FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Mark One
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE OF 1934
FOR THE QUARTERLY PERIOD ENDED: March 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO N/A
COMMISSION FILE NUMBER: 33-21239
TRAVEL DYNAMICS, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
NEVADA 0462569
------------------------------ --------------------------------------
STATE OF INCORPORATION (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
4150 North Drinkwater Boulevard, Fifth Floor
SCOTTSDALE, AZ 85251
-------------------------------------- ----------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code:
(480) 949-9500
Indicate by check mark whether the Registration (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to files
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
X YES NO
As of May 15, 2000, approximately 5,595,080 shares of common stock
($.001 par value) were outstanding.
<PAGE>
1
TRAVEL DYNAMICS, INC.
INDEX
Page
PART 1. Financial Information 1
Item 1. Financial Statements. [Unaudited] 1
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 1
PART II. Other Information 5
Item 2. Changes in Securities and Use of Proceeds 5
Item 5. Other Information 6
Item 6. Exhibits and Reports on Form 8-K 7
[Inapplicable Items Have Been Omitted]
<PAGE>
2
PART 1. Financial Information
------------------------------
Item 1. Financial Statements. [Unaudited]
- ---------------------------------------------
The Condensed Consolidated Financial
Statements of Travel Dynamics, Inc. for the
nine-month period ending March 31, 2000 are
unaudited and are attached as an exhibit and
incorporated as Item 1 by this reference.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
-------------------------------------------------
Certain statements in this 10-QSB,
including without limitation information set
forth under Item 2 entitled "Management's
Discussion and Analysis of Financial
Condition and Results of Operations" contain
forward-looking statements within the
meaning of the Private Securities Litigation
Reform Act of 1995 (the Act), including,
without limitation, statements regarding the
Company's expectations, beliefs, estimates,
intentions, and strategies about the future.
Words such as, "anticipates," "expects,"
"intends," "plans," "believes," "seeks,"
"estimates," or variations of such words and
similar expressions are intended to identify
such forward-looking statements, but their
absence does not mean the statement is not
forward-looking. The Company desires to
avail itself of certain "safe harbor"
provisions of the Act and is therefore
including this special note to enable the
Company to do so. Forward-looking
statements in this 10-QSB or hereafter
included in other publicly available
documents filed with the Securities and
Exchange Commission, reports to the
Company's shareholders and other publicly
available statements issued or released by
the Company involve known and unknown risks,
uncertainties and other factors which could
cause the Company's actual results,
performance (financial or operating) or
achievements to differ from the future
results, performance (financial or
operating) or achievements expressed or
implied by such forward-looking statements
and are not guarantees of future
performance. Similarly, statements that
describe the Company's future operating
performance, financial results, plans,
objectives or goals are also forward-looking
statements. Such future results are based
upon management's best estimates of current
conditions and the most recent results of
operations. Such information contained in
such statements is difficult to predict;
therefore actual results may differ
materially from those expressed or
forecasted. The forward-looking statements
made herein are only made as of the date of
this 10-QSB and the Company undertakes no
obligation to publicly update such
forward-looking statements to reflect
subsequent events or circumstances.
The accompanying condensed
consolidated financial statements include
comparative data for the accounts of Travel
Dynamics, L.L.C. from July 1, 1998 through
July 31, 1998 and the accounts of the former
Travel Dynamics, Inc. (subsequently known as Travel
Dynamic Services, Inc.) from July 31, 1998
(inception) to September 29, 1998 (the date
of the reverse acquisition). The condensed
consolidated financial statements for
comparative purposes also include the
accounts of Greenway Environmental Systems,
Inc., (now known as Travel Dynamics, Inc.)
through the date of the reverse acquisition
on September 29, 1998. These two entities
(Travel Dynamics, Inc. as the parent company
and Travel Dynamics Services, Inc. as the
sole operating subsidiary) are collectively
referred to herein as "the Company." In
March 2000, the name of the subsidiary,
Travel Dynamics Services, Inc., was changed
to Tru Dynamics, Inc. by filing a
Certificate of Amendment to the Articles of
Incorporation with the Secretary of State of
<PAGE>
1
the State of Nevada. After the name change
of the subsidiary, the Company started
promoting its products and services under
the name "Tru Dynamics," as further
described under "Plan of Operations" below.
Nine Months and Three Months Ended March 31,
2000 Compared to Nine Months and Three
Months Ended March 31, 1999
The Company is a marketing firm that
wholesales and distributes educational and
lifestyle products and materials to
independent sales associates ("ISAs"), who
resell the packages. These products and
materials are designed to educate and
support individuals in their development of
income sources for home-based businesses.
The products include discount entertainment
and travel packages and tax planning and
organization packages. The Company also
engages in the organization and hosting of
various marketing, training and motivational
seminars. The Company has been and expects
to continue increasing its various direct
marketing focus and efforts particularly
through its website and Internet sales. As
a result, the Company has experienced
increasing revenues through such direct
marketing activities. The Company's
activities with respect to the Internet, its
proposed web-site and other business plans
are further described in "Plan of
Operations" below.
Net sales for the nine month and
three month periods ended March 31, 2000
were $4,782,358 and $1,421,414. Net sales
during the nine and three month periods
ended March 31, 2000 increased by $2,856,673
or 148% and $547,709 or approximately 63% as
compared to net sales for the comparable
periods during the prior fiscal year. This
increase in net sales for both the nine
month and three month periods ended March
31, 2000 was primarily attributable to the
Company having significantly increased its
customer base over the past year. The
decrease in the rate of revenue growth for
the period is attributable to the fact that
the Company does not hold any seminars in
the third fiscal quarter and defers the
associated revenue until such seminars take
place. For the nine months and three months
ended March 31, 1999, the Company was
essentially a start-up company, in the early
stages of its current form of operations and
had a minimal customer base from which to
generate revenues.
Gross margin for the nine month and
three month periods ended March 31, 2000 was
45% and 36%. Gross margin during the nine
month and three month periods ended March
31, 2000 increased by 1.2% and decreased
14.8% as compared to gross margin for the
comparable periods during the prior fiscal
year. The increase in the nine month period
gross margin relates to the entertainment
and travel packages and executive seminar
products being sold at higher margins as a
result of volume purchasing. The decrease
in the three month period gross margin
relates to a change in how the Company
collects the price of its seminars and other
higher priced products from ISAs,
implemented on January 1, 2000. Since
January 1, 2000, the Company collects the
full retail price of these products directly
from the ISAs' customers and then pays the
ISAs the difference between the retail price
and the wholesale price previously charged
to the ISAs. In contrast, for periods prior
to January 1, 2000, the Company simply
collected the wholesale price from the ISAs.
This change in payments results in a
reduction in gross margin but no change in
gross profit dollars generated on each sale.
<PAGE>
2
Selling, general and administrative
expenses for the nine month and three month
periods ended March 31, 2000 were $2,611,057
and $1,111,709. Selling, general and
administrative expenses during the nine
month and three month periods ended March
31, 2000 increased by $1,369,727 or 110% and
$551,234 or 98% as compared to selling,
general and administrative expenses for the
comparable periods during the prior fiscal
year. The increases in both the nine month
and three month periods ended March 31, 2000
primarily relate to the Company adding
personnel and computer systems to its
infrastructure in conjunction with the
Company's growth in sales. 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 proposed
launch of the Company's web-site and
Internet products in future quarters, as
further described in "Plan of Operations"
below.
The Company's interest expense for
the nine month and three month periods ended
March 31, 2000 was $116,059 and $18,548,
compared to the comparable periods during
the prior fiscal year, during which the
Company did not incur any significant
interest expense. This increase was
primarily attributable to the interest
expense associated with the convertible
debenture offering completed June 30, 1999.
The Company recognized $63,250 of interest
expense in the three months ended September
30, 1999 due to the beneficial conversion
feature of the debentures. From April 1999
to June 30, 1999, the Company engaged in a
private placement of convertible debentures
in reliance upon an exemption under Rule 506
under the Securities Act of 1933. The
convertible debentures required a minimum
investment of $10,000 and are convertible to
common stock of the Company at $1.00 per
share. The Company issued one partial
convertible debenture. The essential terms
of the convertible debenture provide that
interest is payable at 10% simple annual
interest on the face value and payable
quarterly, computation of interest
commencing from the issue date of June 30,
1999. Interest will be with imputed on a
daily basis in the event of call, conversion
or maturity of the convertible debenture.
The convertible debenture is redeemable for
its face value at maturity on January 2,
2015. Any accrued interest will be paid
through the date of redemption, but no
interest will be paid after the date of
redemption.
Net loss for the nine month and three
month periods ended March 31, 2000 was
$556,340 and $613,687 compared with net loss
of $698,360 and $113,303 for the comparable
periods in fiscal year 1999. Net results
during the nine month period ended March 31,
2000 increased by $142,020 or 20% as
compared to the net results for the
comparable period during the prior fiscal
year. The increase in net income for the
nine month period ended March 31, 2000 is
primarily attributable to the increased
sales activity and resulting revenue as
compared to the prior period coupled with
the absence of one time merger and
reorganization expenses of approximately
$307,983 that the Company incurred in the
three months ended September 30, 1998. Net
results during the three month period ended
March 31, 2000 decreased by $500,384 or 442%
as compared to net results for the
comparable period during the prior fiscal
year. The decrease in net income for the
three month period ended March 31, 2000 is
primarily attributable to a decrease in
revenue growth due to the fact that the
Company does not hold any seminars in the
third fiscal quarter and defers the
associated revenue until the seminar takes
<PAGE>
3
place. By way of illustration, deferred
sales have increased from $592,756 as of
March 31, 1999 to $2,346,887 as of March 31,
2000. The decrease in the Company's revenue
is compounded by the reduction in gross
margin, as further described above, relating
to the change of its collection practices
for seminars and other higher priced
products as of January 1, 2000. The Company
now collects the retail price of its
seminars and other higher priced products
directly from the ISAs' customers, rather
than collecting the wholesale price from the
ISAs, as the Company did prior to January 1,
2000. The increase in the Company's
expenses is attributable to the Company's
increase in personnel and computer and other
internal systems to handle increased sales
activity, the promotion of the Company under
the name "Tru Dynamics," web-sites and new
product development and the Company's sales
conference held in March 2000. The Company
continues to experience increased sales
activity and expects improving net results
over the next several quarters as compared
to the previous year's quarters.
Liquidity and Capital Resources
The Company's primary source of cash
has been provided by cash flow from
operations, $385,000 received from the sale
of 385,000 units consisting of one share of
common stock and one warrant in a private
placement offering commenced on March 27,
2000 and currently still open, and
approximately $250,000 from the issuance of
the convertible debentures. The Company
experienced an increase in its cash flow
from operations and management anticipates
the cash received from the March 2000
private placement offering and generated
from operations will be sufficient to
satisfy substantially all of the Company's
working capital needs over the next 12 months.
Net cash generated from operating
activities for the nine months ended March
31, 2000 and 1999 was $506,110 and
$363,858, respectively. The difference in
cash generated from operations is mainly
attributable to changes in operating assets
and liabilities related to increases in
customers and customer transactions.
Expenditures for property and
equipment and other assets totaled $978,016
for the nine months ended March 31, 2000.
Expenditures for property and equipment and
other assets include $243,000 in deposits
relating to development of the Company's
Internet Mall web-site concept, $254,000 in
leasehold improvements and approximately
$180,000 in office and computer equipment.
Plan of Operations
Management estimates that the cash
flow from operations over the next 12
months, as well as the proceeds from the
private placement offering opened March 27,
2000 and offering of certain convertible
debentures, completed June 30, 1999, will be
sufficient to continue the Company's
operations and to cover its operational
expenses. Management believes that the
revenues will be sufficient to maintain
Company operations. Nevertheless, the
Company reserves the right to raise
additional proceeds or incur debt or take
such other actions to expand or sustain its
operations. However, as of the fiscal
quarter ending March 31, 2000 the Company
did not specifically anticipate raising any
additional funds through debt or equity
offerings of securities, except in
connection with the continuation of the
private placement opened March 27, 2000.
<PAGE>
4
In addition to marketing travel
products and seminars, the Company plans to
provide additional services and products.
The Company plans to offer telephone support
for its current products and services. The
Company began offering a tax support package
to home-based businesses and plans to
continue to support and market this program.
The Company projects broadening its product
and service line through electronic commerce
and including more on-line products and
services over the Internet. The Company
expects to launch the first phase of its
family of web-sites in the fourth quarter of
the current year. The Company anticipates
that the first phase of its family of
web-sites will feature a general merchandise
shopping mall, a web-portal and a travel
site. The Company plans to design this web
site to contain a general merchandise
Internet mall with a wide variety of
retailers, to be known as the "Tru Mall".
After changing the name of its operating
subsidiary to "Tru Dynamics, Inc.", the
Company began and plans to continue
marketing its products and services under
the name "Tru Dynamics," and using related
names for its products and services. For
instance, the Company introduced its plans
for the Tru Systems e-Business Program,
designed to provide ISAs an opportunity to
customize their own web pages, linked to the
Company's "Tru Mall" general merchandise
Internet shopping mall and to provide ISAs
with business management and communications
tools. The web-site may contain a
replicating feature to enable the Company's
ISAs to operate their individual Internet
shopping malls under the ISA's designated
web site address to such ISA's clients for a
fee and transaction-based commissions from
the web-site sales revenue.
The Company entered into a lease for
its current principal office in Scottsdale,
Arizona which has a remaining term of
several years. The Company anticipates
increasing its number of employees over the
next 12 months to include clerical and other
administrative personnel to keep pace with
the growth of the Company, in addition to
employees to provide telephone support as
previously described [and provide support
for the Company's Internet related products
and services].
Until the Company achieves a
sustained level of profitability, it must be
considered a start-up entity. Management
considers the growth of revenues and
profitability to be positive and expects to
maintain profitability for the current
fiscal year, however no warranty of this
projection can be made. The Company remains
dependent on continuing cash flows to meet
certain operating expenses and no assurance
of financial success or economic survival of
the Company can be assured during this
period.
It should also be noted that as a
start up entity, the Company has and will
necessarily continue to incur certain types
of start up costs, including costs related
to the commencement of business, legal and
accounting fees, initial filing fees, and
advertising and marketing fees which may not
constitute ongoing fees; or, if ongoing, may
not be incurred at the same level or
percentage of revenues as experienced in the
initial start-up period.
Management's general discussion of
operations is limited by and should be
considered within the context of the actual
Condensed Consolidated Financial Statements
and notes attached hereto and incorporated
as part of Item 1 above.
<PAGE>
5
PART II. Other Information
--------------------------
Item 2. Changes in Securities and Use of Proceeds.
-----------------------------------------
During the three months ending March
31, 2000, the Company issued 274,000 shares
of common stock, $.001 par value, upon
exercise of options held by the Company's
officers, employees and directors. On
January 31, 2000 the Company issued 65,000
shares of common stock, $.001 par value,
upon exercise of options held by a
consultant in reliance upon an exemption
under Rule 506 of the Securities Act of
1933, as amended (the "Securities Act").
The options originally were issued to the
consultant in exchange for independent
marketing services. The Company proposes to
use the proceeds from the exercise of the
foregoing options for general working
capital. The Company issued 20,000 shares
of common stock, $.001 par value, upon
conversion of convertible debentures in
reliance upon Section 3(a)(9) of the
Securities Act. The convertible debentures
were originally issued in connection with an
offering by the Company conducted from April
1999 through June 30, 1999, described in
greater detail above under the Management's
Discussion and Analysis of Financial
Condition and Results of Operations. In
connection with a private placement opened
in March 27, 2000, as of March 31, 2000, the
Company issued 385,000 units (each unit
consisting of one share of common stock,
$.001 par value, and a warrant to purchase
one share of common stock, $.001 par value,
at an exercise price of $3.00). This
private placement is being conducted in
reliance upon an exemption under Rule 506 of
the Securities Act. The private placement
is for up to 1,200,000 units with minimum
subscriptions for 50,000 units, unless
otherwise agreed to by the Company. Each
unit is being sold by the Company for $1.00.
The offering is currently still open but
may not be extended beyond May 31, 2000.
Each warrant allows the holder to purchase
one share of the Company's common stock,
$.001 par value, at an exercise price of
$3.00 per share beginning on May 31, 2000.
The terms of the warrant agreement provide
that all warrants not exercised after May
31, 2003 or after certain other conditions
occur, will expire. The Company plans to
use the proceeds from this offering for the
development of its general merchandise
Internet shopping mall web-site and for
general working capital.
Item 5. Other Information.
- -----------------------------
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 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 agreements
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.
<PAGE>
6
The Company entered into an Electronic
Commerce License and Hosting Agreement with
APEX Interactive, Inc. dated March 1, 2000.
APEX is engaged in the business of web-site
development, marketing and hosting. Under
the terms of the agreement, APEX primarily
agreed to develop, license and host the
proposed general merchandise Internet
shopping mall and back-end functionality
including business management and
communication tools. The specifications
under the agreement contemplate completion
of a majority of the development within
approximately four months. The agreement
also contemplates that APEX will develop the
functionality for ISAs to replicate
individual Internet shopping malls based on
the Company's central Internet shopping mall
web-site. Subject to the terms of the
agreement, the Company proposes to pay APEX
in stages and to issue warrants to APEX.
In March 2000, the name of the
subsidiary, Travel Dynamics Services, Inc.,
was changed to Tru Dynamics, Inc. by filing
a Certificate of Amendment to the Articles
of Incorporation with the Secretary of State
of the State of Nevada. After the name
change of the subsidiary, the Company
started promoting its products and services
under the name "Tru Dynamics," as further
described under "Plan of Operations" above.
The Company held a conference in Los
Angeles, California on March 17, 2000,
attended by more than 1,000 ISAs. At that
conference, the Company introduced its plans
for the Tru Systems e-Business Program,
designed to provide the ISAs an opportunity
to customize their own web pages, linked to
the Company's general merchandise shopping
mall, to be called "Tru Mall," and to
provide ISAs with business management and
communications tools.
As of the end of the third quarter
ending March 31, 2000, the Company knows of
no other material information other than as
described and set out above and under this
Item 5.
Item 6. Exhibits and Reports On Form 8-K.
- ---------------------------------------------
(a) Exhibits:
(1) Unaudited Condensed Consolidated Financial
Statements for the period ending March 31, 2000.
(2) Electronic Commerce License and Hosting Agreement
dated March 1, 2000 between Travel Dynamics, Inc.
and APEX Interactive, Inc.
(3) Certificate of Amendment to Articles of Incorporation
of Travel Dynamics, Inc. (the Company's sole subsidiary)
filed with the Secretary of State of Nevada, March 16,
2000.
(4) Private Offering Memorandum for Travel Dynamics, Inc.
of up to 1,200,000 units (each unit consisting of 1 share
of common stock, $.001 par value and 1 warrant).
(5) Financial Data Schedule
<PAGE>
7
(b) Reports on Form 8-K:
None in the quarter ending March 31, 2000.
<PAGE>
8
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned thereunto duly authorized.
TRAVEL DYNAMICS, INC.
Date: May 22, 2000 By /S/ JAMES PICCOLO
------------------------------
James Piccolo
CEO and Director
Date: May 22, 2000 By /S/ BRIAN K. SERVICE
------------------------------
Brian K. Service
CFO, Secretary and Director
<PAGE>
9
TRAVEL DYNAMICS, INC.
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page
Condensed Consolidated Balance Sheet - March 31, 2000 (Unaudited) F-1
Condensed Consolidated Statements of Operations for the Three and Nine
Months Ended March 31, 2000 and 1999 (Unaudited) F-2
Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended March 31, 2000 and 1999 (Unaudited) F-3
Notes to Condensed Consolidated Financial Statements F-4
<PAGE>
TRAVEL DYNAMICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 581,818
Other receivables 456,180
Inventory 179,572
Prepaid assets 1,192,009
Other current assets 449,722
-------------
Total Current Assets 2,859,301
-------------
Property and Equipment
Office equipment 321,474
Software for internal use 147,837
Leasehold improvements 265,704
Less accumulated depreciation (100,380)
-------------
Net Property and Equipment 634,635
-------------
Other Assets
Trademarks, net of $1,315 accumulated amortization 3,944
Marketing master database, net of $38,035
accumulated amortization 79,622
Investments in certificates of deposit 80,000
Other assets 88,797
-------------
Total Other Assets 252,363
-------------
Total Assets $ 3,746,299
=============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 365,401
Accrued liabilities 527,890
Current portion of deferred lease incentive 40,454
Current portion of obligation under capital lease 3,180
Deferred sales 2,346,887
-------------
Total Current Liabilities 3,283,812
-------------
Long Term Liabilities
Convertible notes payable 587,727
Deferred lease incentive 138,216
Obligation under capital lease 5,170
-------------
Total Long Term Liabilities 731,113
-------------
Stockholders' Deficit
Common stock -$0.001 par value; 50,000,000 shares
authorized; 5,245,080 shares issued and outstanding 5,245
Additional paid-in capital 1,295,201
Unearned compensation (10,032)
Accumulated deficit (1,559,040)
-------------
Total Stockholders' Deficit (268,626)
-------------
Total Liabilities and Stockholders' Deficit $ 3,746,299
=============
See the accompanying notes to condensed consolidated financial statements.
F-1
<PAGE>
TRAVEL DYNAMICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
------------------------- ------------------------
2000 1999 2000 1999
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 1,421,414 $ 873,705 $ 4,782,358 $ 1,925,685
Cost of Sales 904,844 426,533 2,611,582 1,074,732
------------ ----------- ----------- -----------
Gross Profit 516,570 447,172 2,170,776 850,953
------------ ----------- ----------- -----------
Expenses
Selling, general and administrative expense 1,111,709 560,475 2,611,057 1,241,330
Merger and reorganization expense - - - 307,983
Interest expense 18,548 - 116,059 -
------------ ----------- ----------- -----------
Total Expenses 1,130,257 560,475 2,727,116 1,549,313
------------ ----------- ----------- -----------
Net Income (Loss) $ (613,687) $ (113,303) $ (556,340) $ (698,360)
============ =========== =========== ===========
Basic and Diluted Loss Per Common Share $ (0.13) $ (0.03) $ (0.12) $ (0.18)
============ =========== =========== ===========
Weighted Average Number of Common
Shares Used in Per Share Calculation 4,766,596 4,314,802 4,516,284 3,871,350
============ =========== =========== ===========
</TABLE>
[FN]
See the accompanying notes to condensed consolidated financial statements.
</FN>
F-3
<PAGE>
TRAVEL DYNAMICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months
Ended March 31,
------------------------
2000 1999
----------- -----------
Cash Flows From Operating Activities
Net income (loss) $ (556,340) $ (698,359)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 78,801 17,520
Compensation relating to common stock,
options and debentures granted 32,611 201,415
Expenses paid with notes payable - 149,360
Interest expense relating to beneficial
conversion feature 63,250 -
Changes in operating assets and liabilities:
Other receivables (313,124) (5,241)
Prepaid expenses (1,173,977) (147,013)
Inventory (121,941) (79,213)
Accounts payable 149,037 289,303
Accrued liabilities 434,366 43,330
Deferred sales 1,913,427 592,756
----------- -----------
Net Cash and Cash Equivalents Provided By
Operating Activities 506,110 363,858
----------- -----------
Cash Flows From Investing Activities
Payments to purchase property and equipment
and intangible assets (502,341) (259,527)
Increase in other assets (475,675) -
Increase in related party receivable - (34,528)
----------- -----------
Net Cash and Cash Equivalents Used In
Investing Activities (978,016) (294,055)
----------- -----------
Cash Flows From Financing Activities
Proceeds from issuance of common stock
and exercise of options 430,250 -
Proceeds from issuance of notes payable 250,000 50,000
Distribution to shareholder - (900)
Proceeds from deferred lease incentive 200,000 -
Payments on capital lease (544) -
---------- ------------
Net Cash and Cash Equivalents Provided
By Financing Activities 879,706 49,100
---------- ------------
Net Increase (Decrease) in Cash and Cash Equivalents 407,800 118,903
Cash and Cash Equivalents at Beginning of Period 174,018 26,885
---------- ------------
Cash and Cash Equivalents at End of Period $ 581,818 $ 145,788
---------- ------------
See the accompanying notes to condensed consolidated financial statements.
F-4
<PAGE>
TRAVEL DYNAMICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 -- INTERIM FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by Travel Dynamics,
Inc. (the Company) and are unaudited. In the opinion of management, the
accompanying unaudited financial statements contain all necessary
adjustments for fair presentation, consisting of normal recurring
adjustments except as disclosed herein.
The accompanying unaudited interim financial statements have been condensed
pursuant to the rules and regulations of the Securities and Exchange
Commission; therefore, certain information and disclosures generally
included in financial statements have been condensed or omitted. These
financial statements should be read in connection with the Company's annual
financial statements included in the Company's annual report on Form 10-KSB
as of June 30, 1999. The financial position and results of operations of the
interim periods presented are not necessarily indicative of the results to
be expected for the year ended June 30, 2000.
Amounts previously reported for March 31, 1999 and for the three and nine
months then ended have been adjusted to conform to the audited consolidated
financial statements for June 30, 1999 and for the year then ended.
NOTE 2 -- CONVERTIBLE NOTES PAYABLE
During the nine months ended March 31, 2000, the Company issued 10%
convertible debentures totaling $250,000 in cash. Interest accrues on the
debentures beginning June 30, 1999 and is payable at the end of each
quarter. The convertible debentures mature and are redeemable at their face
value on January 2, 2015. The debentures may be converted into common stock
of the Company at the rate of $1.00 per share through June 30, 2001. Each
debenture is callable at 110% of its face value at any time after the first
anniversary date of the execution of the note. The holders of the
debentures, may upon notice of the call, convert the debenture into common
stock within thirty days of receiving written notice of such call. As
described in Note 3 - Common Stock, 20,000 and 80,000 convertible debentures
were converted into common stock during the three and nine months ended
March 31, 2000, respectively.
The Company recognized interest expense equal to the difference between the
$1.00 conversion price per share and the market value of the Company's stock
on the day the debentures were issued, which was $1.27 per share. Interest
expense of $63,250 was recognized due to the beneficial conversion feature
for the nine months ended March 31, 2000.
NOTE 3 -- COMMON STOCK
During the nine months ended March 31, 2000, the Company issued 5,000 shares
of common stock for consulting services valued at $10,445 with prices
ranging from $1.19 per share to $2.69 per share.
During the three and nine months ended March 31, 2000, the 10% convertible
debentures were converted into 20,000 and 80,000 shares of common stock
respectively, at the exercise price of $1.00 per share or a total of $20,000
F-6
<PAGE>
and $80,000, respectively. Also during the three and nine months ended March
31, 2000, the Company issued 339,000 and 435,000 shares of common stock,
respectively for cash of $38,900 and $45,400, respectively, upon the
exercise of options with exercise prices ranging from $0.10 to $0.15 per
share.
On March 27, 2000, the Company started a private placement offering
receiving a total of $385,000 as of March 31, 2000. Each unit sold for $1
and consisted of one share of common stock and one warrant. The warrants can
be exercised for $3.00. In connection with this private placement the
Company is to issue as a finders fee warrants to purchase 38,500 shares of
common stock exercisable at $1.20. The warrants can be exercised for $1.20.
The warrants mentioned above will expire May 31, 2003. In addition, the
warrants will expire prior to May 31, 2003 if, at any time, (i) the average
closing bid price for the shares of common stock (or the closing price if
then traded on a national securities exchange) has equaled or exceeded $3.00
per share for a period of 60 consecutive days, (ii) the Company gives
written notice to the warrant holders within three trading days following
such 60 day period, and (iii) the warrant holder fails to exercise the
warant within 30 days thereafter.
NOTE 4 -- BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
The weighted average number of common shares used in the computation for
basic and diluted loss per share for the three and nine months ended does
not include, 93,000 common shares to be issued (as mentioned in Note 7),
options of 2,033,500, assumed conversion 587,727 convertible debentures and
warrants of 423,500 shares of common stock because their effects would be
antidilutive. The weighted average number of common shares used in the
computation for basic and diluted loss per share for the three and nine
months ended March 31, 1999 does not include options on 1,336,000 shares of
common stock because their effects would be antidilutive.
NOTE 5 -- STOCK OPTIONS
A summary of the status of the Company's stock options as of March 31, 2000
and 1999 and changes during the nine months then ended is presented below:
<TABLE>
<CAPTION>
For the Nine Months Ended For the Nine Months Ended
March 31, 2000 March 31, 1999
------------------------- -------------------------
Weighted- Weighted-
Average Average
Shares Exercise Price Shares Exercise Price
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Outstanding at beginning of period 1,500,000 $ 0.39 - $ -
Forfeited (32,000) 0.98 (75,000) 0.10
Exercised (435,000) 0.10 - -
Granted 1,000,000 1.09 1,411,000 0.11
----------- -----------
Outstanding at period end 2,033,000 0.68 1,336,000 0.10
=========== ===========
Options exercisable at period end 442,500 $ 0.58 237,000 $ 0.12
=========== ===========
Weighted-average fair value of
options granted during the period $ 0.43 $ 0.11
=========== ===========
</TABLE>
The Company measures stock-based compensation from options granted to
non-employees by the fair value method set forth under Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation, and measures compensation from options granted to employees
using the intrinsic value method prescribed in Accounting Principles Board
Opinion 25, Accounting for Stock Issued to Employees, and related
interpretations. Stock-based compensation charged to operations was $13,962
and $39,564 during the three and nine month periods ended March 31, 1999 and
$792 and $22,160 during the three and nine month periods ended March 31,
2000, respectively. Had compensation cost for the Company's options granted
to an employee been determined based on the fair value at the grant dates
consistent with the alternative method set forth under Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation, net loss and loss per share would have increased for the three
and nine months ended March 31, 2000 and 1999 to the pro forma amounts
indicated below:
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
---------------------- ----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Net income (loss):
As reported $ (613,687) $ (113,303) $ (556,340) $ (698,360)
Pro forma (678,430) (128,678) (744,478) (719,360)
Basic and diluted loss per share:
As reported $ (0.13) $ (0.03) $ (0.12) $ (0.18)
Pro forma (0.14) (0.03) (0.16) (0.19)
The fair value of each option granted was estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions for the period ended March 31, 2000: underlying
common stock value - $1.09, expected life of the options - 3 years, expected
volatility - 50% and risk-free interest rate - 5.8%. The weighted-average
assumptions for the period ended March 31, 1999 are as follows: underlying
common stock value - $0.15, expected life of the options - 4.9 years,
expected volatility - 75% and risk-free interest rate - 4.5%.
NOTE 6 -- LETTER OF INTENT
On February 2000, the Company entered into a letter of intent with the
Columbus Companies (Columbus) whereby in exchange for 400,000 shares of the
Company's common stock (closing price as of 2/28/00 of $1.31 per share) the
Company would acquire, (i) all Columbus' tangible and intangible assets, and
(ii) all Columbus' liabilities, excluding those to be set out in a schedule
to be itemized. The purchase agreement is contingent on approval of
counsel, completion of due diligence, approval by the Company's board of
directors, approval by Columbus' board of directors, execution of various
employment agreements and audited financials of Columbus for the 1998 and
1999 financial years.
NOTE 7 -- COMMITMENT
Travel Dynamics entered into an agreement in October 1998 with a business
consulting firm, under the terms of the new agreement, the consulting firm
has provided services and benefits relating to the reorganization of Travel
Dynamics with Greenway. The Company has agreed to the issuance of their
common stock equal to 10% of all outstanding equity securities, computed on
a fully-diluted basis, until the Company has raised up to $5,000,000 of
investment capital or has entered into equivalent business combinations. As
of March 31, 2000, the Company is required to issue 93,000 shares of common
stock regarding this commitment.
NOTE 8 -- SUBSEQUENT EVENT
During April and May 2000, the Company issued an additional 300,000 shares
of common stock in connection with the private placement offering described
in note 3. Each unit was sold for $1 and consisted of one share of common
stock and one warrant.
In April 2000, directors of the Company who were previously issued stock
options exercised options in exchange for 50,000 shares of common stock.
ELECTRONIC COMMERCE LICENSE
AND HOSTING AGREEMENT
This Electronic Commerce License and Hosting Agreement
("Agreement") is made and entered into between Travel
Dynamics organized under the laws of the State of
Nevada, with its principal place of business located at
4150 North Civic Center Road, Penthouse Suite,
Scottsdale, AZ 85251 (hereinafter referred to as
"Travel Dynamics"), and APEX Interactive, Inc., a
corporation organized under the laws of the State of
Wisconsin, with its principal place of business located
at 10437 Innovation Drive, #119, Wauwatosa, Wisconsin
53226 (hereinafter referred to as "APEX") and shall be
effective as of the date this Agreement has been
executed and delivered by both parties ("Effective Date").
WITNESSETH:
A. APEX is engaged in the business
of website development, marketing, and
hosting. Travel Dynamics is engaged in the
business of multilevel marketing. Travel
Dynamics wishes to engage APEX to develop
and host a website related to Travel
Dynamics' business, and APEX wishes to be so
engaged, on the terms and conditions
contained herein.
B. Robert Hahn ("Hahn") is a
principal of Beechwood Research, LLC
("Beechwood"). Beechwood and Travel
Dynamics have previously attempted to
negotiate a so-called "Purchase Agreement -
Electronic Commerce Site" (the "Beechwood /
Travel Dynamics Agreement"), under the
mutually mistaken assumption that Beechwood
was able to sell the rights to the Product
to Travel Dynamics. The Beechwood / Travel
Dynamics Agreement has been terminated
pursuant to a Terminated Agreement between
Beechwood and Travel Dynamics dated March
____, 2000 and is not in force and effect.
C. In anticipation of the execution
and delivery of the Beechwood / Travel
Dynamics Agreement, Travel Dynamics made
payments to Beechwood in the amount of
$212,500. Hahn has forwarded such sum to
APEX, and such sum shall be credited towards
the fee to be paid by Travel Dynamics
hereunder as set forth in the table in
Exhibit B.
I. DEFINITIONS
1.01. "Travel Dynamics Original Work"
shall mean materials and information
(including, but not limited to, Source Code)
provided by Travel Dynamics to APEX, as well
as any component or components of the
Product derived from Travel Dynamics
Original Work or Travel Dynamics Licensed Work.
1.02. "Travel Dynamics Licensed Work"
shall mean materials licensed to Travel
Dynamics by a third party for use in the
Product. "APEX Licensed Work" shall mean
material licensed to APEX by a third party
for use in the Product upon terms which are
acceptable to Travel Dynamics, and any
derivations thereof. "Licensed Work" shall
mean both Travel Dynamics Licensed Work and
APEX Licensed Work, but shall not include
any Prohibited Work.
1.03. "APEX Original Work" shall mean
materials and information (including, but
not limited to the Source Code) developed or
owned by APEX and used in the Product, as
well as any component of the Product derived
from such materials and information.
1.04. "Day" shall mean, unless otherwise
specified, a calendar day (as opposed to a
regular working day). "Days" shall similarly
mean calendar days.
1.05. "Intellectual Property" shall have
the meaning set forth in Paragraph 7.01(a).
1.06. "Product" shall mean any and all
software and/or supporting documentation
developed in whole or in part by APEX for
Travel Dynamics pursuant to this Agreement.
It is the intent of the parties that the
Product shall include, or be derived from,
Travel Dynamics Original Work, Travel
Dynamics Licensed Work, APEX Original Work
and APEX Licensed Work, but shall not
include any Prohibited Work.
1.07. "Prohibited Work" shall mean any
materials, including software, which cannot
be used by Travel Dynamics in connection
with the Product, without violating
Intellectual Property right(s) held by third
party(s).
1.08. "Source Code" means,
collectively, all available sub-programs,
routines, program files, data files, file
and data definitions and relationships, data
definition specifications, data models,
program and system logic, interfaces,
algorithms, program architecture, systems
designs, program structure, sequence and
organization, screen displays and report
layouts which are a part of the Product, in
human-readable or machine-readable form.
1.09. "Special Source Code" shall mean
that part of the Source Code relating to
APEX's proprietary token-based security
system, and any other part of the Source
Code which the parties shall mutually
designate from time to time in writing as
Special Source Code.
1.09. "Specifications" shall mean the
operational and/or functional description of
the Product as set forth in Exhibit A as the
same may be amended from time to time in a
writing executed by both parties.
II. LICENSE
2.01. APEX to Develop Product.
(a) APEX shall create a Product which
conforms to the Specifications set forth in
Exhibit A within the time periods,
milestones and/or program schedules set
forth in Exhibit B.
(b) The Product produced for Travel
Dynamics pursuant to this Agreement shall be
the property of APEX (except as otherwise
explicitly set forth herein) and not be
considered Work For Hire, but shall be
subject to the terms and provisions of this
Agreement.
(c) APEX shall provide Travel Dynamics
with progress reports every two weeks, which
shall indicate:
(i) Status of progress to current
date/milestone;
(ii) Short description of problems (if
any) in meeting such milestones;
(iii) Proposed recovery method to next
milestone, if needed;
(iv) Probability of meeting next
milestone.
The parties agree to conduct regular progress review
meetings at mutually agreeable times and locations to
ensure their mutual satisfaction with the performance
of the development and work.
2.02. Milestones and Delivery Schedules.
(a) On or before the deadline set forth
in Exhibit B, Travel Dynamics shall provide
all necessary Travel Dynamics Original Work
and Licensed Work to APEX for inclusion in
the Product.
(b) On or before the deadline set forth
in Exhibit B, APEX shall create a working
site that will allow the same functionality
(excluding database content) as the
Beechwood model site that was demonstrated
to Travel Dynamics and created by APEX
(excluding Instant Call with five different
call locations).
(c) On or before the deadline set forth
in Exhibit B hereto, APEX shall complete the
Product.
2.03. [RESERVED]
2.04. Additional Work.
(a) After completion and approval of the
Product, APEX shall make available on every
regular business day qualified personnel
reasonably approved by Travel Dynamics to
provide programming upgrade assistance to
Travel Dynamics and technical assistance to
Travel Dynamics and its distributors with
respect to the Product. Travel Dynamics
shall pay APEX at the rate of $120.00 per
man-hour for said programming upgrade
assistance and technical support. APEX
shall remove and replace any such personnel
upon the reasonable request of Travel Dynamics
(b) All other work requested by Travel
Dynamics not described herein, and performed
by APEX, shall be charged to Travel Dynamics
a rate of $120 per man-hour.
(c) APEX may adjust the hourly rates
charged for the work described in this
Section 2.04 after giving Travel Dynamics at
least sixty (60) days prior written notice
of the change. If requested by Travel
Dynamics after such an adjustment, APEX
shall provide Travel Dynamics a list of five
(5) publicly held Internet development
companies together with the hourly rates
each company charges for comparable
technical support if such rates can
reasonably be determined, and APEX agrees
that its adjusted rates will not exceed the
mean of such rates.
1.05. APEX to Host Product. APEX shall
host Travel Dynamics' Web site for the
Product, as well as the home page set-ups
within the Product. This shall include
keeping and maintaining the server(s) (which
will contain the Product) on APEX's premises
and linking said server(s) to the Internet
through APEX's pipeline. As part of the
hosting, APEX shall perform daily backups of
the Web site and hourly database backups.
Furthermore, APEX agrees to remove the daily
backups from its premises and to store said
backups in a reasonably secure location
storage facility. Each month after the date
of the completion of Phase 3 (as described
in Exhibit A), APEX shall be entitled to an
additional fee for performing such hosting
services and providing the hardware for the
Product (the "Hosting Fee"). Such monthly
Hosting Fee shall be determined as set forth
in this table:
<TABLE>
<S> <C>
NUMBER OF MEMBERS AS OF PER MEMBER HOSTING FEE(1)
THE 15TH DAY OF MONTH
0 to 5000 $8.33
5001 to 15,000 $7.50
15,001 to 30,000 $6.66
30,001 to 50,000 $5.83
50,000 and over $5.00
</TABLE>
[FN]
1 THE PARTIES INTEND THE VOLUME DISCOUNT TO BE APPLIED AT THE MARGIN. FOR
EXAMPLE, FOR A MONTH IN WHICH THE NUMBER OF MEMBERS AS OF THE 15TH DAY
IS 10,000, THE HOSTING FEE WOULD BE CALCULATED
(5000 X $8.33) + (5000 X $7.50) = $79,150.
</FN>
Provided, however, that the minimum monthly
Hosting Fee shall be Fifteen Thousand
Dollars ($15,000.00) for any month in which
the number of members on the fifteenth
(15th) day of the month is less than three
thousand (3000). The Hosting Fee shall be
paid to APEX no later than the end of each
month. Travel Dynamics may terminate APEX's
hosting services in accordance with the
terms of this Agreement; provided, however,
that if Travel Dynamics terminates APEX's
hosting services hereunder prior to six (6)
months after completion of Phase 3, Travel
Dynamics shall continue to pay the Hosting
Fee for the remainder of such six (6) month
period. In the event Travel Dynamics
terminates APEX's hosting services hereunder
after such six (6) month period, no further
Hosting fees shall accrue, other than any
fees which may accrue under Paragraph 2.12.
In the event Travel Dynamics terminates
APEX's hosting services hereunder, APEX
shall cooperate with Travel Dynamics in the
transfer of such hosting responsibilities to
the new host, and Travel Dynamics shall
reimburse APEX for APEX's reasonable
expenses relating to such transfer.
2.06. Domain Name and Security. Travel
Dynamics shall be responsible for paying for
and maintaining ownership of its domain name
and annual security certificates. Travel
Dynamics shall also pay APEX fifty-two
Dollars ($52.00) per security token.
2.07. Ownership by Parties.
(a) License of Product. APEX hereby
grants to Travel Dynamics a worldwide,
nonsublicensable (except that Travel
Dynamics may grant a sublicense as necessary
to permit an independent contractor to
modify the Product on behalf of Travel
Dynamics as permitted hereunder),
nontransferable (except in connection with
the permitted transfer or assignment of this
Agreement) irrevocable (except in the event
of non-payment by Travel Dynamics of sums
required to be paid by Travel Dynamics under
Paragraphs 2.05, 2.08, and 2.12 or other
material breach of this Agreement by Travel
Dynamics), royalty free (except for payments
required to be made by Travel Dynamics
hereunder) nonexclusive license to use and
modify the Product (except for Licensed Work
embodied in the Product). Travel Dynamics
agrees to provide a copy of the sublicense
agreement to APEX for approval prior to
making it available to their customers.
Travel Dynamics also agrees to gain APEX
approval for any changes to the sublicense
agreement after it goes in force and during
the tenure of this agreement.
(b) License of Travel Dynamics Original
Work. Travel Dynamics hereby grants to APEX
(a) a license to incorporate in the Product
all Travel Dynamics Original Work, and (b) a
sublicense to incorporate in the Product all
Travel Dynamics' Licensed Work. Travel
Dynamics Original Work as well as any ideas,
innovations or inventions created or
conceived utilizing, in whole or in part,
Travel Dynamics Original Work, shall be
owned solely by Travel Dynamics Further,
APEX shall consider Travel Dynamics Original
Work to be confidential, and shall have no
right to utilize, directly or indirectly,
Travel Dynamics Original Work in any other
product or services. These limitations
imposed upon APEX in this Paragraph 2.07 (b)
shall survive any termination of this
Agreement.
(c) Ownership of APEX Original Work.
Ownership of APEX Original Work shall be
retained by APEX.
(d) Use of Licensed Work. APEX shall not
incorporate any Licensed Work in the Product
unless Travel Dynamics has been granted a
license to utilize the Licensed Work on
terms and conditions acceptable to Travel
Dynamics
2.08. Payment. Provided that APEX is not
in material breach of this Agreement, Travel
Dynamics shall make payment in accordance
with Exhibit B in U.S. currency on the dates
set forth on Exhibit B. Past due amounts
shall accrue interest at a rate equal to the
lesser of one and one-half percent (1 1/2%)
per month from the date due, or the maximum
late charge permitted by law.
2.09. Term. The term of this Agreement
shall commence on the date hereof and shall
continue, unless sooner terminated, until
the five (5) year anniversary of said date
(the "Term"). After the expiration of the
Term, this Agreement shall be automatically
renewed for successive one (1) year renewal
term(s), unless either party notifies the
other party at least thirty (30) days prior
to the end of the term of its intention not
to renew.
2. 10. Termination. In the event either
party is in material breach of this
Agreement, including but not limited to
being delinquent in meeting the agreed upon
milestones, delivery or payment schedules
set forth in Exhibits A and B (subject to
Section 2.11, below), the non-breaching
party may, by notice to the breaching party,
terminate this Agreement and seek any remedy
available pursuant to this Agreement.
Notwithstanding any other provision hereof,
Travel Dynamics may terminate APEX's
services hereunder, for any reason, upon or
after the sixth (6th) month anniversary of
the completion of Phase 3 and after thirty
(30) days written notice to APEX. Upon such
termination, the work performed to date
shall be licensed to Travel Dynamics
pursuant to the terms of Paragraph 2.07(a)
and (b) and the Source Code (other than the
Special Source Code) for such completed work
shall be delivered to Travel Dynamics.
2.11. Time of the Essence. The parties
understand and agree that time is of the
essence. If during the development of the
Product pursuant to this Agreement, APEX is
unable to meet the agreed-upon Specification
by the date set forth herein in all material
respects, for reasons other than a defect or
defects in Travel Dynamics provided hardware
or software or other breach by Travel
Dynamics of any term of this Agreement, and
if fifteen (15) days after receiving written
notice of its inability to meet such
Specification APEX has not yet met such
Specification, then Travel Dynamics may:
(a) Extend the correction period by
any amount of time as may be determined
by Travel Dynamics;
(b) Approve the delivered Product
with a mutually agreeable reduction in
the contract price;
(c) Elect to complete or have
completed (through third parties which
have executed confidentiality agreements
imposing substantially similar
obligations as are imposed upon Travel
Dynamics and APEX pursuant to this
Agreement) the nonconforming Product, and
APEX shall give Travel Dynamics all
reasonable cooperation with respect
thereto at APEX's expense, including but
not limited to (i) granting Travel
Dynamics a world-wide, non-exclusive
license to use APEX Original Work
reasonably necessary for Travel Dynamics
or such third party to complete the
nonconforming Product and (ii) obtaining,
or assisting Travel Dynamics in
obtaining, any licenses from third
parties necessary for the completion of
the non-conforming Product. Thereafter,
Travel Dynamics shall be entitled to
deduct from amounts remaining due APEX
pursuant to this Agreement, any amounts
actually expended pursuant to this
Subsection; or
(d) Terminate this
Agreement for cause.
2.12 Special Source Code.
Notwithstanding any agreement to the
contrary contained in this Agreement, in the
event of termination of this Agreement or
the termination of APEX's hosting services
under Paragraph 2.05, APEX shall have no
obligation to deliver the Special Source
Code to Travel Dynamics. However, in the
event Travel Dynamics is using security
tokens in conjunction with the Product as of
the date that APEX's hosting services are
terminated, APEX shall continue to host a
security gateway to Travel Dynamics' new
hosting location, enabling the continued use
of the security tokens, at an annual fee of
One Thousand Dollars ($1000).
III. REPRESENTATIONS AND WARRANTIES
3.01. Express Representations and
Warranties of APEX. APEX represents and
warrants to Travel Dynamics that:
(a) it has good and marketable title,
or a valid license, to all components of
the Product and that the Product shall be
free and clear of all liens,
encumbrances, security interests or other
claims (other than licenses of Licensed
Work).
(b) APEX possesses the financial and
technical ability to perform its
obligations under the terms of this
Agreement.
(c) No APEX Original Work or APEX
Licensed Work incorporated in the Product
infringes upon any Intellectual Property
right of any third party.
(d) APEX represents and warrants that
the Product will perform in substantial
accordance with the Specifications and
any additional criteria agreed to in
writing by the parties, and shall not
contain any material defect in
operational performance or any material
programming defect. APEX agrees to
promptly notify Travel Dynamics upon
learning of any such material defect in
operational performance or any material
programming defect.
(e) APEX represents and warrants that
it shall perform the services and provide
each and every component of the Product
in a competent and workmanlike manner.
(f) APEX shall "pass through" to
Travel Dynamics any equipment and third
party software end-user warranties and
indemnities which are by their terms
assignable to Travel Dynamics. To the
extent APEX is not permitted to so pass
through, APEX shall enforce such
warranties and indemnities on behalf of
Travel Dynamics.
(g) APEX represents and warrants
that, as of the date of installation, the
Product does not contain, and APEX will
exercise commercially reasonable efforts
to ensure that the Product will not
receive from any APEX data transmission
via modem or other APEX medium, any
Disabling Code including, but not limited
to, any limitations that triggered by:
(a) software being used or copied a
certain number of times, or after the
lapse of a certain period of time; (b)
software being installed on or moved to a
central processing unit or system that
has a serial number, model number or
other identification different from the
central processing unit or system on
which the Product was originally
installed; or (c) the occurrence or lapse
of any similar triggering factor or
event. In the event a Disabling Code is
identified by Travel Dynamics or APEX in
the Product, APEX shall, at APEX's sole
cost: (w) take all steps necessary to
test a new copy of any affected software
for the presence of such Disabling Code;
(x) furnish to Travel Dynamics a new copy
of any affected software without the
presence of such Disabling Code; (y)
install and implement such new copy of
any affected software; and (z) assist
Travel Dynamics in restoring any and all
data or programming lost by Travel
Dynamics as a result of such Disabling
Code. "Disabling Code(s)" means any
virus, worm, trap door, back door, timer,
clock, counter, Trojan horse or other
limiting routine, instruction or design
that would cause the Product not to
perform in substantial accordance with
the Specifications.
(h) APEX represents and warrants that
the Product shall, at all times, achieve
and maintain an uptime availability
average of 99.95% during each calendar
month measured at the APEX/internet
interface, and not including scheduled
downtime for maintenance and upgrades
("Uptime Standard"). For the purposes of
this Agreement, if the Product falls
below the Uptime Standard in any given
month, Travel Dynamics shall notify APEX.
APEX will have fifteen (15) days
following such notice to correct the
situation. If the Product falls below
the Uptime Standard in the following
month, Travel Dynamics shall so notify
APEX and APEX shall credit Travel
Dynamics a ratable portion of such
month's Hosting Fee.
3.02. Disclaimer. OTHER THAN THE EXPRESS
WARRANTY SET FORTH IN PARAGRAPH 3.01, APEX
MAKES NO WARRANTY, EXPRESS OR IMPLIED, WITH
RESPECT TO THE PRODUCT OR THE SERVICES
PROVIDED BY APEX HEREUNDER. APEX HEREBY
DISCLAIMS ANY AND ALL SUCH OTHER WARRANTIES,
INCLUDING BUT NOT LIMITED TO THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE.
3.03. Warranty Obligations. After
delivery of the Product to Travel Dynamics,
upon notice from Travel Dynamics that the
Product is in violation of the warranty
contained in subparagraphs 3.01(d), (g) or
(h), APEX shall, without additional charge
to Travel Dynamics, bring the Product into
compliance with the Specifications, or
repair such material programming defect or
defect in operational performance, within
five (5) days from the time Travel Dynamics
notifies APEX of such noncompliance. Upon
notice to APEX that the Product is in
violation of the warranties contained in
subparagraphs 3.01(a), (c) or (f), APEX
shall, in its sole discretion, either (i)
modify the Product so that the Product is no
longer in violation of such representation
or warranty, (ii) obtain at APEX's expense a
license, from any third party the rights of
which the Product is alleged to have
violated, permitting the continued use of
the Product by Travel Dynamics, or (iii)
refund to Travel Dynamics the fees paid by
Travel Dynamics hereunder with respect to
that part of the Product which infringes
such third party right, or with respect to
all of the Product if the Product as a whole
infringes such third party right.
3.04. Termination Effect. Upon
termination or expiration of this Agreement
for any reason, each party shall immediately
destroy or return to the other all materials
containing proprietary, confidential or
private data and all copies thereof if so
requested by the other party.
3.05. Express Representations and
Warranties of Travel Dynamics. Travel
Dynamics represents and warrants to APEX that:
(a) Travel Dynamics has good and
marketable title to all Travel Dynamics
Original Work.
(b) Travel Dynamics has the right to
sublicense to APEX all Travel Dynamics
Licensed Work provided by Travel Dynamics
to APEX hereunder.
(c) No Travel Dynamics Original Work
provided to APEX hereunder infringes upon
any Intellectual Property right of any
third party.
IV. INDEPENDENT PRODUCT DEVELOPMENT AND RELATED RIGHTS
a. Except as otherwise provided
herein, this Agreement does not
and shall not be construed to
limit the rights of either party
to independently develop, market,
sell, lease, service or
manufacture competing products
provided that no proprietary
knowledge or know-how of the
other party is used in such
products. The foregoing
notwithstanding, Travel Dynamics
shall not reverse engineer any
portion of the Product.
V. HEADINGS
5.01. The headings and titles of the
Articles and Sections of this Agreement are
for convenience only and shall not affect
the construction or interpretation of any
provision.
V1. NOTICES
6.01. Any notice which may be required
to be given under this Agreement shall be in
writing and shall be sent either by
facsimile actually received by the other
party, or by a nationally recognized
overnight delivery service with proof of
delivery. To the extent this Agreement
requires notice to be given to APEX or
Travel Dynamics, such notices shall be
deemed to have been duly given and delivered
upon the receipt of such fax or one (1) day
after being sent by such overnight delivery
service, to the parties at the following
locations, or such other addresses as the
parties may designate from time to time:
<TABLE>
<S> <C>
IF TO APEX: IF TO TRAVEL DYNAMICS
Mr. Joseph G. Wirtz Mr. James Piccolo
APEX Interactive Travel Dynamics
10437 Innovation Drive 4150 North Civic Center Road,
Suite 119 Penthouse suite
Wauwatosa, Wisconsin 53226 Scottsdale, Arizona 85251
Fax No.: (414) 443-2740 Fax No.: (480) 425-7700
</TABLE>
VII. INDEMNIFICATION
7.01. Indemnification.
(a) APEX Interactive. APEX shall indemnify,
defend and hold Travel Dynamics harmless
from, and pay any judgment for, any suit,
claim, fine, demand, penalty or proceeding
(hereinafter "Travel Dynamics Claim")
against Travel Dynamics alleging that any
portion of the Product (other than any
portion of the Product consisting of
containing, or derived from any Travel
Dynamics Original Work or any Travel
Dynamics Licensed Work) infringes any
patents, utility models, copyrights,
trademarks, trade secrets or any other
intellectual property rights of a third
party ("Intellectual Property"), provided
that APEX is promptly notified in writing of
any Travel Dynamics Claim, given all
reasonable assistance required, and
permitted to direct the defense of such
Claim. Travel Dynamics may at its own
expense retain independent counsel to
represent it with respect to any Claim. APEX
shall have no liability for settlements or
costs incurred without its consent.
(b) Travel Dynamics Indemnity. Travel
Dynamics shall indemnify, defend and hold
APEX harmless from, and pay any judgment
for, any suit, claim, fine, demand, penalty
or proceeding (hereafter "Claim") against
APEX alleging that the Travel Dynamics
Original Work or Travel Dynamics Licensed
Work contained in the Product or that Travel
Dynamics modifications to the Product
infringes any Intellectual Property of a
third party, provided that Travel Dynamics
is promptly notified of any Claim, given all
reasonable assistance required, and
permitted to direct the defense of such
Claim. APEX may at its own expense retain
independent counsel to represent it with
respect to any Claim. Travel Dynamics shall
have no liability for settlement or costs
incurred without its consent.
7.02. Injunction. In the event that
Travel Dynamics' use or marketing of the
Product is enjoined due to an alleged
infraction by any of APEX's Original Work
contained in the Product of any Intellectual
Property of a third party, APEX's sole
obligation shall be to, at its option and
expense, (a) license to Travel Dynamics a
fully equivalent component of APEX's
Original Work not subject to such
injunction, (b) modify APEX's Original Work
so that it is no longer subject to such
injunction, (c) obtain for Travel Dynamics
the right to continue using the enjoined
Product, or (d) take back the enjoined
Product from Travel Dynamics and refund to
Travel Dynamics the amounts paid by Travel
Dynamics hereunder.
VIII. ASSIGNMENT
8.01. Assignment by Travel Dynamics.
Travel Dynamics shall not Transfer this
Agreement, except with the prior written
consent of APEX, which consent shall not be
unreasonably withheld;
8.02. Assignment by APEX. APEX shall not
assign or otherwise transfer this Agreement
(other than the right to receive payments
hereunder), except with the prior written
consent of Travel Dynamics, which consent
shall not be unreasonably withheld.
IX. SEVERABILITY
9.01. If any provision of this Agreement
is held invalid by any law, rule, order or
regulation of any government, or by the
final determination of a court of last
resort or arbitrator, such invalidity shall
not affect (a) the other provisions of this
Agreement, (b) the application of such
provision to any other circumstance other
than that with respect to which this
Agreement was found to be unenforceable, or
(c) the validity or enforceability of this
Agreement as a whole.
X. SURVIVAL
10.01. Unless this Agreement expressly
provides otherwise or by its nature a
provision cannot survive this Agreement, the
provisions of this Agreement shall survive
the expiration or any termination of this
Agreement.
XI. CONFIDENTIAL AND PROPRIETARY INFORMATION
11.01. Non-Disclosure of Proprietary
Information. All information of a
confidential and/or proprietary nature
furnished or disclosed by either party shall
remain the property of the disclosing party.
The recipient shall take all reasonable
steps to prevent the disclosure of such
information, and shall allow the disclosure
of such information within its own
organization only on a need-to-know basis.
If the recipient reproduces any part of such
information for permitted use within its own
organization, the recipient shall indicate
the disclosing party's proprietary interest
on all such reproductions. If any such
information is transferred to Travel
Dynamics' or APEX's vendors, suppliers or
customers, such information and such
transfer must be authorized in writing by
the disclosing party. The foregoing
notwithstanding, in no event shall Travel
Dynamics or APEX disclose or cause to be
disclosed, directly or indirectly, in whole
or in part, any confidential information of
the other to any competitor of the other.
Such obligation to keep information
confidential shall survive termination or
expiration of this Agreement.
11.02. Exception to Non-Disclosure.
Neither party hereto shall be bound by the
confidentiality obligations of Section 11.01
hereof if.:
(a) The information was in the public
domain at the time of disclosure;
(b) The information becomes publicly
available through no fault of the recipient;
(c) The information was in the
recipient's possession, free of any
obligation of confidence, at the time of
receipt of the information;
(d) The information was independently
developed by employees or agents of the
recipient, without reverse engineering
barred by this Agreement or applicable
law, and without reference to any of the
information disclosed in confidence; or
(e) The recipient is obligated to
produce the information under court or
government action after all reasonable
appeals have been exhausted.
11.03 No use of Confidential
Information. Travel Dynamics shall own the
content of its database (including, without
limitation, the commission structure,
customers, clients, vendors, independent
reps and distributors), and APEX shall have
no rights in or to any information contained
in Travel Dynamics' database, and APEX shall
not sell, use, market, publicize or
otherwise exploit (commercially or
otherwise) any information contain in Travel
Dynamics' database, including without
limitation, e-mailing or otherwise
contacting any of representatives,
distributors or vendors.
XII. ARBITRATION
12.01 Any dispute arising out of or
relating to this Agreement shall be settled
by binding arbitration, conducted on a
confidential basis, under the then current
Commercial Arbitration Rules of the American
Arbitration Association (the "Association")
strictly in accordance with the terms of
this Agreement and the substantive law of
the State of Wisconsin. The arbitration
shall be held at a mutually agreeable
location in Waukesha, Wisconsin and
conducted by one (1) arbitrator chosen from
a list of attorneys or judges who are
members of the Association's commercial
arbitration panel and are knowledgeable
about the software and electronic commerce
industries. If the parties cannot within
thirty (30) days after the expiration of
such 60-day period, agree on the selection
of the arbitrator, the arbitrator will be
chosen pursuant to the Commercial
Arbitration Rules of the Association. The
costs of the arbitration, including the fees
to be paid to the arbitrator, shall be
shared equally by the parties to the
dispute. The judgment upon the award
rendered by the arbitrator may be entered
and enforced in any court of competent
jurisdiction. Neither party shall be
precluded hereby from seeking equitable
remedies in any court having jurisdiction
hereof including, but not limited to,
temporary restraining orders and preliminary
injunctions, to protect its rights and
interest, but such shall not be sought as a
means to avoid or stay arbitration. The
arbitrator shall not award any
consequential, incidental punitive or
exemplary damages. The parties acknowledge
that they have voluntarily agreed to
arbitrate their disputes in accordance with
the foregoing and each party hereby
irrevocably waives any damages in excess of
compensatory damages.
XIII. WAIVER
13.01 Failure or delay of either party
to exercise any right or remedy under this
Agreement or to require strict performance
by the other party of any provision of this
Agreement shall not be construed to be a
waiver of any such right or remedy or any
other right or remedy hereunder.
XIV. FORCE MAJEURE
14.01 Subject to a party's right to
terminate this Agreement under Section 2.09,
neither APEX nor Travel Dynamics shall be
liable to the other for its failure to
perform any of its obligations during any
period in which such performance is delayed
by fires, insurrection, acts of God or of
the public enemy, or compliance with any
law, regulation or other governmental order.
XV. FURTHER ASSURANCES
15.01 The parties agree to execute all
instruments and documents of further
assurance and will do any and all such acts
as may be reasonably required to carry out
their obligations and to consummate the
transactions contemplated by this Agreement.
XVI. GOVERNING LAW
16.01 This Agreement shall be governed
by and construed in all respects in
accordance with the laws of the State of
Wisconsin. Any action brought concerning
this Agreement or the relationship of the
parties shall be commenced in Wisconsin
circuit court located in Waukesha County,
Wisconsin or in the Federal District Court
for the Eastern District of Wisconsin.
XVII. REMEDIES CUMULATIVE
17.01 Except as otherwise set forth
herein, any rights or cancellation or
termination, or remedies prescribed in this
Agreement are cumulative and are not
intended to be exclusive of any other remedy
not inconsistent herewith, of which the
injured party may be entitled to herein or
at a law or in equity, including, but not
limited to, the remedy of specific performance.
XVIII. CONDITIONS PRECEDENT/THIRD PARTY LICENSES
17.01 [reserved]
17.02 Warrant and Registration Rights
Agreement. It shall be a condition
precedent to APEX's obligations hereunder
that Travel Dynamics shall have executed and
delivered to APEX (a) a Warrant to purchase
certain shares of the common stock of Travel
Dynamics, and (b) a Registration Rights
Agreement with respect to the shares subject
to the Warrant, each in a form acceptable to
APEX.
18.03 License from Third Parties. In
developing the Product for Travel Dynamics,
APEX may be required to obtain licenses from
third party licensors or may be subject to
third party encumbrances other than
prerequisite licenses (e.g. license
limitations or payment to third parties).
All such currently known
requirements/encumbrances will be
communicated by APEX promptly to Travel
Dynamics but in any event prior to final
delivery of the Product to Travel Dynamics
The parties will attempt to minimize, where
possible, the necessity for such
prerequisite licenses. APEX understands and
agrees that Travel Dynamics shall not be
required to accept any Product which
requires Travel Dynamics to enter into
license or sub-license arrangement on terms
which are not acceptable to Travel Dynamics
XIX. INTEGRATION
19.01 This Agreement, including all
exhibits (all of which are incorporated into
this Agreement), constitutes and contains
the entire agreement and understanding
concerning the subject matter between the
parties, sets forth all inducements made by
any party to any other party with respect to
any of the subject matter, and supersedes
and replaces all prior and contemporaneous
negotiations, proposed agreements or
agreements, whether written or oral. Each of
the parties acknowledges to each of the
other parties that no other party nor any
agent or attorney of any other party has
made any promise, representation or warranty
whatsoever, express or implied, written or
oral, not contained herein concerning the
subject matter hereof to induce it to
execute this Agreement, and each of the
parties acknowledges that it has not
executed this Agreement in reliance or any
promise, representation or warranty not
contained herein.
XX. PRE-EXISTING TECHNOLOGY AND INTELLECTUAL PROPERTY
20.01 Except as explicitly set forth
herein, nothing herein shall be deemed to
transfer any ownership of any Travel
Dynamics Original Work or APEX Original
Work, or other things tangible or
intangible, created by either party or
acquired by a party from a third party.
XXI. RELATIONSHIP OF THE PARTIES
21.01 APEX is an Independent Contractor.
(a) It is the intent of the parties that
during the term of this Agreement APEX shall
be an independent contractor, and nothing
set forth herein shall be deemed or
construed to render the parties joint
ventures, partners or employer and employee.
Neither party is authorized to make any
commitment or representation on the other's
behalf.
(b) During the term of this Agreement,
if the term "partnership," "partner" or
"development partner" or the like is used to
describe the parties' relationship, Travel
Dynamics and APEX agree to make it clear to
third parties that these terms refer only to
the spirit of cooperation between them and
neither describe, nor expressly or impliedly
create, the legal status of partners or
joint ventures.
(c) APEX may hire employees, associates,
consultants or other outside agents
("Agents") to assist with the performance of
APEX's responsibilities under this
Agreement. All such Agents shall be subject
to the confidentiality term of this Agreement.
(d) Travel Dynamics will not deduct from
APEX's fees any amount for taxes, insurance,
bonds or payments of any kinds related to an
employer-employee relationship unless Travel
Dynamics is held responsible for such items.
APEX understands and agrees that it is
responsible for the full payment of wages
and other compensation of any and all Agents
APEX may choose to engage, and for the
payment of any federal, state and local
income taxes, social security taxes, workers
compensation and other insurance required by
law.
(e) APEX may determine the method,
details and means for performing services
called for in this Agreement, subject to the
Specifications, timetables and milestones
supplied by Travel Dynamics.
(f) APEX maintains independent offices
in which it performs a majority of its work.
Work at Travel Dynamics' location will be
done only as necessary to facilitate
interaction with Travel Dynamics' equipment
or other personnel.
(g) APEX is free to set its own hours
for performing the services called for in
this Agreement, and is free to choose and
schedule work for other customers without
regard for this Agreement, subject to the
completion schedule, time frames and
milestones set forth Exhibits "A" and "B"
attached hereto.
XXII. ATTORNEYS' FEES
22.01 The prevailing party in any action
or proceeding (including, without
limitation, arbitration) between Travel
Dynamics and APEX arising out of or related
to this Agreement shall be entitled to
recover from the other party all of its
reasonable attorneys' fees and costs in
connection with such action, including any
arbitration or appeal of such action.
IN WITNESS WHEREOF, authorized representatives of the
parties have affixed their signatures as the Effective
Date.
Dated: ____________, 2000 APEX
APEX Interactive, Inc.
BY:
Joseph G. Wirtz, President
TRAVEL DYNAMICS
Travel Dynamics
BY:
James Piccolo, CEO
EXHIBIT A
PRODUCT SPECIFICATIONS
The parties hereto contemplate that delivery of the
Product shall occur in four (4) phases, each of which
are described below. Travel Dynamics shall have the
right, but not the obligation, to proceed with the next
phase of development upon completion by APEX of the
work required to achieve the Product Specifications for
the then-current phase of development. The existence of
a writing executed by both parties shall be considered
conclusive proof of the parties' agreement to proceed
with the subsequent phase on the terms and conditions
set forth in the writing. This phase shall be known as
"Phase 5" and is not a part of this Agreement.
Phase 1. Phase 1 shall consist of the
design meeting and follow-up to define the
functionality changes, aesthetic changes,
and development of the costs associated with
Phase 2 through Phase 4 of the development
of the Product. Phase 1 shall include, but
shall not be limited to:
a. Delivery by Travel Dynamics of proposed
functionality changes to the Specifications;
b. Delivery by Travel Dynamics of proposed
changes to the Specifications;
c. Delivery by APEX of a budget of projected
time/cost to complete Product ("Projected Cost");
d. Delivery of Travel Dynamics of the graphic
design suggestions and logo to be used in the
Product;
e. APEX to begin programming on the
compensation plan and construction of the
"Back office" of the product;
f. Execution of the signed Agreement.
Phase 2. Phase 2 shall consist of the
implementation and incorporation by APEX of
the functionality and aesthetic changes, the
database content (including, without
limitation, Travel Dynamics' commission
compensation structure), and Instant Call
into the working Product. Phase 2 will also
call for working demonstration of the
Product that will be complete with; A
working sample Travel Dynamics Home Page
with three sections, (1) Travel Dynamics
Home page with future functionality
indicated by non working navigation bars,
(2) Travel Dynamics Mall Home page with
Travel Dynamics Travel Options page,
Entertainment Options page, Shopping Options
page, (3) Associate "Back Office" page with
security options. This phase shall also
incorporate the automated enrollment
sections for the purchase of the TruPack
$495.00 that generates an online web page
for the Associate with options to select
from six (6) different home page options.
The development of a complete and fully
functioning Product with testing shall not
be the goal of this phase. It is agreed
that this phase will be the "roll-out" or
"introduction" phase for Travel Dynamic's
direct marketing base. Many of the
functions in this specification simply can
not be totally completed by the proposed
"roll out" date and that much of the success
of this phase is contingent on Travel
Dynamics delivering graphic design concepts
and approving these designs prior to the
"roll out" date.
Phase 3. Phase 3 shall consist of the
implementation by APEX of the functionality
and aesthetic changes, the database content
(including, without limitation, Travel
Dynamics' commission compensation structure
and reports into the working Product),
setting up the Instant Call program for
customer support, the development of a
complete and fully functioning Product per
the specifications included hereunder.
Phase 3 shall include but not be limited to
the delivery of the final Product, as well
as revisions to the Product, if necessary.
Phase 4. Phase 4 shall consist of hosting
services and technical support following
DELIVERY of the Product to Travel Dynamics.
Phase 4 shall include:
a. Technical support for Travel Dynamics and
its distributors every regular business day at
a rate of $120.00 per hour, subject to
adjustment pursuant to Section 2.06;
b. Hosting Travel Dynamics' server at APEX's
premises, including providing Internet access
for the server, hosting all the home page
set-ups within the Product, making daily site
backups and hourly database backups, and
removing the backups from APEX's premises and
storing them long term in a qualified storage
facility;
C . On-going product support and new feature
development for the Product.
The following list of specifications shall be
used for the creation of the Product.
Product Specifications:
ASSOCIATE SITE
Travel Dynamics' Independent Associate site will have
the same functionality as found in the company site as
outlined below with the exception of the "teaser page"
and Corporate history. However, each Associate's page
will have a link to the Corporate site. Each Associate
will have 6 templates to choose from and the ability
for limited customization for their individual site.
The Associate site will utilize the same buttons for
information as follows.
CORPORATE SITE
Travel Dynamics Company Home Page to include:
A collage of Pictures depicting Travel Dynamics Company
with Travel Dynamics' marketing questions. Travel
Dynamics' Company site will include an area to enter a
zip code. The customer will be transferred to the
qualified associate site related to the zip code that
was entered. The option for browser download should
also be available on the homepage with instructions for
users. There will be a "Teaser page" that will be
hosted on a separate URL that will link to the
Corporate home page. This will be a straight HTML
questionnaire that when completed will send the visitor
to the Corporate Home page.
Several Title Buttons to choose from that link the
visitor to the prospective pages:
Go Shopping (Information about shopping in the
Travel Dynamics Mail
How to shop tutorial Formation on how to shop
and what to do inside the mall
Enter the Mall (Takes customer directly into
the Mall)
About Travel Dynamics' company (Information, on
the corporation, stock and investor information
and program outline and Links to subsections):
Vision and Mission (Information and Graphics)
Management Formation, Pictures, and Graphics,)
Strategic Alliances (Information, Pictures and
Graphics)
Product Line (formation, Graphics and Links to
subsections)
administrative section of the distributor log
in below)
e-commerce -Information regarding purchasing
and discount products, Graphics and Links to
subsections
Go Shopping in the Travel Dynamics Mall
(Information, Graphics, Links to subsections
and all product purchases from each
prospective vendor will be tracked and
linked to the portal site in which the
distributor entered, the commission tracking
will be a component of each mall owner or
Direct sales persons commission report as
outlined in the administrative section of
the distributor log in below)
How to shop tutorial
The Travel Dynamics. Mall will be branded with
the Travel Dynamics logos and image and contain
all components and functionality of the Beechwood
Research, LLC demonstration site called "The
I-Mall" and will include (but not limited to) the
following:
All current and future vendors stores
(Travel Dynamics will have first right of
refusal.)
Navigation features to browse by
category or floor.
Newbie University on all sites.
Global Product search w/splash page for
each store site category
Instant Call Back feature to be routed
to the Travel Dynamics Customer Service
Department with up to five (5) different
ring locations per Travel Dynamics choice.
All link Lock Vendor Features, Gobbets
updating each vendor store, etc.
E-mail Links to tech support (Apex), to
Customer Service and to Representative
Information. (Travel Dynamics)
Bonus Bucks (Travel Bucks) Program and
Lifestyles Store with all products
Promotional Giveaway lead generation
Program
Auction/Bid Product program
The Travel Dynamics Store to include all
current product offerings, new Logo and
conference schedule, all personal
development and sales aids and training
programs.
Business Opportunity (Information, Graphics,
Flash Presentation and Links to subsections)
Flash Presentation (presenting business
opportunity)
Mission (Information and Graphics)
Market and Strategy (Information and
Graphics)
Business Overview (Power point
presentation with multiple slides, Power
Point Down Load Capabilities)
Compensation Plan (Information and
Graphics)
Training and Support (Information,
Graphics and link to the IME event sites)
Become a Distributor and Web Mall Owner
(Information, Graphics and Links to
subsections):
Independent representative
application agreement with online
processing of credit card information.
Upon credit card approval a
distributor ID# is automatically
assigned, the new distributor is
automatically placed in the database
genealogy, the company is e-mailed
the new distributor information, the
up-line is e-mailed new distributor
contact information, and the
distribution center is automatically
notified to send a marketing director
kit.
Web Mall owner application
agreement with online processing of
credit card information.
Upon credit card approval the mall
site is automatically assigned the
same distributor ID# and begins an
automatic URL to be searched and
assigned. Shipping information to be
automatically sent to distribution
facility for Web owner welcome kit
and security token to be sent.
6 unique home page designs will be
available for the new web director to
Choose and be assigned with options
to insert pictures and graphics.
Frequently Asked Questions Section
(information and graphics)
ASSOCIATES HOME PAGE
The associate home page shall consist of six different
designs (Looks and feels) that can be selected and
changed at the Associates discretion. There shall be an
option to import customized text and photos that can be
selected and modified by the Associate from a secure
page. There shall be a method for navigating between
four (4) main sections of the Associates site; Travel,
Entertainment, the Shopping mall and an Opportunity
section. The four sections shall include:
Travel
Hotel bookings via a link to a TruDynamic's
partner site
Condo Rentals via a link to a TruDynamic's partner
site
Group Adventures via a link to a TruDynamic's
partner site
Airline via a link to a TruDynamic partners site
Car Rental, Train and Bus via a link to a
TruDynamic's partner's site.
These will not be booking sites but informational
only sites and will not constitute special
programming for auditing commissions. There will
also be a City Search link that will allow an
Associate to locate service providers in a given
city where travel discounts may be used. There
will also be the facility for a site visitor to
purchase the travel package that will be managed
through the current commission program and show up
in the proper direct sales members register.
Entertainment
This area shall be used for the linking to Travel
Dynamics partners sites to check on discounted
dining card members, airline, golf and ski
discounts. It shall not be a booking engine but
will include the ability to purchase magazines
through the Travel Dynamics site.
Shopping
The shopping area will consist of a Travel
Dynamics branded mall that will contain name brand
stores as well as a Travel Dynamics outlet for
health products or other items. The addition of
this health store, or any future stores, shall not
be part of the original specifications but is
listed here as an acknowledgement of the desire of
Travel Dynamics for future store additions to the
shopping site and the need to program in a method
for expansion in the data base. The shopping
area will allow the visitor to purchase items,
goods and services, including long distance
telephone service online. All commissions from
this section shall show up on the Associates
reports. Commissions from stores from within the
mall will populate the Associates reports as soon
as they are received from the stores and on a
real-time basis from any store that is hosted on
the "closed mall" or resident on the APEX servers.
Each shopping site shall have Instant call feature
that will create an interactive customer service
feature between the visitor and the Travel
Dynamics customer service group.
Opportunity
Each Associate site shall have the ability to
present a Power Point or Flash presentation on the
business opportunity (Travel Dynamics shall
provide the content for this presentation). There
will be a explanation of the compensation plan in
this area as well as a copy of Travel Dynamics
policies and Procedures. Content can include
testimonies from current Associates as chosen by
Travel Dynamics for their opportunity
presentation. There will be a facility for
allowing Travel Dynamics to change these
testimonies and import pictures from gig, tif or
Jpeg files. As new services are added to the
Travel Dynamics program this area of the site will
have the ability to allow Travel Dynamics
personnel to update content.
DISTRIBUTOR LOG
In Bar code security is provided to ensure optimal security for web
director access, to include the security token feature. Once Associate
is inside, the Web owner will be placed into the Travel Dynamics "I-
Office" Home Page to include Information, Graphics, Capability to run
audio/video streams, Option to download audio/video player with user
instructions, Button Links to subsections: Travel Dynamics will
provide the video and content for such broadcasting as well as the
following features:
WEB ADMINISTRATIVE SECTION
Personal Sales Volume "Real Time" Reports for
either Travel Dynamics Products and/or stores
other than Travel Dynamics (providing the
purchases are made from current reporting APEX
hosted stores). All other stores sales data shall
populate these reports when received from the stores.
Group Sales Volume Reports for either Travel
Dynamics Products and/or stores other than Travel
Dynamics for Registered groups as well as downline
sales in an Associates group.
Drill Down Purchasing capabilities to view
customer transactions and buying habits from all
stores that do not filter customer data under a
privacy policy or agreement with their customers.
In such cases drill down will show the amount of
the purchase and from what store it came from.
Query capabilities to include (within downline
only, not company wide)
New Associates signups
Qualified Associates or Distributors
within a given group
Non-Qualified Associates or Distributors
in a given group
Commissions Due at variable time frames
Distributor lists by state, title and
qualification
E-mail Distribution Lists Capabilities (within
downline only, not company wide)
E-mail Qualified Associates or
Distributors in your group
E-mail Non-Qualified Distributors
E-mail Down-line By Title or Rank
E-mail distributors by state
E-mail shoppers club members
Lead Follow Up/Generation Program Web owner
notification of the address of all of their mall
visitors who fill out a profile for e-mail follow
up. There shall be a lead follow-up training
program on this part of the site.
TRAVEL DYNAMICS COMPANY FORMS AND TRAINING REPORTS
(All information for web owner downloading purposes)
Independent Associates Applications/Agreements
> Web owners Applications/Agreements > Product
Order Forms > Training Reports or programs >
Positive Press > Leadership Lists );~ Business
Opportunity Outlines/Conference Call Outlines >
Action Plan For Success Advanced Training Reports
> Sales aid order forms.
Complete Company Calendar/Event Registration
and Forms
Travel Dynamics. Business Sales Aid section to
include information, pictures, graphics, sales aid
purchase options that shopping cart the sales
aides and send secure credit card and order
information to the distribution center. Sales
aides are to be included in the Travel Dynamics
store.
Go Shopping in the Travel Dynamics Mall
(Information, Graphics, Links to subsections and
all product purchases from each prospective vendor
will be tracked and linked to the portal site in
which the distributor entered, the commission
tracking will be a component of each mall owner or
web owner's commission report as outlined in the
administrative section of the distributor log-in
below)
The Travel Dynamics Mall will be branded
with the Travel Dynamics logos and image and
contain all components and functionality of
the Beechwood Research, LLC "I-Mall" to
include (but not limited to) the following:
All current and future vendors
stores (Travel Dynamics will have
first right of refusal)
Newbie University on all sites
Global Product search w/ splash
page for each store site category
Instant Call Back feature to be
routed to the Travel Dynamics
Customer Service
All link Lock Vendor Features, as
well as robot updating each vendor
store, etc.
E-mail Links to tech support (Apex)
Customer Service and Representative
Information. (Travel Dynamics)
Bonus Bucks or "Travel Bucks"
Program that allows for purchaser to
earn products from the Lifestyles
Store that will be in the "closed mall."
Promotional Giveaway lead
generation Program which will be
defined by Travel Dynamics but follow
the example in the Beechwood
Research, LLC "I-Mall" example.
Auction/Bid Product program feature.
The Travel Dynamics mall database system
is also the complete administrative backbone
of the company and will include the
following features as outlined below:
AGENT ACCESS
Order Entry access features -Full
remote, secure access with password
protection to the database -Data entry
capabilities for Mall owner and order entry
-Employee log-in automatically assigned to
entries -Authorization to make same day
changes on their entries only.
Customer Service access features -Full
remote, secure access with password
protection to the database -Access to view
all accounts for customer service related
issues -Authorization to make changes to
contact information (name, address, phone
number, email, etc.)
MODIFY ACCESS
Same features as Agent Access, Plus:
-May issue credits
-Able to make Social Security # or Federal Tax ID#
changes
-Authorization to correct data entry errors on any
agent's entries
MANAGEMENT ACCESS
Same features as Agent, and Modify
Access, PLUS:
Able to make sponsorship and
placement corrections to database
records
Limited Management Report capabilities
* Query retrieval by title or rank
* Query retrieval by state
EXECUTIVE ACCESS
Same features as Agent, Modify, and Management
Access, PLUS: -Commission check calculation and
printing functions
Printed check summary
Commission adjustment and correction capabilities
Ability to credit or debit
commissions
E-mail capabilities to all Web
Owners, as well as query type
retrievals for designing different
distribution lists, such as by title
or rank, by income, etc.
Full Management Report capabilities
-Query retrieval of various types
including but not limited to
Title or Rank
State
Income (i.e. top 100)
Activity
Types of sales
Number of hits to website
**A notes section on all IR and customer accounts will
be required to document entries,
revisions and communications.
Additional Features of the entire system:
Apex Interactive will be available via pager to provide
technical support on a 24-hour basis. Subject to the
terms of the Agreement, Apex will perform all technical
support for Travel Dynamics database and genealogy.
Interpretation of Exhibits. The attached Exhibits shall
be interpreted liberally to conform to the terms and
conditions of the Agreement. In the event any term or
provision of this Exhibits is in conflict, or is not
otherwise subject to interpretation in a manner
consistent with the Agreement, the terms and conditions
of the Agreement shall take precedence over any term or
condition of these Exhibits.
EXHIBIT B
The fee for phase 1 through 3 for programming and
graphic work to modify the Beechwood Research, LLC
model known as the "I-Mall" per the specifications in
Exhibit "A" and the design notes provided to APEX by
Martin J. Matthews, shall be Five Hundred Eighty-Six
Thousand Three Hundred Dollars ($586,300), payable as
set forth below.
It is further understood that this cost does not
include back end integration of an accounting system
that will be decided on by Travel Dynamics and
purchased by them. It does not include the design of
an inventory management system nor does it include
interfacing to the UPS label printing and shipping
program currently under modification by United Parcel
Service, or the software that will give Travel Dynamics
the ability to fax reports or other pages using free
web services. These functions will be provided under
phase four (4) and will be completed on a time and
material basis at the billing rate of $120.00 per man
hour, should Travel Dynamics elect to add those
features to the system.
PAYMENT SCHEDULE
Payment Schedule:
<TABLE>
<S> <C> <C>
Description of Milestone Payment terms Amount Due
n/a This is the amount prepaid $212,500
to Hahn, to be delivered to
APEX by Hahn and credited
towards the fee
Execution of Agreement due upon execution of Agreement $80,650
Completion of Phase 2 upon receipt of invoice $146,575
Product goes live on the Internet upon receipt of invoice $146,575
Delivery of Security Tokens Net 30 See Section 2.06
Hosting monthly See Section 2.05
Security Gateway pursuant to Net 30, monthly See Section 2.12
Section 2.12
Phase 4 work Net 30, monthly See Section 2.04 and
Exhibit A
</TABLE>
Time Periods, Milestones, and Schedules:
Providing all content, graphics, Logos and approvals
are met the following schedule for completion of the
project is proposed:
1. 1 week after the date hereof: Travel Dynamics
shall have delivered to APEX all Project graphics
and functional direction per the enclosed
specifications in Exhibit "A" established.
2. 3 weeks after the date hereof: proposed
"I-office" reports shall be presented for review.
3. 11 weeks after the date hereof: Product
review scheduled with Martin Matthews, James
Piccolo and other Travel Dynamics' personnel.
4. 12 weeks after the date hereof: final review
of the Product and check off meeting on the Product.
5. 13 weeks after the date hereof: site goes
live and the start of Phase 4.
Certificate of Amendment to Articles of Incorporation
For Nevada Profit Corporations
(Pursuant to NRS 78.385 and 78.390 After Issuance of
Stock)
1. The name of the corporation is Travel Dynamics Services, Inc.
(the "Corporation").
2. The articles of incorporation have been amended to change the
Corporation's name as follows:
Article I. The name of the Corporation is
Tru Dynamics, Inc.
3. The vote by which the stockholders holding shares in the
Corporation entitling them to exercise at least a majority of
the voting power, or such greater proportion of the voting
power as may be required in the case of a vote by classes or
services, or as may be required by the provisions of the
articles of incorporation have voted in favor of the
amendment is: 855,000 of a total of 1,000,000 outstanding
and issued.
4. Signatures:
--------------------------- ---------------------------
James Piccolo, President Brian K. Service, Secretary
Strictly Confidential
Memorandum No.
Private Offering Memorandum
TRAVEL DYNAMICS, INC.
$1,200,000
Offering of 200,000 to 1,200,000 Units
Offering of $200,000 Minimum to $1,200,000 Maximum
Minimum Subscription: $50,000 for 50,000 Units
(Each Unit Consists of 1 share of Common Stock, $.001 par value, and
1 Warrant)
Travel Dynamics, Inc., a Nevada corporation (the "Company"), is
hereby offering to accredited investors ("Investors") a minimum of
200,000 Units and a maximum of 1,200,000 Units, each consisting of 1
share of Common Stock, $.001 par value ("Common Stock") and 1
Warrant for a total price of $1.00 (the "Unit"), such offering being
hereinafter referred to as the "Offering." Minimum subscription is
50,000 Units for $50,000. The Company reserves the right to accept
subscriptions from a limited number of Investors for less than
50,000 Units.
If subscriptions for at least 200,000 Units ("Minimum Offering")
have not been accepted by the Company on or prior to April 30, 2000
(unless such date is extended one or more times by the Company
provided that such date may not be extended beyond May 31, 2000),
the Offering will terminate and all subscription funds will be
promptly returned to the respective Investors without interest. If
the Minimum Offering is timely achieved, the Offering will continue
until the earlier of (i) acceptance of subscriptions for 1,200,000
Units (the "Maximum Offering") or April 30, 2000 (unless such date
is extended one or more times by the Company, provided that such
date may not be extended beyond May 31, 2000). Notwithstanding the
foregoing, the Company may terminate the Offering at any time in its
sole discretion. See "PLAN OF OFFERING." All funds received up to
the Minimum Offering will be placed in a segregated independent
escrow account, and will not be released to the Company until or
unless the Minimum subscription is raised by the Offering
termination. If funds received are equal to or greater than the
Minimum Offering after the expiration of the Minimum Offering, such
funds will be released to the Company. Any additional funds
received thereafter will be released to the Company from time to
time until the termination of the Offering.
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 first quarter ended September 30, 1999, are incorporated
herein by reference and provide additional material information.
The Company recommends that each prospective Investor review such
documents prior to investment in this Offering. Moreover, the
current 10-QSB information for the Company's second quarter ended
December 31, 1999 should be available on or about February 15, 2000.
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 "DESCRIPTION OF COMMON STOCK AND WARRANTS."
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 UNITED STATES SECURITIES AND EXCHANGE 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.
<TABLE>
Selling Proceeds to
Price Commissions(2) Company(3)
<S> <C> <C> <C>
Per Unit (1) $1.00 $.10 $.90
Minimum Offering (200,000 Units) $200,000.00 $20,000 $180,000.00
Maximum Offering (1,200,000 Units) $1,200,000.00 $120,000 $1,080,000.00
</TABLE>
Footnotes:
(1) Each Investor will be required to subscribe for at least fifty
thousand (50,000) Units for a price of $50,000, provided that the
Company may accept a limited number of subscriptions for less than
fifty thousand Units. See "SUBSCRIPTION FOR UNITS."
(2) 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.
The Company may pay members of the National Association of
Securities Dealers, Inc. ("NASD") a commission not to exceed 10% of
the price of the Units sold to Investors introduced to the Company
by such brokers. If such commissions were to be paid on all sales,
they would be $20,000 on the Minimum Amount and $120,000 on the
Maximum Amount. In addition, NASD member firms may receive Warrants
to purchase shares of Common Stock at an exercise price of 120% of
the offering price of the Units. One Warrant will be issued for
each 10 Units sold through the NASD member. See "PLAN OF OFFERING."
(3) Before deduction of Offering expenses. Offering expenses
connected with this Offering (including, without limitation,
printing costs, attorneys' and accountants' fees, escrow fees and
filing fees) are expected to total approximately $40,000 for the
Minimum Offering and $174,000 for the Maximum Offering. Such
Offering expenses will be paid by the Company from the proceeds of
the Offering. See "ESTIMATED USE OF PROCEEDS."
Travel Dynamics, Inc.
4150 N. Civic Center Blvd.
5th Floor
Scottsdale, AZ 85251
(480) 949-9500
The date of this Private Offering Memorandum is February 17, 2000
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 YOUR QUALIFICATIONS.
THE DELIVERY OF THIS PRIVATE OFFERING MEMORANDUM SHALL NOT
CONSTITUTE AN OFFER TO 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") DELIVERED IN CONNECTION
HEREWITH 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 1
DEPENDENCE ON KEY MANAGEMENT 1
PROPRIETARY RIGHTS 2
COMPETITION 2
GOVERNMENT REGULATION 2
CUSTOMER DEVELOPMENT 2
INDEBTEDNESS 3
FLUCTUATIONS IN OPERATING RESULTS 3
YEAR 2000 ISSUES 4
OTHER FACTORS 4
RISKS ASSOCIATED WITH TECHNOLOGY 5
ACQUISITIONS AND INVESTMENTS 6
RESTRICTIONS ON TRANSFERABILITY;
LIMITED MARKET 5
DETERMINATION OF THE OFFERING PRICE 7
FORWARD LOOKING STATEMENTS 7
BEST EFFORTS OFFERING 6
DILUTION 6
LACK OF DIVIDENDS 8
ESTIMATED USE OF PROCEEDS 6
DILUTION 7
CAPITALIZATION 8
DESCRIPTION OF COMMON STOCK AND WARRANTS 9
COMMON STOCK 11
WARRRANTS 12
PREFERRED STOCK 13
PLAN OF OFFERING 10
TRANSFER RESTRICTIONS 14
SUITABILITY STANDARDS 13
SUBSCRIPTION FOR UNITS 14
LEGAL MATTERS 14
ADDITIONAL INFORMATION 14
<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,
Travel Dynamics Services, 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 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
proceeds from Investors, 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.
Additional capital, in all likelihood,
will be required for the Company to
continue to expand its operations. The
amount of additional capital that may be
required is dependent upon, among other
things, the availability of other
financing on acceptable terms and future
operating results. There can be no
assurance that sufficient capital will
be raised 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 a net
operating losses following the
reorganization and until its quarter
ending September 30, 1999, when it
realized a small net profit. 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 to expand its
current operations and hire additional
staff, specifically to support its
electronic commerce business
development. A substantial portion of
the proceeds from any Investor are
intended to fund such expansion. The
ability of the Company to successfully
expand its 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.
<PAGE>
DEPENDENCE ON KEY MANAGEMENT
The Company's development is dependent
to a large degree upon James Piccolo,
President and Chief Executive Officer,
and Brian K. Service, Secretary and
Chief Financial Officer and certain
other key employees. 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. Brian K. Service is
retained under a consulting agreement
with the Company that will expire
December 1, 2000. The Company is in the
process of entering 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 and Mr.
Service 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 agents 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 new
products, services and materials that
are proprietary.
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, know-how 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.
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:
<PAGE>
<TABLE>
<S> <C>
Source As of June 30
1999
Travel Package Sales 46%
Seminars 34%
Direct Marketing 20%
</TABLE>
The Company's current and projected
revenues may be affected by a lack of
continued growth and marketability to
home-based businesses. 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 $677,786. 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 end of the first
quarter, September, 30, 1999, the
Company reported an unaudited net gain
of $14,888. There can be no assurance
that the Company's profitability will
continue on a quarterly or annual basis.
The Company historically has
experienced, and in the future expects
to continue to experience, variability
in total and net income. 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>
YEAR 2000 ISSUES
The Company evaluated certain
information systems in order to address
year 2000 issues and made any necessary
changes to its equipment and operations
to be year 2000 compliant. To the
Company's knowledge, it has not
experienced any direct or indirect
problems or delays as a result of year
2000 issues.
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.
<PAGE>
ACQUISITIONS AND INVESTMENTS
The Company may use a portion of the net
proceeds of this offering to acquire or
invest in businesses, products, services
and technologies that complement or
augment our current business. However,
the Company has no executed agreements
at this time. 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, which include 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
Unit has 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 Unit
at any time in the future and an
exemption from registration may not be
available at the time a Unit holder
desires to transfer its Unit. It is
likely that resale will be permissible
within one to two years under Rule 144
of the Securities Act and applicable
state law and an exemption from
registration may not be available at the
time a Unit holder desires to transfer
the Unit. Prospective Investors must
represent that they will acquire the
Unit for investment purposes only and
not with a view to their resale or other
distribution. Upon any transfer of
Common Stock or a Warrant, an opinion of
counsel or other evidence satisfactory
to the Company that no registration is
required and must be provided by the
transferring Unit holder. The Unit
holders 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 Unit, a Unit holder may be required
to retain the securities for an
indefinite period of time. See
"Description of 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 Electronic 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:
<TABLE>
<S> <C> <C> <C>
November 1999 December 1999 January 2000
Minimum Closing Bid $1.10 $1.63 $1.38
Highest Closing Asked $3.00 $2.69 $2.00
</TABLE>
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 issued by the Company may have
significant and adverse impacts upon
those markets.
<PAGE>
DETERMINATION OF THE OFFERING PRICE
During the time period of January 5 to
January 31, 2000, the trading range of
the Company's Common Stock was
approximately $1.63 to $1.38 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 is 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 and recoup
their investment. See "Description of
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,"
"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.
<PAGE>
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 in the amount of
proceeds received and will not be able
to attain all of its objectives for the
use of such proceeds. See "Plan of
Offering" and "Estimated Use of Proceeds."
DILUTION
Purchasers of Units will experience
immediate and substantial dilution in
the net tangible book value of $.61 or
61% 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 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.
<PAGE>
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.
ESTIMATED USE OF PROCEEDS
The Company intends to utilize the net
proceeds of the sale of the Units for
expansion of the Company's electronic
commerce products and services and for
general working capital. If the Minimum
Offering is sold, the gross proceeds
should be approximately $200,000 and if
the Maximum Offering is sold, the net
proceeds should be approximately
$1,200,000. If less than the Maximum
Offering is sold, the Company intends to
use the proceeds in a manner which will
enable it to accomplish the greatest
number of its objectives.
The following table sets forth the
estimated use of proceeds of the Offering.
<TABLE>
<CAPTION>
Minimum Offering Maximum Offering
Amount Percent Amount Percent
--------- --------- ---------- -------
<S> <C> <C> <C> <C>
Gross Proceeds of Offering $200,000 100% $1,200,000 100%
Offering Expenses:
Sales Commissions (1) $20,000 10.0% $120,000 10.0%
Sales Expenses (2) $20,000 10.0% $54,000 4.5%
Total Offering Expenses $40,000 20.0% $174,000 14.5%
Amount Available Net of
Offering Expenses $160,000 80.0% $1,026,000 85.5%
Electronic Commerce Site (3) $160,000 80.0% $600,000 50.0%
Working Capital Reserve (4) $0 0% $426,000 35.5%
Total Application of Proceeds $200,000 100.0% $1,200,000 100.0%
</TABLE>
(1) The Offering will be conducted by
officers and directors of the Company
who will not be compensated for their
sales activities. The Company may pay
members of the NASD a commission not to
exceed 10% of the price of Units sold to
Investors introduced by them. If such
commissions were to be paid on all
sales, they would be $20,000 on the
Minimum Amount and $120,000 on the
Maximum Amount. In addition, NASD
member firms may receive Warrants to
purchase shares of Common Stock at an
exercise price of 120% of the offering
price of the Units. One Warrant will be
issued for each 10 Units sold through
the NASD member. See "PLAN OF OFFERING."
(2) Sales expenses include legal fees,
accounting fees, filing fees, printing
costs, escrow charges, dealer expenses,
equaling 3% of the selling price, and
other expenses of the Offering.
(3) Establish a general merchandise
mall, electronic commerce site with
features including: distributor support
and tracking, state of the art,
real-time tracking of orders and
commissions and replication of mirror
malls based on central site.
(4) The working capital may be used by
the Company for any corporate purpose.
<PAGE>
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
September 30, 1999 was $1,111,800, or
$.26 per share. Without taking into
account any changes in such tangible
book value subsequent to September 30,
1999, other than to give effect to the
issuance of the Maximum Offering of
1,200,000 Units at a price of $1.00 per
Unit (after deducting the estimated
Offering expenses payable by the
Company), the net adjusted tangible book
value at September 30, 1999, would have
been $2,137,800 or $.39 per share of
Common Stock. This would represent an
increase in net tangible book value of
$.13 per share of Common Stock to the
existing shareholders and dilution of
$.61 per share of Common Stock to the
Investors in this Offering.
The following table illustrates such pro
forma per share dilution:
Offering price per Unit $1.00
Net adjusted tangible book value per share
at September30, 1999 $0.26
Increase in net adjusted tangible book value per
common share attributable to new Investors $0.13
Tangible book value per common share after Offering $0.39
Dilution in net adjusted tangible book value per
common share to new Investors $0.61
Dilution per share as percentage of the Offering price 61%
The following table sets forth on a pro
forma basis at September 30, 1999, 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.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
--------------------- --------------------- Average Price
Amount Percent Amount Percent Per Share
---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Existing shareholder 4,342,080 78.3% $825,205 40.7% $.19
New Investors 1,200,000 21.7% $1,200,000 59.3% $1.00
Total 5,542,080 100% $2,025,205 100% $.37
</TABLE>
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. will 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 20,000 shares of
Common Stock if the Minimum
Offering is sold and 120,000 shares of
Common Stock if the Maximum Offering is
sold, with the possibility of receiving
additional shares on the same proportion
if Warrants are exercised. Issuance of
these securities will further dilute the
per share net tangible book value of the
Company.
<PAGE>
CAPITALIZATION
The Company has authorized 50,000,000
shares having a par value of $.001. Of
these shares, as of January 31, 2000,
there were approximately 4,848,080
currently issued, outstanding and
subscribed for shares. A total of
1,257,807 shares, exclusive of option
rights, are held by management or
affiliates, constituting of
approximately 26% of the total issued
and outstanding shares. Of the total
issued and outstanding shares, 1,273,033
or approximately 26%, are free trading
at the time of this Offering Memorandum
and the balance of 3,575,047 shares or
approximately 74% 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 may also have an adverse effect
upon the market price for the Company's
shares.
The following table shows the
capitalization of the Company as of
September 30, 1999, on a pro forma basis
adjusted to give effect to the sale of
the Maximum Offering of 1,200,000 Units
offered hereby at an assumed Offering
price of $1.00 per Unit (after deducting
estimated Offering expenses payable by
the Company):
<TABLE>
<CAPTION>
September 30, 1999
----------------------
Actual As Adjusted
---------- ----------
<S> <C> <C>
Debt:
Current liabilities $757,055 $757,055
Long-term debt $677,728 $677,728
Total debt $1,434,783 $1,434,783
Shareholders' Equity:
Common Voting Stock, $00. par value; 50,000,000,000 $4,342 $5,542
shares authorized, 4,342,080 shares issued and
outstanding; 5,542,080 shares as adjusted
Additional paid-in capital $820,863 $1,845,663
Retained earnings (deficit) $ -987,812 $ -987,812
Unearned compensation $ -63,741 $ -63,741
Total shareholders' equity $ -226,348 $799,652
Total capitalization $1,208,435 $2,234,435
</TABLE>
<PAGE>
DESCRIPTION OF COMMON STOCK AND WARRANTS
COMMON STOCK
Up to 1,200,000 shares of the Company's
voting Common Stock are offered hereby.
As of the date of this Memorandum, there
were 4,848,080 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
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 nonassessable.
Holders of Common Stock have no
preemptive rights and no right to
convert their Common Stock to any other
securities.
Because the shares 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 shares is
restricted. Any shareholder desiring to
transfer Common Stock 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 shares being
transferred. Therefore, each prospective
Investor should be prepared to hold any
Common Stock purchased for an indefinite
period.
<PAGE>
WARRANTS
Up to 1,200,000 Warrants are offered
hereby. Each Warrant entitles the
holder to purchase one share of Common
Stock at an exercise price of $3.00 per
share beginning on May 31, 2000. NO
ASSURANCE CAN BE GIVEN THAT THE MARKET
PRICE OF THE COMPANY'S COMMON STOCK WILL
EQUAL OR EXCEED THE EXERCISE PRICE OF
THE WARRANTS DURING THE TIME THE
WARRANTS ARE OUTSTANDING. All warrants
not exercised will expire at midnight
May 31, 2003. In addition, the Warrants
will expire prior to May 31, 2003 if, at
any time, (i) the average closing bid
price for the shares of Common Stock (or
the closing price if then traded on a
national securities exchange) has
equaled or exceeded $3.00 per share for
a period of 60 consecutive trading days,
(ii) the Company gives written notice to
the Warrant holders within 3 trading
days following such 60 day period, and
(iii) the Warrant holder fails to
exercise the Warrant within 30 days
thereafter. Holders of Warrants will
not, as such, have any of the rights of
shareholders of the Company.
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 a current prospectus 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 will
also attempt to take such actions as may
be appropriate to enable 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, but no assurance can be given
that the Company will be successful in
this regard. 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. 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.
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 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.
<PAGE>
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.
PLAN OF OFFERING
A maximum of 1,200,000 Units (the
"Maximum Offering") are being offered
hereby. The Offering period terminates
on April 30, 2000 unless extended by the
Company, in one or more extensions, to a
date not later than May 31, 2000. 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 200,000
Units (the "Minimum Offering") have not
been subscribed for and issued by April
30, 2000, unless extended by the
Company, in one or more extensions, to a
date not later than May 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
$1.00 per Unit. A minimum investment of
50,000 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
funds will be deposited in an account at
Wells Fargo Bank and will not be
released to the Company until at least
200,000 Units have been purchased.
Thereafter, subscription funds 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 subscription funds
will be returned to their subscribers.
If less than 200,000 Units have been
subscribed for by close of business on
April 30, 2000, unless such date is
extended as described above, the
Offering will be withdrawn and all
subscriber funds 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, provided that the Company may
pay members of the NASD a commission not
to exceed 10% of the price of Units sold
to Investors introduced to the Company
by such members. In addition, NASD
member firms may receive Warrants to
purchase shares of Common Stock at an
exercise price of 120% of the offering
price of the Units. One Warrant will be
issued for each 10 Units sold through
the NASD member. Expenses of
distribution of the Units shall be paid
by the Company out of the proceeds from
the sale of the Units.
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.
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
of a share of Common Stock and a Warrant
or that an Investor will realize that
amount upon sale in the future.
Individuals purchasing, hereunder,
understand and agree that they will have
a substantial holding period to evidence
investment intent before their Units may
be resold. Under currently prevailing
federal regulations and substantially
similar regulations in most state
jurisdictions, the securities acquired
in this private placement must be held
for a period of one (1) year from the
purchase of the Unit before it can be
resold. After the one (1) year period,
(i) the securities are generally subject
to resale provided that there is current
public information about the Company,
(ii) that certain volume limitations
upon the number of Units that can be
sold in each three (3) month period are
observed, (iii) that the selling Unit
holder obtains an opinion of counsel
acceptable to the Company as to the
holding period and the tradability of
the Unit, (iv) and that the selling Unit
holder file a required Form 144 with the
SEC.
<PAGE>
TRANSFER RESTRICTIONS
The Units 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 being offered
hereby are subject to certain
restrictions on transfer, as further set
forth in the Subscription Agreement.
Each Unit holder agrees to indemnify the
Company against any liability that may
result from the transfer, exchange or
assignment of such holder's Unit in
violation of any provision of applicable
United States federal or state
securities law.
Each purchaser of a Unit, by its
acceptance thereof, will be deemed to
have acknowledged, represented,
certified to and agreed with the Company
as follows:
(1) The purchaser
understands and acknowledges
that (a) the Unit is being
offered in a transaction not
involving a public offering
in the United States within
the meaning of the
Securities Act, (b) the Unit
has 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 purchaser
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 purchaser 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
Unit 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
Unit. Such Accredited
Investor is aware that he or
she may be required to bear
the economic risk of an
investment in the Unit for
an indefinite period of time
and is able to bear such
risk for an indefinite
period. Each Unit purchaser
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 purchaser
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 Unit
as it has deemed
necessary in
connection with its
decision to purchase
the Unit including an
opportunity to ask
questions of and
request information
from the Company.
(4) The purchaser
is purchasing the Unit
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
purchaser agrees on
its own behalf and on
behalf of any investor
account for which it
is purchasing the Unit
and each subsequent
holder of the Unit by
its acceptance thereof
will agree, to sell,
pledge or otherwise
transfer such Unit
only (a) to the
Company, (b) pursuant
to a registration
statement which has
been declared
effective under the
Securities Act, (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
purchaser 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 purchaser
acknowledges that the Unit
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
purchaser 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 a Unit are
no longer accurate, it
shall promptly notify
the Company. If it 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.
<PAGE>
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 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 COMMON STOCK AND
WARRANTS." A minimum investment of
50,000 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.
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 and thereby
become a shareholder 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 check payable to
the Bank in the amount of $1.00 for each
Unit purchased. The minimum
subscription is 50,000 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.
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
and, when available, December 31, 1999.
The Company may charge up to $.20 per
page for copies of documents provided to
prospective Investors or their
representatives.
Footer page for TDI Private Offering
Memorandum.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet as of March 31, 2000, and statements of operations for the nine months
ended March 31, 2000, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 581,818
<SECURITIES> 0
<RECEIVABLES> 456,180
<ALLOWANCES> 0
<INVENTORY> 179,572
<CURRENT-ASSETS> 2,859,301
<PP&E> 735,015
<DEPRECIATION> (100,380)
<TOTAL-ASSETS> 3,746,299
<CURRENT-LIABILITIES> 3,283,812
<BONDS> 0
0
0
<COMMON> 5,245
<OTHER-SE> (273,871)
<TOTAL-LIABILITY-AND-EQUITY> 3,746,299
<SALES> 4,782,358
<TOTAL-REVENUES> 4,782,358
<CGS> (2,611,582)
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (116,509)
<INCOME-PRETAX> (556,340)
<INCOME-TAX> (556,340)
<INCOME-CONTINUING> (556,340)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (556,340)
<EPS-BASIC> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
