-----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, OT/rQKb5oOnhCzifYh5x6h3krRvE/IPpRObP8UQpAtM6re88zMrR875Dpk17UgEl 97bDdmbyBCmMt5Gr5BTuSA== 0000950123-98-006743.txt : 19980721 0000950123-98-006743.hdr.sgml : 19980721 ACCESSION NUMBER: 0000950123-98-006743 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980720 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980720 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRIMOL GROUP INC CENTRAL INDEX KEY: 0001011733 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 133859706 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-28144 FILM NUMBER: 98668837 BUSINESS ADDRESS: STREET 1: 410 WEST 53RD ST STE 105 CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2126648949 MAIL ADDRESS: STREET 1: 51 HUDSON POINT LN CITY: OSSINING STATE: NY ZIP: 10562 FORMER COMPANY: FORMER CONFORMED NAME: NUTRONICS INTERNATIONAL INC DATE OF NAME CHANGE: 19960404 8-K/A 1 AMENDMENT TO FORM 8-K RE: TRIMOL GROUP, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earlier event reported): July 20, 1998 TRIMOL GROUP, INC. (Exact Name of Registrant as Specified in Charter) Delaware 0-28144 13-3859706 (State of Incorporation (Commission File No.) (IRS Identification Number) or other Jurisdiction) 1285 Avenue of the Americas, 35th Floor New York, New York 10019 (Address of Principal Executive Offices) (212) 554-4394 (Registrant's Telephone Number Including Area Code) 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS As reported in the Current Report on Form 8-K filed with the Securities and Exchange Commission on May 20, 1998 (the "8-K"), on May 6, 1998, pursuant to a Stock Purchase Agreement dated May 3, 1998 to which Trimol Group, Inc. (the "Company"), was a party, the Company acquired all of the issued and outstanding shares of the capital stock of Intercomsoft Limited, an Irish corporation ("Intercomsoft") controlled by Boris Birshtein, a principal stockholder of the Company, in exchange for 1,000,000 shares of Common Stock of the Company. In the Form 8-K, the Company indicated that it did not have available the required financial information of Intercomsoft. The Company is filing this Current Report on Form 8- K/A to amend the 8-K to include all required financial statements and information. See Item 7 below. Intercomsoft's revenues and net profit for the year ended December 31, 1997 were $4,346,000 and $2,214,000, respectively, and its revenues and net profit for the first quarter ended March 31, 1998 were $1,312,000 and $715,000, respectively, as set forth in the financial statements referred to in ITEM 7 below. Also included in the financial statements referred to in ITEM 7 below is Unaudited Proforma Consolidated Financial Information of the Company for the year ended December 31, 1997 and the first quarter ended March 31, 1998, which unaudited proforma consolidated financial information includes the results of operations of Intercomsoft for such periods as if Intercomsoft had been acquired by the Company as of January 1, 1997. As set forth in such Unaudited Proforma Consolidated Financial Information, the earnings per share of the Company for the quarter ended March 31, 1998 were $.03 per share, exclusive of the results of operations of Intercomsoft for such period and $.09 per share, inclusive of the results of operations of Intercomsoft for such period. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. See the Index to Financial Statements and Exhibits. 3 INDEX TO FINANCIAL STATEMENTS Page No. -------- UNAUDITED PROFORMA CONSOLIDATED FINANCIAL INFORMATION Description of Transactions 5 Unaudited Proforma Consolidated Balance Sheet 6 Unaudited Proforma Consolidated Statement of Operations 8 Notes to the Unaudited Proforma Consolidated Financial Statements 12 INTERCOMSOFT LIMITED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED DECEMBER 31, 1997 Report of Independent Auditors 15 Balance Sheets as of December 31, 1996 and 1997 16 Statements of Operations for the Years Ended December 31, 1996 and 1997 17 Statements of Shareholders' Equity for the Years Ended December 31, 1996 and 1997 18 Statements of Cash Flows for the Years Ended December 31, 1996 and 1997 19 Notes to the Financial Statements 20 INTERCOMSOFT LIMITED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED DECEMBER 31, 1996 Report of Independent Auditors 28 Balance Sheets as of December 31, 1995 and 1996 29 Statements of Operations for the 11 Months Ended December 31, 1995 and for the Year Ended December 31, 1996 30 Statements of Shareholders' Equity for the 11 Months Ended December 31, 1995 and for the Year Ended December 31, 1996 31 Statements of Cash Flows for the 11 Months Ended December 31, 1995 and for the Year Ended December 31, 1996 32 Notes to the Financial Statements 33 INTERCOMSOFT LIMITED FINANCIAL STATEMENTS AS AT AND FOR THE QUARTER ENDED DECEMBER 31, 1998 Balance Sheets as of March 31, 1998 41 Statements of Operations for the 3 Months Ended March 31, 1998 42 Statements of Shareholders' Equity for the 3 Months Ended March 31, 1998 43 Statements of Cash Flows for the 3 Months Ended March 31, 1998 44 Notes to the Financial Statements 45 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the Undersigned hereunto duly authorized. TRIMOL GROUP, INC. (REGISTRANT) By: /s/ Ted Shapiro ------------------------------------- Ted Shapiro, President Dated: As of July 20, 1998 5 TRIMOL GROUP, INC. UNAUDITED PROFORMA CONSOLIDATED FINANCIAL INFORMATION DESCRIPTION OF TRANSACTIONS (a) As of January 6, 1998 pursuant to an Agreement and Plan of Reorganization dated as of December 31, 1997, Trimol Group, Inc. ("the Company") acquired all of the issued and outstanding shares of the capital stock of Exim Asint S.A. and of Banca Comerciale Pe Actiuni "Export - Import", and 65% of the capital stock of Jolly Alon Limited (collectively, the "Target Companies") in exchange for an aggregate of 10,000,000 shares of the Company's common stock, par value $0.01 per share, which shares represented 90.9% of the total issued and outstanding shares of the Company's common stock. (b) Pursuant to a Stock Purchase Agreement dated May 3, 1998, to which the Company was a party, on May 6, 1998 the Company acquired all of the issued and outstanding shares of capital stock of Intercomsoft Limited, an Irish corporation ("Intercomsoft") in exchange for 1,000,000 shares of the Company's common stock, par value $0.01 per share. 6 TRIMOL GROUP INC. UNAUDITED PROFORMA CONSOLIDATED BALANCE SHEET (IN THOUSANDS)
MARCH 31, 1998 ---------------------------------------- PROFORMA AS REPORTED ADJUSTMENTS RESULTS ----------- ----------- ------- ASSETS ASSETS OF BANK BUSINESS Cash and due from banks .................... $ 4,619 $ -- $4,619 Time deposits with banks ................... 520 -- 520 Securities purchased under resale agreements 212 -- 212 Held to maturity securities ................ 1,315 -- 1,315 Loans ...................................... 5,662 -- 5,662 Less: allowance for possible loan losses ... (602) -- (602) Customer's acceptance liabilities .......... 1,895 -- 1,895 Investments in investee .................... 15 -- 15 Bank premises and equipment ................ 961 -- 961 Other account receivable and debit balances 371 -- 371 ------- ---- ------- TOTAL ASSETS OF BANK BUSINESS .............. 14,968 -- 14,968 ------- ---- ------- ASSETS OF INSURANCE BUSINESS INVESTMENTS Short term securities held to maturity ..... 267 -- 267 ------- ---- ------- 267 -- 267 ------- ---- ------- Outstanding premiums ....................... 3 -- 3 Other accounts receivable .................. 9 -- 9 ------- ---- ------- 12 -- 12 ------- ---- ------- REINSURERS' SHARE OF RESERVES Provision for unearned premiums ............ 46 -- 46 Losses and loss adjustment reserves ........ 142 -- 142 ------- ---- ------- 188 -- 188 ------- ---- ------- INVESTMENT IN AFFILIATE .................... 9 -- 9 ------- ---- ------- FURNITURE, EQUIPMENT AND VEHICLES .......... 79 -- 79 ------- ---- ------- OTHER ASSETS ............................... 46 -- 46 ------- ---- ------- TOTAL ASSETS OF INSURANCE BUSINESS ......... 601 -- 601 ------- ---- ------- ASSETS OF OTHER BUSINESSES CURRENT ASSETS: Cash and cash equivalents .................. 20 -- 20 Trade accounts receivable .................. 74 588 662 Other account receivable and debit balances 157 -- 157 Inventories ................................ 234 -- 234 ------- ---- ------- 485 588 1,073 ------- ---- ------- OPERATING EQUIPMENT ........................ 266 -- 266 ------- ---- ------- PROPERTY AND EQUIPMENT, NET ................ 6,057 -- 6,057 ------- ---- ------- GOODWILL ................................... 89 -- 89 ------- ---- ------- TOTAL ASSETS OF OTHER BUSINESSES ........... 6,897 588 7,485 ------- ---- ------- TOTAL ASSETS ............................... $22,466 $588 $23,054 ======= ==== =======
7 TRIMOL GROUP INC. UNAUDITED PROFORMA CONSOLIDATED BALANCE SHEET (IN THOUSANDS)
MARCH 31, 1998 ---------------------------------------- PROFORMA AS REPORTED ADJUSTMENTS RESULTS ----------- ----------- ------- LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES OF BANK BUSINESS DEPOSITS: Non interest bearing deposits ............................. $ 5,945 $ -- $ 5,945 Interest bearing deposits ................................. 2,700 -- 2,700 Deposits of the National Bank ............................. 360 -- 360 ------- ---- ------- 9,005 -- 9,005 ACCEPTANCE OUTSTANDING .................................... 1,895 -- 1,895 ------- ---- ------- OTHER LIABILITIES ......................................... 2,420 -- 2,420 ------- ---- ------- TOTAL LIABILITIES OF BANK BUSINESS ........................ 13,320 -- 13,320 ------- ---- ------- LIABILITIES OF INSURANCE BUSINESS Losses and loss adjustment reserves ....................... 256 -- 256 Provision for unearned premiums ........................... 91 -- 91 Reinsurance balances payable .............................. 19 -- 19 Deferred policy acquisition costs, net .................... 5 -- 5 Other accounts payable .................................... 30 -- 30 ------- ---- ------- TOTAL LIABILITIES OF INSURANCE BUSINESS ................... 401 -- 401 ------- ---- ------- LIABILITIES OF OTHER BUSINESSES Credit from banking institutions .......................... -- 4 4 Related parties ........................................... 121 -- 121 Trade accounts payable .................................... 91 528 619 Other accounts payable and credit balances ................ 100 -- 100 ------- ---- ------- 312 532 844 ------- ---- ------- LONG TERM LIABILITIES Deferred taxes ............................................ 25 -- 25 ------- ---- ------- TOTAL LIABILITIES OF OTHER BUSINESSES ..................... 337 532 869 ------- ---- ------- TOTAL LIABILITIES ......................................... 14,058 532 14,590 ------- ---- ------- OUTSIDE SHAREHOLDERS' INTEREST ............................ 2,316 -- 2,316 ------- ---- ------- SHAREHOLDERS' EQUITY Preferred stock: 10,000 shares authorized of U.S.$100 par value, 0 and 0 shares issued and outstanding, respectively -- -- -- Common stock: 30,000,000 shares authorized of U.S.$ 0.01 par value, 11,000,000 and 12,000,000 shares issued and outstanding, respectively ................................. 110 10 120 Additional paid in capital ................................ 5,651 (10) 5,641 Retained earnings ......................................... 331 56 387 ------- ---- ------- TOTAL SHAREHOLDERS' EQUITY ................................ 6,092 56 6,148 ------- ---- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .................................................... $22,466 $588 $23,054 ======= ==== =======
8 TRIMOL GROUP INC. UNAUDITED PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED MARCH 31, 1998 ---------------------------------------- AS REPORTED AS REPORTED BY THE BY PROFORMA COMPANY INTERCOMSOFT RESULTS ------- ------------ ------- INCOME FROM BANK BUSINESS INTEREST INCOME Interest on due from banks and time deposits with banks $ 29 $ -- $ 29 Interest on securities ................................ 91 -- 91 Interest on loans ..................................... 450 -- 450 ----- ----- ----- TOTAL INTEREST INCOME ................................. 570 -- 570 ----- ----- ----- INTEREST EXPENSE Interest on demand deposits ........................... -- -- -- Interest on time deposits ............................. 141 -- 141 Interest on deposits from banks ....................... 2 -- 2 ----- ----- ----- TOTAL INTEREST EXPENSE ................................ 143 -- 143 ----- ----- ----- NET INTEREST INCOME ................................... 427 -- 427 LESS: ALLOWANCE FOR POSSIBLE LOAN LOSSES .............. (64) -- (64) ----- ----- ----- NET INTEREST INCOME AFTER ALLOWANCE FOR POSSIBLE LOAN LOSSES ................................................ 363 -- 363 ----- ----- ----- NON INTEREST INCOME Financial services fees ............................... 166 -- 166 Foreign exchange trading profits and commissions ...... 204 -- 204 Other ................................................. 17 -- 17 ----- ----- ----- TOTAL NON INTEREST INCOME ............................. 387 -- 387 ----- ----- ----- NON INTEREST EXPENSE Salaries and related costs ............................ 151 -- 151 Equipment and depreciation ............................ 80 -- 80 Maintenance ........................................... 20 -- 20 Communication and transportation ...................... 78 -- 78 Taxes other than income ............................... 2 -- 2 Outside services and processing ....................... 26 -- 26 Marketing and development ............................. 29 -- 29 Fees paid ............................................. 26 -- 26 Other ................................................. 25 -- 25 ----- ----- ----- TOTAL NON INTEREST EXPENSE ............................ 437 -- 437 ----- ----- ----- INCOME BEFORE INCOME TAXES............................. 313 -- 313 INCOME TAX ............................................ 46 -- 46 ----- ----- ----- NET INCOME FROM BANK BUSINESS ......................... $ 267 $ -- $ 267 ----- ----- -----
9 TRIMOL GROUP INC. UNAUDITED PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED MARCH 31, 1998 -------------------------------------------- AS REPORTED AS REPORTED BY THE BY PROFORMA COMPANY INTERCOMSOFT RESULTS ------- ------------ ------- FROM INSURANCE BUSINESS REVENUES Gross insurance premiums written ...................... $ 45 $ -- $ 45 Change in provisions for unearned premium ............. 2 -- 2 ----------- ------- ----------- Gross premiums earned ................................. 47 -- 47 ----------- ------- ----------- Premiums ceded (reinsured) ............................ (24) -- (24) Change in reinsurers' share for unearned premium ...... (17) -- (17) ----------- ------- ----------- Earned premiums ceded ................................. (41) -- (41) ----------- ------- ----------- Net premiums earned ................................... 6 -- 6 ----------- ------- ----------- Interest income, net .................................. 14 -- 14 ----------- ------- ----------- Other revenues Commission earned from reinsurance .................... 11 -- 11 Other income .......................................... 2 -- 2 ----------- ------- ----------- 13 -- 13 ----------- ------- ----------- TOTAL REVENUES ........................................ 33 -- 33 ----------- ------- ----------- EXPENSES Losses and loss adjustment expense .................... 61 -- 61 Reinsurers' share of losses and loss adjustment expense (35) -- (35) ----------- ------- ----------- 26 -- 26 ----------- ------- ----------- Other operating expenses .............................. 46 -- 46 Translation loss ...................................... 2 -- 2 ----------- ------- ----------- 48 -- 48 ----------- ------- ----------- TOTAL EXPENSES ........................................ 74 -- 74 ----------- ------- ----------- NET LOSS FROM INSURANCE BUSINESS ...................... (41) -- (41) ----------- ------- ----------- FROM OTHER BUSINESSES Revenue .............................................. 694 1,312 2,006 Cost of revenue ...................................... 388 512 900 ----------- ------- ----------- Gross profit ......................................... 306 800 1,106 Selling, administrative and general expenses ......... 124 85 209 ----------- ------- ----------- Income before financing income ....................... 182 715 897 Financing income, net ................................ 6 -- 6 ----------- ------- ----------- Income from regular operations ....................... 188 715 903 Other expenses ....................................... 5 -- 5 ----------- ------- ----------- Income before income taxes ........................... 183 715 898 Income taxes ......................................... 42 -- 42 ----------- ------- ----------- NET INCOME FROM OTHER BUSINESSES ..................... 141 715 856 ----------- ------- ----------- TOTAL INCOME BEFORE OUTSIDE SHAREHOLDERS' INTEREST IN NET EARNINGS ............... 367 715 1,082 OUTSIDE SHAREHOLDERS' INTEREST IN NET EARNINGS .............................................. (44) -- (44) ----------- ------- ----------- TOTAL NET INCOME ...................................... $ 323 $ 715 $ 1,038 =========== ======= =========== NET EARNING PER SHARE FOR THE PERIOD .................. $ 0.03 $ 7,153 $ 0.09 =========== ======= =========== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING ........................................... 10,333,333 100 12,000,000 =========== ======= ===========
10 TRIMOL GROUP INC. UNAUDITED PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, 1997 ----------------------------------------------------------- AS REPORTED ACQUISITION AS REPORTED BY THE OF TARGET BY PROFORMA COMPANY COMPANIES INTERCOMSOFT RESULTS ------- --------- ------------ ------- INCOME FROM BANK BUSINESS INTEREST INCOME Interest on due from banks and time deposits with banks ..................................... $ -- $ 319 $ -- 319 Interest on securities ......................... -- 656 -- 656 Interest on loans .............................. -- 1,453 -- 1,453 -------- ------- ---- ------- TOTAL INTEREST INCOME .......................... -- 2,428 -- 2,428 -------- ------- ---- ------- INTEREST EXPENSE Interest on demand deposits .................... -- 81 -- 81 Interest on time deposits ...................... -- 484 -- 484 Interest on deposits from banks ................ -- 202 -- 202 -------- ------- ---- ------- TOTAL INTEREST EXPENSE ......................... -- 767 -- 767 -------- ------- ---- ------- NET INTEREST INCOME ............................ -- 1,661 -- 1,661 LESS: ALLOWANCE FOR POSSIBLE LOAN LOSSES ....... -- (674) -- (674) -------- ------- ---- ------- NET INTEREST INCOME AFTER ALLOWANCE FOR POSSIBLE LOAN LOSSES .................................... -- 987 -- 987 -------- ------- ---- ------- NON INTEREST INCOME Financial services fees ........................ -- 745 -- 745 Foreign exchange trading profits and commissions -- 1,123 -- 1,123 Other .......................................... -- 94 -- 94 -------- ------- ---- ------- TOTAL NON INTEREST INCOME ...................... -- 1,962 -- 1,962 -------- ------- ---- ------- NON INTEREST EXPENSE Salaries and related costs ..................... -- 673 -- 673 Equipment and depreciation ..................... -- 156 -- 156 Maintenance .................................... -- 71 -- 71 Communication and transportation ............... -- 299 -- 299 Taxes other than income ........................ -- 32 -- 32 Outside services and processing ................ -- 279 -- 279 Marketing and development ...................... -- 40 -- 40 Fees paid ...................................... -- 106 -- 106 Other .......................................... -- 193 -- 193 -------- ------- ---- ------- TOTAL NON INTEREST EXPENSE ..................... -- 1,849 -- 1,849 -------- ------- ---- ------- INCOME BEFORE INCOME TAXES ..................... -- 1,100 -- 1,100 INCOME TAX ..................................... -- 208 -- 208 -------- ------- ---- ------- NET INCOME FROM BANK BUSINESS .................. $ -- $ 892 $ -- $ 892 -------- ------- ---- -------
11 TRIMOL GROUP INC. UNAUDITED PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, 1997 ------------------------------------------------------------ AS REPORTED ACQUISITION AS REPORTED BY THE OF TARGET BY PROFORMA COMPANY COMPANIES INTERCOMSOFT RESULTS ------- --------- ------------ ------- FROM INSURANCE BUSINESS REVENUES Gross insurance premiums written ...................... $ -- $ 311 $ -- $ 311 Change in provisions for unearned premium ............. -- (45) -- (45) ----- ------------ ------- ------------ Gross premiums earned ................................. -- 266 -- 266 ----- ------------ ------- ------------ Premiums ceded (reinsured) ............................ -- (196) -- (196) Change in reinsurers' share for unearned premium ...... -- 20 -- 20 ----- ------------ ------- ------------ Earned premiums ceded ................................. -- (176) -- (176) ----- ------------ ------- ------------ Net premiums earned ................................... -- 90 -- 90 ----- ------------ ------- ------------ Interest income, net .................................. -- 53 -- 53 ----- ------------ ------- ------------ Other revenues Commission earned from reinsurance .................... -- 51 -- 51 Other income .......................................... -- 15 -- 15 ----- ------------ ------- ------------ -- 66 -- 66 ----- ------------ ------- ------------ TOTAL REVENUES ........................................ -- 209 -- 209 ----- ------------ ------- ------------ EXPENSES Losses and loss adjustment expense .................... -- 185 -- 185 Reinsurers' share of losses and loss adjustment expense -- (126) -- (126) ----- ------------ ------- ------------ -- 59 -- 59 ----- ------------ ------- ------------ Other operating expenses .............................. -- 115 -- 115 Translation loss ...................................... -- 2 -- 2 ----- ------------ ------- ------------ -- 117 -- 117 TOTAL EXPENSES ........................................ -- 176 -- 176 ----- ------------ ------- ------------ INCOME BEFORE INCOME TAXES ............................ -- 33 -- 33 INCOME TAXES .......................................... -- 2 -- 2 ----- ------------ ------- ------------ NET INCOME FROM INSURANCE BUSINESS .................... -- 31 -- 31 ----- ------------ ------- ------------ FROM OTHER BUSINESSES Revenue ............................................... -- 2,817 4,346 7,163 Cost of revenue ....................................... -- 2,123 2,008 4,131 ----- ------------ ------- ------------ Gross profit .......................................... -- 694 2,338 3,032 Selling, administrative and general expenses .......... -- 737 123 860 ----- ------------ ------- ------------ Income (loss) before financing income ................. -- (43) 2,215 2,172 Financing expenses, net ............................... -- 46 1 47 ----- ------------ ------- ------------ Income (loss) from regular operations ................. -- (89) 2,214 2,125 Other expenses ........................................ -- 11 -- 11 ----- ------------ ------- ------------ Income (loss) before income taxes ..................... -- (100) 2,214 2,114 Income taxes .......................................... -- 7 -- 7 ----- ------------ ------- ------------ NET INCOME (LOSS) FROM OTHER BUSINESSES .............. -- (107) 2,214 2,107 ----- ------------ ------- ------------ TOTAL INCOME BEFORE OUTSIDE SHAREHOLDERS' INTEREST IN NET EARNINGS ................ -- 816 2,214 3,030 OUTSIDE SHAREHOLDERS' INTEREST IN NET LOSS ............ -- 34 -- 34 ----- ------------ ------- ------------ TOTAL NET INCOME ...................................... $ -- $ 850 $ 2,214 $ 3,064 ===== ============ ======= ============ NET EARNING PER SHARE FOR THE PERIOD .................. $ -- $ 0.08 $22,141 $ 0.26 ===== ============ ======= ============ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING ........................................... -- 11,000,000 100 12,000,000 ===== ============ ======= ============
12 TRIMOL GROUP INC. NOTES TO THE UNAUDITED PROFORMA CONSOLIDATED FINANCIAL STATEMENTS 1. The unaudited proforma consolidated balance sheet as of March 31, 1998 is prepared under the assumption that the acquisition of Intercomsoft was consummated on March 31, 1998. 2. The unaudited proforma consolidated statements of operations for the year ended December 31, 1997 and for the period of three months ended March 31, 1998 are prepared under the assumption that the acquisition of target companies and the acquisition of Intercomsoft were both implemented on December 31, 1996. 3. The acquisition of the Target Companies was accounted for using the reverse purchase method. The excess amount of the purchase price over net assets amounted to $90,909 and was attributed to goodwill, which is amortized by the straight line method over ten years. The purchase price was calculated under the assumption that the value of one share of the Company's common stock as of December 31, 1996 was $0.10. 4. The acquisition of Intercomsoft is a transaction between enterprises under common control. The assets and liabilities of Intercomsoft were accounted for by the historical cost method in a manner similar to that in pooling of interests accounting. 13 INTERCOMSOFT LIMITED FINANCIAL STATEMENTS DECEMBER 31, 1997 US DOLLARS 14 INTERCOMSOFT LIMITED INDEX TO FINANCIAL STATEMENTS
PAGE - ---- REPORT OF INDEPENDENT AUDITORS........................................................1 Balance Sheets as of December 31, 1996 and 1997.......................................2 Statements of Operations for the years ended December 31, 1996 and 1997...............3 Statements of Shareholders' Equity for the years ended December 31, 1996 and 1997........................................................................4 Statements of Cash Flows for the years ended December 31, 1996 and 1997...............5 Notes to the Financial Statements.....................................................6 - 10
15 REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Shareholders of Intercomsoft Limited We have audited the accompanying balance sheets of Intercomsoft Limited (Irish Company) ("the Company") as of December 31, 1996 and 1997, and the related statements of operations, shareholders' equity and cash flows for each of the two years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 1996 and 1997 and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles in the United States. Braude Bavly Certified Public Accountants (Israel) A Member of firm KPMG International Tel Aviv, Israel May 9, 1998 16 INTERCOMSOFT LIMITED BALANCE SHEETS US DOLLARS
DECEMBER 31, --------------------------- 1997 1996 ------- ------- ASSETS CURRENT ASSETS: Cash ............................................................... $ -- $ 15,020 Accrued income ..................................................... 404,996 210,494 Related parties (Note 3) .......................................... -- 638,919 ----------- ----------- Total current assets ............................................ 404,996 864,433 ----------- ----------- $ 404,996 $ 864,433 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Credit from banking institution .................................... $ 411 $ -- Supercom ........................................................... 350,640 295,873 Related parties (Note 3) ........................................... -- 894,220 ----------- ----------- Total current liabilities ....................................... 351,051 1,190,093 ----------- ----------- SHAREHOLDERS' EQUITY: Ordinary share capital - English pound sign 1 par value: 1,000,000 shares authorised, 100 shares issued and outstanding as of December 31, 1996 and 1997 respectively .......................... 156 156 Retained earnings (accumulated deficit) ............................ 53,789 (325,816) ----------- ----------- Total shareholders' equity (deficiency) ......................... 53,945 (325,660) ----------- ----------- $ 404,996 $ 864,433 =========== ===========
The accompanying notes are an integral part of the financial statements. 17 INTERCOMSOFT LIMITED STATEMENTS OF OPERATIONS US DOLLARS
YEAR ENDED DECEMBER 31, ------------------------- 1997 1996 ------- ------ Revenue (Note 5 (a)) ............................ $4,345,934 $1,605,952 Cost of revenue (Note 5 (b)) .................... 2,008,027 988,338 ---------- ---------- Gross profit .................................... 2,337,907 617,614 Operating expenses: Selling expenses (Note 5 (c)) .............. 5,200 2,200 Management and general expenses (Note 5 (c)) 117,401 136,964 ---------- ---------- Total operating expenses ........................ 122,601 139,164 Income from operations ................ 2,215,306 478,450 Financing expenses (Note 5(d)) .................. 1,157 722 ---------- ---------- Net income for the year ............... $2,214,149 $ 477,728 ========== ========== Net income per share (Note 7) ......... $ 22,141 $ 4,777 ========== ==========
The accompanying notes are an integral part of the financial statements. 18 INTERCOMSOFT LIMITED STATEMENTS OF SHAREHOLDERS' EQUITY US DOLLARS
ORDINARY SHARE RETAINED CAPITAL EARNINGS ------------------- (ACCUMULATED SHARES AMOUNT DEFICIT) TOTAL ------ ------ -------- ----- Balance as of January 1, 1996 . 100 $ 1.56 $ (803,544) $ (803,338) Net income for the year ....... -- -- 477,728 477,728 --- -------- ----------- ----------- Balance as of December 31, 1996 100 $ 1.56 (325,816) (325,660) Net income for the year ....... -- -- 2,214,149 2,214,149 Dividend paid ................. -- -- (1,834,544) (1,834,544) --- -------- ----------- ----------- Balance as of December 31, 1997 100 $ 1.56 $ 53,789 $ 53,945 === ======== =========== ===========
The accompanying notes are an integral part of the financial statements. 19 INTERCOMSOFT LIMITED STATEMENTS OF CASH FLOWS US DOLLARS
YEAR ENDED DECEMBER 31, --------------------------- 1997 1996 ------- ------- Cash flows from operating activities Net income for the year ............................................. $ 2,214,149 $ 477,728 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Changes in assets and liabilities: Increase in accrued income .......................................... (194,502) (160,366) Increase in related parties ......................................... (255,301) (654,606) Increase in Supercom ................................................ 54,767 287,243 ----------- ----------- Net cash provided by (used in) operating activities .................... 1,819,113 (50,001) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase in credit from banking institution ......................... 411 -- Cash dividend paid .................................................. (1,834,544) -- ----------- ----------- Net cash used in financing activities .................................. (1,834,133) -- ----------- ----------- Decrease in cash ....................................................... (15,020) (50,001) Balance of cash at beginning of year .................................. 15,020 65,021 ----------- ----------- Balance of Cash at end of year ......................................... $ -- $ 15,020 ========= ===========
The accompanying notes are an integral part of the financial statements. 20 INTERCOMSOFT LIMITED NOTES TO THE FINANCIAL STATEMENTS US DOLLARS NOTE 1 - GENERAL (a) Establishment of the Company Intercomsoft Limited (the "Company") was incorporated on February 1995 as a non resident Irish registered company. (b) Activity of the Company The Company imports equipment and auxiliary materials intended for the production of computerised documents (passports, drivers licenses, vehicle registrations and ID cards), and the software that is necessary for operating of this equipment, and leases it to the Moldovan Ministry of Economics, which is the Company's sole client, according to the Contracts on Leasing Equipment and Licensing Technology between the Company and such Ministry (the "Supply Agreement") (for more details see note 4). (c) Concentration of risks that may have a significant impact on the Company are as follows: 1. Political environment in Moldova. The political situation could have a material effect on the Company's business. 2. Concentration of credit risk as mentioned above the Company's only client is the Moldovan Ministry of Economics. NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES The financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("US GAAP") applied on a consistent basis. The significant accounting policies followed in the preparation of the financial statements, are: (a) FINANCIAL STATEMENTS IN US DOLLARS The accompanying financial statements have been prepared in US Dollars (the "dollar") because the functional currency of the Company is the dollar. The dollar is the currency of the primary economic environment in which the operations of the Company are conducted. The Company manages its operations in dollars (the incomes are received in dollars, and all the expenses and equipment purchases are paid in dollars). (b) USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. (c) INVESTMENT IN LEASE Due to uncertainties regarding the economic situation in Moldova, the present value of the lease payments has been charged to the statements of operations. 21 INTERCOMSOFT LIMITED NOTES TO THE FINANCIAL STATEMENTS US DOLLARS NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued) (d) REVENUE RECOGNITION Revenue from the lease agreement with Moldovan Ministry of Economics is recognised upon the number of computerised documents that were produced during the period. (e) ADVERTISING EXPENSES Advertising expenses are charged to income as incurred. Advertising expenses were $5,200 and $2,200 for 1997 and 1996, respectively. (f) NET INCOME PER SHARE Information regarding net income per share is computed on the basis of the weighted average of the number of ordinary shares outstanding in the period. NOTE 3 - RELATED PARTIES (a) Transactions In September 1995 the Company acquired equipment from a related party for $894,220 US dollars. (b) Balances with related parties
DECEMBER 31, ------------------------- 1997 1996 ---- ---- CURRENT ASSETS Related parties .............. $ -- $638,919 ===== ======== CURRENT LIABILITIES Related Party .................. $ -- $894,220 ===== ========
(1) Regarding the balance in 1996, see also note 3(a). Regarding the balance in 1997, the amount in respect of the said balance was paid. 22 INTERCOMSOFT LIMITED NOTES TO THE FINANCIAL STATEMENTS US DOLLARS NOTE 4 - COMMITMENTS (a) On August 25, 1995 the Company entered into an agreement with Supercom Ltd. ("Supercom") for the purchase of equipment for the production of computerised documents (passports, driver licenses, vehicle registrations and I.D. documents). Pursuant to the agreement, Supercom provides the Company with the guidance and support required for the installation and operation of the equipment, as well as the materials required for its maintenance, and has the right to improve and upgrade the equipment and make such improvements and upgrades available to the Company. The Company pays Supercom for each months delivery of equipment, software and consumable on the following month plus 25% of the Company's profits payable monthly, and is required to pay, in case of delays in payment, a penalty equal to 0.2% of the overdue sum for each delayed day. The unpaid balance as of December 31, 1997 is $350,640. (b) The Company's selling, management and general expenses and also the purchase of the auxiliary materials are paid by Supercom, which is refunded after an invoice is submitted to the Company. (c) On April 29, 1996 the Company entered into the Supply Agreement with the Moldovan Ministry of Economics for the lease of equipment for production of computerised documents, which it purchased from Supercom, for a period of ten years. At the expiration of this period, the agreement shall be automatically extended for an additional term of ten years. Pursuant to the Supply Agreement the Company will also provide professional training in the use of the equipment, maintenance and consultancy services, and regular supply of supplementary equipment. According to the Supply Agreement the lessee will be entitled to receive ownership of the equipment at the end of the term of the Agreement. According to the Supply Agreement, the lessee shall pay to the Company each month US $10 for each passport and US $4.50 for any other document. Regarding the accounting policy in respect of the leased equipment - see note 2(c). 23 INTERCOMSOFT LIMITED NOTES TO THE FINANCIAL STATEMENTS US DOLLARS NOTE 5 - SUPPLEMENTARY STATEMENT OF OPERATIONS INFORMATION
YEAR ENDED DECEMBER 31, --------------------------- 1997 1996 ---- ---- (a) Revenue Services Supplementary installations and services ... $4,345,934 $1,605,952 ========== ========== (b) Cost of revenue Equipment (1) .............................. $1,547,929 $ 870,709 Auxiliary materials ........................ 442,994 89,486 Packaging ....................................... 6,928 9,466 Transportation .................................. 10,176 18,677 ---------- ---------- $2,008,027 $ 988,338 ========== ==========
(1) Includes the amount of $809,880 and $711,466 in respect of 1997 and 1996, respectively, in respect of amortization of leased equipment, and the amount of $738,049 and $159,243 in respect of 1997 and 1996, respectively, in respect of the portion of profit to which Supercom is entitled under the Agreement. (Regarding the accounting policy in respect of the leased equipment - see note 2(c)). (c) Selling, management and general expenses
(1) Selling expenses Advertising ................. $ 5,200 $ 2,200 ======== ======== (2) Management and general expense Labor ............................ $ 61,776 $ 41,205 Travel ........................... 21,717 26,460 Communications ................... 3,760 5,261 Management fees .................. 20,000 -- Entertainment .................... 838 827 Legal fees ....................... -- 4,546 Professional services ............ 3,500 54,348 Other ............................ 5,810 4,317 -------- --------
24
(d) Financing expenses ............... $117,401 $136,964 ======== ======== Interest and commissions ......... $ 1,157 $ 722 ======== ========
25 INTERCOMSOFT LIMITED NOTES TO THE FINANCIAL STATEMENTS US DOLLARS NOTE 6 - TAX EXPENSES Company's tax liability (a) The Company is a non resident Irish Registered Company, that is wholly owned and controlled from outside of Ireland and does not undertake any activities within this jurisdiction, therefore, according to a legal opinion, the Company is not subject to Irish tax. (b) The Company delivers in Moldova the equipment on the basis of the Supply Agreement with the Ministry of Economics of Moldova. In this case, the Ministry of Economics is the importer and therefore is subject to taxation. Based upon the above, the Company is not subject to taxation in the Republic of Moldova, because it is not carrying out the business activity in Moldova which would subject it to taxation. NOTE 7 - NET INCOME PER SHARE
YEAR ENDED DECEMBER 31, ------------------------------ 1997 1996 ---- ---- Net income for the year ............... $2,214,149 $ 477,728 ---------- ---------- Number of shares of (English pound sign) 1 par value .... 100 100 ========== ========== Net income per share .................. $ 22,141 $ 4,777 ========== ==========
NOTE 8 - SUPPLEMENTARY INFORMATION REGARDING FINANCIAL INSTRUMENTS (a) The Company has the following financial instruments: Non-derived financial assets including cash and accrued income and related parties and non-derived financial liabilities including trade accounts payable and related parties. Due to the nature of most of the financial instruments, their fair value is similar or identical to their carrying value. (b) Supplementary credit risk information: Credit risk represents the accounting loss which may result to the Company as of the date of the financial statements as a result of debtors not meeting their liabilities. As mentioned in note 1(b), the Company has only one client which is the Moldovan Ministry of Economics (see also note 2(c)). Regarding debts of related parties see note 3. 26 INTERCOMSOFT LIMITED FINANCIAL STATEMENTS DECEMBER 31, 1996 US DOLLARS 27 INTERCOMSOFT LIMITED INDEX TO FINANCIAL STATEMENTS
PAGE ---- REPORT OF INDEPENDENT AUDITORS ............................................ 1 BALANCE SHEETS AS OF DECEMBER 31, 1995 AND 1996 ........................... 2 STATEMENTS OF OPERATIONS FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1995 AND FOR THE YEAR ENDED DECEMBER 31, 1996 ................................ 3 STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1995 AND FOR THE YEAR ENDED DECEMBER 31, 1996 ....................... 4 STATEMENTS OF CASH FLOWS FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1995 AND FOR THE YEAR ENDED DECEMBER 31, 1996 ................................ 5 NOTES TO THE FINANCIAL STATEMENTS ......................................... 6 - 10
28 REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Shareholders of Intercomsoft Limited We have audited the accompanying balance sheets of Intercomsoft Limited (Irish Company) ("the Company") as of December 31, 1995 and 1996, and the related statements of operations, shareholders' equity and cash flows for each of the eleven monthes ended December 31, 1995 and for the year ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 1995 and 1996 and the results of its operations and its cash flows for the eleven monthes ended December 31, 1995 and for the year ended December 31, 1996, in conformity with generally accepted accounting principles in the United States. Braude Bavly Certified Public Accountants (Israel) A Member of firm KPMG International Tel Aviv, Israel May 9, 1998 29 INTERCOMSOFT LIMITED BALANCE SHEETS US DOLLARS
DECEMBER 31, -------------------------------- 1 9 9 6 1 9 9 5 ----------- ----------- NOTE ASSETS CURRENT ASSETS: Cash ............................................................................ 15,020 $ 65,021 Accrued income .................................................................. 210,494 50,128 Related parties (Note 3) ........................................................ 638,919 156 ----------- ----------- Total current assets ......................................................... 864,433 115,305 ----------- ----------- $ 864,433 $ 115,305 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Supercom ........................................................................ $ 295,873 $ 8,630 Related parties (Note 3) ........................................................ 894,220 910,063 ----------- ----------- Total current liabilities .................................................... 1,190,093 918,693 ----------- ----------- SHAREHOLDERS' EQUITY: Ordinary share capital - (English pound sign) 1 par value: 1,000,000 shares authorised, 100 shares issued and outstanding as of December 31, 1995 and 1996 respectively ............................................................. 156 156 Accumulated deficit ........................................................... (325,816) (803,544) ----------- ----------- Total shareholders' deficiency ............................................... (325,660) (803,388) ----------- ----------- $ 864,433 $ 115,305 =========== ===========
The accompanying notes are an integral part of the financial statements. 30 INTERCOMSOFT LIMITED STATEMENTS OF OPERATIONS US DOLLARS
ELEVEN MONTHES YEAR ENDED ENDED DECEMBER 31, DECEMBER 31, 1996 1995 ----------- ----------- Revenue (Note 5 (a)) ............................... $ 1,605,952 $ 417,214 Cost of revenue (Note 5 (b)) ....................... 988,338 1,197,864 ----------- ----------- Gross profit (loss) ...................... 617,614 (780,650) Operating expenses: Selling expenses (Note 5 (c)) ................. 2,200 -- Management and general expenses (Note 5 (c)) .. 136,964 22,794 ----------- ----------- Total operating expenses ........................... 139,164 22,794 Income (loss) from operations ............ 478,450 (803,444) Financing expenses (Note 5(d)) ..................... 722 100 ----------- ----------- Net income (loss) for the period ......... $ 477,728 $ (803,544) =========== =========== Net income (loss) per share (Note 7) ..... $ 4,777 $ (8,035) =========== ===========
The accompanying notes are an integral part of the financial statements. 31 INTERCOMSOFT LIMITED STATEMENTS OF SHAREHOLDERS' EQUITY US DOLLARS
RETAINED ORDINARY SHARE CAPITAL EARNINGS ---------------------- (ACCUMULATED SHARES AMOUNT DEFICIT) TOTAL ------ ------ -------- ----- Issuance of founders shares .............. 100 $1.56 -- $ 1.56 Net loss for the period from February 2, 1995 (date of inception) to December 31, 1995 ................................... -- -- (803,544) (803,544) --- ----- --------- --------- Balance as of December 31, 1995 .......... 100 $1.56 (803,544) (803,388) Net income for the year .................. -- -- 477,728 477,728 --- ----- --------- --------- Balance as of December 31, 1996 .......... 100 $1.56 $(325,816) $(325,660) === ===== ========= =========
32 INTERCOMSOFT LIMITED STATEMENTS OF CASH FLOWS US DOLLARS
Eleven Months YEAR ENDED Ended DECEMBER 31, December 31, ------------ ------------- 1996 1995 ------------ ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) for the period .............................................. $ 477,728 $(803,544) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Changes in assets and liabilities: Increase in accrued income .................................................... (160,366) (50,128) Increase (decrease) in related parties ....................................... (654,606) 909,907 Increase in Supercom .......................................................... 287,243 8,630 --------- --------- Net cash provided by (used in) operating activities .............................. (50,001) 64,865 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of shares ........................................................... -- 156 --------- --------- Net cash provided by financing activities ........................................ -- 156 --------- --------- Increase (decrease) in cash ...................................................... (50,001) 65,021 Balance of cash at beginning of period ........................................... 65,021 -- --------- --------- Balance of Cash at end of period ................................................. $ 15,020 $ 65,021 ========= =========
The accompanying notes are an integral part of the financial statements. 33 INTERCOMSOFT LIMITED NOTES TO THE FINANCIAL STATEMENTS US DOLLARS NOTE 1 - GENERAL (a) Establishment of the Company Intercomsoft Limited (the "Company") was incorporated in February 1995 as a non resident Irish registered company. (b) Activity of the Company The Company imports equipment and auxiliary materials intended for the production of computerised documents (passports, drivers licenses, vehicle registrations and ID cards), and the software that is necessary for operating of this equipment, and leases it to the Moldovan Ministry of Economics, which is the Company's sole client, pursuant to the Supply Agreement (for more details see note 4). (c) Concentration of risks that may have a significant impact on the Company are as follows: 1. Political environment in Moldova. The political situation could have a material effect on the Company's business. 2. Concentration of credit risk as mentioned above the Company's only client is the Moldovan Ministry of Economics. NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES The financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("US GAAP") applied on a consistent basis. The significant accounting policies followed in the preparation of the financial statements, are: (a) FINANCIAL STATEMENTS IN US DOLLARS The accompanying financial statements have been prepared in US Dollars (the "dollar") because the functional currency of the Company is the dollar. The dollar is the currency of the primary economic environment in which the operations of the Company are conducted. The Company manages its operations in dollars (the incomes are received in dollars, and all the expenses and equipment purchases are paid in dollars). (b) USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. (c) INVESTMENT IN LEASE Due to uncertainties regarding the economic situation in Moldova, the present value of the lease payments has been charged to the statements of operations. 34 INTERCOMSOFT LIMITED NOTES TO THE FINANCIAL STATEMENTS US DOLLARS NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued) (d) REVENUE RECOGNITION Revenue from the lease agreement with Moldovan Ministry of Economics is recognised upon the number of computerised documents that were produced during the period. (e) ADVERTISING EXPENSES Advertising expenses are charged to income as incurred. Advertising expenses were $2,200 in 1996. (f) NET INCOME PER SHARE Information regarding net income per share is computed on the basis of the weighted average of the number of ordinary shares outstanding in the period. NOTE 3 - RELATED PARTIES (a) Transactions In September 1995 the company acquired equipment from a related party for $894,220 US dollars. (b) Balances with related parties
DECEMBER 31, ------------------------- 1996 1995 -------- -------- CURRENT ASSETS Related parties ............ $638,919 $ 78 ======== ======== CURRENT LIABILITIES Related Party (1) .......... 894,220 894,220 Spectrum Ltd ............... -- 15,843 -------- -------- $894,220 $910,063 ======== ========
(1) Regarding the balance in 1995 and 1996, see also note 3(a). 35 INTERCOMSOFT LIMITED NOTES TO THE FINANCIAL STATEMENTS US DOLLARS NOTE 4 - COMMITMENTS (a) On August 25, 1995 the Company entered into an agreement with Supercom Ltd. ("Supercom") for the purchase of equipment for the production of computerised documents (passports, driver licenses, vehicle registrations and I.D. documents). Pursuant to the agreement, Supercom provides the Company with the guidance and support required for the installation and operation of the equipment, as well as the materials required for its maintenance, and has the right to improve and upgrade the equipment and make such improvements and upgrades available to the Company. The Company pays Supercom for each months delivery of equipment, software and consumable on the following month plus 25% of the Company's profits payable monthly, and is required to pay, in case of delays in payment, a penalty equal to 0.2% of the overdue sum for each delayed day. The unpaid balance as of December 31, 1996 is $ 295,873. According to an agreement between Supercom and the Company, Supercom is entitled to 25% of the Company's profits each year. (b) The Company's selling, management and general expenses and also the purchase of the auxiliary materials are paid by Supercom, which is refunded after an invoice is submitted to the Company. (c) On April 29, 1996 the Company entered into the Supply Agreement with the Moldovan Ministry of Economics ("the lessee") for the lease of equipment for the production of computerised documents, which it purchased from Supercom for a period of ten years. At the expiration of this period, the agreement shall be automatically extended for an additional term of ten years. Pursuant to the Supply Agreement the Company will also provide professional training in the use of the equipment, maintenance and consultancy services, and regular supply of supplementary equipment. According to the Supply Agreement the lessee will be entitled to receive ownership of the equipment at the end of the term of the Agreement. According to the Supply Agreement, the lessee shall pay to the Company each month US$10 for each passport and US$4.5 for any other document. Regarding the accounting policy in respect of the leased equipment - see note 2(c). 36 INTERCOMSOFT LIMITED NOTES TO THE FINANCIAL STATEMENTS US DOLLARS NOTE 5 - SUPPLEMENTARY STATEMENT OF OPERATIONS INFORMATION
ELEVEN MONTHES YEAR ENDED ENDED DECEMBER 31, DECEMBER 31, 1996 1995 ---------- ---------- (a) Revenue Services Supplementary installations and services ... $1,605,952 $ 417,214 ========== ========== (b) Cost of revenue Equipment (1) .............................. $ 870,709 $1,187,888 Auxiliary materials ........................ 89,486 1,534 Packaging .................................. 9,466 -- Transportation ............................. 18,677 8,442 ---------- ---------- $ 988,338 $1,197,864 ========== ==========
(1) Includes the amount of $711,466 and $1,187,888 in respect of 1996 and 1995, respectively, in respect of amortization of leased equipment, and the amount of $159,243 in respect of 1996, in respect of the portion of Intercomsoft's profit to which Supercom is entitled under the Agreement. (Regarding the accounting policy in respect of the leased equipment - see note 2(c)). (c) Selling, management and general expenses (1) Selling expenses Advertising ........................... $ 2,200 $ -- ======== ======== (2) Management and general expense Labor .................................. $ 41,205 $ 12,324 Travel ................................. 26,460 7,115 Communications .......................... 5,261 -- Management fees ......................... -- -- Entertainment ........................... 827 3,355 Legal fees .............................. 4,546 --
37 INTERCOMSOFT LIMITED NOTES TO THE FINANCIAL STATEMENTS US DOLLARS Professional services ........................... 54,348 -- Other ........................................... 4,317 -- -------- -------- $139,164 $ 22,794 ======== ======== (d) Financing expenses Interest and commissions ................... $ 722 $ 100 ======== ========
38 INTERCOMSOFT LIMITED NOTES TO THE FINANCIAL STATEMENTS US DOLLARS NOTE 6 - TAX EXPENSES Company's tax liability (a) The Company is a non resident Irish Registered Company, that is wholly owned and controlled from outside of Ireland and does not undertake any activities within this jurisdiction, therefore, according to a legal opinion, the Company is subject to Irish tax. (b) The Company delivers in Moldova the equipment on the basis of the Supply Agreement with the Ministry of Economics of Moldova. In this case, the Ministry of Economics is the importer of these services and therefore is subject to taxation. Based upon the above the Company is not subject to taxation in the Republic of Moldova, because it is not carrying out the business activity in Moldova which would subject it to taxation. NOTE 7 - NET INCOME (LOSS) PER SHARE
1996 1995 --------- --------- Net income (loss) for the period ... $ 477,728 $(803,544) --------- --------- Number of shares of (English pound sign) 1 par value ................ 100 100 ========= ========= Net income (loss) per share ........ $ 4,777 $ (8,035) ========= =========
NOTE 8 - SUPPLEMENTARY INFORMATION REGARDING FINANCIAL INSTRUMENTS (a) The Company has the following financial instruments: Non-derived financial assets including cash and accrued income and related parties and non-derived financial liabilities including trade accounts payable and related parties. Due to the nature of most of the financial instruments, their fair value is similar or identical to their carrying value. (b) Supplementary credit risk information: Credit risk represents the accounting loss which may result to the Company as of the date of the financial statements as a result of debtors not meeting their liabilities. As mentioned in note 1(b), the Company has only one client which is the Moldovan Ministry of Economics (see also note 2(b)). Regarding debts of related parties see note 3. 39 INTERCOMSOFT LIMITED FINANCIAL STATEMENTS MARCH 31, 1998 US DOLLARS 40 INTERCOMSOFT LIMITED INDEX TO FINANCIAL STATEMENTS PAGE BALANCE SHEETS AS OF MARCH 31, 1998............................................1 STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998.............2 STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 1998...3 STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1998.............4 NOTES TO THE FINANCIAL STATEMENTS..............................................5 41 INTERCOMSOFT LIMITED BALANCE SHEETS US DOLLARS
MARCH 31, --------------------------- DECEMBER 31, 1 9 9 8 1 9 9 7 1 9 9 7 ---------- ---------- ---------- (UNAUDITED) (AUDITED) ASSETS CURRENT ASSETS: Cash ..................................................... $ -- $ 19,016 $ -- Accrued income ........................................... 588,412 373,736 404,996 Related parties .......................................... -- 1,293,536 -- ---------- ---------- ---------- Total current assets .................................. 588,412 1,686,288 404,996 ---------- ---------- ---------- $ 588,412 $1,686,288 $ 404,996 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Credit from banking institution .......................... $ 4,437 $ -- $ 411 Supercom ................................................. 457,646 500,273 350,640 Related parties .......................................... -- 894,220 -- Other trade payable ...................................... 70,000 -- -- ---------- ---------- ---------- Total current liabilities ............................. 532,083 1,394,493 351,051 ---------- ---------- ---------- SHAREHOLDERS' EQUITY: Ordinary share capital - (Function) 1 par value: 1,000,000 shares authorised, 100 shares issued and outstanding as of December 31, 1997 and as of March 31, 1997 and 1998, respectively ............................................. 156 156 156 Retained earnings (accumulated deficit) .................. 56,173 291,639 53,789 ---------- ---------- ---------- Total shareholders' equity (deficiency) ............... 56,329 291,795 53,945 ---------- ---------- ---------- $ 588,412 $1,686,288 $ 404,996 ========== ========== ==========
The accompanying notes are an integral part of the financial statements. - 1 - 42 INTERCOMSOFT LIMITED STATEMENTS OF OPERATIONS US DOLLARS
THREE MONTHS ENDED YEAR ENDED MARCH 31, DECEMBER 31, --------------------------- ---------- 1 9 9 8 1 9 9 7 1 9 9 7 ---------- ---------- ---------- (UNAUDITED) (AUDITED) Revenue ............................... $1,311,668 $1,332,850 $4,345,934 Cost of revenue ....................... 511,407 687,813 2,008,027 ---------- ---------- ---------- Gross profit ................ 800,261 645,037 2,337,907 Operating expenses: Selling expenses ................. -- -- 5,200 Management and general expenses... 84,954 27,397 117,401 ---------- ---------- ---------- Total operating expenses .............. 84,954 27,397 122,601 Income from operating ....... 715,307 617,640 2,215,306 Financing expenses .................... 35 185 1,157 ---------- ---------- ---------- Net income for the period ............. $ 715,272 $ 617,455 $2,214,149 ========== ========== ========== Net income per share .................. $ 7,153 $ 6,175 $ 22,141 ========== ========== ==========
The accompanying notes are an integral part of the financial statements. - 2 - 43 INTERCOMSOFT LIMITED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY US DOLLARS
RETAINED ORDINARY SHARE CAPITAL EARNINGS ----------------------------- (ACCUMULATED SHARES AMOUNT DEFICIT) TOTAL ----------- ----------- ----------- ----------- Balance as of January 1, 1997 ......... 100 $ 1.56 $ (325,816) $ (325,660) Net income for the three months ended 31 March 1997 (unaudited) ................. -- -- 617,455 617,455 ----------- ----------- ----------- ----------- Balance as of March 31, 1997 ........... 100 $ 1.56 $ 291,639 $ 291,795 =========== =========== =========== =========== Balance as of January 1, 1997 ......... 100 $ 1.56 $ (325,816) $ (325,660) Net income for the year (audited) ...... -- -- 2,214,149 2,214,149 Dividend paid .......................... -- -- (1,834,544) (1,834,544) ----------- ----------- ----------- ----------- Balance as of December 31, 1997 ....... 100 $ 1.56 $ 53,789 $ 53,945 =========== =========== =========== =========== Balance as of January 1, 1998 ......... 100 $ 1.56 $ 53,789 $ 53,945 Net income for the three months ended 31 March 1998 (unaudited) ....... -- -- 715,272 715,272 Dividend paid .......................... -- -- (712,888) (712,888) ----------- ----------- ----------- ----------- Balance as of March 31, 1998 ........... 100 $ 1.56 $ 56,173 $ 56,329 =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements. - 3 - 44 INTERCOMSOFT LIMITED STATEMENTS OF CASH FLOWS US DOLLARS
THREE MONTHS ENDED MARCH 31, YEAR ENDED ------------------------------ DECEMBER 31, 1 9 9 8 1 9 9 7 1 9 9 7 ----------- ----------- ----------- (UNAUDITED) (AUDITED) CASH FLOWS FROM OPERATING ACTIVITIES Net income for the period .......................... $ 715,272 $ 617,455 $ 2,214,149 Adjustment to reconcile net income to net cash provided by operating activities: Changes in assets and liabilities: Increase in accrued income ...................... (183,416) (163,242) (194,502) Increase in related parties ..................... -- (654,617) (255,301) Increase in Supercom ............................ 107,006 204,400 54,767 Increase in other trade payable ................. 70,000 -- -- ----------- ----------- ----------- Net cash provided by operating activities .......... 708,862 3,996 1,819,113 ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Increase in credit from banking institutions..... 4,026 -- 411 Cash dividend paid .............................. (712,888) -- (1,834,544) ----------- ----------- ----------- Net cash used in financing activities .............. (708,862) -- (1,834,133) ----------- ----------- ----------- Increase (decrease) in cash ........................ -- 3,996 (15,020) Balance of cash at beginning of period ............ -- 15,020 15,020 ----------- ----------- ----------- Balance of cash at end of period ............... $ -- $ 19,016 $ -- =========== =========== ===========
The accompanying notes are an integral part of the financial statements. - 4 - 45 INTERCOMSOFT LIMITED NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION a. All significant accounting policies have been applied consistently with the year ended December 31, 1997. b. The accompanying unaudited interim financial statements as of March 31, 1998 and for the three month period then ended (the "Interim Financial Statements") were prepared in condensed format, in accordance with US GAAP. The accounting principles used in the presentation of the unaudited interim financial statements are consistent with those principles used in the presentation of annual financial statements. However, the unaudited interim financial statements do not include all the data and notes which are required when preparing annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. The results of operations for the three month period ended March 31, 1998, are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. For further information, refer to the financial statements and notes thereto for the year ended December 31, 1997. - 5 - -----END PRIVACY-ENHANCED MESSAGE-----