-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QzC8Q6LvRXRuMeg596TdCfvX2nPzu5p6aWV0wQUXFtIYpgB6H0zmqX5+jgNp+3dd 8LrEDQiHVP09v5a7kCoMEw== /in/edgar/work/20000814/0000912057-00-037337/0000912057-00-037337.txt : 20000921 0000912057-00-037337.hdr.sgml : 20000921 ACCESSION NUMBER: 0000912057-00-037337 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRIMOL GROUP INC CENTRAL INDEX KEY: 0001011733 STANDARD INDUSTRIAL CLASSIFICATION: [6770 ] IRS NUMBER: 133859706 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-28144 FILM NUMBER: 699338 BUSINESS ADDRESS: STREET 1: 1285 AVENUE OF THE AMERICAS STREET 2: 35TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2125544394 MAIL ADDRESS: STREET 1: 1285 AVENUE OF THE AMERICAS STREET 2: 35TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: NUTRONICS INTERNATIONAL INC DATE OF NAME CHANGE: 19960404 10QSB 1 a10qsb.txt FORM 10QSB U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) /X/ Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2000 / / Transition report under Section 13 or 15(d) of the Exchange Act For the transition period from ______________ to _______________ Commission file number: 0-28144 TRIMOL GROUP, INC. (Exact Name of Small Business Issuer as Specified in Its Charter) DELAWARE 13-3859706 (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 1285 Avenue of the Americas, 35th Floor, New York, New York 10019 (Address of Principal Executive Offices) (212) 554-4394 (Issuer's Telephone Number, Including Area Code) (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes / / No / / APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of August 14, 2000, 12,039,000 shares of Common Stock, par value $.01 per share. Transitional Small Business Disclosure Format (check one): Yes / / No /X/ TABLE OF CONTENTS PART I. FINANCIAL INFORMATION
Page Number Item 1. Financial Statements Independent Accountant's Review Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1 Consolidated Balance Sheet as of June 30, 2000 (Unaudited) and December 31, 1999 (Audited). . . . . . . . . . . . F-2 Consolidated Statement of Operations for the six month period ended June 30, 2000 (Unaudited). . . . . . . . . . . F-3 Statement of Changes in Shareholders' Equity for the six month period ended June 30, 2000 (Unaudited). . . . . . . F-4 Consolidated Statement of Cash Flow for the six month period ended June 30, 2000 (Unaudited). . . . . . . . . . . F-5 Notes to the Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7 Item 2. Management's Discussion and Analysis and Results of Operations . . . . . . . . . . . . . . . . . . . . . 1 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
INDEPENDENT ACCOUNTANTS' REVIEW REPORT To The Board of Directors and Shareholders Trimol Group, Inc. We have reviewed the accompanying consolidated balance sheet of Trimol Group, Inc. (the "Company") as of June 30, 2000 and the related consolidated statements of operations for the six and three month period ended June 30, 2000, changes in stockholders' equity and cash flows for the six month period ended June 30, 2000. These consolidated financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. PARITZ & COMPANY, P.A. Hackensack, New Jersey August 8, 2000 F-1 TRIMOL GROUP, INC. CONSOLIDATED BALANCE SHEET - -------------------------------------------------------------------------------- June 30, 2000 December 31, 1999 (Unaudited) (Audited) - -------------------------------------------------------------------------------- (In Thousands of US Dollars) ASSETS Cash and cash equivalents 5,053 5,273 Held to maturity securities 1,214 545 Loans, net of allowance for possible loan losses of $383 and $928, respectively 3,083 2,871 Reinsurance recoverable 263 157 Property, plant and equipment 5,588 5,836 Other assets 1,937 1,326 ------ ------ TOTAL ASSETS 17,138 16,008 ------ ------ Liabilities Non interest bearing demand deposits 4,926 3,440 Interest bearing deposits 2,924 3,135 ------ ------ Total deposits 7,850 6,575 Insurance policy and claim reserves 391 288 Other liabilities 2,261 2,348 ------ ------ TOTAL LIABILITIES 10,502 9,211 MINORITY INTEREST 1,447 1,600 SHAREHOLDERS' EQUITY 5,189 5,197 ------ ------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 17,138 16,008 - -------------------------------------------------------------------------------- The accompanying notes are an integral part of the financial statements. F-2 TRIMOL GROUP, INC. CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
SIX MONTHS ENDED THREE MONTHS ENDED --------------------------------- ------------------------------- JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 2000 JUNE 30, 1999 --------------- ---------------- --------------- -------------- (In Thousands of US Dollars, except share and per share data) REVENUES Revenues from hotel operations 1,167 1,067 633 597 Revenues from document processing 1,380 1,565 697 648 Loan interest 324 501 141 230 Other interest 177 244 77 104 Insurance premiums 48 40 27 17 Commissions, fees and other revenues 537 591 269 272 ---------- ---------- ---------- ---------- TOTAL REVENUES 3,633 4,008 1,844 1,868 Interest expense 247 391 123 158 ---------- ---------- ---------- ---------- TOTAL REVENUES, NET OF INTEREST EXPENSE 3,386 3,617 1,721 1,710 ========== ========== ========== ========== PROVISION FOR BENEFITS, CLAIMS AND CREDIT LOSSES Provision for credit losses (gains) (491) 112 (292) 56 Provision for benefits and claims 17 -- 10 -- ---------- ---------- ---------- ---------- (474) 112 (282) 56 ========== ========== ========== ========== OPERATING EXPENSES Cost of revenues from hotel operations 502 533 284 241 Cost of revenues from document processing 472 443 233 188 Other operating expenses 2,650 1,736 1,332 1,037 ---------- ---------- ---------- ---------- TOTAL OPERATING EXPENSES 3,624 2,712 1,849 1,466 ========== ========== ========== ========== INCOME FROM OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST 236 793 154 188 ========== ========== ========== ========== Provision (credit) for income taxes 43 51 25 (2) Minority interest, net of income taxes 60 86 34 62 ---------- ---------- ---------- ---------- NET INCOME 133 656 95 128 ========== ========== ========== ========== Net income per share (basic and diluted) 0.01 0.06 .008 0.01 ---------- ---------- ---------- ---------- WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 12,039,000 12,039,000 12,039,000 12,039,000
- -------------------------------------------------------------------------------- The accompanying notes are an integral part of the financial statements. F-3 TRIMOL GROUP, INC. STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY (Unaudited) Six Months Ended ---------------------------- June 30, 2000 June 30, 1999 ---------------------------- (In Thousands of US Dollars) COMMON STOCK Balance, January 1 and June 30 120 120 ====== ====== ADDITIONAL PAID-IN CAPITAL Balance, January 1 and June 30 6,178 6,018 ====== ====== DEFERRED COMPENSATION Balance, January 1 (27) -- Deferred compensation 27 -- ------ ------ Balance, June 30 -- -- ------ ------ RETAINED EARNINGS Balance, January 1 (1,074) 1,428 Net income 133 656 Other comprehensive (loss) (168) (2,178) ------ ------ Balance, June 30 (1,109) (94) ====== ====== TOTAL SHAREHOLDERS' EQUITY 5,189 6,044 ====== ====== ACCUMULATED OTHER COMPREHENSIVE LOSS Balance, January 1 (2,413) -- Foreign currency translations (168) (1,109) ------ ------ Balance, June 30 (2,581) (1,109) - -------------------------------------------------------------------------------- The accompanying notes are an integral part of the financial statements. F-4 TRIMOL GROUP, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Six Months Ended ----------------------------- June 30, 2000 June 30, 1999 -------------- ------------- (In Thousands of US Dollars) CASH FLOW FROM OPERATING ACTIVITIES Net income 134 656 ------ ------ ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH USED IN OPERATING ACTIVITIES INCOME AND EXPENSES NOT INVOLVING CASH FLOW Depreciation and amortization 257 191 Provision for credit gains (491) (94) Provision for benefits and claims (17) -- Minority interest 60 (458) Stock based compensation 27 -- ------ ------ (164) (361) ------ ------ CHANGES IN ASSETS AND LIABILITIES Net (increase) in other assets (706) (365) Net increase (decrease) in other liabilities 70 (538) Net decrease in reinsurance recoverable 118 79 ------ ------ (518) (824) ------ ------ TOTAL ADJUSTMENTS (682) (1,185) ------ ------ NET CASH USED IN OPERATING ACTIVITIES (548) (529) ====== ====== CASH FLOW FROM INVESTING ACTIVITIES Proceeds from redemptions of securities held to 2,229 5,497 maturity Purchase of securities held to maturity (2,814) (4,970) Purchase of equipment (437) (61) Net decrease in loans 66 1,248 ------ ------ NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (956) 1,714 ====== ====== CASH FLOW FROM FINANCING ACTIVITIES Net increase in deposits 1,764 (588) ------ ------ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,764 (588) ====== ====== Effect of exchange rate on cash (480) (277) ------ ------ Increase (decrease) in cash and cash equivalents (220) 320 Cash and cash equivalents at beginning of period 5,273 4,173 ------ ------ CASH AND CASH EQUIVALENTS AT END OF PERIOD 5,053 4,493 ====== ====== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid 207 316 Income taxes paid 33 82
The accompanying notes are an integral part of the financial statements. F-5 TRIMOL GROUP, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION The unaudited consolidated financial statements of Trimol Group, Inc. (the "Company") as of June 30, 2000 and for the six and three month periods ended June 30, 2000 and 1999 included herein have been prepared on the same basis as those in the Annual Report on Form 10-KSB for the year ended December 31, 1999. In the opinion of management, all adjustments (consisting only of those which are normal and recurring) necessary for a fair presentation have been included. The results of operations for interim periods are not necessarily indicative of the results to be expected for a full fiscal year. Certain financial information that is normally included in annual financial statements prepared in accordance with generally accepted accounting principles, but is not required for interim reporting purposes, has been condensed or omitted. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 1999. The consolidated statements of the Company include the accounts of the Company and its operating subsidiaries and their holding companies. Inter-company balances have been eliminated in consolidation. NOTE 2 - OPERATIONS The Company owns all of the shares of four holding corporations that own capital stock of four companies with business operations in the Republic of Moldova ("Moldova"). The capital stock of such companies are comprised of all of the issued and outstanding shares of an insurance company, Exim Asint S.A. (the "Insurance Company"), a bank, Banca Comerciala pe Actiuni "Export Import" (the "Bank"), 65% of the issued and outstanding shares of a hotel, the Jolly Alon Limited (the "Hotel"), and all of the issued and outstanding shares of Intercomsoft Limited ("Intercomsoft"), a document production company. The Insurance Company began operations at the beginning of 1995 and is active in the general insurance sector providing property and liability coverage to the Moldovan market. Commencing in the last quarter of 1997, the Insurance Company also provides reinsurance services to the Moldovan insurance market. The Bank was established on April 26, 1994, received its General Banking License from the National Bank of Moldova on April 29, 1994 and began activity as a new bank on June 1, 1994. The Bank's activities include receipt of monetary deposits, granting credit, transacting in foreign currency, financing international trade, investment in securities, retaining and managing marketable documents and other assets for other parties, and managing payments. The Hotel was established on October 15, 1991 and operates and manages the Jolly Alon Hotel and rents stores and offices located on Hotel property. The principal guests of the Hotel are business executives and international diplomats from all over the world. The tourism sector with respect to Hotel guests is marginal and, accordingly, seasonability is not a factor. F-6 TRIMOL GROUP, INC. (CONT.) Intercomsoft was incorporated in February 1995 as a non-resident Irish registered company. Intercomsoft supplies the technology and consumables required to produce secure essential documents (passports, drivers' licenses, car licenses and ID cards) to the government of the Republic of Moldova. NOTE 3 - RISKS AND UNCERTAINTIES The following factors relating to the Company and its business should be carefully considered: (a) The Company's subsidiaries operate in Moldova, a former Republic of the Soviet Union, and are heavily dependent on Russia and on a number of former Republics of the Soviet Union. Accordingly, the current political and economic situation in Moldova, Russia and the former Republics of the Soviet Union, which have historically been unstable, could have a material adverse effect on the Company and its subsidiaries. Political uncertainty and instability in the Republic of Moldova could also have a material adverse effect on the future revenue and income of the Company and its subsidiaries. (b) The Moldovan Ministry of Economics is Intercomsoft's only customer. In November 1999, the Company learned that the Ministry of Economy Affairs and Reform of the Republic of Moldova was soliciting bids to select an audit company to review the contract between Intercomsoft and the Government of the Republic of Moldova ("GRM"), pursuant to which Intercomsoft is granted the right to act as the exclusive supplier of the technology required to produce secure essential documents to GRM. The Company believes that the review will involve the assessment of such contract comparing it with international norms for prices charged for the services performed. A loss, or a substantial change in the terms of such contract could, however, have a material adverse effect on Intercomsoft and the Company. (c) The Insurance Company cedes insurance to other companies, the major one being Munchener Ruckversicherungs Gesellschaft (Munich Re). These reinsurance contracts do not relieve the Insurance Company from its primary obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Insurance Company. In order to reduce its credit risk, the Insurance Company seeks to do business only with financially sound reinsurance companies and regularly reviews the financial strength of reinsurers used. No provision for uncollectible amounts has been made since none of the receivables is deemed to be uncollectible. (d) The Bank currently operates under a B-License issued by the National Bank of Moldova ("NBM"). NBM regularly revises the capital requirements for the banks. In accordance with current regulations, banks operating under a B-License must maintain a shareholders' equity of no less than 48 Million Moldovan Leu ("MDL") as of July 1, 2000, which amount equals approximately $3.8 Million U.S. Dollars at the exchange rate in effect at June 30, 2000. The Bank met this requirement and maintains its B-License issued by the NBM. In addition, NBM has advised the Company that as of January 1, 2001, banks with a B-License will be required to increase its equity to a minimum of 76 Million MDL; approximately $6 Million U.S. Dollars based upon the exchange rate in effect on June 30, 2000. The Bank's shareholders' equity as of June 30, 2000 was 48.2 Million MDL; approximately $3.85 Million U.S. Dollars. As a result, the Bank must increase its shareholder equity by approximately 27.8 Million MDL; approximately $2.2 Million U.S. Dollars, using the exchange rate in effect on June 30, 2000, by January 1, 2001 in order to maintain its current banking license in Moldova. Should the Bank be unable to meet this capitalization requirement, it may lose its B-License to operate as a bank in Moldova, which would have a material adverse effect on the Company. NOTE 4 - FOREIGN CURRENCY TRANSLATION The Moldovan Leu (MDL) is the functional currency of the Company's subsidiaries, all of which are F-7 TRIMOL GROUP, INC. (CONT.) either located in, or derive their revenue from, the Republic of Moldova. Accordingly, the assets and liabilities denominated in foreign currency are translated into U.S. Dollars at the current rate of exchange existing at period-end and revenues and expenses are translated at average monthly exchange rates. Related translation adjustments are reported as a separate component of shareholders' equity, whereas gains or losses resulting from foreign currency transactions are included in results of operations. During the six months ended June 30, 2000 and 1999 fluctuations in the MDL and the United States Dollar reduced the Company's net income in the amounts reflected in the Company's Consolidated Statement of Changes in Shareholders' Equity under the line item "Accumulated Other Comprehensive Loss", as a component of Shareholders' Equity. NOTE 5 - SHAREHOLDERS' EQUITY (a) On February 25, 1999, the Company entered into employment agreements (collectively the "Employment Agreements") with three of its executives (the "Executives") each of which is for a term of five years commencing January 1, 1999 and provide for aggregate annual compensation of $360,000 in the first year of the Employment Agreement and an aggregate of $650,000 in the second year. In addition, the Employment Agreements provide that for every $1,000,000 of the Company's excess net pre-tax profits, as defined, generated by the Company in the determining year, the Executives will receive incentive warrants ("Incentive Warrants") to purchase an aggregate of 200,000 shares of the Company's common stock (the "Common Stock") up to a maximum of 3,000,000 shares of Common Stock per year at an exercise price equal to the closing price of Common Stock on the issue date. As of June 30, 2000, no Incentive Warrants were outstanding. (b) In May 1999 the Company issued warrants to purchase 1,400,000 shares of its Common Stock to the Executives. The warrants may be exercised for a period of five years at an exercise price of $11.50 per share. Effective February 28, 2000 the Company canceled these warrants and issued 1,400,000 warrants with substantially the same terms, at an exercise price of $.50 per share. During 1999, the Company granted five year warrants to purchase up to 60,000 shares of the Company's Common Stock, 30,000 of which are at an exercise price of $11.50 per share and 30,000 of which are at an exercise price of $.75 per share, to certain former members of the Company's Board of Directors. As of June 30, 2000, warrants to purchase 1,460,000 shares of Common Stock were issued and outstanding. NOTE 6 - RELATED PARTY TRANSACTIONS The Company transacts business at times with related parties while conducting its commercial activities. The Company believes such transactions are on substantially the same terms as those prevailing at the time for comparable transactions with unrelated parties. Pursuant to a resolution of the Company's Board of Directors on March 31, 2000, the Company repaid its debt to a company owned by the Company's majority stockholder of the principal balance of $1,162,000 plus interest from January 6, 1998 to the date of payment (April 5, 2000) in the amount of $187,000. Prior to this resolution, the liability had been deemed non-interest bearing. On June 27, 2000, the Company borrowed $797,000 (the "Loan") from a company controlled by the Company's majority stockholder ("Stockholder") and invested the Loan proceeds in the Bank to meet the capital requirements referred to in Note 3(d). The Loan bears interest at 2% per annum above the prime rate and matures on December 31, 2000. If the Loan is not repaid by its due date, the F-8 TRIMOL GROUP, INC. (CONT.) Stockholder can elect to convert the Loan into a 22% equity interest in two of the Company's subsidiaries that own all the issued and outstanding shares of the Bank. On June 28, 2000, the Company repaid $74,000 of the Loan leaving a balance of $723,000 at June 30, 2000. This amount is included in other liabilities on the accompanying June 30, 2000 balance sheet. NOTE 7 - MINORITY INTEREST The minority interest comprises a 35% interest by the Government of the Republic of Moldova in the Hotel. F-9 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the Company's consolidated financial statements and notes thereto appearing elsewhere in this report. General The Company through its wholly-owned subsidiaries; owns 65% of the issued and outstanding shares of capital stock of the Jolly Alon Limited, a Moldovan corporation ("Hotel"), that operates and manages the Jolly Alon Hotel in Chisinau, Moldova with the remaining thirty-five (35%) percent of the issued and outstanding shares of capital stock of the Hotel being owned by the Government of the Republic of Moldova; 100% of the issued and outstanding shares of capital stock of Banca Commerciala pe Actiuni "Export-Import," a Moldovan corporation ("Bank"), which owns a commercial bank in Moldova; 100% of the issued and outstanding shares of capital stock of Exim Asint, S.A., a Moldovan corporation ("Insurance Company") which owns a property and casualty insurance business in Moldova; and 100% of the issued and outstanding shares of capital stock of Intercomsoft, Ltd., an Irish corporation ("Intercomsoft"), which is the exclusive supplier to the Government of the Republic of Moldova of the technology and equipment required to manufacture secure essential government documents (e.g., passports, drivers' licenses, etc.). The Company's interests in the Bank, the Hotel and the Insurance Company were acquired on January 6, 1998. The Company's interest in Intercomsoft was acquired on May 6, 1998. As the Company's subsidiaries all operate in, or derive its revenues from, the Republic of Moldova, the current (and future) economic situation, and the political uncertainty and instability, in the Republic of Moldova and in Russia could have a material adverse effect on the Company and its subsidiaries. The functional currency in the Republic of Moldova is the Moldovan Leu. References herein to $ or U. S. $ are to the United States Dollar. References herein to MDL are to the Moldovan Leu. 1 COMPARISON OF 2nd QUARTER 2000 TO 2nd QUARTER 1999 The Company (As Consolidated) The Company's total revenues for 2nd Quarter 2000 were $1,844,000, a decline of $24,000 from 2nd Quarter 1999 total revenues or approximately 1.3%. Operating expense were approximately $1,849,000 and $1,466,000, in 2nd Quarter 2000 and 2nd Quarter 1999, respectively. Measured as a percentage of revenues, total operating expenses were approximately 100% and 78% for 2nd Quarter 2000 and 2nd Quarter 1999. In 2nd Quarter 2000, the Company had net income of approximately $95,000, or 5% of revenues. In 2nd Quarter 2000, net income declined by $33,000 from the net income of $128,000 in 2nd Quarter 1999, or 26%. The significant increase in the Company's operating expenses had a material adverse impact on the Company's consolidated net income. The Company believes that the economic crisis in Russia, which caused an economic slowdown in the Republic of Moldova, resulting in less disposable income to the Moldovan population, had an adverse impact on the revenues and income of the Company's subsidiaries and, therefore, on the Company. Such slowdown may continue to have an adverse impact. In addition, the Moldovan Leu, the currency of the Republic of Moldova, has undergone significant and adverse devaluation, which has also had a significant and adverse impact on the revenue and income of the Company. Additional devaluation of the currency may continue to have an adverse impact. The Bank The Bank generates its revenue from charging fees for its services, interest charged on loans, interest earned from funds deposited from correspondent banks and investing in securities issued by the Moldovan Government. During 2nd Quarter 2000, the Bank earned interest income of approximately $224,000, which was a decline from the results of 2nd Quarter 1999 interest income of $303,000 by approximately $79,000 or 26%. The largest component of the Bank's total interest income was interest earned on loans, which was approximately $141,000 and $230,000, or approximately 62% and 76% of the Bank's total interest income earned during the 2nd Quarter 2000 and 1999 respectively. The decrease both in dollars and as a percentage of interest income of interest earned on loans was the result of decline of the Moldovan economy. The remaining components of the Bank's interest income were interest earned on securities and interest earned on deposits with correspondent banks. During 2nd Quarter 2000 interest earned on securities was approximately $11,000 or 5% of the Bank's total interest income and interest earned on deposits with correspondent banks was approximately $72,000 or 32% of the total interest income. During 2nd Quarter 1999 interest earned on securities was approximately $45,000 or 15% of the Bank's total interest income and interest earned on deposits with correspondent banks was approximately 2 $28,000 or 9% of the total interest income. This was the result of the Bank's focus on commercial loans which have a greater return than securities, due to a decline in interest earned on securities. The decision to focus more on commercial loans was also based on the fact that interest on the securities issued by Moldovan Government has been significantly reduced and therefore it has lost its appeal as an investment vehicle by the Bank. The increase in the interest income on the deposits with the correspondent banks was a result of an increase of the daily closing balances on Nostro accounts (accounts at correspondent banks over which the Bank has control) since January 1, 2000. In addition to the interest income, the Bank also earned non-interest income of approximately $255,000 in 2nd Quarter 2000 as compared to approximately $255,000 in 2nd Quarter 1999. The principal component of non-interest income was financial service fees of approximately $193,000 and $212,000 for 2nd Quarter 2000 and 1999 respectively, decreasing in 2nd Quarter 2000 by approximately $19,000 or 9%. Financial service fees include commissions charged for transactions on cash transfers and cash exchange in foreign currency, as well as commissions on Western Union transactions performed for individuals. Another principal component of non-interest income is foreign exchange trading profit and commissions of approximately $73,000 and $175,000, in 2nd Quarter 2000 and 1999 respectively, which was a decrease in 2nd Quarter 2000 by approximately $57,000 or 32%. The decrease is a result of a slight fluctuation in the exchange rate in comparison to the previous period. Offsetting the Bank's total interest income during 2nd Quarter 2000 was interest expense of approximately $107,000, or 48% of interest income, comprised principally of interest paid on deposits. During 2nd Quarter 1999 total interest expense was approximately $158,000, or 52% of total interest income. During 2nd Quarter 2000, the Bank had a gain resulting from a reduction in its allowance for possible loan losses of $292,000. In comparison, in 2nd Quarter 1999, the Bank recognized a loss from allowance of possible loans losses of $56,000. Offsetting the Bank's total non-interest income earned during 2nd Quarter 2000 and 1999 were total non-interest expenses of approximately $491,000 and $318,000 respectively, including salaries and related costs of approximately $125,000 and $97,000, outside services and processing expenses of approximately $117,000 and $64,000 and marketing and development costs of approximately $73,000 and $17,000, respectively. Salaries and related costs incurred during the 2nd Quarter 2000 increased in comparison to 2nd Quarter 1999 as a result of increased Bank's staffing levels. The increase in outside services and processing expenses resulted from an increased need for use of alternative information agencies and additional work with consulting and audit companies. The increase in marketing and development costs resulted from increased competition in the financial services market. The Bank's net income was $173,000 for 2nd Quarter 2000, an increase of $122,000 over the net income for 2nd Quarter 1999. The Hotel The Hotel derives its revenues principally from rental of guest accommodations, restaurant operations and leasing of stores and offices. During 2nd quarter 2000 the Hotel's revenues of $633,000 were principally derived from (a) rental of guest accommodations ($440,000 or 70% of the Hotel's revenue); (b) restaurant operations 3 ($87,000 or 14% of the Hotel's revenue); and (c) leasing of stores and offices ($80,000 or 13% of the Hotel's revenue). Revenue for 2nd Quarter 2000 increased from 2nd Quarter 1999 from approximately $597,000, an increase of $36,000 or 6%. Total cost of revenue for the Hotel was approximately $284,000 and $241,000 or approximately 45% and 40% of Hotel's revenue, for the 2nd quarter 2000 and 1999, respectively. The increase in percentage ratio results from additional expenses for room renovation which began in January 2000. The gross profit (revenue minus cost of revenue) for 2nd Quarter 2000 and 1999 was $349,000 (55% of revenue) and $356,000 (60% of revenue), respectively, decreasing in 2nd Quarter 2000 by $7,000. The foregoing dollar amounts are stated before giving effect to the minority (35%) interest of he government of the Republic of Moldova. The net income of the Hotel for 6 months 2000 was $97,000 a decrease of $81,000 from 6 months 1999 of $178,000. Intercomsoft Intercomsoft derives its revenue from being the exclusive supplier of the technology, equipment and consumables required to produce secure essential documents (e.g., passports, driving licenses, etc.), to the Government of the Republic of Moldova. During 2nd quarter 2000 and 1999 Intercomsoft had revenues from operations of approximately $697,000 and $648,000, respectively. Management attributes this approximate 8% increase in revenues to a higher number of documents processed during the 2nd quarter 2000. Intercomsoft's increase in operating expenses from 27% of total revenue, or $173,000 in 2nd Quarter 1999 to 50%, or $351,406, in 2nd Quarter 2000 is due to additional marketing and promotion costs resulting from a contract entered into in 1st quarter 2000. Accordingly, the income from operating activities declined from $474,000, or 73% in 2nd Quarter 1999 to $346,584, or 50% in 2nd Quarter 2000. Intercomsoft's net income for 2nd Quarter 2000 was $342,000, a decrease of $132,000 from 2nd Quarter 1999 of $474,000. The Insurance Company The Insurance Company derives its revenues from premium payments from its insureds and from the investment of its insurance reserves. Although the Insurance Company earned approximately $50,000 and $45,000 in gross premiums during 2nd Quarter 2000 and 1999 respectively, earned premiums ceded to reinsures approximated $23,000 and $28,000 respectively resulting in approximately $27,000 and $17,000 in net premiums earned of the Insurance Company's total revenues of approximately $43,000 and $22,000 for 2nd Quarter 2000 and 1999 respectively. During 2nd Quarter 2000 and 2nd Quarter 1999, the Insurance Company also received net interest income of approximately $2,000 and $5,000 respectively. 4 Reinsurance commissions earned during 2nd Quarter 2000 and 2nd Quarter 1999 were $14,000 and $6,000, respectively. The Insurance Company's total expenses of approximately $35,000 incurred during 2nd quarter 2000 resulted in a net income before taxes of approximately $8,000 compared to a net loss of approximately $9,000 in 2nd Quarter 1999 after total expenses of $31,000. Business segment information for three months ended June 30, 2000
- ---------------------------------------------------------------------------------------------------------------------------------- Bank Hotel Insur- Docu- Holding Elimina- Consolidated Opera- Opera- ance ment Activities tions tions tions opera- proces- tions sing - ---------------------------------------------------------------------------------------------------------------------------------- (In thousands of USD) Total revenue 479 633 43 697 (8) -- 1,844 Interest expense (107) -- -- -- (16) -- (123) Total revenue net of interest expense 372 633 43 697 (24) -- 1,721 Provision for benefits, claims and credit gains 292 -- (10) -- -- -- 282 Operating expenses (491) (512) (25) (355) (466) -- (1,849) Income (loss) from operations before income taxes and minority interest 173 121 8 342 (490) -- 154 Provision for income taxes -- (24) (1) -- -- -- (25) Minority interest, net of taxes -- (34) -- -- -- -- (34) Net income (loss) 173 63 7 342 (490) -- 95 Fixed assets 1,686 3,875 27 -- -- -- 5,588 Total assets 11,650 4,387 598 358 145 -- 17,138 ==================================================================================================================================
5 Business segment information for three months ended June 30, 1999
- ------------------------------------------------------------------------------------------------------------------------------- Bank Hotel Insur- Docu- Holding Elimina- Consolidated Opera- Opera- ance ment Activities tions tions tions opera- proces- tions sing - ------------------------------------------------------------------------------------------------------------------------------- (In thousands of USD) Total revenue 602 597 22 647 -- -- 1,868 Interest expense (158) -- -- -- -- -- (158) Total revenue net of interest expense 400 597 22 647 -- -- 1,666 Provision for benefits, claims and credit losses (56) -- -- -- -- -- (56) Operating expenses (318) (396) (31) (173) (548) -- (1,466) Income (loss) from operations before income taxes and minority interest 26 201 (9) 474 (548) -- 144 Provision for income taxes 25 (23) -- -- -- -- 2 Minority interest, net of taxes -- -- -- -- -- (62) (62) Net income (loss) 51 178 (9) 474 (548) (62) 84 Fixed assets 710 4,323 71 -- 211 (43) 5,104 Total assets 9,147 4,769 376 1,566 211 (43) 16,016 ==================================================================================================================================
6 COMPARISON OF 6 MONTHS 2000 TO 6 MONTHS 1999 The Company (As Consolidated) The Company's total revenues declined by approximately $315,000 or 9% from $4,008,000 to $3,633,000 in 6 months 2000 and compared to 6 months 1999. Total operating expenses increased by $912,000 to approximately $3,624,000 for 6 months 2000 from $2,712,000 for 6 months 1999. Measured as a percentage of total revenues, total operating expenses were approximately 99% and 68% for 6 months 2000 and 6 months 1999, respectively. The Company was unable to reduce total operating expenses in proportion to reduced total revenues. For 6 months 2000, the Company had net income of approximately $133,000, or approximately 36% of total revenues. For 6 months 2000, net income declined from 6 months 1999 by approximately $523,000, or approximately 14% of total revenues in 6 months 2000. The Bank During 6 months 2000, the Bank earned interest income of approximately $474,000, which is a decline from the results of 6 months 1999 of $695,000 by approximately $221,000, or 31%. The largest component of the Bank's total interest income was interest earned on loans which was approximately $324,000 and $501,000, or approximately 68% and 72% of the Bank's total interest income earned during 6 months 2000 and 6 months 1999 respectively. The decrease was the result of the economic crisis in Moldova. The remaining components of the Bank's interest income were interest earned on securities and interest earned on deposits with correspondent banks. During 6 months 2000 interest earned on securities was approximately $30,000 or 6% of the Bank's total interest income and interest earned on deposits with correspondent banks of approximately $120,000 or 25% of the total interest income. During 6 months 1999 interest earned on securities was approximately $132,000 or 19% of the Bank's total interest income and interest earned on deposits with correspondent banks of approximately $62,000 or 9% of the total interest income. The reason for the foregoing decline in interest earned on securities was the Bank's greater focus on commercial loans, which have greater return than securities, thus management allocated less funds to securities investments. In addition, interest on the securities issued by Moldovan Government was reduced significantly and at present holds no appeal for the Bank as an investment vehicle. The increase in the interest income on the deposits with the correspondent banks was the increase of the daily closing balances on Nostro accounts (accounts at corresponding bank's over which the Bank has control) during 6 months 2000. In addition to interest income, the Bank also earned non-interest income, which for 6 months 2000 was approximately $497,000, a decrease of approximately $68,000, or 12%, in comparison to the income earned during 6 months 1999 of approximately $565,000. The principal component of non-interest income was financial service fees of approximately $384,000 and approximately $360,000 for 6 months 2000 and 1999 respectively, increasing in 2000 by approximately $24,000, or 7%. Financial service fees include commissions charged for transactions on cash transfers and cash exchange of foreign currency, as well as commissions on Western Union transactions performed for individuals. Another component of non-interest income was foreign exchange trading profit and commissions of 7 approximately $144,000 and approximately $324,000 earned during 6 months 2000 and 1999 respectively, a decrease in 2000 of approximately $180,000, or 55%. Offsetting the Bank's total interest income during 6 months 2000 was interest expense of approximately $210,000, or 41% of interest income, comprised principally of interest paid on deposits. During 6 months 1999 total interest expense amounted to approximately $391,000 or 56% of total interest income. In 6 months 2000, the Bank had a gain resulting from a reduction in its allowances for possible loan losses of $491,000 compared to the recognition by the Bank of a loss from allowance for possible loan losses of $112,000 in 6 month 1999. Offsetting the Bank's total non-interest income earned during 6 months 2000 and 1999 were total non-interest expenses of approximately $944,000 and $576,000 respectively, including salaries and related costs of approximately $227,000 and $205,000, outside services and processing expenses of approximately $250,000 and $110,000 and marketing and development costs of approximately $107,000 and $32,000 respectively. Salaries and related costs incurred during 6 months 2000 increased in comparison to months 1999 resulting from an increase in the Bank's staffing levels. The increase in outside services and processing expenses resulted from the use of alternatives information agencies and additional consulting and audit expenses. The increase in marketing and development costs was due to increased competition in the financial services market. The Bank's net income for 6 months 2000 was $309,000, an increase of $128,000 over the net income for 6 months 1999 of $181,000. The Hotel During 6 months 2000, the Hotel's revenue of $1,167,000 was principally derived from (a) rental of guest accommodations ($779,000 or 67% of the Hotel's revenue); (b) restaurant operations ($164,000 or 14% of the Hotel's revenue); and (c) leasing of stores and offices ($161,000 or 14% of the Hotel's revenue). Revenue earned during 6 months 2000 compared to the results of 6 months 1999 of $1,067,000 increased by $100,000 or 9%. Total cost of revenue was $502,000 and $533,000 or approximately 50% and 43% of Hotel's revenue, for 6 months 2000 and 1999, respectively. This decline in the Hotel's costs of revenues resulted from new management's budget cutting measures resulting in more efficient Hotel operations and more efficient management of labor and related expenses. Operating equipment purchases and maintenance costs all declined and the reduced demand and cost cutting measures reduced the selling, general and administrative expenses. The gross profit (revenue minus cost of revenue) for 6 months 2000 and 1999 was $665,000, or 57% of revenue, and $534,000, or 50% of revenue, respectively, increasing in 2000 by $131,000. The foregoing dollar amounts are stated before giving effect to the minority (35%) interest of the government of the Republic of Moldova. The net income of the Hotel for 6 months 2000 was $170,000 a decrease of $77,000 from 6 months 1999 of $247,000. 8 Intercomsoft During 6 months 2000 and 6 months 1999 Intercomsoft had revenues from operations of approximately $1,380,000 and $1,565,000 respectively. An increase in operating expenses from 29% of total revenue from $453,000 for 6 months 1999 to 52% of total revenue, or $725,000, for 6 months 2000 is due to additional marketing and promotion costs resulting from a contract entered into in 1st Quarter 2000. Accordingly, the income from operations declined from $1,112,000, or 71% for 6 months 1999 to $675,000, or 48% for 6 months 2000. Intercomsoft's net income was $675,000 for 6 months 2000, a decrease of $437,000 from 6 months 1999 of $1,112,000. The Insurance Company Although the Insurance Company earned approximately $97,000 and $76,000 in gross premiums during 6 months 2000 and 6 months 1999, respectively, earned premiums ceded to reinsures approximated $49,000 and $36,000 in those years resulting in approximately $48,000 and $40,000 in net premiums earned of the Insurance Company's total revenues of approximately $94,000 and $73,000 6 months 2000 and 6 months 1999 respectively. During 6 months 2000 and 6 months 1999, the Insurance Company also received net interest income of approximately $6,000 and $24,000. During 6 months 2000 the Insurance Company also had approximately $25,000 of other income. Reinsurance commissions earned during 6 months 2000 and 1999 were approximately $14,000 and $9,000, respectively. The Insurance Company's total expenses of approximately $60,000 for 6 months 2000 resulted in a net income before taxes of approximately $34,000 compared to a net loss of approximately $5,000 in 6 months 1999 after total expenses of $78,000. 9 Business segment information for six months ended June 30, 2000
- ------------------------------------------------------------------------------------------------------------------------------- Bank Hotel Insur- Docu- Holding Elimina- Consolidated Opera- Opera- ance ment Activities tions tions tions opera- proces- tions sing - ------------------------------------------------------------------------------------------------------------------------------- (In thousands of USD) Total revenue 971 1,167 94 1,401 -- -- 3,633 Interest expense (210) -- -- -- (37) -- (247) Total revenue net of interest expense 761 1,167 94 1,401 (37) -- 3,386 Provision for benefits, claims and 491 -- (17) -- -- -- 474 credit gains Operating expenses (943) (957) (43) (726) (955) -- (3,624) Income (loss) from operations before income taxes and minority interest 309 210 34 675 (992) -- 236 Provision for income taxes -- (40) (3) -- -- -- (43) Minority interest, net of taxes -- (60) -- -- -- -- (60) Net income (loss) 309 110 31 675 (992) -- 133 Fixed assets 1,686 3,875 27 -- -- -- 5,588 Total assets 11,650 4,387 598 358 145 -- 17,138 ==================================================================================================================================
10 Business segment information for six months ended June 30, 1999
- ------------------------------------------------------------------------------------------------------------------------------- Bank Hotel Insur- Docu- Holding Elimina- Consolidated Opera- Opera- ance ment Activities tions tions tions opera- proces- tions sing - ------------------------------------------------------------------------------------------------------------------------------- (In thousands of USD) Total revenue 1,303 1,067 73 1,565 -- -- 4,008 Interest expense (391) -- -- -- -- -- (391) Total revenue net of interest expense 869 1,067 73 1,565 -- -- 3,574 Provision for benefits, claims and (112) -- -- -- -- -- (112) credit losses Operating expenses (576) (772) (78) (453) (833) -- (2,712) Income (loss) from operations before income taxes and minority interest 181 295 (5) 1,112 (833) -- 750 Provision for income taxes (3) (48) -- -- -- -- (51) Minority interest, net of taxes -- -- -- -- -- (86) (86) Net income (loss) 178 247 (5) 1,112 (833) (86) 613 Fixed assets 710 4,323 71 -- -- -- 5,104 Total assets 9,147 4,769 376 1,566 211 (43) 16,016 ==================================================================================================================================
11 Liquidity & Capital Resources The Company believes that its existing source of liquidity and its current revenues and cash flow, will be adequate to sustain its current operations and to satisfy its current working capital and capital expenditure requirements for the next twelve (12) months, with the exception of the Bank, which requires additional capitalization of no less than $2,200,000 by January 1, 2001 to maintain its status as a bank in Moldova. The Company plans to continue seeking other acquisition candidates, both domestically and internationally, which may be acquired through the issuance of securities and/or the payment of available cash. Year 2000 Compliance The Company believes it is Year 2000 compliant and experienced no difficulties associated with the rollover of the latter two digit year value to 00. Recent Developments The Company learned in November 1999 that the Ministry of Economy Affairs and Reform of the Republic of Moldova (the "Ministry"), was soliciting bids to select an audit company to review the Supply Agreement between Intercomsoft and the Government of the Republic of Moldova pursuant to which Intercomsoft is granted the right to act as the exclusive supplier of the technology required to produce secure essential documents to the Government. The Company believes that the review will involve the assessment of such contract comparing it with international norms for prices charged for the service performed. A loss, or a substantial change in the terms of such contract could, however, have a material adverse affect on Intercomsoft and the Company. On May 1, 2000, Alexander M. Gordin and Gary Shokin were appointed to serve as members of the Company's Board of Directors to fill the vacancies in the Board resulting from the resignations of Abdallah S. Mishrick and Jay J. Miller on February 7, 200 and February 11, 2000, respectively. Further, on May 1, 2000, Alexander A. Gordin was appointed as the Company's President and Gary Shokin was appointed as the Company's Vice President. Ted Shapiro simultaneously resigned as President of the Company, but remains as its Chief Executive Officer and a member of its Board of Directors. Related Party Transactions On April 3, 2000, Magnum Associates Limited ("Magnum"), a controlling stockholder of the Company beneficially owned by the Company's Chairman of the Board, demanded payment to it of the indebtedness of the Company owed to it in the principal amount of $1,162,000, together with interest thereon through the date of payment. Pursuant a resolution of the Company's Board of Director's, the Company repaid its debt to Magnum in the principal balance of $1,162,000, plus interest from January 6, 1998 in the amount of $187,000 on April 5, 2000 in response to such demand. The Company utilized substantially all of its available cash to make such payment. On June 27, 2000, the Company borrowed $797,000 from Magnum (the "Loan") and invested the proceeds from the Loan in the Bank in order to meet the Bank's capital requirements as of July 1, 2000. The Loan bears interest at a rate 12 of 2% per annum above prime rate and matures on December 31, 2000. If the Loan is not repaid by its due date, Magnum can elect to convert the Loan into a 22% equity interest in the two Company subsidiaries which own all of the issued and outstanding shares of the Bank. On June 28, 2000, the Company repaid $74,000 on the principal of the Loan leaving a balance of $723,000 at June 30, 2000. The Company believes all transactions conducted with affiliates are on terms that could be obtained from non-affiliated independent third parties on an arms length basis. The foregoing discussion and analysis should be read in conjunction with the Company's consolidated financial statements and notes thereto appearing elsewhere in this report. 13 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (A) EXHIBITS Exhibit No. Description of Document - ----------- ----------------------- 2 Agreement and Plan of Reorganization, effective January 6, 1998, by and among the Company, Edward F. Cowle, H. DeWorth Williams, Gold Hill Mines, Inc., Magnum Associates Ltd. and Starbeam, Ltd.(1) 2A Registrant's Certificate of Incorporation(2) 3 By-Laws(2) 4 Specimen of Certificate of Common Stock(2) 21 List of Subsidiaries(3) 27 Financial Data Schedule (B) REPORTS ON FORM 8-K No Current Report on Form 8-K was filed during the Quarter ended June 30, 2000. - ---------- (1) Incorporated by reference to the Company's Report on Form 8-K, filed on January 6, 1998, as amended by the Company's Form 8-KA on March 6, 1998. (2) Incorporated by reference to the Company's Registration Statement on Form 10-SB. (3) Incorporated by reference to the Company's Report on Form 10-KSB for its fiscal year ended December 31, 1999. 14 SIGNATURES In accordance with the requirements of the Securities Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TRIMOL GROUP, INC. Dated: August 14, 2000 By: /s/ Ted Shapiro ----------------------------------------- Ted Shapiro, Chief Executive Officer Dated: August 14, 2000 By: /s/ Shmuel Gurfinkel ----------------------------------------- Shmuel Gurfinkel, Chief Financial Officer 15 EX-27 2 ex-27.txt EXHIBIT 27
5 1,000 3-MOS DEC-31-2000 APR-01-2000 JUN-30-2000 5,053 1,214 3,466 383 0 9,613 5,588 0 17,138 8,241 0 0 0 120 6,178 17,138 1,844 1,844 358 1,690 34 0 123 120 25 0 0 0 0 95 .008 .008
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