynamics" and additional
development and promotional expenses for the launch of the
Company's web-site and Internet products. There can be no
assurance that the Company will experience profitability on a
quarterly or annual basis. The Company historically has
experienced, and in the future expects to continue to experience,
variability in operating results. Factors expected to contribute
to this variability include, among others: (i) the level of
purchasers and selling prices of products; (ii) the extent of
borrowings and changes in interest rates; (iii) the Company's
ability to continue to market and sell its products and develop
new products; (iv) delays in product production or shipments or
services due to strikes, adverse weather conditions, acts of God
or the availability of supplies or employees; and (v) the
prevailing economic condition in the markets and industries with
which the Company conducts business. These particular
circumstances may or may not continue and others may develop in
the future. Consequently, the Company's historical financial
performance is not necessarily a meaningful indicator of future
results and, in general, the Company expects its financial
results to vary from period to period.
<PAGE>
COMPANY FILINGS
The Company files information under forms 10-QSB and 10-KSB with
the Securities and Exchange Commission. Such forms are filed
electronically with the SEC at its office at 450 Fifth Street
N.W., Washington, D.C. 20549 and may be obtained from its office
or its website at www.sec.gov. At this point in time, the
Company does not file any other forms or information with the SEC
under the Securities Exchange Act of 1934 (the "Exchange Act").
RECISSION OFFERING
The Company closed a private offering on May 31, 2000 made under
a Private Offering Memorandum dated February 17, 2000 for Travel
Dynamics, Inc. (the "February Offering"). The February Offering
was for a minimum of 200,000 and a maximum of 1,200,000 units
(each unit consisting of 1 share of common stock, $.001 par value
and 1 warrant). The Private Offering Memorandum for the February
Offering misstated the potential dilution at 61% per share. An
error in the calculation was identified and the properly stated
dilution per share should have been at 87%. When the February
Offering closed, the Company had raised $735,000.
Due to the misstatement of the dilution per share in the Private
Offering Memorandum for the February Offering, the Company will
conduct a recission offering to the investors who purchased units
under the February Offering. The proposed recission offering
would allow any and all investors to elect to receive a refund
for units purchased thereunder. The Company cannot predict the
probability of any or the number of potential investor refunds.
Any return of investor funds will be made over a 90 day period
under the terms of the recission. Nevertheless, refunds under
the recission offering would reduce the amount of cash available
to the Company for its operations and expansion. The Company
does not anticipate, but reserves the right, to apply amounts
from the Line of Credit to any such refunds in the event and only
to the extent the Company does not have sufficient operating
revenues to cover such refunds.
OTHER FACTORS
Additional factors that may affect future operations, and
therefore revenues, of the Company, include, but are not limited
to, the following:
(a) A shortage of trained personnel, especially in the field of
electronic commerce;
(b) Employee strikes, other adverse labor actions or disputes
could result in a substantial decrease in revenues without
corresponding decreases in costs;
(c) Natural disasters, including floods and earthquakes, may
damage the facilities of the Company, interrupt utility services
to these facilities, interrupt on-line services or otherwise
impair the operations of the Company and the generation of
revenues from the Company's facilities, as well as the Company's
ability to generate revenue from sales of travel packages or
other products and services through its website or its
independent sales associates, including taxes on electronic
commerce or home-based businesses;
(d) Technology, systems or telecommunications problems or the
need to upgrade to the extent the Company relies on sales on the
Internet; and
(e) Unfavorable trends in the national, state or local economy
or political climate, which in turn may adversely affect home-
based businesses, the travel industry or electronic commerce;
unfavorable changes in current federal, state and county
legislation and local ordinance; increased governmental
regulations or taxes, which could adversely affect the Company;
loss of confidence by the Company's independent sales associates,
which would adversely affect the level of revenue forecasted;
increasing products liability, workers' compensation and other
claims; competition by other entities, which desire to provide
products and services provided by the Company; and unforeseen
major repairs of the Company's properties or increases in
insurance or other operating costs without the Company being able
to obtain corresponding increases in revenues.
<PAGE>
RISKS ASSOCIATED WITH TECHNOLOGY
The Company cannot accurately forecast revenues as a result of
the Company's limited operating history and the emerging nature
of the Internet-based services market. Revenues could fall short
of expectations if the Company experiences delays or
cancellations of services. A number of factors are likely to
cause fluctuations in the Company's operating results, including,
but not limited to:
. changes in demand and patterns of usage of the Internet;
. ability to attract and retain independent sales associates
and customers;
. ability to upgrade, develop and maintain systems and
infrastructure;
. the amount and timing of operating costs and capital
expenditures relating to expansion of the business and
infrastructure;
. technical difficulties or system outages;
. the announcement or introduction of new or enhanced services
by competitors;
. ability to attract and retain qualified personnel with
Internet industry expertise, particularly sales and marketing
personnel;
. the pricing policies of competitors; and
. governmental regulation surrounding the Internet and
electronic commerce.
Independent sales associates and customers have in the past
experienced some interruptions in connecting to the web site. We
believe that these interruptions will continue to occur from time
to time. These interruptions are due to hardware failures and
operating system failures. It is possible to experience
occasional temporary capacity constraints due to sharply
increased traffic, which may cause unanticipated system
disruptions, slower response times, impaired quality and
degradation in levels of customer service. If this were to
continue to happen, our business and reputation could suffer
dramatically. As we develop our electronic commerce business, we
will depend on strategic relationships to expand our services and
products and marketing efforts. Our ability to increase revenues
depends upon marketing our services through new and existing
strategic relationships. We must design and implement service
enhancements to our electronic commerce business that meet
customer requirements in a timely and efficient manner. We may
not successfully determine customer requirements and we may be
unable to satisfy customer demands. Furthermore, we may not be
able to design and implement a service incorporating desired
features in a timely and efficient manner. In addition, if any
new service we launch is not favorably received by customers,
independent sales associates and end-users, our reputation could
be damaged. If we fail to accurately determine customer feature
requirements or service enhancements or to market services
containing such features or enhancements in a timely and
efficient manner, our business and operating results could suffer
materially.
Our online services depend on complex software, both internally
developed and licensed from third parties. Complex software often
contains defects, particularly when first introduced or when new
versions are released. Although we conduct extensive testing, we
may not discover software defects that affect our new or current
services or enhancements until after they are deployed. Although
we have not experienced any material software defects to date, it
is possible that, despite testing by us, defects may occur in the
software. These defects could cause service interruptions, which
could damage our reputation or increase our service costs, cause
us to lose revenue, delay market acceptance or divert our
development resources, any of which could cause our business to
suffer.
ACQUISITIONS AND INVESTMENTS
The Company may use a portion of the Line of Credit or proceeds
from any Warrants to acquire or invest in businesses, products,
services and technologies that complement or augment our current
business. In February 2000, the Company executed a letter of
intent with Columbus Companies of Bountiful, Utah. The letter of
intent indicates the Company's intent to pursue an acquisition of
the stock or assets of Columbus Companies in exchange for equity
<PAGE>
in the Company. Certain provisions of the letter of intent are
binding but conditioned upon various contingencies, such as
approval of counsel, completion of due diligence, approval by the
parties' board of directors, execution of various employment
contracts and audited financials of Columbus Companies. Under the
terms of the letter of intent, the Company proposes to exchange
400,000 shares of the Company's common stock for (i) all of
Columbus Companies' tangible and intangible assets, and (ii) all
of Columbus Companies' liabilities, excluding certain itemized
liabilities. Columbus Companies is a travel and incentive
marketing business with an Internet presence. The Company, if it
consummates the acquisition of Columbus Companies, plans to use
the acquisition to enhance the Company's group of travel products
and services offered.
Integrating any newly acquired businesses or technologies may be
expensive and time-consuming. To finance any acquisitions, it may
be necessary for the Company to raise additional funds through
debt or equity financings, which may be on terms that are not
favorable to us and, in the case of equity financings, may result
in dilution to our shareholders. We may not be able to operate
any acquired businesses profitably or otherwise implement our
growth strategy successfully. If we are unable to integrate any
newly acquired entities or technologies effectively, our results
of operations could suffer.
RESTRICTIONS ON TRANSFERABILITY; LIMITED MARKET
The Units and the Warrants, which include the option to acquire
shares of Common Stock, issued by the Company would be in
reliance upon exemptions from the registration requirements of
federal and state securities laws and would thus be subject to
restrictions against transfer. Although there is a market for
the Company's Common Stock on the OTC Bulletin Board, the shares
of Common Stock are thinly traded, volatile and do not have much
liquidity. The Units, the Warrants and the underlying Common
Stock (the "Securities") have not been registered under federal
or state securities laws and cannot be sold unless registered by
the Company or an exemption from registration from such laws is
available. The Company has made no commitment to and it is highly
unlikely that the Company will, register the Securities at any
time in the future and an exemption from registration may not be
available at the time a Unitholder desires to transfer its
Securities. Although resale may be permissible within one to two
years under Rule 144 of the Securities Act and applicable state
law, such time period may not "tack" to the extent consideration,
such as the exercise price under the Warrants, has not been paid.
Therefore, an exemption from registration may not be available at
the time a Unitholder desires to transfer the Securities.
Prospective Investors must represent that they will acquire the
Securities for investment purposes only and not with a view to
their resale or other distribution. Upon any transfer of
Securities, an opinion of counsel or other evidence satisfactory
to the Company that no registration is required must be provided
by the transferring Unitholder. The Unitholders may not be able
to liquidate their investment in the event or an emergency or
should they desire to do so for any reason, and the Unit will
likely not be acceptable as collateral for a loan. As a result
of the foregoing restrictions upon the transferability of the
Securities, a Unitholder may be required to retain the Securities
for an indefinite period of time. See "Description of Units,
Common Stock and Warrants," "Transfer Restrictions" and "Plan of
Offering."
Please note, the Company was only able to obtain a submission for
quotation on the OTC Bulletin Board as of January 1999. As a
result, there is little historical record of trading in the
Company's stock. Moreover, the Company must be considered as
"thinly" traded such that the price appears to be very volatile,
shown in the following table:
June 2000 July 2000
Minimum Closing Bid
$.75 $ .88
Highest Closing Asked
$1.47 $1.31
Each prospective Investor in this Offering should understand that
the Company has very limited trading markets and no assurance can
be given that the price of its Common Stock may not be at risk or
adversely affected by the completion of this Offering, or that
the price will be the same as currently quoted. Further, because
the markets are very thinly traded, any additional Units, Common
Stock or other equity rights issued by the Company may have
significant and adverse impacts upon those markets.
<PAGE>
DETERMINATION OF THE OFFERING PRICE
During the time period of July 3 to July 31, 2000, the trading
range of the Company's Common Stock was approximately $1.06 to
$.88 per share. The price at which a Unit is being offered was
determined by the Board of Directors of the Company and is not
related to any independent appraisal of the current or future
value of the Company or its Common Stock. The Units being issued
as a result of this Offering and underlying Securities are
subject to certain transfer restrictions and will be restricted
under the securities laws and subject to Rule 144 of the
Securities Act. These restrictions may adversely affect the
future price of the Common Stock and Warrants. As a result,
Investors who purchase Units may not be able to sell their Common
Stock or Warrants for a period of at least one-year or longer and
recoup their investment. See "Description of Units, Common Stock
and Warrants," and "Plan of Offering."
FORWARD LOOKING STATEMENTS
This Offering Memorandum includes certain statements and
estimates provided by the Company with respect to the Company's
anticipated operations. References to "opportunities," "growth
potential," "objectives" and "goals," and the words "anticipate,"
"hope," "plan," "believe," "estimate," "expect," and similar
expressions used herein indicate such forward-looking statements.
Such statements and estimates reflect various assumptions made by
the Company about circumstances and events, many of which have
not yet taken place, as well as reflecting a substantial degree
of judgment by management as to the scope and presentation of
such information. There can be no assurance that any of such
statements or estimates of anticipated operations will prove to
be correct, and no representations and warranties are made as to
the accuracy of such statements or estimates. Actual results may
vary and such variations may be material.
BEST EFFORTS OFFERING
The Units will be sold on a best efforts basis by the Company.
As such, it is possible that the Company will not be able to sell
all of the Units under the Minimum or Maximum Offering. If less
than the Maximum Offering is sold, the Company will be limited to
a Line of Credit equal to the amount represented under the
Letters of Credit and limited to the amount of proceeds, if any,
received from the exercise of the Warrants and will not be able
to attain all of its objectives for the use of such amount. See
"Plan of Offering" and "Estimated Use of Proceeds."
DILUTION
Assuming exercise of all of the Warrants under the Maximum
Offering, purchasers of Units will experience immediate and
substantial dilution in the net tangible book value of $.38 or
74% per share. There are substantial options granted to
management and third party consultants which will afford such
holders the right to acquire shares at prices which may be below
the market price for the Company's shares or less than the price
at which shares may be issued in this Offering. To the extent
such options are exercised, or subsequent Common Stock is issued,
such transactions may constitute additional "dilution" to
existing shareholders and will, in all events, result in a
diminution of control. This market overhang could also
significantly reduce the prevailing market price of the Common
Stock as such options are exercised. Investors electing to
acquire Units in this Offering must understand that they if they
will not be able to vote as shareholders unless they exercise
their Warrants, in which case, they will acquire a minority
position as to voting control. That is, other shareholders will
continue to hold the majority of the issued and outstanding
shares; and, thereby, control the Company. Further, the Company
has no provision for cumulative voting or preemptive rights.
LACK OF DIVIDENDS
The Company has paid no dividends on its Common Stock. Payment
of dividends in the future will depend on the Company's earnings
and the degree to which such earnings are needed for the working
capital needs of the business.
<PAGE>
LETTERS OF CREDIT
The Investors should be aware of the risks associated with
providing the Letters of Credit. In the event the Company
defaults on its Line of Credit, the Investors in all likelihood
will be required to pay the Lender the amount committed under the
Letters of Credit. In such case, the Investors' only recourse
against the Company will be to convert the amounts paid under the
Letters of Credit into the Company's Common Stock in accordance
with the Warrant. In the event of a default, the Investors may
have to pay cash amounts to the Lender with or without notice and
which may deplete the Investor's cash and assets. In addition,
the Investors will only be able to receive Common Stock from the
Company that will be restricted from transfer. See "Transfer
Restrictions" and "Letters of Credit."
ESTIMATED USE OF LINE OF CREDIT AND PROCEEDS
The Company intends to utilize amounts drawn from the Line of
Credit and secured by the Letters of Credit in connection with
the sale of the Units for expansion of the Company's electronic
commerce products and services, customer support, international
expansion and for general working capital. If the Minimum
Offering is sold, the amount of the Line of Credit available
should be approximately $200,000 and if the Maximum Offering is
sold, the amount of the Line of Credit available should be
approximately $1,500,000 (before deduction of Offering expenses).
If less than the Maximum Offering is sold, the Company intends to
use the amounts drawn on the Line of Credit in a manner which
will enable it to accomplish the greatest number of its
objectives.
The following table sets forth the estimated use of the amounts
available from the Line of Credit of the Offering.
<PAGE>
Minimum Offering Maximum Offering
Amount Percent Amount Percent
-------- -------- ---------- --------
Gross Amount of Offering $200,000 100.0% $1,500,000 100.00%
Offering Expenses(1) $ 30,000 15.0% $ 142,500 9.50%
Amount Available Net of $170,000 85.0% $1,357,500 90.50%
Offering Expenses
Expansion of Electronic $ 85,000 42.5% $ 400,000 26.67%
Commerce Site (2)
Call Center development $ 0 0.0% $ 100,000 6.67%
International expansion $ 85,000 42.5% $ 500,000 33.33%
Working Capital Reserve (3) $ 0 0.0% $ 357,500 23.83%
Total Application of $200,000 100.0% $1,500,000 100.00%
Proceeds
(1) The Offering will be conducted by officers and directors of
the Company who will not be compensated for their sales
activities, but may be reimbursed for expenses. Sales expenses
include legal fees, accounting fees, filing fees, printing costs,
Letter of Credit origination fees, Commitment Fees and other fees
associated with the Line of Credit and other expenses of the
Offering.
(2) Provide further enhancement of the general merchandise mall,
electronic commerce site to include features such as: distributor
support and tracking, state of the art, real-time tracking of
orders and commissions and replication of mirror malls based on
central site.
(3) The working capital may be used by the Company for any
corporate purpose.
The Company intends to use the proceeds from the exercise price
of the Warrants, if any, for further expansion of the Company's
electronic commerce products and services, customer support,
international expansion and for general working capital and in
all likelihood, for the payment of the amounts due on the Line of
Credit. If the Minimum Offering is sold, the gross proceeds from
the exercise price if all of the Warrants are exercised should be
approximately $200,000 and if the Maximum Offering is sold, the
gross proceeds from the exercise price if all Warrants are
exercised should be approximately $1,500,000. If less than the
Maximum Offering is sold, the Company intends to use the proceeds
from the exercise of the Warrants in a manner which will enable
it to accomplish the greatest number of its objectives.
DILUTION
Dilution is a term which normally describes the reduction in
value per share or other security to an Investor subscribing in a
public or private Offering by contrasting the purchase price
being paid for those securities to the Investor's net worth per
security immediately after the close of the Offering. The net
adjusted tangible book value (tangible assets less total
liabilities) of the Company as of March 31, 2000 was $ (352,192),
or $(.07) per share. Without taking into account any changes in
such tangible book value subsequent to March 31, 2000, other than
to give effect to the issuance of the Maximum Offering of
3,000,000 Units at a price of $.50 per Unit (after deducting the
estimated Offering expenses payable by the Company) and to the
exercise of all of the Warrants thereunder, the net adjusted
tangible book value at March 31, 2000, would have been $1,005,308
or $.12 per share of Common Stock. This would represent an
increase in net tangible book value of $.19 per share of Common
Stock to the existing shareholders and dilution of $.38 per share
of Common Stock to the Investors in this Offering.
<PAGE>
The following table illustrates such pro forma per share(1)
dilution:
Offering price per Unit $ 0.50
Net adjusted tangible book value per share at March
31, 2000 $ (0.07)
Increase in net adjusted tangible book value per
common share attributable to new Investors $ 0.19
Tangible book value per common share after Offering $ 0.12
Dilution in net adjusted tangible book value per
common share to new Investors $ 0.38
Dilution per share as percentage of the Offering
price 76%
(1) Assumes exercise of all Warrants under the Maximum Offering.
The following table sets forth on a pro forma basis at March 31,
2000, the differences between the existing shareholders and new
Investors with respect to the number of shares of Common Stock
purchased from the Company, the total consideration paid to the
Company and the average price paid per share.
Shares Total
Purchased(1) Consideration(1) Average
------------------ -------------------- Price
Amount Percent Amount Percent Per Share
--------- ------- ---------- -------- ---------
Existing 5,245,080 63.6% $1,300,446 46.4% $0.25
shareholder
New Investors 3,000,000 36.4% $1,500,000 53.6% $0.50
Total 8,245,080 100.0% $2,800,446 100.0% $0.34
(1) The number shares and the consideration amount are based on
the assumption that all 3,000,000 Units are sold and that all of
the Warrants are exercised.
In 1998, the Company engaged Mackenzie Shea, Inc. to provide a
wide range of business consulting services for a period of two
years. A portion of the compensation to Mackenzie Shea, Inc.
included its receiving a 10% equity interest the Company. The
Company also agreed that, until the Company has raised $5,000,000
in investment capital, Mackenzie Shea, Inc. would receive, as
part of its ongoing compensation, equity securities equal to 10%
of any issuance of equity securities, or securities convertible
into equity securities, of the Company. As a result, Mackenzie
Shea, Inc. will receive 40,000 shares of Common Stock if the
Minimum Offering is sold and 300,000 shares of Common Stock if
the Maximum Offering is sold if all of the Warrants are
exercised. Issuance of these securities will further dilute the
per share net tangible book value of the Company which is not
reflected in the foregoing tables.
CAPITALIZATION
The Company has authorized 50,000,000 shares of Common Stock
having a par value of $.001. Of these shares, as of June 30,
2000, there were approximately 5,773,078 currently issued,
outstanding and subscribed for shares. A total of 1,309,807
shares, exclusive of option rights, are held by management or
affiliates, constituting approximately 23% of the total issued
and outstanding shares. Of the total issued and outstanding
shares, 1,416,116 or approximately 25%, are free trading at the
time of this Offering Memorandum and the balance of 4,356,962
shares or approximately 75% are restricted shares which may only
be sold pursuant to subsequent registration or an exemption from
registration for resale, such as Rule 144.
It should be understood by any prospective Investors that the
significant number of restricted securities may cause the price
of the stock to be more volatile as it limits the amount of
capital available for current sales into the market. Moreover,
it should also be noted that as shares become eligible for sales
in the market under Rule 144 at a future date, it might also have
an adverse effect upon the market price for the Company's shares.
<PAGE>
The following table shows the capitalization of the Company as of
March 31, 2000, on a pro forma basis adjusted to give effect to
the sale of the Maximum Offering of 3,000,000 Units offered
hereby at an assumed Offering price of $.50 per Unit (after
deducting estimated Offering expenses payable by the Company) and
assuming exercise of all of the Warrants under the Maximum
Offering:
March 31,2000
Actual As Adjusted
Debt:
Current liabilities $3,283,812 $ 3,283,812
Long-term debt $ 731,113 $ 731,113
Total debt $4,014,925 $ 4,014,925
Shareholders' Equity:
Common Voting Stock, $.001 par value; $ 5,245 $ 8,245
50,000,000 shares authorized, 5,245,080
shares issued and outstanding; 8,245,080
shares as adjusted
Additional paid-in capital $1,295,201 $ 2,649,701
Retained earnings (deficit) $(1,559,040) $(1,559,040)
Unearned compensation $ (10,032) $ (10,032)
Total shareholders' equity $ (268,626) $ 1,088,874
Total capitalization $ 3,746,299 $5,103,799
DESCRIPTION OF UNITS, COMMON STOCK AND WARRANTS
UNITS
Each Unit consists of (i) a Warrant to purchase one (1) share of
Common Stock at an exercise price of $.50 per share and (ii) a
Commitment Fee. The Warrants are described below. The Commitment
Fee is equal to two percent (2%) of the amount of Units
subscribed and paid for by an Investor (the "Subscription
Amount"). The Commitment Fee is not due and payable unless the
Letter of Credit is available for use by the Company as
contemplated herein for a one (1) year period. At the end of
each one (1) year period the Company will pay the Commitment Fee
by check (or other form) to the name and address of the Investor
on the Company's records within thirty (30) days thereafter.
Such Commitment Fee shall not accrue any interest and is only due
and payable if the Investor complies with the terms of the Letter
of Credit and Subscription Agreement.
COMMON STOCK
If the Investors exercise all of their Warrants, the Company will
issue up to 3,000,000 shares of Common Stock. As of the date of
this Memorandum, there were 5,773,078 issued and outstanding
shares of Common Stock. A total of 50,000,000 shares of voting
Common Stock are authorized.
The holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of
funds legally available therefor. The Company has not paid any
dividends to date. Future dividend policy will be determined
from time to time by the Board of Directors based upon conditions
<PAGE>
then existing, including but not limited to the Company's
earnings and financial condition. No projection of future
earnings or dividends of the Company should be inferred from any
of the information contained in this Memorandum. In the event of
liquidation, dissolution or winding up of the Company, holders of
the Common Stock are entitled to share ratably the assets
remaining after payment of liabilities.
Holders of the Company's voting Common Stock will be entitled to
one vote per share. All outstanding shares of Common Stock upon
completion of the Offering will be fully paid and non-assessable.
Holders of Common Stock have no preemptive rights and no right to
convert their Common Stock to any other securities.
WARRANTS
In exchange for the completed and executed Subscription
Agreement, the form of which is set forth in Exhibit "A", and
Letter of Credit, the Company will issue a Warrant to each
Investor similar to the form set forth in Exhibit "B". The
Warrant will entitle the holder to purchase shares of Common
Stock equal to two-times the amount of the Investor's Letter of
Credit. The Investor may exercise its right to purchase the
shares of Common Stock at an exercise price of $.50 per share
during the period from the date of issuance until September 30,
2002. During the exercise period and as provided in the Warrant,
the Investor may exercise its Warrant for either or a combination
of the following: (a) cash paid to the Company for the exercise
price; or (b) in exchange for the amounts drawn on and paid by
the Investor under its Letter of Credit, if any. Upon exercising
its Warrant as provided therein, an Investor will receive the
number of shares of Common Stock determined at the $.50 exercise
price. From time to time, as determined by the Company in good
faith, the amount available under the Investor's Letter of Credit
will be reduced to the extent (i) the Investor exercises its
Warrant for cash paid to the Company or (ii) of amounts draw on
and paid by the Investor under its Letter of Credit, if any.
From time to time as determined by the Company in good faith, the
Company will release the Investor's Letter of Credit as security
for the Line of Credit if the Investor pays the entire
Subscription Amount in either or a combination of the following
ways: (i) the Investor exercises its Warrant and pays the
Company the aggregate exercise price for the shares of Common
Stock exercised under the Warrant or (ii) the Investor pays the
Lender amounts drawn on its Letter of Credit. An Investor's
right to convert under the Warrant constitute the Investor's sole
recourse against the Company in the event of a default under the
Line of Credit or the Lender's exercise of its right to draw on
the Letters of Credit.
Holders of Warrants will not, as such, have any of the rights of
shareholders of the Company. In addition, the Warrant may not be
transferred or assigned without the prior consent of the Company
as long as the Investor's Letter of Credit is outstanding. The
terms and conditions governing the Investor's rights and
obligations under the Warrant and Letter of Credit are further
set forth in the Subscription Agreement.
In certain cases, the issuance of Common Stock upon exercise of
the Warrants would violate the securities laws of the United
States or certain states. The Company will use its best efforts
to maintain current information relating to such Common Stock at
all times when the market price of the Common Stock exceeds the
exercise price of the Warrants until the expiration date of the
Warrants and to take such other actions under the laws of various
states as may be required to cause the sale of the Common Stock
upon exercise of the Warrants to be lawful. The Company, in its
sole discretion, may permit the holders of Warrants to exercise
the Warrants in so-called "cashless exercise" in which Warrants
are exercised simultaneously with the sale of the underlying
Common Stock, which is not currently permitted. However, there
is no assurance that the Company will permit a cashless exercise.
In any event, the Company will not be required to honor the
exercise of Warrants if, in the opinion of the Company's Board of
Directors, upon advice of counsel, the sale of Common Stock upon
such exercise would be unlawful.
Warrants may be exercised, once the exercise period has
commenced, by completing and signing the appropriate purchase
form on the Warrants and mailing or delivering the Warrants to
the Company prior to redemption or expiration, accompanied by
payment in full of the exercise price for the Warrants being
exercised, as provided in the Warrant. Common Stock certificates
will be issued as soon as practicable after exercise and payment
of the exercise price as described above. If a Warrant holder
exercises with respect to less than all the Warrants held, new
Warrants for the unexercised portion of the Warrants will be
issued to the Warrant holder, as provided in the Warrant.
Because the Warrants are being offered and sold in reliance upon
various exemptions from registration under federal and state
securities laws, the resale or other transfer of the Warrants is
restricted. Any Warrant holder desiring to transfer Warrants
<PAGE>
within two years may be required to provide an opinion of counsel
satisfactory to the Company that such transfer may be made
without registration, under applicable securities laws, of the
Warrants being transferred. Therefore, each prospective Investor
should be prepared to hold any Warrants purchased for an
indefinite period. Furthermore, upon exercise of the Warrant,
the Investor's resulting shares of Common Stock may be subject to
a new holding period under Rule 144 of the Securities Act. See
"Transfer Restrictions."
PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of preferred
stock, $.001 par value. The privileges and restrictions of each
series of preferred stock are determined prior to issuance. No
shares of preferred stock have been issued.
LINE OF CREDIT
Using the Letters of Credit as security, the Company plans to
open a Line of Credit with Community Bank of Arizona or another
financial institution (the "Lender") of the Company's choosing at
any time for up to $1,500,000. This Line of Credit is
anticipated to have a one (1) year term with renewal options.
Interest will accrue monthly at prime rate plus one to two
percent. The Company will pay origination fees upon opening the
Line of Credit that may range from one-half to one point. There
is no pre-payment penalty. The Line of Credit will be secured by
the Letters of Credit.
If the Company defaults on the Line of Credit, the Lender may
exercise its rights to recover from the Investors under the terms
of the Letters of Credit. In the event of any such default, the
Investors' sole recourse against the Company shall be to exercise
their options to convert the amount of the Letter of Credit into
Common Stock in accordance with the terms of the Warrant.
The Company reserves the right to amend, modify or cancel the
Line of Credit or replace the Lender at any time without notice
to the Investors.
LETTERS OF CREDIT
The Letters of Credit must be irrevocable and effective for an
approximate two-year period during the term of the Line of
Credit. Exhibit "C" sets forth the terms provided by the
Company's Lender that should be contained in the Letter of Credit
supplied by the Investor's bank or financial institution and the
instructions for providing the Letter of Credit. The Letters of
Credit will serve as security for the Line of Credit. The
Company reserves the right to reject any Letters of Credit that
are not acceptable to the Company or the Lender.
During the exercise period and as provided in the Warrant, the
Investor may exercise its Warrant either (a) for cash paid to the
Company, or (b) in exchange for the amounts drawn on and paid by
the Investor under the Letter of Credit, if any. From time to
time as determined by the Company in good faith, the amount
available under the Investor's Letter of Credit will be reduced
to the extent (i) the Investor exercises its Warrant for cash
paid to the Company or (ii) of amounts draw on and paid by the
Investor under its Letter of Credit, if any. From time to time
as determined by the Company in good faith, the Company will
release the Investor's Letter of Credit as security for the Line
of Credit if the Investor pays the entire Subscription Amount in
either or a combination of the following ways: (i) the Investor
exercises its Warrant and pays the Company the aggregate exercise
price for the shares of Common Stock exercised under the Warrant
or (ii) the Investor pays the Lender amounts drawn on its Letter
of Credit. An Investor's right to convert under the Warrant
constitute the Investor's sole recourse against the Company in
the event of a default under the Line of Credit or the Lender's
exercise of its right to draw on or demand payment under the
Letters of Credit. See "WARRANTS" below. The terms and
conditions governing the Investor's rights and obligations under
the Warrant and Letter of Credit are further set forth in the
Subscription Agreement.
<PAGE>
IN THE EVENT THE LENDER DRAWS ON OR DEMANDS PAYMENT UNDER THE
LETTERS OF CREDIT, THE INVESTORS' SOLE RECOURSE AGAINST THE
COMPANY SHALL BE THE RIGHT TO CONVERT THE AMOUNTS DRAWN AND PAID
INTO THE COMPANY'S COMMON STOCK PURSUANT TO THE TERMS OF THE
WARRANT. THE INVESTORS WAIVE ANY AND ALL LIABILITY AGAINST THE
COMPANY RESULTING FROM ANY DRAFTS DRAWN ON THE LETTERS OF CREDIT
OR PAYMENTS MADE OR EXPENSES INCURRED BY THE INVESTORS IN
CONNECTION WITH LETTERS OF CREDIT.
PLAN OF OFFERING
A maximum of 3,000,000 Units (the "Maximum Offering") are being
offered hereby. The Offering period terminates on November 30,
2000 unless extended by the Company, in one or more extensions,
to a date not later than December 31, 2000 or terminates when the
Maximum Offering has been sold. The Offering may, however, be
terminated by the Company in its sole discretion at any time.
Notwithstanding the Maximum Offering termination date, the
Offering will also terminate if at least 400,000 Units (the
"Minimum Offering") have not been subscribed for and issued by
November 30, 2000, unless extended by the Company, in one or more
extensions, to a date not later than December 31, 2000. Units
are being offered to a limited number of persons, whom the
officers and directors of the Company reasonably believe would be
suitable Investors in the Company.
Units are being offered at a price of $.50 per Unit. A minimum
investment of 100,000 Units ($50,000) is required, though the
Company reserves the right to accept a limited number of
subscriptions for less than the minimum investment. Until the
minimum number of Units have been subscribed for, all
Subscription Agreements and Letters of Credit will be held by the
Company and will not be released to the Company until at least
400,000 Units have been purchased. Thereafter, Letters of Credit
from any additional subscriptions will be available to the
Company as soon as the subscription has been accepted by the
Company.
No allocation will be made among subscribers in the event
subscriptions exceed the number of Units available in this
Offering. In such event, Units will be sold on a first come-
first served basis and all excess subscriptions and Letters of
Credit will be returned to their subscribers. If less than
400,000 Units have been subscribed for by close of business on
November 30, 2000, unless such date is extended as described
above, the Offering will be withdrawn and all Letters of Credit
will be returned without interest.
The Offering is not being underwritten and Units will be offered
only by officers and directors of the Company. No compensation,
commissions or discounts will be paid or allowed to any persons
in connection with this Offering. Expenses of distribution of
the Units may be paid by the Company out of the amounts available
under the Line of Credit or other funds.
At the time of subscription, each Investor will be required to
execute a Subscription Agreement, the form of which is attached
to this Memorandum as Exhibit "A", which contains certain
restrictions on transfer of the Units and other Securities.
Prospective Investors should carefully read the Subscription
Agreement before subscribing to purchase any Units.
Since the Units are being offered on a best efforts basis by the
Company, no assurance can be given that all or any part of the
Units will be sold.
Currently, there is a limited trading market for the Company's
Common Stock on the OTC Bulletin Board system. The Offering
price per Unit is determined in advance by the Board of Directors
of the Company. There is no assurance that the price per Unit
reflects the actual value the Warrant or that an Investor will
realize that amount in the future.
Individuals purchasing, hereunder, understand and agree that they
will have a substantial holding period to evidence investment
intent before their Units or other Securities may be resold.
Under currently prevailing federal regulations and substantially
similar regulations in most state jurisdictions and absent
certain circumstances, the securities acquired in this private
placement in general must be held for a period of one (1) year
from the purchase, or in the case of Common Stock underlying
Warrants, from the exercise of the Warrants and payment of any
exercise price, before any Common Stock can be resold. After
such one (1) year period the Securities may be generally subject
<PAGE>
to resale provided (i) that there is current public information
about the Company, (ii) that certain volume limitations upon the
number of Securities that can be sold in each three (3) month
period are observed, (iii) that the selling Unitholder obtains an
opinion of counsel acceptable to the Company as to the holding
period and the tradability of the Securities, (iv) and that the
selling Unitholder file a required Form 144 with the SEC and (v)
the Unitholder complies with any other requirements.
TRANSFER RESTRICTIONS
The Securities have not been registered under the Securities Act
and may not be offered or sold except pursuant to an exemption
from, or in a transaction not subject to, the registration
requirements of the Securities Act. Accordingly, the Units and
underlying Securities being offered hereby are subject to certain
restrictions on transfer, as further set forth in the
Subscription Agreement.
Each purchaser of a Unit (a "Unitholder") agrees to indemnify the
Company against any liability that may result from the transfer,
exchange or assignment of such holder's Unit and underlying
Securities in violation of any provision of applicable United
States federal or state securities law.
Each Unitholder, by its acceptance of Units, will be deemed to
have acknowledged, represented, certified to and agreed with the
Company as follows:
(1) The Unitholder understands and acknowledges that (a) the
Units are being offered in a transaction not involving a public
offering in the United States within the meaning of the
Securities Act and (b) the Units and underlying Securities have
not been registered under the Securities Act or any other
applicable securities law, may not be offered, resold, pledged or
otherwise transferred except in compliance with the registration
requirements of the Securities Act, or any other applicable
securities law, pursuant to an exemption therefrom, or in a
transaction not subject thereto. The Unitholder will, and each
subsequent holder is required to, notify any subsequent purchaser
from it of the resale restrictions set forth in the legend
described below.
(2) The Unitholder is an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act ("Accredited
Investor"). Such Accredited Investor invests in or purchases
securities similar to the Units and has such knowledge and
experience in financial and business matters that he or she is
capable of evaluating the merits and risks of purchasing the
Units. Such Accredited Investor is aware that he or she may be
required to bear the economic risk of an investment in the Units
for an indefinite period of time and is able to bear such risk
for an indefinite period. Each Unitholder that is an Accredited
Investor must execute and deliver the Subscription Agreement for
the benefit of the Company, substantially in the form included as
Exhibit "A" to this Offering Memorandum.
(3) The Unitholder acknowledges that neither the Company nor any
person representing the Company has made any representation to it
with respect to the Company or the Offering or sale of any Unit
other than the information contained in this Offering Memorandum,
which has been delivered to it and upon which it is relying in
making its investment decision with respect to the Company and
the Units as it has deemed necessary in connection with its
decision to purchase the Units including an opportunity to ask
questions of and request information from the Company.
(4) The Unitholder is purchasing the Units for its own account,
or for one or more investor accounts for which it is acting as a
fiduciary or agent, in each case for investment, and not with a
view to, or for offer or sale in connection with, any
distribution thereof in violation of the Securities Act. The
Unitholder agrees on its own behalf and on behalf of any investor
account for which it is purchasing the Units and each subsequent
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holder of the Units and underlying Securities by its acceptance
thereof will agree, to sell, pledge or otherwise transfer such
Units and underlying Securities only (a) to the Company, (b)
pursuant to a registration statement which has been declared
effective under the Securities Act, or (c) pursuant to any other
available exemption from the registration requirements of the
Securities Act, and in each in accordance applicable state
securities laws. Each Unitholder acknowledges that the Company
reserves the right prior to any sale, pledge or other transfer
pursuant to clause, (c) above to require the delivery of an
opinion of counsel, certifications and/or other information
satisfactory to the Company.
(5) Each Unitholder acknowledges that the Units and certificates
representing the shares of Common Stock and Warrants will contain
a legend substantially to the following effect:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM.
THE HOLDER OF THE SECURITIES EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE COMPANY THAT THE
SECURITIES EVIDENCED HEREBY MAY BE OFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) TO THE
COMPANY, (II) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR (III) PURSUANT TO
AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, AND IN EACH IN
ACCORDANCE APPLICABLE STATE SECURITIES LAWS. EACH
PURCHASER ACKNOWLEDGES THAT THE COMPANY RESERVES THE
RIGHT PRIOR TO ANY SALE, PLEDGE OR OTHER TRANSFER
PURSUANT TO CLAUSE (III) TO REQUIRE: (A) AN OPINION
LETTER OF COUNSEL AND SUCH CERTIFICATIONS AND DOCUMENTS
TO THE COMPANY'S SATISFACTION, AND (B) THE HOLDER AND
EACH SUBSEQUENT HOLDER TO NOTIFY ANY PURCHASER FROM IT
OF THE NOTE EVIDENCED HEREBY OF THESE RESALE
RESTRICTIONS.
(6) The Unitholder acknowledges that the Company and others will
rely upon the truth and accuracy of the foregoing
acknowledgments, representations, certifications and agreements
and agrees that, if any of the acknowledgments, representations
or warranties deemed to have been made by its purchase of Units
are no longer accurate, it shall promptly notify the Company. If
the Unitholder is acquiring any Units as a fiduciary or agent for
one or more investor accounts, it represents that it has sole
investment discretion with respect to each such account and that
it has full power to make the foregoing acknowledgments,
representations, certifications and agreements on behalf of each
such account.
SUITABILITY STANDARDS
The Offering is being made in reliance upon an exemption from
federal securities registration requirements contained in the
Securities Act, and regulations promulgated thereunder as well as
in reliance upon "private offering" exemptions under applicable
state securities laws. In this regard, subscriptions will not be
accepted from partnerships, corporations, trusts or other
entities unless they can satisfy the Company that they were not
organized or reorganized for the specific purpose of acquiring
Units. Furthermore, suitability standards may vary from state to
state.
Each prospective Investor should realize that (i) the Units
offered hereby and underlying Securities are subject to certain
restrictions concerning their transfer; and (ii) there can be no
assurance that a public market will exist when the shares of
Common Stock or Warrants become unrestricted under the applicable
securities laws. See "RISK FACTORS" and "DESCRIPTION OF UNITS,
COMMON STOCK AND WARRANTS." A minimum investment of 100,000 Units
($50,000) must be made by each Investor. In addition, because of
various risk factors and the relative lack of liquidity of
securities of this type, as compared with other investments in
securities, each Investor must be of sufficient financial means
to assume the risks inherent in the purchase of Units. Each
Investor must evaluate whether this is a suitable investment
based upon such person's investment objectives, financial
situation and needs.
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Generally, under the requirements of the exemptions under which
the Offering is made, sales may be made to not more than 35
purchasers who are non-Accredited Investors. There is no
limitation on the number of Accredited Investors who purchase
Units. In some states, however, the number of Investors is
limited without regard to their status as accredited or non-
accredited.
An Accredited Investor is deemed to meet the suitability
requirements of this Offering both in terms of the ability to
understand the risks and merits of the investment and in terms of
the ability to bear the economic risk of the investment. An
Accredited Investor is defined specifically as an Investor who
meets the qualifications of any one of the following categories:
(a) Any natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of purchase exceeds
$1,000,000.
(b) Any natural person who had an individual income in excess of
$200,000 in each of the two most recent years and who reasonably
expects an income in excess of $200,000 in the current year.
(c) Any natural person who had a joint income with that person's
spouse in excess of $300,000 for each of the past two years and
who reasonably expects joint income in excess of $300,000 in the
current year.
(d) Any director or executive officer of the Company.
(e) An entity in which all of the owners are Accredited
Investors under (a) though (d) above.
(f) A self-directed employee benefit plan where investment
decisions are solely within the control of an Accredited
Investor.
In addition to the above, there are several categories of
employee benefit plans and institutional Accredited Investors.
These entities are described in the Subscription Agreement, the
form of which is set forth in Exhibit "A" to this Memorandum.
SUBSCRIPTION FOR UNITS
This Offering is made solely to persons whom the directors and
officers of the Company reasonably believe to be suitable
Investors. Each person desiring to purchase Units in the Company
must complete and execute the Subscription Agreement received
with this Memorandum. A completed and executed Subscription
Agreement must be submitted to the Company together with a signed
Letter of Credit in the amount of $.50 for each Unit purchased.
The minimum subscription is 100,000 Units or $50,000, provided
that the Company reserves the right to accept a limited number of
subscriptions from suitable Investors for less than the minimum
investment.
Subscriptions shall be irrevocable during the period of the
Offering. The Company reserves the right, however, to reject any
subscription on the basis of the nonsuitability of the Investor,
failure to comply with required subscription procedures or for
any other reason its deems appropriate. If a subscription is
rejected for any reason, the funds submitted with such
subscription will be returned promptly to the subscriber without
interest.
<PAGE>
The Company will not directly or indirectly pay or award any
compensation to a third party engaged as an investment advisor by
a prospective Investor as inducement to advise favorably toward
the Company.
LEGAL MATTERS
The validity of the Units offered hereby will be passed upon for
the Company by the firm of Jennings, Strouss & Salmon, P.L.C., 2
North Central Avenue, Suite 1600, Phoenix, Arizona 85004-2393.
ADDITIONAL INFORMATION
The Company will answer all inquiries from prospective Investors
(and their representatives) and will make available to them, at a
reasonable time after prior notice, any additional information
that is in the possession of the Company or can be acquired
without unreasonable effort or expense, so long as the inquiry or
requested information is related to the Units, this Offering, or
any information set forth in this Memorandum. Documents not
included in this Memorandum, copies of which are available upon
written request to the Company, include the following:
a. Articles of Incorporation of the Company;
b. Bylaws of the Company;
c. Amended and restated 10-KSB/A Report (Amendment No. 1) for
the year ended June 30, 1999;
d. Forms 10-QSB for periods ending September 30, 1999, December
31, 1999 and March 31, 2000; and
e. Line of Credit documents.
The Company may charge up to $.20 per page for copies of
documents provided to prospective Investors or their
representatives.
<PAGE>
EXHIBIT "C"
INSTRUCTIONS FOR IRREVOCABLE LETTERS OF CREDIT
SECURING TRAVEL DYNAMICS, INC.'S LINE OF CREDIT WITH
COMMUNITY BANK OF ARIZONA
Each participant in Travel Dynamic, Inc.'s financing plan
deals directly with his/her own bank who will issue an
Irrevocable Letter of Credit to Community Bank of Arizona.
Below are the instructions from Community Bank to the
potential investor's bank with respect to those Letters of
Credit. Questions regarding these instructions may be
directed to Mr. Leonard. J. LaBrie, Senior VP at Community
Bank at (480)837-2786.
1) The letters of credit must be addressed to:
Community Bank of Arizona
13404 N. LaMontana Dr.
Fountain Hills, Arizona 85269
2) The Irrevocable Letters of Credit will be in favor
of Community Bank of Arizona for the account of Travel
Dynamics, Inc.
3) The Letter of Credit will expire on September 1,
2001, with an automatic extension for one additional year,
except as noted below in 4(a).
4) Specific verbage that the potential Investor's
bank should include on the Letter of Credit is:
a) This Letter of Credit shall be automatically extended
without amendment until September 1, 2002, unless we have
notified you in writing, not less than sixty (60) days
before such expiration date, that we elect not to renew this
Letter of Credit. Our notice of such election shall be sent
certified mail, return receipt requested, to the above
address.
b) Any draft(s) drawn by you under this Letter of Credit
shall be accompanied by a letter executed by an authorized
bank official of Community Bank of Arizona stating that
"Travel Dynamics, Inc. is in default of the terms and
conditions of the credit facility or facilities established
by Community Bank of Arizona".
c) We hereby agree with you that all draft(s) drawn under
and in compliance with the terms of this Letter of Credit
will be fully honored upon presentation, as specified
herein, without additional endorsement. We further agree
that Letter of Credit proceeds shall be paid without
deduction, set-off or counter claim, and any banking
charge(s) is for the account of the applicant and will not
be deducted from the proceeds.
<PAGE>
