SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ________ to
________
Commission File No. 33-55254-22
TRINON, INC.
(Exact name of Registrant as specified in its charter)
NEVADA 87-0438633
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1800 East Sahara Avenue, Suite 107
Las Vegas, Nevada 89104
- -------------------------------------------- -------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (702) 693-5786
3098 South Highland Drive, Suite 460
CETACEAN INDUSTRIES, INC. Salt Lake City, Utah 84106
- ------------------------- --------------------------
Former Name Former Address
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (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 file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
As of March 5, 1998, the aggregate market value of the voting stock held by
non-affiliates of the registrant is approximately $230,000 based on a bid price
of $.375.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding as of December 31, 1997
- ------------------------------------ -----------------------------------
$.001 PAR VALUE CLASS A COMMON STOCK 748,224 SHARES
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART I
ITEM 1. Business.
The Company was incorporated under the laws of Utah on April 16, 1986
and subsequently reorganized under the laws of Nevada on December 30, 1993. The
Company's reorganization plan was formulated for the purpose of changing the
state of domicile and provided that the Company form a new corporation in Nevada
which acquired all of the contractual obligations, shareholder rights and
identity of the Utah corporation, and then the Utah corporation was dissolved.
The Company is in the developmental stage, and its operations to date have been
limited. The Company is in the process of investigating potential business
ventures which, in the opinion of management, will provide a source of eventual
profit to the Company. Such involvement may take many forms, including the
acquisition of an existing business or the acquisition of assets to establish
subsidiary businesses. The Company's management does not expect to remain
involved as management of an acquired business; presently unidentified
individuals would be retained for such purposes.
No assurance can be given as to when the Company may locate suitable
business opportunities and such opportunities may be difficult to locate;
however, the Company intends to actively search for potential business ventures
for the next five years. The Company intends not to allocate any incoming funds
specifically, should there be any in the future, to general use for the purpose
of seeking, investigating and acquiring or becoming engaged in a business
opportunity. Decisions concerning these matters may be made by management
without the participation or authorization of the shareholders.
Management anticipates that due to its limited funds, and the limited
amount of its resources, the Company may be restricted to participation in only
one potential business venture. This lack of diversification should be
considered a substantial risk because it will not permit the Company to offset
potential losses from one venture against gains from another.
Business opportunities, if any arise, are expected to become available
to the Company principally from the personal contacts of its officers and
directors. While it is not expected that the Company will engage professional
firms specializing in business acquisitions or reorganizations, such firms may
be retained if funds become available in the future, and if deemed to be
advisable. Opportunities may thus become available from professional advisers,
securities broker-dealers, venture capitalists, members of the financial
community, and other sources of unsolicited proposals. In certain circumstances,
the Company may agree to pay a finder's fee or other form of compensation,
including perhaps one-time cash payments, payments based upon a percentage of
revenues or sales volume, and/or payments involving the issuance of securities,
for services provided by persons who submit a business opportunity in which the
Company shall decide to participate, although no contracts or arrangements of
this nature presently exist. The Company is unable to predict at this time the
costs of locating a suitable business opportunity.
The Company will not restrict its search to any particular business,
industry or geographical location, and reserves the right to evaluate and to
enter into any type of business opportunity, in any stage of their development
(including the "start up" stage), in any location. In seeking a business
venture, Management will not be influenced primarily by an attempt to take
advantage of the anticipated or perceived appeal of a specific industry,
management group, or product or industry, but rather will be motivated by the
Company's business objective of seeking long term capital appreciation in their
real value. In addition, the Exchange Act reporting requirements require the
filing of the Form 8-K disclosing any businesses acquired and requires certified
financial statements of such companies. These reporting requirements may
substantially limit the businesses which may be available for possible
acquisition candidates.
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The analysis of business opportunities will be undertaken by or under
the supervision of the Company's management, none of whom is a professional
analyst and none of whom have significant general business experience. Among the
factors which management will consider in analyzing potential business
opportunities are the available technical, financial and managerial resources;
working capital and financial requirements; the history of operation, if any;
future prospects; the nature of present and anticipated competition; potential
for further research, development or exploration; growth and expansion
potential; profit potential; the perceived public recognition or acceptance of
products or services; name identification, and other relevant factors.
It is not possible at present to predict the exact manner in which the
Company may participate in a business opportunity. Specific business
opportunities will be reviewed and, based upon such review, the appropriate
legal structure or method of participation will be decided upon by management.
Such structures and methods may include, without limitation, leases, purchase
and sale agreements, license, joint ventures; and may involve merger,
consolidation or reorganization. The Company may act directly or indirectly
through an interest in a partnership, corporation or other form of organization.
However, it is most likely that the Company will acquire a business venture by
conducting a reorganization involving the issuance of the Company's restricted
securities. Such a reorganization may involve a merger (or combination pursuant
to state corporate statutes, where one of the entities dissolves or is absorbed
by the other), or it may occur as a consolidation, where a new entity is formed
and the Company and such other entity combine assets in the new entity. A
reorganization may also occur, directly or indirectly, through subsidiaries, and
there is no assurance that the Company would be the surviving entity. Any such
reorganization could result in additional dilution to the book value of the
shares and loss of control of a majority of the shares. The Company's present
directors may be required to resign in connection with a reorganization.
A reorganization may be structured in such a way as to take advantage
of certain beneficial tax consequences available in business reorganizations, in
accordance with provisions of the Internal Revenue Code of 1986 (as amended).
Pursuant to such a structure, the number of shares held prior to the
reorganization by all of the Company's shareholders might be less than 20% of
the total shares to be outstanding upon completion of the trans action.
Substantial dilution of percentage equity ownership may result to the minority
shareholders, in the discretion of management.
Generally, the issuance of securities in a reorganization transaction
would be undertaken in reliance upon one or more exemptions from the
registration provisions of applicable federal securities laws, including the
exemptions provided for non-public or limited offerings, distributions to
persons resident in only one state and similar exemptions provided by state law.
Shares issued in a reorganization transaction based upon these exemptions would
be considered "restricted" securities under the 1933 Act, and would not be
available for resale for a period of two years, in accordance with Rule 144
promulgated under the 1933 Act. However, the Company might undertake, in
connection with such a reorganization transaction, certain registration
obligations in connection with such securities.
The Company may choose to enter into a venture involving the
acquisition of or merger with a company which does not need substantial
additional capital but desires to establish a public trading market for their
securities. Such a company may desire to consolidate its operations with the
Company through a merger, reorganization, asset acquisition, or other
combination, in order to avoid possible adverse consequences of undertaking its
own public offering. (Such consequences might include expense, time delays or
loss of voting control.) In the event of such a merger, the Company may be
required to issue significant additional shares, and it may be anticipated that
control over the Company's affairs may be transferred to others. It should also
be noted that this type of business venture
2
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might have the effect of depriving the minority shareholders of the protection
of federal and state securities laws, which normally affect the process of a
company's becoming publicly held.
It is likely that the investigation and selection of business
opportunities will be complex, time-consuming and extremely risky. However,
management believes that even though the Company will have limited capital, the
fact that their securities will be publicly-held will make it a reasonably
attractive business prospect for other firms.
As part of their investigation of acquisition possibilities, the
Company's management may meet with executive officers of the business and its
personnel; inspect its facilities; obtain independent analysis or verification
of the information provided, and conduct other reasonable measures, to the
extent permitted by the Company's limited resources and management's limited
expertise. Generally, the Company intends to analyze and make a determination
based upon all available information without reliance upon any single factor as
controlling.
In all likelihood, the Company's management will be inexperienced in
the areas in which potential businesses will be investigated and in which the
Company may make an acquisition or investment. Thus, it may become necessary for
the Company to retain consultants or outside professional firms to assist
management in evaluating potential investments, and to hire managers to run or
oversee the operations of its acquisitions or investments. The Company can give
no assurance that it will be able to find suitable consultants or managers.
It may be anticipated that the investigation of specific business
opportunities and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require substantial
management time and attention, and substantial costs for accountants, attorneys
and others. Should a decision thereafter be made not to participate in a
specific business opportunity, it is likely that costs already expended would
not be recoverable. It is also likely, in the event a transaction should
eventually fail to be consummated, for any reason, that the costs incurred by
the Company would not be recoverable. The Company's officers and directors are
entitled to reimbursement for all expenses incurred in their investigation of
possible business ventures on behalf of the Company, and no assurance can be
given that if the Company has available funds they will not be depleted in such
expenses.
In addition to the severe limitations placed upon the Company by virtue
of its financial status, the Company will also be limited, in its investigation
of possible acquisitions, by the reporting requirements of the Securities
Exchange Act of 1934, pursuant to which certain information must be furnished in
connection with any significant acquisitions. The Company would be required to
furnish, with respect to any significant acquisition, certified financial
statements for the acquired company, covering one, two or three years (depending
upon the relative size of the acquisition). Consequently, acquisition prospects
which do not have the requisite certified financial statements, or are unable to
obtain them, may be inappropriate for acquisition under the present reporting
requirements of the 1934 Act.
The Company does not intend to take any action which would render it an
investment company under The Investment Companies Act of 1940 (the "1940 Act").
The 1940 Act defines an investment company as one which (1) invests, reinvests
or trades in securities as its primary business, (2) issues face-amount
certificates of the installment type or (3) invests, reinvests, owns, holds or
trades securities or owns or acquires investment securities having a value
exceeding 40 percent of the value of its total assets (exclusive of Government
securities and cash items) on an unconsolidated basis. The above 40 percent
limitation may be exceeded so long as a company is primarily engaged, directly
or through wholly-owned subsidiaries, in a business or businesses other than
that of
3
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investing, reinvesting, owning, holding or trading in securities. A wholly-owned
subsidiary is defined as one which is at least 95% owned by the company.
Neither the Company nor any of its officers or directors are registered
as investment advisers under the Investment Advisers Act of 1940 (the "Advisers
Act"), and so there is no authority to pursue any course of business or
activities which would render the Company or its management "investment
advisers" as defined in the Advisers Act. Management believes that registration
under the Advisers Act is not required and that certain exemptions are
available, including the exemptions for persons who may render advice to a
limited number of other persons and who may advise other persons located in one
state only.
The Company expects to encounter intense competition in its efforts to
locate suitable business opportunities in which to engage. The primary
competition for desirable investments may come from other small companies
organized and funded for similar purposes, from small business development
corporations and from public and private venture capital organizations. As the
Company has limited funding, it can fairly be said that all of the competing
entities will have significantly greater experience, resources, facilities,
contacts and managerial expertise than the Company and will, consequently, be in
a better position than the Company to obtain access to, and to engage in,
business opportunities. Due to its lack of funds, the Company may not be in a
position to compete with larger and more experienced entities for business
opportunities which are low-risk. Business opportunities in which the Company
may ultimately participate are likely to be highly risky and extremely
speculative.
ITEM 2. Properties.
The Company owns no properties and utilizes space on a month to month
rent basis. This arrangement is expected to continue until such time as the
Company becomes involved in a business venture which necessitates its
relocation, as to which no assurances can be given. The Company has no
agreements with respect to the maintenance or future acquisition of office
facilities, however, if a successful merger/acquisition is negotiated, it is
anticipated that the office of the Company will be moved to that of the acquired
company.
ITEM 3. Historical Legal Proceedings.
On January 7, 1994, the Bureau of Securities of the State of New Jersey
filed a complaint in the matter of Capital General Corporation, David R. Yeaman
and 74 other named defendants, Nevada and Utah corporations including the
Company, which complaint proposes that civil monetary penalties totalling
$30,000.00 be assessed against Capital General Corporation for alleged
violations of the Uniform Securities Law (1967), N.J.S.A. 49:3-47 et. seq. by
(1) selling to 24 New Jersey residents between April 1986 and May 1991,
securities in 25 of the 74 above referred to respondent corporations named in
the proceeding, including the Company, which were neither registered nor exempt
from registration, and (2) making untrue statements of material fact and
omitting to state material facts in connection with said New Jersey sales in 6
of the 74 above referred to resident corporations named in the proceeding, not
including the Company. Also on January 7, 1994, the Bureau of Securities of the
State of New Jersey, based on substantially similar allegations as in the above
referred complaint, issued its Order Denying Exemptions and to Cease and Desist.
This order summarily denied the exemptions contained in N.J.S.A. 49:3- 50(b),
(1), (2), (3), (9), (11) and (12) of the securities of Capital General
Corporation and the other 74 respondent corporations, including the Company,
except that excluded from the summary denial of the exemption contained in
N.J.S.A. 49-3-50(b)(12) is the Offer of Rescission by Capital General
Corporation to 24 New Jersey residents pursuant to the offer of rescission which
began about April 28, 1993. This order also ordered Capital General
4
<PAGE>
Corporation and David Yeaman to Cease and Desist from offering or selling any
securities in blind pool corporations into, or from the State of New Jersey.
Capital General and David Yeaman filed answers denying the material
allegations of said complaint and resisting the imposition of said civil
monetary penalties, and the said Order Denying Exemptions and to Cease and
Desist. Subsequently the issues raised in said complaint and order were settled
by agreement between the said Bureau of Securities and Mr. Yeaman and Capital
General Corporation in a consent order dated July 11, 1994 and approved by an
administrative law judge of the State of New Jersey Office of Administrative Law
September 2, 1994. Under the terms of said consent order, all claims in the
complaint against all named respondents were settled by the payment of $3,000
civil penalty, and the order was modified so that it does not apply to 27 of the
respondent companies; however said order does still apply to the Company.
During 1986 and 1987, Capital General gifted very small percentages of
stock (usually 100 shares to each giftee) in the following companies, which
includes the Company, to approximately 1,000 persons or entities: Amenity, Inc.,
Dogmatic, Inc., Mystic Industries, Inc., Highland Mfg., Inc., Kowtow, Inc.,
Noble Industries, Inc., Oryan Capital Corporation, Pegasus Star Enterprise,
Inc., Showstoppers, Inc., Hightide, Inc., Grandeur, Inc., Fantastic Industries,
Inc., Jugglar, Inc., Xebec Galleon, Inc., Golden Home Health Care Equipment
Centers, Inc., Nighthawk Capital, Inc., Instrument Development Corporation,
Panther Industries, Inc., Owl Enterprises, Inc., Quail, Inc., GBS Technologies
Corporation, H & B Carriers, Inc., Florida Growth Industries, Inc., Macaw, Inc.,
Longhorn Enterprise, Inc., Koala Corporation, Yahwe Corporation, Star Dolphin,
Inc., Jackal, Inc., Hyena Capital, Inc., Gopher, Inc., Flamingo Capital, Inc.,
Egret, Inc., Cetacean Industries, Inc., Bonito, Inc., Alpaca, Inc., Zeus
Enterprise, Inc., Tamarind, Inc., Saber, Inc., Radar, Inc., Quiescent
Corporation, Vanadium, Inc., Upsilon, Inc., Why Not?, Inc., Bestmark, Inc.,
Missouri Illinois Mining Co., Inc.
Capital General did not register the gifts of shares in these companies
with the Securities Division of the State of Utah or with the Securities
Exchange Commission because it believed these gifts to be outside the scope of
the Utah Uniform Securities Act and the Securities Act of 1933 in as much as
such acts require registration for sales and do not require registration of
gifts. Nevertheless, in connection with the distribution of shares of its
subsidiaries, Capital General was found by the Utah Securities Advisory Board,
in two decisions affirmed by the Utah State Courts, to have violated the
registration provisions of the Utah Uniform Securities Act. See In re Amenity
Inc., No. SD-86-11 (Utah Sec. Adv. Bd. February 18, 1987) aff'd C87-2625 (3d
Dist. Ct. September 18, 1987) aff'd sub nom Capital General Corp. v. Utah Dep't
of Business Reg., 777 P.2d 494, 498 (Utah Ct. App.) cert. denied, 781 P.2d 873
(Utah S. Ct. 1989); In re H&B Carriers Inc., No. 87-09-28-01 (Utah Sec. Adv.
Bd., Apr. 15, 1988) aff'd No. 88-5900053 (3d Dist. Ct. Sept 10, 1990) aff'd sub
nom Capital General Corp. v. Utah Dep't of Business Reg., Case No 91-196 (Utah
Ct. App. February 10, 1992. All of the remaining companies listed above were
parties to the H&B Carriers order.
Both of these actions sought suspension of transactional exemptions
respecting the shares of these companies pursuant to Section 14 (3) of the Utah
Uniform Securities Act. Capital General defended both actions on the grounds
that the Utah Uniform Securities Act did not apply to gifts of securities, that
the gifts were good faith gifts specifically exempted by the Act, and that in
any event even if it had "sold" shares in violation of the Act, suspension of
transactional exemptions was not an authorized remedy under the statute. These
defenses were rejected at the administrative agency level, and upon judicial
review at the District Court level and by the Utah Court of Appeals.
5
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ITEM 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to the Company's security holders for a vote
during the fiscal year ending December 31, 1997.
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholders Matters.
During the fourth quarter of 1997, the Company's stock price traded in the
range of $.00 to $5.625. The stock trades under the Symbol TNNI on the NASDAQ-BB
System.
As of December, 1997, there were 774 record holders of the Company's
common stock. The Company has not previously declared or paid any dividends on
its common stock and does not anticipate declaring any dividends in the
foreseeable future.
ITEM 6. Selected Financial Data.
TRINON, INC.
SUMMARY OF OPERATIONS
DECEMBER 1997
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Assets............. 25,605 0 0 0 0
Revenues................ 0 0 0 0 0
Operating Expenses.... 333,193 0 0 0 0
Net Earnings (Loss).. (333,193) 0 0 0 0
Per Share Data
Earnings (Loss)....... (.65) 0 0 0 0
Average Common Shares
Outstanding..... 515,938 250,000 250,000 250,000 250,000
</TABLE>
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation.
The Company has had limited operational history. All risks inherent in
new and inexperienced enterprises are inherent in the Company's business. The
Company has not made a formal study of the economic potential of any business.
At the present, the Company has not identified any assets or business
opportunities for acquisition.
As of February, 1998, the Company has limited liquidity and capital
resources, such as credit lines, guarantees, etc. and should a merger or
acquisition prove unsuccessful, it is possible that the Company may be dissolved
by the State of Nevada for failing to file reports, at which point the Company
would no longer be a viable corporation under Nevada law and would be unable to
function as a legal entity. Should management decide not to further pursue its
acquisition activities, management may abandon its activities and the shares of
the Company would become worthless.
6
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Based on current economic and regulatory conditions, Management
believes that it is possible, if not probable, for a company like the Company,
without assets or liabilities, to negotiate a merger or acquisition with a
viable private company. The opportunity arises principally because of the high
legal and accounting fees and the length of time associated with the
registration process of "going public". However, should any of these conditions
change, it is very possible that there would be little or no economic value for
anyone taking over control of the Company.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
ITEM 8. Financial Statements and Supplementary Data.
See Item 14.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not Applicable.
PART III
ITEM 10. Directors and Executive Officers of the Registrant.
The following table shows the positions held by the Company's officer
and director. The director was appointed August 20, 1997 and will serve until
the next annual meeting of the Company's stockholders, and until his successors
have been elected and have qualified. The officer was appointed to his
positions, and continues in such positions, at the discretion of the director.
Name Age Position
Craig Hurst 33 President, Secretary/Treasurer, Director
CRAIG HURST (Age 33) - President and Director. From 1987 to 1988 Mr. Hurst
was a pro-trader on the V.S.E. with C.M. Oliver & Co. From 1988 to 1989 he acted
as licensed investment advisor with First Vancouver Securities, and from 1989 to
present has been an independent venture capital executive consultant
specializing in drafting and structuring of new corporations, merger and
acquisition consulting, and development of public relations programs for both
public and private companies such as Accord SEG, Dynamic Associates, Inc.
(DYAS/OTC), PLC Systems, Inc. (PLC/AMES), Hygeia Pharmaceutical (NVO/TSE),
Unilens Optical, Corp. (UOCCF/OTC), and Clearly Canadian Beverage Co.
(CLCDF/OTC).
ITEM 11. Executive Compensation.
The Company has made arrangements for limited remuneration of its
officers and directors, also that they will be entitled to receive reimbursement
for actual, demonstrable out-of-pocket expenses, including travel expenses if
any, made on the Company's behalf in the investigation of business
opportunities. Remuneration has been paid to the Company's officers or directors
prior to the filing of this form. There are no agreements or understandings
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with respect to the amount or remuneration that officers and directors are
expected to receive in the future. No present prediction or representation can
be made as to the compensation or other remuneration which may be paid to the
Company's management, since upon the successful consummation of a business
opportunity, substantial changes may occur in the structure of the Company and
its management. At such time, contracts may be negotiated with new management
requiring the payment of annual salaries or other forms of compensation which
cannot presently be anticipated. Use of the term "new management" is not
intended to preclude the possibility that any of the present officers or
directors of the Company might be elected to serve in the same or similar
capacities upon the Company's decision to participate in one or more business
opportunities.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of December 31, 1997, information
regarding the beneficial ownership of shares by each person known by the Company
to own five percent or more of the outstanding shares, by each of the directors
and by the officers and directors as a group.
<TABLE>
<CAPTION>
Name and address Amount of Percent
Title of class of beneficial owner beneficial ownership of class
<S> <C> <C> <C>
Common Stock Roche Holdings (Espana) SA 133,766 17.9%
PO Box 866
Anderson Square Building
Grand Cayman, BWI
Common Stock Four Star Ranch 52,000 7.0%
3098 South Highland Dr., Suite 460
Salt Lake City, Utah 84106
Common Stock Katherine Lee 37,879 5.1%
4 Rolling Green Drive
Amherst, MA 01002
Common Stock Craig Hurst 200,000(1) 26.8%
7000 North 16th Street, Suite 120-411
Phoenix, Arizona 85106
Common Stock All Officers and Directors as a group 200,000 26.8%
</TABLE>
(1)Includes 200,000 options which are held by Mr. Hurst.
ITEM 13. Certain Relationships and Related Transactions.
Not Applicable.
8
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PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Financial Statements and Financial Statement Schedules.
Financial Statements - December 31, 1997, 1996 and 1995.
Reports on Form 8-K.
There were no reports on Form 8-K filed during the fourth quarter of
1997.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CETACEAN INDUSTRIES, INC.
Date: March 10, 1998 By: /s/ Craig Hurst
Craig Hurst, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 10, 1998 By: /s/ Craig Hurst
Craig Hurst, President, Secretary/Treasurer,
and Director
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SMITH & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
MEMBERS OF: 10 WEST 100 SOUTH
AMERICAN INSTITUTE OF SALT LAKE CITY, UTAH 84101
CERTIFIED PUBLIC ACCOUNTANTS TELEPHONE: (801) 575-8297
UTAH ASSOCIATION OF FACSIMILE: (801) 575-8306
CERTIFIED PUBLIC ACCOUNTANTS E-mail: [email protected]
- --------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Trinon, Inc. (A Development Stage Company)
We have audited the accompanying balance sheets of Trinon, Inc. (formerly
Cetacean Industries, Inc.) (a development stage company) as of December 31, 1997
and 1996, and the related statements of operations, changes in stockholders'
equity, and cash flows for the years ended December 31, 1997, 1996, and 1995,
and for the period of April 16, 1986 (date of inception) to December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Trinon, Inc. (formerly Cetacean
Industries, Inc.) (a development stage company) as of December 31, 1997 and
1996, and the results of its operations, changes in stockholders' equity, and
its cash flows for the years ended December 31, 1997, 1996, and 1995, and for
the period of April 16, 1986 (date of inception) to December 31, 1997, in
conformity with generally accepted accounting principles.
/s/ Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
February 12, 1998
F-1
<PAGE>
TRINON, INC.
(Formerly Cetacean Industries, Inc.)
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
12/31/97 12/31/96
----------------- -----------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash in bank $ 15,690 $ 0
Prepaid expenses 9,915 0
----------------- -----------------
TOTAL CURRENT ASSETS 25,605 0
OTHER ASSETS
Organization costs (Note 1) 0 0
----------------- -----------------
0 0
----------------- -----------------
$ 25,605 $ 0
================= =================
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts payable $ 10,514 $ 0
----------------- -----------------
TOTAL CURRENT LIABILITIES 10,514 0
STOCKHOLDERS' EQUITY
Common Stock $.001 par value:
Authorized - 100,000,000 shares
Issued and outstanding
748,224 shares (250,000 in 1996) 748 250
Additional paid-in capital 352,536 1,750
Stock subscription receivable (3,000) 0
Deficit accumulated during
the development stage (335,193) (2,000)
----------------- -----------------
TOTAL STOCKHOLDERS' EQUITY 15,091 0
----------------- -----------------
$ 25,605 $ 0
================= =================
</TABLE>
See Notes to Financial Statements.
F-2
<PAGE>
TRINON, INC.
(Formerly Cetacean Industries, Inc.)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
4/16/86
Year Year Year (Date of
ended ended ended inception) to
12/31/97 12/31/96 12/31/95 12/31/97
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales $ 0 $ 0 $ 0 $ 0
Cost of sales 0 0 0 0
-------------- -------------- -------------- --------------
GROSS PROFIT 0 0 0 0
Bad debt 25,000 0 0 25,000
General & administrative
expenses 87,759 0 0 89,759
-------------- -------------- -------------- --------------
112,759 0 0 114,759
-------------- -------------- -------------- --------------
Net loss before discontinued
operations (112,759) 0 0 (114,759)
Discontinued operations:
Operations of subsidiaries
which were terminated
as subsidiaries on
11/4/97 (Note 5) (220,434) 0 0 (220,434)
-------------- -------------- -------------- --------------
NET LOSS $ (333,193) $ 0 $ 0 $ (335,193)
============== ============== ============== ==============
Net income (loss) per weighted average share:
Operations $ (.22) $ .00 $ .00
Discontinued operations (.43) .00 .00
-------------- -------------- --------------
$ (.65) $ .00 $ .00
============== ============== ==============
Weighted average number of
common shares used to compute
net income (loss) per weighted
average share 515,938 250,000 250,000
============== ============= ==============
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE>
TRINON, INC.
(Formerly Cetacean Industries, Inc.)
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During
Par Value $0.001 Paid-in Development
Shares Amount Capital Stage
-------------- -------------- -------------- --------------
Balances at 4/16/86
<S> <C> <C> <C> <C>
(Date of inception) 0 $ 0 $ 0 $ 0
Issuance of common stock
(restricted) at $.008 per
share at 5/29/86 250,000 250 1,750
Net loss for period (1,950)
-------------- -------------- -------------- --------------
Balances at 12/31/86 250,000 250 1,750 (1,950)
Net loss for year (10)
-------------- -------------- -------------- --------------
Balances at 12/31/87 250,000 250 1,750 (1,960)
Net loss for year (10)
-------------- -------------- -------------- --------------
Balances at 12/31/88 250,000 250 1,750 (1,970)
Net loss for year (10)
-------------- -------------- -------------- --------------
Balances at 12/31/89 250,000 250 1,750 (1,980)
Net loss for year (10)
-------------- -------------- -------------- --------------
Balances at 12/31/90 250,000 250 1,750 (1,990)
Net loss for year (10)
-------------- -------------- -------------- --------------
Balances at 12/31/91 250,000 250 1,750 (2,000)
Net income for year 0
-------------- -------------- -------------- --------------
Balances at 12/31/92 250,000 250 1,750 (2,000)
Net income for year 0
-------------- -------------- -------------- --------------
Balances at 12/31/93 250,000 250 1,750 (2,000)
Net income for year 0
-------------- -------------- -------------- --------------
Balances at 12/31/94 250,000 250 1,750 (2,000)
Net income for year 0
-------------- -------------- -------------- --------------
Balances at 12/31/95 250,000 250 1,750 (2,000)
Net income for year 0
-------------- -------------- -------------- --------------
Balances at 12/31/96 250,000 250 1,750 (2,000)
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE>
TRINON, INC.
(Formerly Cetacean Industries, Inc.)
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (continued)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During
Par Value $0.001 Paid-in Development
Shares Amount Capital Stage
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Balances at 12/31/96 250,000 $ 250 $ 1,750 $ (2,000)
Issuance of restricted stock
for subsidiaries and
services at $.004:
8/26/97 (1) 685,500 686 2,056
9/15/97 (1) 364,585 365 1,093
Stock sold for cash at:
$8.95 8/29/97 (S-8) 13,750 14 122,986
$10.00 9/15/97 1,250 1 12,499
$9.00 9/15/97 900 1 8,099
$10.00 9/26/97 1,550 2 15,498
$9.00 10/3/97 (S-8) 12,500 12 112,488
$2.00 10/22/97 (S-8) 7,250 7 14,493
$9.00 10/22/97 2,500 2 22,498
$1.00 12/2/97 (S-8) 14,500 15 14,485
$2.00 12/2/97 (S-8) 2,500 2 4,998
$2.00 12/22/97 (S-8) 1,000 1 1,999
Stock sold for subscription at:
$1.00 10/27/97 (S-8) 1,250 1 1,249
$1.00 10/28/97 (S-8) 1,750 2 1,748
Stock issued for services at:
$1.00 12/15/97 (S-8) 2,500 2 2,498
$1.00 12/19/97 (Reg. S) 11,000 11 10,989
Stock issued for prepaid
expenses at $1.00
12/19/97 (Reg. S) 3,000 3 2,997
Stock canceled (1) (629,061) (629) (1,887)
Net loss for year (333,193)
-------------- -------------- -------------- --------------
Balances at 12/31/97 748,224 $ 748 $ 352,536 $ (335,193)
============== ============== ============== ==============
</TABLE>
(1) A total of 629,061 of these shares were canceled in November
when certain transactions were rescinded.
All share figures reflect a one for four reverse split of the
Company's common stock which was approved on January 29, 1998 to be
effective February 17, 1998.
See Notes to Financial Statements.
F-5
<PAGE>
TRINON, INC.
(Formerly Cetacean Industries, Inc.)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
4/16/86
Year Year Year (Date of
ended ended ended Inception) to
12/31/97 12/31/96 12/31/95 12/31/97
-------------- -------------- -------------- --------------
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net income (loss) $ (333,193) $ 0 $ 0 $ (335,193)
Adjustments to reconcile
net income (loss) to
cash used by operating
activities:
Stock issued for expenses 15,184 0 0 15,184
Amortization 0 0 0 50
Changes in assets and
liabilities:
Prepaid expenses (6,915) 0 0 (6,915)
Accounts payable 10,514 0 0 10,514
-------------- -------------- -------------- --------------
NET CASH USED BY
OPERATING ACTIVITIES (314,410) 0 0 (316,360)
INVESTING ACTIVITIES
Organization costs 0 0 0 (50)
-------------- -------------- -------------- --------------
NET CASH USED BY
INVESTING ACTIVITIES 0 0 0 (50)
FINANCING ACTIVITIES
Proceeds from sale of
common stock 330,100 0 0 332,100
-------------- -------------- -------------- --------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 330,100 0 0 332,100
-------------- -------------- -------------- --------------
INCREASE IN CASH
AND CASH EQUIVALENTS 15,690 0 0 15,690
Cash and cash equivalents
at beginning of year 0 0 0 0
-------------- -------------- -------------- --------------
CASH & CASH EQUIVALENTS
AT END OF YEAR $ 15,690 $ 0 $ 0 $ 15,690
============== ============== ============== ==============
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE>
TRINON, INC.
(Formerly Cetacean Industries, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Accounting Methods:
The Company recognizes income and expenses based on the accrual method
of accounting.
Dividend Policy:
The Company has not yet adopted any policy regarding payment of
dividends.
Organization Costs:
The Company amortized its organization csts over a five year period.
Cash and Cash Equivalents:
For financial statement puroses, the Company considers all highly
liquid investments with an original maturity of three months or less
when purchased to be cash equivalents.
Earnings (loss) per share:
Earnings or loss per common and common equivalent share is computed by
dividing net earnings (loss) by the weighted average common shares
outstanding during each year.
Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amount of
revenue and expenses during the reporting period. Actual results could
differ from those estimates.
Stock Options:
The Company has elected to follow Accounting Principles Board Option
No. 25, "Accounting for Stock Issued to Employees" (APB 25) and
related interpretations in accounting for its employee stock options
rather than adopting the alternative fair value accounting provided
for under Financial Accounting Standards Board ("FASB") FASB Statement
No. 123, Accounting for Stock Based Compensation (SFAS 123).
Income Taxes:
The Company records the income tax effect of transactions in the same
year that the transactions enter into the determination of income,
regardless of when the transactions are recognized for tax purposes.
Tax credits are recorded in the year realized. Since the Company has
not yet realized income as of the date of this report, no provision
for income taxes has been made.
In February, 1992, the Financial Accounting Standards Board adopted
Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes, which supersedes substantially all existing
authoritative literature for accounting for income taxes and requires
deferred tax balances to be adjusted to reflect the tax rates in
effect when those amounts are expected to become payable or
refundable. The Statement was applied in the Company's financial
statements for the fiscal year commencing January 1, 1993.
At December 31, 1997 a deferred tax asset has not been recorded due to
the Company's lack of operations to provide income to use the net
operating loss carryover of $335,193 which expires as follows:
Year Ended Expires Amount
December 31, 1986 December 31, 2001 $ 1,950
December 31, 1987 December 31, 2002 10
December 31, 1988 December 31, 2003 10
December 31, 1989 December 31, 2004 10
December 31, 1990 December 31, 2005 10
December 31, 1991 December 31, 2006 10
December 31, 1997 December 31, 2010 333,193
------------
$ 335,193
============
F-7
<PAGE>
TRINON, INC.
(Formerly Cetacean Industries, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1997
NOTE 2: DEVELOPMENT STAGE COMPANY
The Company was incorporated under the laws of the State of Utah on
April 16, 1986 as Cetacean Industries, Inc. and has been in the
development stage since incorporation. On December 30, 1993, the
Company was dissolved as a Utah corporation and reincorporated as a
Nevada corporation. On January 30, 1998, the name was changed to
Trinon, Inc.
NOTE 3: CAPITALIZATION
On the date of incorporation, the Company sold 250,000 shares of its
common stock to Capital General Corporation for $2,000 cash for an
average consideration of $.008 per share. During 1997, the Company
sold 57,700 shares of its common stock for $330,100 of cash. The
Company's authorized stock includes 100,000,000 shares of common stock
at $.001 par value.
Effective February 17, 1998, the Company's shareholders approved a one
for four reverse stock split. All share amounts and per share amounts
from inception have been restated to reflect the reverse split.
NOTE 4: RELATED PARTY TRANSACTIONS
Prior to August 1997, the Company neither owned nor leased any real
property. Office services were provided, without charge, by Capital
General Corporation. Such costs were immaterial to the financial
statements and, accordingly, have not been reflected therein. The
officers and directors of the Company are involved in other business
activities and may, in the future, become involved in other business
opportunities. If a specific business opportunity becomes available,
such persons may face a conflict in selecting between the Company and
their other business interests. The Company has not formulated a
policy for the resolution of such conflicts. During 1997, the father
of the Company's President received $2,000 cash and common stock
valued at $2,500 for consulting services.
NOTE 5: DISCONTINUED OPERATIONS
During 1997, the Company acquired two subsidiaries and intended to
operate in the industry of extracting diamonds in South America. The
plan did not become viable so the transaction to acquire the
subsidiaries was rescinded on November 4, 1997. Through that date
approximately $220,000 was advanced to and/or spent by the former
subsidiaries. The $220,000 will not be recovered and has been charged
to expense.
NOTE 6: COMMITMENTS
The Company leases its office space under a month-to-month agreement.
Monthly payments are $1,000.
NOTE 7: INCENTIVE STOCK OPTION PLAN
During 1997, the Company established an incentive stock option plan
for employees and directors of the Company. The maximum number of
shares to be issued under the plan is 500,000. The Company also can
grant non-qualified stock options. The aggregate fair market value
(determined at the grant date) of the shares to which options become
exercisable for the first time by an optionee during any calendar year
shall not exceed $100,000. For 10% shareholders, the option price
shall not be less than 110% of the fair market value of the shares on
the grant date and the exercise period shall not exceed 5 years from
the grant date. In the case of non-qualified stock options, the option
price shall not be less than $.25 per share, or at a price exceeding
$.25 per share at the discretion of the Committee.
During 1997, 43,000 options were exercised at $.50 per share and
136,000 options were exercised at $.25 per share. At December 31, 1997
there are 215,000 options outstanding with an exercise price of $.25
per share. The Company's President has 200,000 of the options. The
215,000 options expire December 31, 2000.
F-8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Trinon, Inc. December 31, 1997 financial statements and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000894531
<NAME> Trinon, Inc.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 15,690
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,605
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 25,605
<CURRENT-LIABILITIES> 10,514
<BONDS> 0
0
0
<COMMON> 748
<OTHER-SE> 14,343
<TOTAL-LIABILITY-AND-EQUITY> 25,605
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 333,193
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (333,193)
<INCOME-TAX> 0
<INCOME-CONTINUING> (112,759)
<DISCONTINUED> (220,434)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (333,193)
<EPS-PRIMARY> (.65)
<EPS-DILUTED> (.65)
</TABLE>
