-----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, M2GkaV5sRHIU7P+feYpDGo5J/nDa7bdzH8rohQ+ipGxpVuDwUtxAjosRFndfEB2k ZHf1nmvI7nkDJEk+iWvTOg== 0001047469-99-034260.txt : 19990901 0001047469-99-034260.hdr.sgml : 19990901 ACCESSION NUMBER: 0001047469-99-034260 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990831 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: 10QSB/A SEC ACT: SEC FILE NUMBER: 000-28144 FILM NUMBER: 99703907 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/A 1 10QSB/A U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB(A) (Mark One) [ x ] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 1999 [ ] Transition report under Section 13 or 15(d) of the Exchange Act For the transition period from _____________________ to _____________________ Commission file number 0-28144 TRIMOL GROUP, INC. (Exact Name of Small Business Issuer as Specified in Its Charter) DELAWARE 13-3859706 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1285 AVENUE OF THE AMERICAS, 35TH FLOOR, NEW YORK, NEW YORK 10019 (Address of Principal Executive Offices) (212) 554-4394 (Issuer's Telephone Number, Including Area Code) (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes | | No |_| APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of March 31, 1999, 12,039,000 shares of Common Stock, par value $.01 per share. Transitional Small Business Disclosure Format (check one): Yes |X| No |_| TABLE OF CONTENTS PART I. FINANCIAL INFORMATION
Heading Page - ------- ---- Item 1. Financial Statements.......................................................................................... F-1 - F-8 Condensed Consolidated Balance Sheet as of March 31, 1999 (Unaudited) and December 31, 1998 (Audited).................. F-1 Consolidated Statement of Operations for the three month period ended March 31, 1999 (Unaudited)....................... F-2 Statement of Changes in Shareholders' Equity for the three month period ended March 31, 1999 (Unaudited)............... F-3 Condensed Consolidated Statement of Cash Flow for the three month period ended March 31, 1999 (Unaudited).............. F-4 - F-5 Notes to the Condensed Consolidated Financial Statements............................................................... F-6 - F-8 Item 2. Management's Discussion and Analysis and Results of Operations................................................ 2-7 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K.............................................................................. 8 Signatures............................................................................................................. 9
(i) TRIMOL GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEET
- -------------------------------------------------------------------------------------------------------------------- March 31, Dec. 31, 1999 1998, (unaudited) (audited) - -------------------------------------------------------------------------------------------------------------------- (In Thousands of US Dollars) ASSETS Cash and cash equivalents $4,430 $4,173 Time deposits - 215 Held to maturity securities 1,186 1,136 Loans 5,797 6,343 Less: allowance for possible loan losses (865) (912) ------ ------ Loans, net 4,932 5,431 Reinsurance recoverable 37 148 Investments 68 Property, plant and equipment 6,066 7,165 Other assets 1,506 1,123 ------- ------- TOTAL ASSETS 18,225 19,391 ------- ------- LIABILITIES Long term liabilities Non interest bearing deposits 3,778 2,330 Interest bearing deposits 3,419 4,532 ------ ------ Total deposits 7,197 6,862 Insurance policy and claim reserves 155 274 Other liabilities 1,981 2,490 ------- ------- TOTAL LIABILITIES 9,333 9,626 ------- ------- MINORITY INTERESTS 1,907 2,199 SHAREHOLDERS EQUITY Preferred Stock: 10,000 shares authorized of $1.00 par value, no shares issued and outstanding. - - Common Stock: 30,000,000 shares authorized of $0.01 par value, 12,039,000 and 12,039,000 shares issued and outstanding respectively. 120 120 Additional paid in capital 6,018 6,018 Retained earnings 1,956 1,428 Translation reserve (1,109) ------- ------- Accumulated comprehensive income 847 7,446 TOTAL SHAREHOLDERS' EQUITY 6,985 7,566 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $18,225 $19,391 - -------------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
F-1 TRIMOL GROUP, INC. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------- Three months Three months ended ended March 31, March 31, 1999 (Restated) 1998 - -------------------------------------------------------------------------------------------------------------------- (In Thousands of US Dollars, except share and per share data) REVENUES Revenues from hotel $ 470 $ 694 Revenues from document processing 918 1,312 Loan interest 271 450 Other interest 140 134 Insurance premiums 23 47 Commissions and fees 318 406 ------------- ------------- TOTAL REVENUES 2,140 3,043 Interest expense 233 143 ------------- ------------- TOTAL REVENUES, NET OF INTEREST EXPENSE 1,907 2,900 ------------- ------------- PROVISION FOR BENEFITS, CLAIMS AND CREDIT LOSSES Provision for credit losses 56 64 ------------- ------------- 56 64 ------------- ------------- OPERATING EXPENSES Cost of revenue from hotel 292 386 Cost of revenue from document processing 255 511 Other operating expenses 699 645 Result from exchange remeasurement 124 ------------- ------------- TOTAL OPERATING EXPENSES 1,246 1,666 ------------- ------------- ------------- ------------- INCOME FROM OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST 605 1,170 ------------- ------------- Provision for income taxes 53 88 Minority interest, net of income taxes 24 44 ------------- ------------- NET INCOME 528 1,038 ------------- ------------- ------------- ------------- Net income per share (basic and diluted) .04 .10 ------------- ------------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES 12,039,000 10,333,333 - -------------------------------------------------------------------------------------------------------------------- OTHER COMPREHENSIVE INCOME Translation reserve (1,109) - Add: Net Income 528 1,038 ------------- ------------- TOTAL COMPREHENSIVE INCOME $ (581) $1,038 - -------------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
F-2 TRIMOL GROUP, INC. STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------ Three months Three months ended March 31, ended March 31, 1999 (Restated) 1998 - ------------------------------------------------------------------------------------------------------------------ (In Thousands of US Dollars) COMMON STOCK Balance, January 1 120 110 Issue of common stock - 10 ----------- ----------- Balance, end of the period 120 120 ADDITIONAL PAID IN CAPITAL Balance, January 1 6,018 6,018 Issue of common stock ----------- ----------- Balance, end of the period 6,018 6,018 RETAINED EARNINGS Balance, January 1 1,428 (338) Net income 528 1,038 Dividend paid to outside shareholders - (713) Translation reserve (1,109) ----------- ----------- Balance, end of the period 847 (13) ----------- ----------- TOTAL SHAREHOLDERS EQUITY 6,985 6,125 - ------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. F-3 TRIMOL GROUP, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------- Three months Three months ended March 31, ended March 31, 1999 (Restated) 1998 - -------------------------------------------------------------------------------------------------------------- (In Thousands of US Dollars) CASH FLOW FROM OPERATING ACTIVITIES NET INCOME $ 528 $ 1,038 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES INCOME AND EXPENSES NOT INVOLVING CASH FLOW Depreciation 137 162 Provision for credit losses 56 64 Minority interest 24 37 --------------- --------------- 217 263 --------------- --------------- CHANGES IN ASSETS AND LIABILITIES Net decrease (increase) in other assets (220) (347) Net increase (decrease) in other liabilities (586) 201 Net decrease (increase) in reinsurance recoverable (104) (12) --------------- --------------- (910) 189 --------------- --------------- TOTAL ADJUSTMENTS (693) 105 --------------- --------------- --------------- --------------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (165) 1,143 CASH FLOW FROM INVESTING ACTIVITIES Proceeds from redemption of securities held to maturity 3,200 3,147 Purchase of securities held to maturity (3,250) (2,913) Proceeds from sale of equipment - 32 Purchase of equipment (41) (91) Net decrease (increase) in loans 466 (829) --------------- --------------- --------------- --------------- NET CASH PROVIDED (USED) FOR INVESTING ACTIVITIES 375 (654) CASH FLOW FROM FINANCING ACTIVITIES Net decrease in deposits 313 784 Payment of dividends - (713) Proceeds from issue of share capital - Foreign currency translation adjustment (266) - --------------- --------------- NET CASH PROVIDED (USED) FOR FINANCING ACTIVITIES 47 71 --------------- --------------- --------------- --------------- Increase in cash and cash equivalents 257 560 Cash and cash equivalents at beginning of period 4,173 4,079 --------------- --------------- CASH AND CASH EQUIVALENTS AT END PERIOD $4,430 $ 4,639 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid 183 - Income taxes paid 79 - - -------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
F-4 TRIMOL GROUP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands of US Dollars) NOTE 1 - BASIS OF PRESENTATION The unaudited condensed consolidated financial statements of Trimol Group, Inc. (the "Company") 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, 1998 with the exception of the change from highly inflationary accounting to non highly inflationary accounting during 1999 as discussed in Note 2. In the opinion of management all adjustments (consisting only of 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 the full fiscal year. NOTE 2 - FOREIGN CURRENCY TRANSLATION The Company operates in Moldova and the currency in which the company transacts its operations is the Moldovan leu. At January 1, 1998 the three year accumulated rate of inflation in the Republic of Moldova was approximately 80%. During 1998, the Company's consolidated financial statements were prepared assuming that the Moldovan economy remained highly inflationary. The United States dollar was used at the Company's functional currency during 1998. In the second quarter of 1999, it was determined that at January 1, 1999 the three year accumulated rate of inflation in the Republic of Moldova was 42.4%. A country is only considered to be highly inflationary if the three-year accumulated rate of inflation is 100% or more. Accordingly, management concluded that the Company's functional currency should revert to the Moldovan leu from the United States dollar and that the Company's first quarter financial statements for the year 1999 should be restated accordingly. During the three month period ending March 31, 1998, fluctuations in the Moldovan leu and the United States dollar were charged to Net Income under the caption "Results from exchange". During the same period in 1999, the fluctuations in the restated statements are included in the caption "Other comprehensive income", not forming part of Net Income. NOTE 3 - STOCK-BASED COMPENSATION On February 25, 1999, the Company entered into employment agreements with Boris Birshstein, Chairman of the Board, Ted Shapiro, President, Chief Executive Officer and Director and Robert L. Blessey, Secretary and Director (collectively the "Employment Agreements"). The Employment Agreements are each for a term of five years commencing January 1, 1999. In addition to the provisions for annual salaries and other benefits, the Employment Agreements provide for stock based compensation. As set forth in the Employment Agreements, for every $1,000,000 of the Company's excess net pre-tax profits (net pre-tax profits in each year exceeded by net pre-tax profits in the immediately preceding year) generated by the Company in the determining year, Mr. Birshtein will receive incentive warrants ("Incentive Warrants") to purchase 100,000 shares of the Company's common stock (the "Common Stock") up to a maximum of 1,000,000 shares of Common Stock per year and Messrs. Shapiro and Blessey will each receive Incentive Warrants to purchase 50,000 shares of Common Stock up to a maximum of 1,000,000 shares per year, at an exercise price equal to the market price of the Common Stock on the date of exercise of the particular Incentive Warrants so exercised. As of March 31, 1999, no Incentive Warrants were outstanding. F-5 NOTE 4-BUSINESS SEGMENT INFORMATION FOR THE PERIOD ENDED MARCH 31, 1999 (UNAUDITED) Trimol Group, Inc.
- ----------------------------------------------------------------------------------------------------------------------------- Bank Hotel Insurance Document Holding Elimina- Consolidated operations operations operations processing Activities tions - ----------------------------------------------------------------------------------------------------------------------------- (In Thousands of US Dollars) Total revenue $ 702 470 51 918 - - 2,140 Interest expense (233) - - - - - (233) Total revenue net of interest expense 469 470 51 918 - - 1,908 Provision for benefits, claims and credit losses (56) - - - - - (56) Operating expenses (258) (376) (47) (280) (285) - (1,246) Income (loss) from operations before income taxes and minority interest 155 94 4 638 (285) - 605 Provision for income taxes (28) (25) - - - - (53) Minority interest, net of taxes - - - - - (24) (24) Net income (loss) 127 69 4 638 (285) (24) 528 Fixed assets 831 5,143 92 - - - 6,066 Other assets 9,813 379 299 1,561 154 (43) 12,159 ---------- ---------- --------- ---------- ---------- -------- ------------ TOTAL ASSETS $10,644 5,522 391 1,561 154 (43) 18,225 - -----------------------------------------------------------------------------------------------------------------------------
F-6 NOTE 5: RESTATED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS COMPARISON (UNAUDITED) As explained in Note 2, the method of foreign currency translation was changed after the filing of the Condensed Consolidated Financial Statements for the period ended March 31, 1999. The Condensed Consolidated Financial Statements as restated herein adapt and amend the original filing. The schedule below provides a comparison of the Condensed Consolidated Statement of Operations for such period as restated and as originally filed.
- ----------------------------------------------------------------------------------------------------------------- Three months Three months ended ended March 31, 1999 March 31, 1999 (Restated) (As Originally Filed) - ----------------------------------------------------------------------------------------------------------------- (In Thousands of US Dollars except share and per share data) REVENUES Revenues from hotel $ 470 $ 465 Revenues from document processing 918 903 Loan interest 271 271 Other interest 140 174 Insurance premiums 23 18 Commissions and fees 318 290 1 -------------- ----------------- TOTAL REVENUES 2,140 2,122 Interest expense 233 233 -------------- ----------------- TOTAL REVENUES, NET OF INTEREST EXPENSE 1,907 1,889 -------------- ----------------- PROVISION FOR BENEFITS, CLAIMS AND CREDIT LOSSES Provision for credit losses 56 56 -------------- ----------------- 56 56 -------------- ----------------- OPERATING EXPENSES Cost of revenue from hotel 292 299 Cost of revenue from document processing 255 255 Other operating expenses 699 604 Result from exchange remeasurement - 497 -------------- ----------------- TOTAL OPERATING EXPENSES 1,246 1,663 -------------- ----------------- INCOME FROM OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST 605 86 -------------- ----------------- Provision for income taxes 53 28 Minority interest, net of income taxes 24 19 -------------- ----------------- NET INCOME 528 123 -------------- ----------------- -------------- ----------------- NET INCOME PER SHARE (Basic and Diluted) .04 .01 WEIGHTED AVERAGE NUMBER OF COMMON SHARES 12,039,000 12,039,000 -------------- ----------------- -------------- ----------------- - -----------------------------------------------------------------------------------------------------------------
F-7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS SIGNIFICANT ACCOUNTING ISSUES This Quarterly Report on Form 10-QSB(A) amends and restates the Quarterly Report of the Company as of March 31,1999 and the three month period then ended. The restatement is the result of a change in the method of foreign currency translation. The Company's subsidiaries operate in the Republic of Moldova and the currency in which the Company transacts a significant part of its operations is the Moldovan leu. At January 1, 1998, the three year accumulated rate of inflation in the Republic of Moldova was approximately 80%. During 1998, the Company's condensed consolidated financial statements were prepared assuming that the Moldovan economy remained highly inflationary. The United States dollar was used as the Company's functional currency during 1998. In the second quarter 1999, it was determined that at January 1, 1999, the three year accumulated rate of inflation in the Republic of Moldova was 42.4%. A country is only considered to be in hyperinflation if the three year accumulated rate of inflation is 100% or more. Accordingly, management (based upon discussions with its consultants and other persons) concluded the Republic of Moldova no longer had a hyperinflationary economy and that the Company's functional currency should revert to the Moldovan leu from the United States dollar as from that date. The 1st Quarter 1999 (as defined below), has been restated below to conform to the change in Moldova from a hyperinflation economy to a non-hyperinflation economy. The Condensed Consolidated Statement of Operations for 1st Quarter 1999 as originally filed is compared to the restated financial information for 1st Quarter 1999 (appearing in the Condensed Consolidated Statement of Operations in this Report) in Note 5 to the Notes to the Condensed Consolidated Financial Statements. RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the Company's financial statements and notes thereto appearing elsewhere in this report. General The Company, through its wholly-owned subsidiaries, owns 65% of the issued and outstanding shares of capital stock of the Jolly Alon Limited, a Moldovan corporation ("Hotel"), that operates and manages the Jolly Alon Hotel in Chisinau, Moldova with the remaining thirty-five (35%) percent of the issued and outstanding shares of capital stock of the Hotel being owned by the Government of the Republic of Moldova; 100% of the issued and outstanding shares of capital stock of Banca Commerciala pe Actiuni "Export-Import," a Moldovan Corporation ("Bank"), which owns a commercial bank in Moldova; 100% of the issued and outstanding shares of capital stock of Exim Asint, S.A. a Moldovan corporation which owns a property and casualty insurance business in Moldova ("Insurance Company"); and 100% of the issued and outstanding shares of capital stock of Intercomsoft, Ltd. ("Intercomsoft") which is the exclusive supplier to the Government of the Republic of Moldova of the technology, equipment 2 and consumables required to manufacture secure essential government documents (e.g., passports, drivers' licenses, etc.). The Company's interests in the Bank, the Hotel and the Insurance Company were acquired on January 6, 1998. The Company's interest in Intercomsoft was acquired on May 6, 1998. As the Bank, the Hotel, the Insurance Company and Intercomsoft were entities under common control during the fiscal year ended December 31, 1998 and the three (3) month periods ended March 31, 1998 ("1st Quarter 1998") and March, 1999 ("1st Quarter 1999"), their individual operations for those periods are compared below following the Company discussion. COMPARISON OF 1ST QUARTER 1999 TO 1ST QUARTER 1998 The Company From 1st Quarter 1998 to 1st Quarter 1999, the Company's total revenues declined by approximately $903,000 or approximately 30% from approximately $3,043,000 to $2,140,000, respectively. The Company believes such decrease resulted from the economic crisis in Russia causing an economic slowdown in Moldova which resulted in less disposable income to the Moldovan population. Total operating expenses decreased from approximately $1,666,000 and $1,246,000 in 1st Quarter 1998 and 1st Quarter 1999, respectively. Measured as a percentage of total revenues, total operating expenses, were approximately 55% and 58% for 1st Quarter 1998 and 1st Quarter 1999, respectively. The Company was unable to reduce total operating expenses in proportion to reduced total revenues as total operating expenses remained relatively constant but total revenues decreased which management attributed to the above discussed continuing Russian economic crises resulting in an economic slowdown in Moldova and the Moldovan's having less disposable income. In 1st Quarter 1998 the Company had net income of approximately $1,038,000, or approximately 34% of total revenues. In 1st Quarter 1999, net income declined from 1st Quarter 1998 by approximately $510,000 to approximately $528,000 or approximately 25% of total revenues in 1st Quarter 1999. The Company believes such decline in net income in 1st Quarter 1999 as compared to 1st Quarter 1998 is a result of the above discussed Russian economic crisis. The Bank REVENUES. The Bank derives its revenue from charging fees for its services, interest charged on loans, interest earned on funds deposited in correspondent banks and investing in securities issued by the Moldovan government. During 1st Quarter 1999, the Bank had interest income of approximately $392,000, a decrease of approximately $178,000 or approximately 31% from the 1st Quarter 1998 total interest income of approximately $570,000. The largest component of the Bank's total interest income was interest earned on loans which was approximately $271,000 and $450,000, or approximately 69% and 79% of the Bank's total interest income during 1st Quarter 1999 and 3 1st Quarter 1998, respectively. The decrease both in dollars and as a percentage of interest income of interest earned on loans was the result of the economic crisis in Russia and the related economic slowdown in Moldova, as described above. The remaining components of the Bank's interest income were interest earned on securities and interest earned on deposits with correspondent banks. During 1st Quarter 1999, the Bank earned approximately $87,000 in interest on securities, approximately 22% of the Bank's total interest income in 1st Quarter 1999, and approximately $34,000 or approximately 9% of its total interest income from interest earned on deposits with correspondent banks. During the 1st Quarter 1998, the Bank earned approximately $91,000 in interest on securities, approximately 16% of the Bank's total interest income in 1st Quarter 1998 and approximately $29,000 or 5% of its interest income from interest earned on deposits with correspondent banks. In addition to interest income, the Bank also had non-interest income of approximately $310,000 during 1st Quarter 1999 in comparison to approximately $387,000 in 1st Quarter 1998, a decrease of approximately $77,000 or 20%. The principal component of the Bank's non-interest income was exchange trading and commissions of approximately $149,000 and $204,000 which represented approximately 48% and 53% of the Bank's non-interest income during 1st Quarter 1999 and 1st Quarter 1998. Another component of the Bank's non-interest income was financial advisory service fees of approximately $148,000 and $160,000 which represented approximately 48% and 41% of the Bank's non-interest income during 1st Quarter 1999 and 1st Quarter 1998, respectively, representing a decrease of approximately $12,000 or 8%. Financial advisory service fees are paid in the Moldovan Leu and represented less U.S. dollars when converted. Although the Bank's allowance for possible loan losses increased in raw dollars from approximately $602,000 in 1st Quarter 1998 to approximately $865,000 in 1st Quarter 1999, when the allowance is measured as a percentage of the amount of outstanding loans (approximately $5,662,000 and $5,797,000 in 1st Quarter 1998 and 1st Quarter 1999, respectively), the increase (expressed as a percentage) was only 4% in 1st Quarter 1999 as compared to the 1st Quarter 1998. EXPENSES. Offsetting the Bank's total interest income during 1st Quarter 1999 was total interest expense of approximately $233,000, approximately 59% of interest income. During 1st Quarter 1998, interest expense was approximately $143,000 or 24% of total interest income. Offsetting the Bank's non-interest income during 1st Quarter 1998 and 1st Quarter 1999 was total non-interest expenses of approximately $437,000 and $258,000, respectively, comprised principally of salaries and related costs of approximately $151,000 and $108,000, respectively, communication and transportation expenses of approximately $78,000 and $9,000, respectively, approximately $26,000 and $46,000 of outside services and processing costs, respectively, and approximately $29,000 and $15,000 of marketing and development costs, respectively. A substantial portion of such decrease was due to aggressive cost cutting measures implemented by the Bank. NET INCOME. For 1st Quarter 1999, the Bank's net interest income, after allowance for possible loan losses of approximately $56,000, was approximately $103,000, and its total non-interest income was approximately $310,000. 4 Total interest income and total non-interest income was approximately $702,000. The Bank's 1st Quarter 1999 income was offset by total interest expenses of approximately $233,000 and non-interest expenses of $258,000 resulting in net income of approximately $127,000 from the Bank's business in 1st Quarter 1999. Net income was approximately 18% of the Bank's aggregated total non-interest income and total interest income for 1st Quarter 1999. During 1st Quarter 1998, the Bank's net interest income, after allowance for possible loan losses of approximately $64,000, was approximately $363,000 with non-interest income of approximately $387,000. The Bank's 1st Quarter 1998 income was offset by interest expenses of approximately $143,000 and non-interest expenses of approximately $437,000, which reduced income before taxes to approximately $313,000, with income taxes reducing net income to approximately $267,000 in 1st Quarter 1998. Net income was approximately 28% of the Bank's aggregated total non-interest income and interest income for 1st Quarter 1998. Net income declined both in dollars and as a percentage of revenues due to the economic crisis in Russia and the related economic slowdown in Moldova, as described above. The Hotel During 1st Quarter 1999, the Hotel's revenues were approximately $470,000. First Quarter 1999 Hotel revenues declined by approximately $224,000 or approximately 32% from approximately $694,000 in 1st Quarter 1998. Total cost of revenues for the Hotel were approximately $386,000 and $292,000 for 1st Quarter 1998 and 1st Quarter 1999, or approximately 56% and 62% of Hotel revenues, respectively. The Hotel's approximately $224,000 decline in revenues from 1st Quarter 1998 to 1st Quarter 1999 resulted principally from a decline in revenues from restaurant operation flowing from increased restaurant competition and a reduced level of consumer disposable income due to the economic slowdown in Moldova resulting from the Russian economic crises. This decline was offset by new management's budget cutting measures resulting in the Hotel running more efficiently with labor and related expenses, operating equipment purchases and maintenance costs all declining. Also offsetting the decline in revenues was reduced costs of food and beverage, flowing from the reduced demand and cost cutting measures which reduced selling, general and administrative expenses. The end result of the foregoing was that in 1st Quarter 1999 the Hotel realized an operating profit (Hotel revenues minus Hotel cost of revenues) of approximately $178,0000 (or approximately 38% of revenues) while in 1st Quarter 1998 the Hotel derived an operating profit (Hotel revenues minus Hotel cost of revenues) of approximately $308,000 or approximately 44% of its revenues, representing an decrease in operating profit of approximately $130,000, or approximately 6% when the Hotel's operating profit is measured as a percentage of the Hotel's revenues for such periods. The foregoing dollar amounts are stated before giving effect to the minority (35%) interest of the Government of the Republic of Moldova. 5 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, drivers' licenses, etc.), to the Government of the Republic of Moldova. During 1st Quarter 1998 and 1st Quarter 1999, Intercomsoft had revenues from operations of approximately $1,312,000 and $918,000, respectively. Management attributes this approximate 30% decrease in revenues to the Russian economic crisis and Moldovan's having less disposable income. However, Intercomsoft was able to reduce its cost of revenues which were approximately $511,000, or approximately 39% of its revenues in 1st Quarter 1998, to approximately $255,000 or approximately 28% of its revenues in 1st Quarter 1999. This decline in cost of revenues is the result of a decline in equipment expenditures. Intercomsoft was able to maintain its profitability with operating profit (Intercomsoft revenues minus its cost of revenue) in 1st Quarter 1999 of approximately $663,000 from approximately $801,000 in 1st Quarter 1998. The Insurance Company Although the Insurance Company began operations in 1995 it is still in a development stage. 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 $47,000 and $31,000 in gross premiums during 1st Quarter 1998 and 1st Quarter 1999, respectively, earned premiums ceded to reinsurers approximated $41,000 and $8,000 in those years resulting in approximately $6,000 and $23,000 in net premiums earned of the Insurance Company's total revenues of approximately $48,000 and $51,000 for 1st Quarter 1998 and 1st Quarter 1999, respectively. During 1st Quarter 1998 and 1st Quarter 1999, the Insurance Company also received net interest income of approximately $14,000 and $19,000, respectively. During 1st Quarter 1998 and 1st Quarter 1999, the Insurance Company also had approximately $2,000 and $6,000 of other income, respectively, and reinsurance commissions of approximately $11,000 and $3,000. The Insurance Company's total expenses of approximately $47,000 in 1st Quarter 1999 resulted in a net income of approximately $4,000 during 1st Quarter 1999 as compared to a net loss of approximately $41,000 in 1st Quarter 1998. 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 capital expenditure requirements for the next twelve months. The Company has no current plans for material capital expenditures. 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. 6 Year 2000 Compliance The Company is aware of the issues associated with the programming code in existing computer systems as the millennium (Year 2000) approaches. The "Year 2000" problem is pervasive and complex as virtually every computer operation will be affected in some way by the rollover of the latter two digit year value to 00. The issue is whether computer systems will properly recognize date sensitive information when the year changes to 2000. Systems that do not properly recognize such information could generate erroneous data or cause a system to fail. Management of the Company, however, has assessed the "Year 2000" compliance expense and related potential effect on the Company's earnings and believes it is compliant as to the Hotel, Insurance Company, Intercomsoft and itself. Most of the recordkeeping of the Hotel, Insurance Company and Intercomsoft is done in manual format or with a manual back-up. Computerized information is kept on staff PCs which are believed to be year 2000 compliant, as to the Hotel, Insurance Company, Intercomsoft and the Company. Additionally, in the locale of the operations of the Operating Entities computerized record creation and maintenance is not widespread and the Hotel, Insurance Company and Intercomsoft clientele and supply bases are not believed to be computer dependent. The Bank has performed an analysis of its Year 2000 Compliance. The Bank's Year 2000 remediation plan was completed in the quarter ended June 30, 1999 at an approximate cost of $20,000. The Bank has received assurances from most of its key customers, clients and vendors that they are Year 2000 compliant. The Bank has received assurances from all of its key vendors which sell and/or maintain software to or from it, as the case may be, that the key vendors software is Year 2000 compliant. Since public utilities in the Republic of Moldova are only to a minor extent dependent upon computerized systems, most operations are performed mechanically, it is not expected that there will be major disruptions in the supply of electricity, heating and other essential utilities after January 1, 2000. The risk of non-operating telephones is mitigated by the fact that Moldova has several network systems, of which two were installed only recently. Considering the absence of electronic networks for intercompany and interbank payment systems in Moldova, possible disruptions in electronic data processing will most probably have an isolated character with only minor effects on the Moldovan economy as a whole. The foregoing discussion and analysis should be read in conjunction with the Company's financial statements and notes thereto appearing elsewhere in this report. 7 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) 27.1 Financial Data Schedule (b) REPORTS ON FORM 8-K The Company filed no Current Reports on Form 8-K during the 1st Quarter 1999. - ---------- (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, 1998. 8 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: As of August 31, 1999 By: /s/ TED SHAPIRO -------------------------------- Ted Shapiro, Chief Executive Officer and President Dated: As of August 31, 1999 By: /s/ SHMUEL GURFINKEL -------------------------------- Shmuel Gurfinkel, Chief Financial Officer 9 EX-27.1 2 EX-27.1
5 0001011733 TRIMOL GROUP, INC. 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-30-1999 4,430 1,186 5,797 865 0 6,041 6,066 0 18,225 2,136 0 0 0 120 0 18,225 0 2,140 0 1,246 0 56 233 581,000 53,000 0 0 0 0 528 .04 .04
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