-----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, Ep89la3au1JJ5J8FiPwtvI1KkI1G2ORFrBbq0lBukBC6Az4FO/G20LtK2DpDuxpl C/CWNLbomtyYMvTFd4xKMg== /in/edgar/work/0000912057-00-050910/0000912057-00-050910.txt : 20001121 0000912057-00-050910.hdr.sgml : 20001121 ACCESSION NUMBER: 0000912057-00-050910 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001120 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: 773248 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 a2031549z10qsb.txt FORM 10-QSB 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 September 30, 2000 / / Transition report under Section 13 or 15(d) of the Exchange Act for the transaction 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 issuers' classes of common equity, as of the latest practicable date: As of November 20, 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 F-1-F-9 Independent Accountant's Review Report F-i Consolidated Balance Sheet as of September 30, 2000 (Unaudited) and December 31, 1999 (Audited) F-1 Consolidated Statement of Operations For the three and nine month period ended September 30, 2000 and 1999 (Unaudited) F-2 Statement of Changes in Shareholder's Equity For the nine month period ended September 30, 2000 and 1999 (Unaudited) F-3 Consolidated Statement of Cash Flows For the nine month period ended September 30, 2000 and 1999 (Unaudited) F-4-F-5 Notes to Consolidated Financial Statements F-6-F-9 Item 2. Management's Discussion and Analysis and Results of Operations 1-13 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. as of September 30, 2000 and the related consolidated statements of operations for the nine and three month period ended September 30, 2000, changes in shareholders' equity and cash flows for the nine month period ended September 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 November 13, 2000 F-i TRIMOL GROUP, INC. CONSOLIDATED BALANCE SHEET
September 30, 2000 December 31, 1999 (Unaudited) (Audited) (In Thousands of U.S. Dollars) ASSETS Cash and cash equivalents 4,475 5,273 Held to maturity securities 1,037 545 Loans, net of allowance for possible loan losses of $472 and $928, respectively 3,158 2,871 Reinsurance recoverable 222 157 Property, plant and equipment 5,913 5,836 Other assets 2,046 1,326 ------ ------ TOTAL ASSETS 16,851 16,008 ------ ------ ------ ------ LIABILITIES Non interest bearing demand deposits 4,536 3,440 Interest bearing deposits 3,033 3,135 ------ ------ Total deposits 7,569 6,575 Insurance policy and claim reserves 256 288 Other liabilities 2,308 2,348 ------ ------ TOTAL LIABILITIES 10,133 9,211 MINORITY INTEREST 1,634 1,600 SHAREHOLDERS' EQUITY 5,084 5,197 ------ ------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 16,851 16,008 ------ ------ ------ ------
The accompanying notes are an integral part of the financial statements. F-1 TRIMOL GROUP, INC. CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
NINE MONTHS ENDED THREE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2000 1999 2000 1999 ------ ------ ------ ------ (In Thousands of US Dollars, except share and per share data) REVENUES Revenues from hotel operations 1,735 1,580 568 513 Revenues from document processing 2,165 2,142 785 577 Loan interest 551 763 227 262 Other interest 302 336 125 92 Insurance premiums 87 58 39 18 Commissions, fees and other revenues 884 1,064 347 473 ----- ----- ----- ----- TOTAL REVENUES 5,724 5,943 2,091 1,935 Interest expense 340 472 93 81 ----- ----- ----- ----- TOTAL REVENUES, NET OF INTEREST EXPENSE 5,384 5,471 1,998 1,854 ===== ===== ===== ===== PROVISION FOR BENEFITS, CLAIMS AND CREDIT LOSSES Provision for credit losses (gains) (420) 327 71 215 Provision for benefits and claims 33 27 16 9 ----- ----- ----- ----- (387) 354 87 224 ===== ===== ===== ===== OPERATING EXPENSES Cost of revenues from hotel operations 753 829 251 296 Cost of revenues from document processing 733 569 261 126 Other operating expenses 4,024 3,116 1,374 1,398 ----- ----- ----- ----- TOTAL OPERATING EXPENSES 5,510 4,514 1,886 1,820 ===== ===== ===== ===== INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST 261 603 25 (190) ===== ===== ===== ===== Provision (credit) for income taxes 72 113 29 62 Minority interest, net of income taxes 76 96 16 10 ----- ----- ----- ----- NET INCOME (LOSS) 113 394 (20) (262) ===== ===== ===== ===== Net income per share (basic and diluted) .009 0.03 (.002) (0.02) ----- ----- ----- ----- WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 12,039,000 12,035,542 12,039,000 12,039,000 The accompanying notes are an integral part of the financial statements. F-2 TRIMOL GROUP, INC. STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY (Unaudited) Nine Months Ended September 30, 2000 1999 (In Thousands of US Dollars) COMMON STOCK Balance, January 1 and September 30 120 120 ------ ------ ADDITIONAL PAID-IN CAPITAL Balance, January 1 and September 30 6,178 6,018 Issuance of common stock - 182 ------ ------ 6,178 6,200 ------ ------ DEFERRED COMPENSATION Balance, January 1 (27) - Deferred compensation 27 (61) ------ ------ Balance, September 30 - (61) ------ ------ RETAINED EARNINGS Balance, January 1 (1,074) 1,428 Net income 113 394 Other comprehensive (loss) (253) (1,862) ------ ------ Balance, September 30 (1,214) (40) ------ ------ TOTAL SHAREHOLDERS' EQUITY 5,084 6,219 ------ ------ ACCUMULATED OTHER COMPREHENSIVE LOSS Balance, January 1 (2,413) - Foreign currency translations (253) (1,862) ------ ------ Balance, September 30 (2,666) (1,862)
The accompanying notes are an integral part of the financial statements. F-3 TRIMOL GROUP, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, 2000 1999 ---- ---- (In Thousands of US Dollars) CASH FLOW FROM OPERATING ACTIVITIES Net income 113 394 ------ ------ ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH USED IN OPERATING ACTIVITIES INCOME AND EXPENSES NOT INVOLVING CASH FLOW Depreciation and amortization 363 383 Provision for credit gains (420) (294) Provision for benefits and claims 33 (49) Minority interest 76 (475) Stock based compensation 27 - Disposal of property, plant and equipment 187 - ------ ------ 266 (435) ------ ------ CHANGES IN ASSETS AND LIABILITIES Net (increase) in other assets (790) (741) Net increase (decrease) in other liabilities 69 (265) Net decrease in reinsurance recoverable (73) 63 ------ ------ (794) (943) ------ ------ TOTAL ADJUSTMENTS (528) (1,378) ------ ------ NET CASH USED IN OPERATING ACTIVITIES (415) (984) ------ ------ CASH FLOW FROM INVESTING ACTIVITIES Proceeds from redemptions of securities held to maturity 6,534 (9,104) Purchase of securities held to maturity (7,025) 9,150 Purchase of equipment (924) (174) Net (increase) decrease in loans (16) 2,365 ------ ------ NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (1,431) 2,237 ------ ------ CASH FLOW FROM FINANCING ACTIVITIES Net increase in deposits 1,335 (985) Proceeds from issuance of common stock - 130 ------ ------ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,335 (855) ------ ------ Effect of exchange rate on cash (287) 112 ------ ------
F-4 TRIMOL GROUP, INC.
Nine Months Ended September 30, 2000 1999 ---- ---- (In Thousands of US Dollars) Increase (decrease) in cash and cash equivalents (798) 510 Cash and cash equivalents at beginning of period 5,273 4,173 ------ ------ CASH AND CASH EQUIVALENTS AT END OF PERIOD 4,475 4,683 ------ ------ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid 300 572 Income taxes paid 33 113 ------ ------
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 September 30, 2000 and for the nine and three month periods ended September 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 four companies comprise 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 persons 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. 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, F-6 TRIMOL GROUP, INC. car licenses and ID cards) and provides such technology and consumables 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 banks in the Republic of Moldova. 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 September 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 September 30, 2000. The Bank's shareholders' equity as of September 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 September 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 which are all located in, or derive their revenue from, F-7 TRIMOL GROUP, INC. 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 nine months ended September 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. In addition to salary and benefits, 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 September 30, 2000, no Incentive Warrants were outstanding. Effective October 25, 2000, two of the above Executives agreed to terminate their Employment Agreements with the Company subject to the consummation of a Release and Indemnity Agreement between the Company and each of two such individuals. (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 September 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 (the "Stockholder") of the principal balance of $1,162,000 plus interest from January 6, 1998 to 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 (the "Loan") $797,000 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% above prime rate and matures on December 31, 2000. If the Loan is not repaid by its due date, the Stockholder can elect to convert the Loan into a 22% interest in two of the Company's subsidiaries which own all the issued and outstanding shares of F-8 TRIMOL GROUP, INC. the Bank. On June 28, 2000, the Company repaid $74,000 of the Loan leaving a balance of $723,000 at September 30, 2000. This amount is included in other liabilities on the accompanying September 30, 2000 consolidated 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"0, 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 manufacturer 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 form the Republic of Moldova, the current (and future) economic situation, and the political uncertainty and instablity, 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 Moldova 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 3rd QUARTER 2000 TO 3rd QUARTER 1999 The Company (As Consolidated) The Company's total revenues for 3rd Quarter 2000 were $2,091,000, an increase of $156,000 from 3rd Quarter 1999 total revenues of $1,935,000, an approximate 8% increase. Operating expenses were approximately $1,886,000 and $1,820,000, in 3rd Quarter 2000 and 3rd Quarter 1999, respectively. Measured as a percentage of revenues, total operating expenses were approximately 90% and 94% for 3rd Quarter 2000 and 3rd Quarter 1999, respectively. In 3rd Quarter 2000, the Company had a net loss of approximately $20,000, or 1% of revenues. In 3rd Quarter 2000, the net loss declined by $242,000 from the net loss of $262,000 in 3rd Quarter 1999, or 13%. 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 3rd Quarter 2000, the Bank earned interest income of approximately $348,000, which was an increase from the results of 3rd Quarter 1999 interest income of $337,000 by approximately $11,000, or 3%. The largest component of the Bank's total interest income was interest earned on loans, which was approximately $227,000 and $262,000, or approximately 65% and 76% of the Bank's total interest income earned during the 3rd 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, which, in turn, has led to an unstable financial condition of the banking industry, in the Republic of Moldova. The remaining components of the Bank's interest income were interest earned on securities and interest earned on deposits with correspondent banks. During 3rd Quarter 2000 interest earned on securities was approximately $63,000 or 20% of the Bank's total interest income and interest earned on deposits with correspondent banks was approximately $58,000 or 22% of the total interest income. During 3rd Quarter 1999 interest earned on securities was approximately $41,000 or 12% of the Bank's total interest income and interest earned on deposits with correspondent banks was approximately $34,000 or 10% of the total interest income. 2 This was the result of the Bank's focus on commercial loans, which have a greater rate of return than securities in the Republic of Moldova, 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 $322,000 in 3rd Quarter 2000 as compared to approximately $494,000 in 3rd Quarter 1999. The principal component of non-interest income was financial service fees of approximately $203,000 and $202,000 for 3rd Quarter 2000 and 1999 respectively, increasing in 3rd Quarter 2000 by approximately $1,000 or .5%. 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 $48,000 and $138,000, in 3rd Quarter 2000 and 1999 respectively, which was a decrease in 3rd Quarter 2000 by approximately $90,000 or 65%. 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 3rd Quarter 2000 was interest expense of approximately $87,000, or 27% of interest income, comprised principally of interest paid on deposits. During 3rd Quarter 1999 total interest expense was approximately $81,000, or 24% of total interest income. During 3rd Quarter 2000, the Bank had a loss resulting from its allowance for possible loan losses of $71,000. In comparison, in 3rd Quarter 1999, the Bank recognized a loss from allowance of possible loans losses of $215,000. Offsetting the Bank's total non-interest income earned during 3rd Quarter 2000 and 1999 were total non-interest expenses of approximately $489,000 and $442,000 respectively, including salaries and related costs of approximately $100,000 and $104,000, outside services and processing expenses of approximately $116,000 and $37,000 and marketing and development costs of approximately $71,000 and $48,000, respectively. The increase in marketing and development costs resulted from a number of marketing contracts that were entered into in response to increased competition in the financial services market. The Bank's net loss was $5,000 for 3rd Quarter 2000, a decrease of $16,000 in the net loss of $21,000 in 3rd Quarter 1999. THE HOTEL The Hotel derives its revenues principally from rental of guest accommodations, restaurant operations and leasing of stores and offices. During 3rd quarter 2000 the Hotel's revenues of $568,000 were principally derived from (a) rental of guest accommodations ($359,000 or 63% of the Hotel's revenue); (b) restaurant operations ($81,000 or 14% of the Hotel's revenue); and (c) leasing of stores and offices ($83,000 or 15% of the Hotel's revenue). Revenue for 3rd Quarter 2000 increased from 3rd Quarter 1999 from approximately $513,000, an increase of $55,000 or 11%. 3 Total cost of revenue for the Hotel was approximately $251,000 and $296,000 or approximately 45% and 57% of Hotel's revenue, for the 3rd quarter 2000 and 1999, respectively. The gross profit (revenue minus cost of revenue) for 3rd Quarter 2000 and 1999 was $317,000 (56% of revenue) and $217,000 (42% of revenue), respectively, increasing in 3rd Quarter 2000 by $100,000. 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 3rd Quarter 2000 was $47,000 an increase of $19,000 from 3rd Quarter 1999 of $28,000. 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 3rd Quarter 2000 and 1999 Intercomsoft had revenues from operations of approximately $785,000 and $577,000, respectively. Management attributes this approximate 36% increase in revenues to a higher number of documents processed during the 3rd quarter 2000. During 3rd Quarter 2000, the cost of revenue was approximately $261,000, or 33% of revenue, which was an increase as compared to 3rd Quarter 1999 of $126,000, or 21% of revenue. Intercomsoft had other operating expenses of $117,000 in 3rd Quarter 2000, and increase of $110,000 of the operating expenses during 3rd quarter 1999. This is due to additional marketing and promotion costs resulting from a contract entered into in 1st quarter 2000. Accordingly, Intercomsoft's net income for 3rd Quarter 2000 was $407,000, a decrease of $72,000 from 3rd Quarter 1999 net income of $479,000. 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 $82,000 and $48,000 in gross premiums during 3rd Quarter 2000 and 1999 respectively, earned premiums ceded to reinsures approximated $43,000 and $28,000 respectively resulting in approximately $39,000 and $20,000 in net premiums earned of the Insurance Company's total revenues of approximately $69,000 and $57,000 for 3rd Quarter 2000 and 1999 respectively. During 3rd Quarter 2000 and 3rd Quarter 1999, the Insurance Company also received net interest income of approximately $4,000 and $6,000 respectively. 4 Reinsurance commissions earned during 3rd Quarter 2000 and 3rd Quarter 1999 were $22,000 and $13,000, respectively. The Insurance Company's total expenses of approximately $42,000 incurred during 3rd quarter 2000 resulted in a net income before taxes of approximately $26,000 compared to a net income of approximately $40,000 in 3rd Quarter 1999 after total expenses of $17,000. Business segment information for three months ended September 30, 2000
Insur- Docu- Bank Hotel rance ment Opera- Opera- opera- proces- Holding Elimina- tions tions tions sing Activities tions Consolidated ------ ------ ------ ------- ---------- -------- ------------ (In thousands of USD) Total revenue 670 568 68 785 - 2,091 Interest expense (87) (7) - - 1 (93) Total revenue net of interest expense 583 561 68 785 1 - 1,998 Provision for benefits, claims and credit gains (71) - (16) - - - (87) Operating expenses (489) (514) (25) (378) (480) - (1,886) Income (loss) from operations before income taxes and minority interest 23 47 27 407 (479) - 25 Provision for income taxes (28) - (1) - - - (29) Minority interest, net of taxes - (16) - - - - (16) Net income (loss) (5) 30 26 407 (479) - (20) Fixed assets 1,743 4,135 35 - - - 5,913 Total assets 11,110 4,553 609 351 228 - 16,851 ------ ----- --- --- --- --- ------
5 Business segment information for three months ended September 30, 1999
Insur- Docu- Bank Hotel rance ment Opera- Opera- opera- proces- Holding Elimina- tions tions tions sing Activities tions Consolidated ------ ------ ------ ------- ---------- -------- ------------ (In thousands of USD) Total revenue 753 513 57 612 - - 1,935 Interest expense (81) - - - - - (81) Total revenue net of interest expense 672 513 57 612 - - 1,854 Provision for benefits, claims and credit losses (215) - (9) - - - (224) Operating expenses (442) (459) (8) (133) (778) - (1,820) Income (loss) from operations before income taxes and minority interest 15 54 40 479 (778) - (190) Provision for income taxes (36) (26) - - - - (62) Minority interest, net of taxes - - - - - (10) (10) Net income (loss) (21) 28 40 479 (778) (10) (262) Fixed assets 777 4,450 41 - 5,268 Total assets 9,200 4,910 425 1,568 181 16,284 ----- ----- --- ----- --- --- ------
6 COMPARISON OF 9 MONTHS 2000 TO 9 MONTHS 1999 The Company (As Consolidated) The Company's total revenues declined by approximately $219,000 or 3.7% from $5,943,000 to $5,724,000 in 9 months 2000 as compared to 9 months 1999. Total operating expenses increased by $996,000 to approximately $5,510,000 for 9 months 2000 from $4,514,000 for 9 months 1999. Measured as a percentage of total revenues, total operating expenses were approximately 96% and 76% for 9 months 2000 and 9 months 1999, respectively. The Company was unable to reduce total operating expenses in proportion to reduced total revenues. For 9 months 2000, the Company had net income of approximately $113,000, or approximately 2% of total revenues. For 9 months 2000, net income declined from 9 months 1999 by approximately $281,000, or approximately 5% of total revenues in 9 months 2000. THE BANK During 9 months 2000, the Bank earned interest income of approximately $822,000, which is a decline from the results of 9 months 1999 of $1,032,000 by approximately $210,000, or 20%. The largest component of the Bank's total interest income was interest earned on loans which was approximately $551,000 and $763,000, or approximately 67% and 74% of the Bank's total interest income earned during 9 months 2000 and 9 months 1999 respectively. The decrease was the result of the economic crisis in Moldova which, in turn, has led to an unstable financial condition of the banking industry in the Republic of Moldova. The remaining components of the Bank's interest income were interest earned on securities and interest earned on deposits with correspondent banks. During 9 months 2000 interest earned on securities was approximately $94,000 or 11% of the Bank's total interest income and interest earned on deposits with correspondent banks of approximately $177,000 or 22% of the total interest income. During 9 months 1999 interest earned on securities was approximately $173,000 or 17% of the Bank's total interest income and interest earned on deposits with correspondent banks of approximately $96,000 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 9 months 2000. In addition to interest income, the Bank also earned non-interest income, which for 9 months 2000 was approximately $819,000, a decrease of approximately $205,000, or 20%, in comparison to the income earned during 9 months 1999 of approximately $1,024,000. The principal component of non-interest income was financial service fees of approximately $586,000 and approximately $562,000 for 9 months 2000 and 1999 respectively, increasing in 2000 by approximately $24,000, or 4%. 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 7 foreign exchange trading profit and commissions of approximately $238,000 and approximately $462,000 earned during 9 months 2000 and 1999 respectively, a decrease in 2000 of approximately $224,000, or 48%. Offsetting the Bank's total interest income during 9 months 2000 was interest expense of approximately $297,000, or 36% of interest income, comprised principally of interest paid on deposits. During 9 months 1999 total interest expense amounted to approximately $472,000 or 46% of total interest income. In 9 months 2000, the Bank recognized a gain resulting from a reduction in its allowances for possible loan losses of $420,000 compared to the recognition by the Bank of a loss from allowance for possible loan losses of $327,000 in 9 months 1999. Offsetting the Bank's total non-interest income earned during 9 months 2000 and 1999 were total non-interest expenses of approximately $1,432,000 and $1,018,000 respectively, including salaries and related costs of approximately $326,000 and $309,000, outside services and processing expenses of approximately $366,000 and $147,000 and marketing and development costs of approximately $178,000 and $80,000 respectively. Salaries and related costs incurred during 9 months 2000 increased in comparison to 9 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 alternative information agencies and additional consulting and audit expenses. The increase in marketing and development costs of 122% was due to a number of marketing contracts that were entered into in response to increased competition in the financial services market. The Bank's net income for 9 months 2000 was $304,000, an increase of $104,000 over the net income for 9 months 1999 of $200,000. THE HOTEL During 9 months 2000, the Hotel's revenue of $1,735,000 was principally derived from (a) rental of guest accommodations ($1,138,000 or 66% of the Hotel's revenue); (b) restaurant operations ($245,000 or 14% of the Hotel's revenue); and (c) leasing of stores and offices ($244,000 or 14% of the Hotel's revenue). Revenue earned during 9 months 2000 compared to the results of 9 months 1999 of $1,580,000 increased by $155,000 or 10%. Total cost of revenue was $753,000 and $829,000 or approximately 43% and 52% of Hotel's revenue, for 9 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 9 months 2000 and 1999 was $982,000, or 56% of revenue, and $751,000, or 47% of revenue, respectively, increasing in 2000 by $231,000. The foregoing dollar amounts are stated before giving effect to the minority (35%) interest of the government of the Republic of Moldova. 8 The net income of the Hotel for 9 months 2000 was $217,000 a decrease of $58,000 from 9 months 1999 of $275,000. INTERCOMSOFT During 9 months 2000 and 9 months 1999 Intercomsoft had revenues from operations of approximately $2,165,000 and $2,142,000 respectively. An increase in total operating expenses from 27% of total revenue of $586,000 for 9 months 1999 to 51% of total revenue, or $1,104,000, for 9 months 2000 is due to additional marketing and promotion costs resulting from a contract entered into in 1st Quarter 2000. Accordingly, Intercomsoft's net income was $1,082,000 for 9 months 2000, a decrease of $509,000 from 9 months 1999 of $1,591,000. THE INSURANCE COMPANY Although the Insurance Company earned approximately $179,000 and $122,000 in gross premiums during 9 months 2000 and 9 months 1999, respectively, earned premiums ceded to reinsures approximated $92,000 and $64,000 in those years resulting in approximately $87,000 and $58,000 in net premiums earned of the Insurance Company's total revenues of approximately $162,000 and $130,000 for 9 months 2000 and 9 months 1999, respectively. During 9 months 2000 and 9 months 1999, the Insurance Company also received net interest income of approximately $10,000 and $30,000. During 9 months 2000 the Insurance Company also had approximately $28,000 of other income. Reinsurance commissions earned during 9 months 2000 and 1999 were approximately $37,000 and $22,000, respectively. The Insurance Company's total expenses of approximately $101,000 for 9 months 2000 resulted in a net income before taxes of approximately $57,000 compared to a net income of approximately $35,000 in 9 months 1999 after total expenses of $95,000. 9 Business segment information for nine months ended September 30, 2000
Insur- Docu- Bank Hotel rance ment Opera- Opera- opera- proces- Holding Elimina- tions tions tions sing Activities tions Consolidated ------ ------ ------ ------- ---------- -------- ------------ (In thousands of USD) Total revenue 1,641 1,735 162 2,186 - - 5,5724 Interest expense (297) (7) - - (36) - (341) Total revenue net of interest expense 1,344 1,728 162 2,186 (36) - 5,384 Provision for benefits, claims and credit gains 420 - (33) - - - 387 Operating expenses (1,432) (1,471) (68) (1,104) (1,435) - (5,510) Income (loss) from operations before income taxes and minority interest 332 257 61 1,082 (1,471) - 261 Provision for income taxes (28) (4) (40) - - - (72) Minority interest, net of taxes - (76) - - - - (60) Net income (loss) 304 141 57 1,082 (1,471) - 113 Fixed assets 1,743 4,135 35 - - - 5,913 Total assets 11,110 4,553 609 351 228 - 16,851 ------ ----- --- ----- ------ --- ------
10 Business segment information for nine months ended September 30, 1999
Insur- Docu- Bank Hotel rance ment Opera- Opera- opera- proces- Holding Elimina- tions tions tions sing Activities tions Consolidated ------ ------ ------ ------- ---------- -------- ------------ (In thousands of USD) Total revenue 2,056 1,580 130 2,177 - - 5,943 Interest expense (472) - - - - - (472) Total revenue net of interest expense 1,584 1,580 130 2,177 - - 5,471 Provision for benefits, claims and credit losses (327) - (27) - - - (354) Operating expenses (1,018) (1,231) (68) (586) (1,611) - (4,514) Income (loss) from operations before income taxes and minority interest 239 349 35 1,591 (1,611) - 603 Provision for income taxes (39) (74) - - - - (113) Minority interest, net of taxes - - - - - (96) (96) Net income (loss) 200 275 35 1,591 (1,611) (96) 394 Fixed assets 777 4,450 41 - - - 5,268 Total assets 9,200 4,910 425 1,568 181 16,284 ----- ----- --- ----- ------ --- ------
11 LIQUIDITY AND 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 capial 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 Janaury 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 hte 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 October 25, 2000 Ted Shapiro resigned from the Company's Board of Directors and as the Company's Chief Executive Officer ("CEO"). Robert L. Blessey also resigned from the Company's Board of Directors as of such date. As of the date of this filing, no individual has been appointed to the Company's Board of Directors to fill such vacancies. In addition, on October 25, 2000 Ted Shapiro and Robert L. Blessey each agreed to terminate their Employment Agreements with the Company subject to the consummation of a Release and Indemnity Agreement between the Company and each of such two individuals. On November 9, 2000 Alexander Gordin was appointed as the Company's CEO. RELATED PARTY TRANSACTIONS 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 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. The balance on the Loan is $723,000 at September 30, 2000. 12 The Company believes all transactions conducted with related parties and 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 September 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: November 20, 2000 By: /s/Alexander Gordin -------------------------------- Alexander Gordin, President and Chief Executive Officer Dated: November 20, 2000 By: /s/Shmuel Gurfinkel -------------------------------- Shmuel Gurfinkel, Chief Financial Officer 15 EX-27 2 a2031549zex-27.txt FDS
5 0001011733 TRIMOL GROUP, INC. 1,000 9-MOS DEC-31-2000 JUL-01-2000 SEP-30-2000 4,475 1,037 3,630 472 0 8,892 5,913 0 16,851 7,825 0 0 0 120 4,964 16,851 0 5,724 1,439 5,463 76 0 340 185 72 113 0 0 0 113 .009 .009
-----END PRIVACY-ENHANCED MESSAGE-----