-----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, AsspfoMs3ARa787nTbHPJ2eISk55B0NN0X+pTBQ52gnMdjo/e0kX7NPtLSs4ejRC TsJo9NhhQ2BrvOBzn7fFYg== 0001169232-03-002885.txt : 20030414 0001169232-03-002885.hdr.sgml : 20030414 20030414144105 ACCESSION NUMBER: 0001169232-03-002885 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030414 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: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-28144 FILM NUMBER: 03648421 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 10KSB 1 d55198_10ksb.txt U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB (Mark One) |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2002 |_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ......... to .......... Commission file number: 000-26971 TRIMOL GROUP, INC. (Name of small business issuer in its charter) DELAWARE 13-3859706 (State of Incorporation) (IRS Employer ID No.) 1285 Avenue of the Americas, 35th Floor New York, New York, 10019 (Address of principal offices) Registrant's Telephone Number:(212) 554-4394 Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act:
- ------------------------------------------------------------------------------------------------ Title of Each Class Name of each Exchange on which listed - ------------------------------------------------------------------------------------------------ Common Stock, par value $0.01 per share OTC Bulletin Board - ------------------------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. |X| Yes |_| No Indicate by check mark if disclosure of delinquent files pursuant to Item 405 of Regulation S-K (ss. 229/405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. |_| Issuer's revenues for fiscal year ended December 31, 2002: $4,971,000 The aggregate market value of the voting common equity held by non-affiliates of the registrant is approximately $404,000 as of March 31, 2003. The number of shares outstanding of the Registrant's common stock, as of March 31, 2003 is: 101,139,000. Indicate by checkmark whether the Registrant is an accelerated filer as defined in Rule 12b-2 of the Securities Exchange Act of 1934. YES |_| NO |X| 1 DOCUMENTS INCORPORATED BY REFERENCE Registrant's definitive information statement which was filed with the Securities and Exchange Commission (the "Commission") on January 24, 2001, for a special meeting of stockholders, and its information statement which was filed with the SEC on July 19, 2001 amending the 2001 Omnibus Plan, is incorporated by reference throughout this Form 10-KSB. Transitional Small Business Disclosure Format (check one): YES |_| NO |X| Certain statements in this Annual Report that are not historical facts constitute "forward-looking statements" within the meaning of the Federal securities laws. Discussions containing such forward-looking statements may be found in the sections entitled, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," as well in this Annual Report generally. In addition, when used in this Annual Report the words "anticipates," "intends," "seeks," "believes," "plans," "estimates," and "expects" and similar expressions as they relate to Registrant or its management are intended to identify such forward-looking statements. Such statements are subject to a number of risks and uncertainties. Actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Registrant undertakes no obligation to revise these forward-looking statements to reflect any future events or circumstances. 2 TABLE OF CONTENTS PART I....................................................................1 ITEM 1. DESCRIPTION OF BUSINESS.......................................1 ITEM 2. DESCRIPTION OF PROPERTY.......................................6 ITEM 3. LEGAL PROCEEDINGS.............................................7 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........7 PART II...................................................................8 ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...............................8 ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION................10 ITEM 7. FINANCIAL STATEMENTS.........................................14 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.......................16 PART III.................................................................17 ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT....................................17 ITEM 10. EXECUTIVE COMPENSATION.......................................20 ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...............................................28 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............31 ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.............................35 1 PART I ITEM 1. DESCRIPTION OF BUSINESS Business Development We were incorporated on May 6, 1953 under the laws of the State of Delaware. Since incorporation, we have undergone several name changes and have been engaged in several different businesses. Since 1998 we have operated our wholly-owned subsidiary, Intercomsoft Limited, a non-resident Irish company, which provides proprietary technology and auxiliary consumable materials used in the production of secure essential government identification documents such as passports, drivers' licenses, car licenses and identification cards, in the Republic of Moldova, a former member of the Soviet Union. From 1998 and through the year ending December 31, 2000, we also operated a hotel, an insurance company and a bank in the Republic of Moldova. In 2000, faced with the prospects of continued financial weakening as a result of the economic and political climate of the Republic of Moldova, we began to explore alternative opportunities available to us and to divest ourselves of certain of our assets operating in the Republic of Moldova. We devised a strategic plan to focus in the area of technology in order to enhance growth and achieve long-term profitability. As a result, we began discussions with Aluminum-Power Inc., an alternative energy company that owns and develops certain proprietary rights to an aluminum-air fuel cell technology. Boris Birshtein, the Chairman of our Board of Directors, directly controls the entity that is the majority owner of Eontech Group Inc., which in turn is the majority owner of the Aluminum-Power Inc. (the owner of a majority of the outstanding shares of our common stock). See "Certain Relationships and Related Transactions". On February 16, 2001, we closed on a transaction under a Technology Acquisition Agreement and a License Agreement between Aluminum-Power Inc. and us, dated January 11, 2001. This agreement and license are incorporated by reference to our Definitive Information Statement filed with the Securities and Exchange Commission on January 24, 2001. Immediately thereafter, we began to pursue the development of a mechanically rechargeable aluminum-air fuel cell for use with portable electronic devices, with the goal of commercial exploitation. At the time of closing the agreement and license with Aluminum-Power Inc., Mr. Birshtein was and continues to be the indirect beneficial owner of a majority of our common stock and the common stock of Aluminum-Power Inc. See "Directors, Executive Officers, Promoters and Control Persons"; "Security Ownership of Certain Beneficial Owners and Management" and "Certain Relationships and Related Transactions". Pursuant to the agreement and license with Aluminum-Power Inc., in consideration of the 1 receipt of 88,000,000 shares of our common stock, and certain of our assets, Aluminum-Power Inc. transferred to us: o An exclusive worldwide license to make, use and sell a mechanically rechargeable metal-air fuel cell solely for use with consumer portable electronic devices that will allow for an instantaneous mechanical rechargeable battery requiring no external power source for recharging; o All rights and title to certain technology relating to metal-air batteries and fuel cells suitable for consumer portable electronic devices, including two-way radios, wireless telephones, portable audio and video players, video cameras and personal computers. The objective of this technology is to create a battery with a virtually unlimited shelf life prior to activation; and, o The design and know-how to a DC/DC Converter designed and developed by Aluminum-Power Inc. to be used as part of a full battery assembly which will enable the conversion of cell voltage of an aluminum-metal-air-cathode battery to the voltage required by different consumer portable electronic devices. In exchange for the above noted assets, on February 16, 2001, we transferred to Aluminum-Power Inc. 88,000,000 shares of our common stock together with interests in three operating subsidiaries; Banca Commerciala pe Actiuni "Export-Import", a bank organized under the laws of the Republic of Moldova , Exim Asint S.A., an insurance company organized under the laws of the Republic of Moldova, and Jolly LLC, a limited liability company organized under the laws of Wyoming which indirectly owned and operated a hotel in the Republic of Moldova. As a result of the transfer of the above listed assets to Aluminum-Power Inc., we divested ourselves of all of our interest in those businesses and refocused our efforts on the further development of Intercomsoft and the development and exploitation of the aluminum-air fuel cell technology we acquired and licensed from Aluminum-Power Inc. On June 1, 2001, in a joint effort with Aluminum-Power Inc., we opened an International Research and Development Center in Toronto, Ontario, Canada. The R&D Center is located in a 6,000 square foot facility that Aluminum-Power Inc. leased on March 31, 2001, for a five-year term. We have agreed to reimburse Aluminum-Power Inc. a percentage of its research and development costs (as such costs relate to work specifically performed for and on behalf of us). See "Certain Relationships and Related Transactions." Since our acquisition of the aluminum-air fuel cell technology for use in portable consumer electronic devices, we have continued to advance research and development with the goal of commercial exploitation of such technology. Aluminum-Power Inc. advised us in a letter dated March 31, 2003 that, to date, it has spent in excess of $3,000,000 on research and development related to our aluminum-air fuel cell technology. However, Aluminum-Power Inc. further advised us that although it has aggressively pursued licensing opportunities and sought joint venture partners, private financing and investment capital in an effort to support its on-going research and 2 development efforts, it has been unable to secure financing for such efforts, other than shareholder loans, which provided the funds noted above. Further, Aluminum-Power Inc. indicated that over the past two years they have found the development time line and cost for research and development to be significantly in excess of what it had originally anticipated. In its letter, Aluminum-Power Inc. cited a recent report by the Department of Energy ("DOE") dated February 2003 and submitted to Congress by the DOE under cover of letter dated February 28, 2003, entitled "Fuel Cell Report to Congress: Fuel Cell Future Not Certain" that concluded that there are significant and heretofore unforeseen barriers to the development of various fuel cell technologies, most specifically the onerous cost of development and commercialization. This concurs with Aluminum-Power Inc.'s independent evaluation of the matter. Aluminum-Power Inc. further advised that the U.S governments' unilateral support of hydrogen based fuel cell technology, almost to the exclusion of all others, has had a significant adverse effect on its efforts to secure financing, development partners and licensing. Further, it advised that the erosion of the technology marketplace has adversely affected its efforts at securing additional research and development funding. Aluminum-Power Inc. concluded its letter that in light of the above, as well as other considerations, it has elected to suspend any further research and development efforts of the aluminum-air fuel cell under the R&D Agreement at this time advising that it does not believe that it would be prudent for either it or us to expend any additional research and development funds on the technology until it can evaluate the prospects and feasibility of further development and access marketing opportunities. Accordingly, as of the second quarter 2003, our research and developments efforts were suspended until such time as Aluminum-Power resumes its research and development efforts on our behalf, or we are able to obtain financing to proceed with such efforts on our own. Although research and development efforts were suspended in the second quarter of 2003, we still continue to believe in the viability of our technology and have not changed our opinion as to the potential benefits our technology could make in the field of alternative power. However, management has concluded that due to the extraordinary time and enormous costs involved, continued research and development efforts at this time are not justified. We will, however, continue to actively seek patent protection on our technology. In fact, such efforts resulted in the issuance by the United States Patent and Trademark Office of a patent entitled "Ecologically Clean Mechanically Rechargeable Air-Metal Current Source" on March 12, 2002. In addition on February 21, 2003 a Notice of Allowance was issued by the U.S. Patent and Trademark Office on our patent application entitled "A Metal-Air Battery Having In-Situ Generatable Electrolyte" which we anticipate will result in the issuance of an additional patent in the second quarter 2003. 3 Intercomsoft Limited Intercomsoft Limited is a provider of proprietary technology and consumables used to produce secure essential government identification documents. Currently, and since 1996, Intercomsoft only provides such technology and consumables to the Government of the Republic of Moldova, although it continues to actively seek other opportunities throughout the European marketplace and elsewhere. The system utilizing this technology is leased from Supercom, Ltd., an Israeli corporation, pursuant to a lease agreement dated August 25, 1995 with a term of ten (10) years with an automatic ten (10) year extension, unless either party submits a written notification of termination prior to the expiration of the initial 10 year term. All of the materials required to operate, maintain, and repair the system are supplied by Supercom, Ltd. pursuant to the lease agreement. The system utilized by Intercomsoft consists principally of secured proprietary technology that allows high-speed laser printing on plastic. The system can print up to 450 high quality cards an hour. The heart of the system is "ID-SOFT," identification generator application software, which allows the system to integrate with and adapt into any given project including, but not limited to, fingerprints, palm geometry, and signatures. Additional applications of the technology include police and military use, access control, high security identification, government identification, and company identification products. An important aspect of the Intercomsoft system is that it can be readily connected to any existing computer mainframe or central database (such as a national population registry) to capture millions of records and images of data. These records and images are then stored and can be printed at a high rate of speed to accommodate the needs and demands of the customer. In April 1996, Intercomsoft was awarded a ten-year contract by the Ministry of Economics, Republic of Moldova to provide a National Register of Population and a National Passport System. Under the terms of this agreement, Intercomsoft supplies all of the equipment, technology, software, and materials necessary to produce all national passports, drivers' licenses, vehicle permits, identification cards and other national documents in the Republic of Moldova. Intercomsoft also provides the consumables needed to produce such identification products. Intercomsoft believes it currently has no competition for its products in the Republic of Moldova. Although it is currently seeking other opportunities, Intercomsoft presently derives all of its revenues and income pursuant to the agreement with the Ministry of Economics. Therefore, the Government of Moldova is the only existing client of Intercomsoft. If the Government of Moldova defaults on this agreement, or if this agreement is terminated or the terms materially amended, such changes would have a material adverse impact on Intercomsoft and us. Further, as the revenue generated by Intercomsoft is our only current revenue, any material adverse impact on Intercomsoft would have a material adverse impact on us. 4 Aluminum-Air Fuel Cell Technology Scientists at Aluminum-Power Inc. originally developed our aluminum-air fuel cell technology over a six-year period. Prior to 1980, considerable worldwide research and development was underway in the field of metal-air fuel cells, including aluminum-air fuel cells. While efforts continued in the United States to commercialize metal-air technology, much of the research establishment turned its efforts to proton exchange membrane (PEM) technologies. By the mid-eighties, government funding and the automobile industry had rallied behind the PEM fuel cell leaving metal-air research on the sidelines. However, some research establishments, operating under a different funding model and with different goals, continued work in metal-air fuels cells and consequently overcame many of the difficulties faced by researchers some twenty years ago. Generally, a storage device that converts chemical energy into direct-current (DC) electrical energy is referred to as a "battery." If the battery releases energy on demand, and is then disposed of because it cannot be recharged, it is commonly referred to as a "primary battery." As such, fuel cells can be considered as a special class of primary batteries, and metal-air fuel cells as a specific type of fuel cell. Metal-air fuel cells contain an anode (which serves as the fuel), a cathode, and an electrolyte. The density of the aluminum metal fuel source combined with the electrochemical properties and viability makes the aluminum-air type of power cell versatile and environmentally friendly. These types of cells do not customarily contain toxic or reactive substances. Electricity from our proprietary aluminum-air fuel cell is generated through an electrochemical reaction between aluminum, an alkaline solution and oxygen from the air. As the aluminum oxidizes in the alkaline solution, electricity is produced. Fundamentally, aluminum has tremendous energy density when compared with other metals used in batteries. Furthermore, spent aluminum can be recycled and obtaining aluminum from recycled aluminum hydroxide is more economical and less energy intensive than mining aluminum ore. Environmental and Regulatory Concerns with our Aluminum-Air Fuel Cell Technology Our technology uses oxygen from the air and aluminum metal as a fuel to provide a high density, environmentally safe and economical source of energy. Through repeated laboratory trials and extensive research, the products of reacted aluminum metal from our fuel cells have thus far proven to be environmentally benign. In the aluminum-air reaction, no pollutants are produced. The by-product, aluminum hydroxide, is fully recyclable and is non-polluting. Additionally, the electrolyte solution we use is non-toxic. Internally, our fuel cells operate at ambient pressures and no special high pressure or high temperature containment systems are required, as is the case with lithium polymer battery systems, flywheels or PEM based systems using hydrogen as a fuel. 5 We feel that our products would have the potential to effectively eliminate environmental pollution resulting from the manufacturing and removal of conventional fuel cells. Additionally, we feel that our products will eliminate associated disposal charges, regulatory compliance costs, and the threat of toxic spills, which may be common with competitive fuel cells. Given the composition and design of our fuel cells, we do not believe that we will be subject to any environmental or regulatory restrictions and/or governmental approvals prior to the commercial exploitation of our technology, although there can be no assurances. Our Competition Although there is currently a very limited market for consumer fuel cells utilizing aluminum-air technology, the fuel cell and battery industries, as a whole, are characterized by intense competition with a large number of companies offering or seeking to develop technology and products that will compete with those that we are seeking to develop and distribute. We compete with large and small manufacturers of alkaline, carbon-zinc, seawater, high rate and primary batteries as well as other manufacturers of lithium batteries. We are also subject to competition from manufacturers and developers of aluminum and/or zinc metal-air fuel cells, nickel-cadmium (NiCd), nickel metal hybdride (NiMH), lithium-ion/polymer (Li ion/polymer), lead-acid, and some smaller-size alkaline cells. We are also subject to competition from manufacturers engaged in the development of batteries incorporating new technologies. Our Employees We currently have three full time employees and numerous individuals or entities that provide services to us on a consulting or advisory basis. These figures do not include certain individuals who, by contract with their respective employers, may conduct research and development on our technology pursuant to a Research & Development Agreement with Aluminum-Power Inc., dated July 1, 2001. Additionally, these figures do not include individuals who work in various capacities for, or on behalf of, Intercomsoft Limited, our subsidiary. See "Certain Relationships and Related Transactions." ITEM 2. DESCRIPTION OF PROPERTY During the period covered by this Annual Report, we maintained our office located at 1285 Avenue of the Americas, 35th Floor, New York, New York 10019, on a month-to-month tenancy. In addition, on May 1, 2002 we entered into a one-year sublease with EZ TEL USA Inc., whose President is Gary Shokin, our Vice President, for office space at 25 Broad Street, Suite 15-E, New York, New York 10004. 6 Additionally, during the period covered by this report, in a joint effort with Aluminum-Power Inc., we operated an International Research and Development Center in Toronto, Ontario, Canada. The R&D Center is located in a 6,000 square foot facility that Aluminum-Power Inc. leased on March 31, 2001, for a five-year term. We have agreed to reimburse Aluminum-Power Inc. a percentage of its costs and expenses as it relates solely to the R&D Center and to work specifically performed for and on behalf of us. See "Directors, Executive Officers, Promoters and Control Persons", "Security Ownership of Certain Beneficial Owners and Management" and "Certain Relationships and Related Transactions." ITEM 3. LEGAL PROCEEDINGS During the fiscal year ended December 31, 2002, neither the Company nor any of its subsidiaries were a party to, or otherwise involved, in any material legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted during the fiscal year covered by this Annual Report to a vote of security holders, through the solicitation of proxies or otherwise. 7 PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our common stock is quoted and traded on a limited and sporadic basis on the OTC Bulletin Board operated by The Nasdaq Stock Market, Inc. under the trading symbol "TMOL." The limited and sporadic trading does not constitute, nor should it be considered, an established public trading market for our common stock. The following table sets forth the high and low closing bid prices for our common stock for the periods indicated, as reported by the OTC Bulletin Board, Nasdaq Trading and Market Services. Such quotations reflect inter-dealer prices, without real mark-up, mark-down or commissions, and may not necessarily represent actual transactions. We had 402 stockholders of record of our common stock as of December 31, 2002. Fiscal 2003 High Low ---- --- First Quarter $0.25 $0.07 Fiscal 2002 High Low ---- --- Fourth Quarter $0.37 $0.14 Third Quarter $0.60 $0.08 Second Quarter $0.33 $0.13 First Quarter $0.16 $0.06 Fiscal 2001 High Low ---- --- Fourth Quarter $0.65 $0.21 Third Quarter $1.08 $0.50 Second Quarter $1.10 $0.45 First Quarter $2.25 $0.50 We have not declared any cash dividends for the last two fiscal years and do not anticipate declaring any in the near future. There are no restrictions that limit our ability to pay dividends, other than those generally imposed by applicable state law. The future payment of dividends, if any, on the common stock is within the sole discretion of the board of directors and will depend, in part, on our earnings, capital requirements, financial condition, and other relevant factors, as determined by the Board. Set forth below is information regarding the issuance and sales of our securities without registration during the last three years. Other than as set forth below, no such sales involved the use of an underwriter and no commissions were paid in connection with the sale of any securities. All 8 of such transactions by us did not involve any public offering and were exempt from the registration requirements under the Securities Act pursuant to Section 4(2) thereof. On September 5, 2002 we issued 500,000 shares of our common stock to each of Alexander M. Gordin, our President and Chief Executive Officer and Gary Shokin, our Vice President and Secretary, in partial compensation of services to be rendered from such date through August 2003. Pursuant to a letter agreement entered into with each of Mr. Gordin and Mr. Shokin, such stock is earned by each of them at a rate of 41,000 shares per month beginning September 2002. Should their employment terminate within the twelve-month term of the agreement, any unearned stock will be returned to us within ten days of such termination. On May 30, 2002, we issued 100,000 shares of common stock to Dmitri Izzimov in consideration of certain research and development services provided to us by such individual. On January 2, 2002, we entered into a one-year Independent Consultant Agreement (the "Consultant Agreement") with The Rogich Communications Group, a Nevada corporation ("Rogich"). As compensation for the services that Rogich provided under the Consultant Agreement, we granted Rogich the following options to purchase shares: (i) an option to purchase 1,000,000 shares of common stock at an exercise price of $0.21 per share that vested upon execution of such Consultant Agreement, and (ii) options to purchase up to 3,000,000 shares of common stock at an exercise price of $0.21 per share that are granted pursuant to our 2001 Omnibus Plan, as amended. The options for up to 3,000,000 shares of common stock were granted on a monthly basis at a rate of 250,000 shares per month commencing on January 31, 2002 and ending on December 31, 2002. On August 15, 2001, the Company granted John R. Loveland, a former Director, options to purchase 100,000 shares of common stock, with an expiration date of August 15, 2006 and an exercise price of $0.50 per share of common stock. These options were not granted pursuant to the terms of the 2001 Omnibus Plan, as amended In July of 2001, Eontech Group Inc., a company indirectly controlled by Mr. Birshtein, the Company's Chairman, and a company which is the majority shareholder of Aluminum-Power Inc., entered into a consulting agreement with Mr. Jerry Goodis and The DragonWyck Corporation, whereby Mr. Goodis and The DragonWyck Corporation have agreed to provide Eontech Group Inc., and its subsidiaries, including Aluminum-Power Inc. and the Company, with certain consulting services. As partial consideration for such services, the Company granted options to The DragonWyck Corporation to purchase up to 200,000 shares of common stock, for a period of three years, at an exercise price of $0.50 per share of common stock. On February 16, 2001, we issued 88,000,000 shares of common stock to Aluminum-Power Inc. pursuant to a Technology Acquisition Agreement in addition to our interests in three operating subsidiaries; Banca Commerciala pe Actiuni "Export-Import", a corporation organized under the laws of the Republic of Moldova, Exim Asint S.A., a corporation organized under the laws of the Republic of Moldova, and Jolly LLC, a limited liability company organized under the laws of Wyoming which indirectly owned and operated a Hotel in the Republic of Moldova. 9 Additionally, during fiscal year ended December 31, 2002, we granted one consultant options, pursuant to the 2001 Omnibus Plan, as amended, to purchase an aggregate of 1,750,000 shares of our common stock, and cancelled 1,600,000 previously issued options. No officers or directors were granted options pursuant to the 2001 Omnibus Plan, as amended, during fiscal year 2002. During fiscal year ended December 31, 2001, the Company granted a total of 25 directors, officers, advisers or consultants options, pursuant to the 2001 Omnibus Plan, as amended, to purchase an aggregate of 7,970,000 shares of the Company's common stock. As of December 31, 2002, 8,120,000 were issued and outstanding under the 2001 Omnibus Plan as amended, and 2,550,000 options issued and outstanding outside of such 2001 Omnibus Option Plan, as amended. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION The following management's discussion and analysis of financial condition and results of operations should be read in conjunction with our financial statements and notes thereto contained elsewhere in this report. Plan of Operation General Intercomsoft, Ltd. ("Intercomsoft"), our wholly owned subsidiary, holds the world-wide rights to proprietary technology used to produce secure government identification documents, such as drivers' licenses and passports. Although Intercomsoft's current operations are based solely in the Republic of Moldova, it is actively seeking to expand its base of operations and offer its unique services to other areas and regions in the European marketplace and elsewhere. We currently derive all of our revenues and income pursuant to Intercomsoft's Supply Contract with the Government of the Republic of Moldova. The political and economic environment of the Republic of Moldova has historically been unstable. Should the Government of the Republic of Moldova default on the Supply Contract or discontinue the use of Intercomsoft's services under the Supply Contract, we would likely have limited recourse. We do not anticipate any other revenues during the fiscal year ending December 31, 2003. If for any reason (or for no reason) the Supply Contract were terminated, the terms were materially or adversely amended, or business reduced, such event would have a material adverse effect on Intercomsoft as well as on us. In addition, in the first quarter of 2001, we acquired certain rights, as more fully defined 10 below, to an aluminum-air fuel cell technology for use in portable consumer electronic devices such as cellular telephones and laptop computers. Since acquisition we have engaged in research, development and marketing efforts in the development of such technology. In addition to our research and development efforts, during the period covered by this report we actively sought strategic business partners to commercialize the technology. Further, since the acquisition of the aluminum-air fuel cell technology, we have vigorously pursued the prosecution of our patent applications involving such technology. On June 1, 2001, in a joint effort with Aluminum-Power Inc., a corporation that is controlled by our Chairman of the Board, we opened an International Research and Development Center in Toronto, Ontario, Canada. This R&D Center is located in a 6,000 square foot facility that Aluminum-Power Inc. leased on March 31, 2001, for a five-year term. Pursuant to a Research & Development Agreement between Aluminum-Power Inc. and us, dated July 1, 2001, we have agreed to reimburse Aluminum-Power Inc. a percentage of its costs and expenses, as such costs relate to work specifically performed for and on our behalf. Under the Research & Development Agreement, for a period of five years, we are not obligated to pay any amount owed to Aluminum-Power Inc., with the exception of a monthly fee equal to 1.2% of Aluminum-Power Inc.'s fixed monthly expenses associated with the R&D Center. The accrued balance of the total amount owed to Aluminum-Power Inc. shall be payable on the fifth anniversary of the Research & Development Agreement, and shall bear interest at a rate of 2% per annum. In a letter from Aluminum Power Inc. dated March 31, 2003 Aluminum-Power Inc. advised us that it was suspending further research and development efforts of the aluminum-air fuel cell technology under the Research and Development Agreement for the foreseeable future. Accordingly, as of the second quarter 2003 our research and developments efforts were suspended until such time as Aluminum-Power Inc. resumes its research and development efforts on our behalf, or we are able to obtain financing to proceed with such efforts on our own. (See "Description of Business" for further details.) Asset Acquisition and Discontinued Operations Pursuant to the Asset Acquisition Agreement dated January 11, 2001, between Aluminum-Power Inc. and us, we acquired: o An exclusive worldwide license to make, use and sell a mechanically rechargeable metal-air battery solely for use with consumer portable electronic devices, evidenced by United States Patent and Trademark Office Patent Application Number: 09/522,930, filed on March 10, 2000, titled, "Ecologically Clean Mechanically Rechargeable Air-Metal Current Source" (United States Patent No. 6,355,369, issued March 12, 2002) and Canadian Patent Application Number: 2,301,470, filed on December 7, 2000, that will allow for an instantaneous mechanical rechargeable battery requiring no external power source for recharging. 11 o All rights and title to certain technology relating to metal-air batteries and fuel cells, evidenced by United States Patent and Trademark Office Patent Application Reference No. PNK/M275689/IAROCHENKO, filed on December 19, 2000, and Internal Reference Patent Application #1167 filed with the Canadian Intellectual Property Office on February 7, 2000, and titled, "A Metal-Air Battery Having In-Situ Generatable Electrolyte," suitable for consumer portable electronic devices, including two-way radios, wireless telephones, portable audio devices, video cameras and personal computers. o The design and know-how to a DC/DC Converter designed and developed by Aluminum-Power Inc. to be used as part of a full battery assembly which will enable the conversion of cell voltage of an aluminum-metal-air-cathode battery to the voltage required by different consumer portable electronic devices. In exchange for the above noted assets, on February 16, 2001, we transferred to Aluminum-Power Inc. 88,000,000 shares of our common stock together with interests in three operating subsidiaries; Banca Commerciala pe Actiuni "Export-Import", a bank organized under the laws of the Republic of Moldova , Exim Asint S.A., an insurance company organized under the laws of the Republic of Moldova, and Jolly LLC, a limited liability company organized under the laws of Wyoming which indirectly owned and operated the Jolly Alon, a hotel in the Republic of Moldova. Results of Operations General During the fiscal year ended December 31, 2002, our assets consisted of Intercomsoft, a wholly owned subsidiary, and an aluminum-air fuel cell technology, as more fully described above. Intercomsoft currently operates in, and derives its revenues from, services performed for the Government of the Republic of Moldova pursuant to a Supply Agreement with such government. Although Intercomsoft is actively seeking to expand its services to areas outside of the Republic of Moldova, the uncertain economy and political instability in the Republic of Moldova could have a material adverse effect on us. Comparison of Fiscal Year Ending December 31, 2002 to Fiscal Year Ending December 31, 2001 During the fiscal year ended December 31, 2002, we had revenues resulting solely from Intercomsoft's production of government documents in the Republic of Moldova of $4,971,000 as compared to $3,886,000 for 2001. The increase in revenue of $1,085,000 was due to a number of factors. In 2001 Romania and Moldova introduced passport control between their two countries which led to an increase in passport issuances to the residents of Moldova. In addition, beginning in 2001 and continuing through 2002, a program of public awareness was effectuated encouraging the renewal of various forms of government licenses and registrations, reminding individuals to renew 12 expiring documents resulting in an increase in the issuance of such replacement documents. Increased marketing efforts by us beginning in the third quarter 2001 and cross marketing to individuals during passport renewals and/or issuance also led to a continuing increase in the sale of collateral documentation including drivers licenses and other government issued documents. During the fiscal year ended December 31, 2002, Intercomsoft's costs associated with generating these revenues was $1,170,000 or 23.5% as compared to $1,206,000 or 31% for 2001. The reduction in the percentage of costs associated with generating revenues was, in part, due to the purchase of new equipment that resulted in less maintenance costs, higher performance and production and increased efficiency. This resulted in gross profit for Intercomsoft of $3,801,000 and $2,680,000 for the fiscal years ending December 31, 2002 and 2001 respectively, an increase of $1,121,000, or 42%. General and administrative expenses for fiscal year ending December 31, 2002, were $1,525,000, which consisted of $75,000 from Intercomsoft and $1,450,000 of general corporate and administrative expenses. For the same period in 2001 general and administrative expenses aggregated approximately $1,445,000 which consisted of $81,000 from Intercomsoft and $1,364,000 of general corporate and administrative expenses. The minor increase of general corporate and administrative expenses resulted, in part, from a combination of savings in consulting, legal and accounting expenses, coupled with increases in insurance costs and a minor increase in office expenses relating to the opening of our new office located in downtown New York established to pursue business development opportunities. Public relations, marketing and advertising for fiscal year ending December 31, 2002 were $1,447,000 which consisted of $1,441,000 from Intercomsoft for marketing expenses relating to efforts to expand the use of Intercomsoft's services, and $6,000 which related to the on-going public awareness program for our aluminum-air fuel cell technology. For the same period in 2001, such expenses aggregated approximately $950,000, which consisted of $852,000 from Intercomsoft and $98,000 related to the aluminum-air fuel cell technology. The increase of $589,000 from Intercomsoft was the direct result of a marketing agreement entered into in the 3rd quarter 2001 to aggressively market Intercomsoft's products and services to the Moldovan population. The decrease of $92,000 in such expense relating to the aluminum-air fuel cell resulted from a reassessment of the marketing needs for the technology. Beginning in the first quarter of 2001, we began our research and development program of the metal-air (aluminum-air) fuel cell technology acquired in such period. To that end, together with our majority shareholder Aluminum-Power Inc., we opened an International Research & Development Center in Toronto, Ontario, Canada. Research and development costs for 2002 were $353,000, compared to $527,000 in 2001. The decrease of $172,000 in research and development costs in year 2002 resulted from a stabilization of start-up and non-recurring costs incurred in 2001, the first year of research and development, and the expense incurred in establishing the R&D Center in 2001 to facilitate ongoing research and development. We had a net profit from operations of approximately $476,000 for 2002 as compared to a net loss of $242,000 for 2001. 13 Liquidity & Capital Resources Our joint venture with Aluminum-Power Inc. to operate the R&D Center has added significant additional costs and expenses associated with running such facility. As of December 31, 2002, we owed Aluminum-Power Inc. approximately $119,000, payable on the fifth anniversary of the Research & Development Agreement, and bearing interest at a rate of 2% per annum. While we believe we have adequate capital to fund current operations for fiscal year 2003, we believe that we will need to obtain additional working capital for future periods if we are to continue with our research and development efforts of our aluminum-air fuel cell technology. At December 31, 2002 there were unpaid cash advances totaling approximately $208,000 that were made to us in 2001 by Mr. Boris Birshtein, our Chairman of the Board and indirect owner of a majority of our outstanding shares of common stock, or by entities effectively owned and controlled by Mr. Birshtein. Of such amount, Mr. Birshtein personally is owed approximately $120,000 and entities effectively owned and controlled by Mr. Birshtein, are owed approximately $88,000. All cash advances made to the Company are non-interest bearing and due on demand. Although no assurances can be made, we believe that our operating expenses will not decrease during the fiscal year ending December 31, 2003 as a result of the temporary suspension of research and development efforts, due to the anticipation of partial payment to our Chairman of the Board, or entities controlled by him, of the above noted unpaid cash advances. We may seek additional funding through public or private financing or other arrangements in an effort to subsidize research and development expenses. However, there can be no assurances that additional financing will be available or, if available, on terms that are acceptable to us. If adequate funds are not available, or not available on terms that are acceptable to us, we may not be able to further develop and market our aluminum air fuel cell technology. FORWARD LOOKING STATEMENTS Certain statements contained in this Annual Report, including, without limitation, statements containing the words "believes," "anticipates," "estimates," "expects," "projections," and words of similar import, constitute "forward-looking statements." You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including risks faced by us described in this Report and the other documents we file with the Securities and Exchange Commission ("SEC"). ITEM 7. FINANCIAL STATEMENTS The consolidated financial statements of the Company for the years ended December 31, 2002 and 2001 have been examined to the extent indicated in the report provided by the independent 14 accountants, Paritz & Company, PA. Paritz & Company, PA has confirmed to the Company that the consolidated financial statements have been prepared in accordance with generally accepted accounting principles and with Regulation S-X promulgated by the SEC. 15 TRIMOL GROUP, INC. CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002 AND 2001 TRIMOL GROUP, INC. CONTENTS Page Numbers Report of the Independent Auditors F-1 Consolidated Balance Sheet F-2 Consolidated Statement of Operations F-3 Statement of Changes in Shareholders' Equity F-4 Consolidated Statement of Cash Flows F-5 Notes to the Consolidated Financial Statements F-6 to F-13 REPORT OF THE INDEPENDENT AUDITORS To the Board of Directors and Shareholders of Trimol Group, Inc. We have audited the accompanying consolidated balance sheet of Trimol Group, Inc. and subsidiaries (the "Company") as of December 31, 2002 and the related consolidated statements of operations, changes in shareholders' equity and cash flows for the years ended December 31, 2002 and 2001. 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 audit. We conducted our audit in accordance with generally accepted auditing standards in the United States of America. 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 audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2002 and the results of its operations and cash flows for each of the two years in the period ended December 31, 2002, in conformity with generally accepted accounting principles in the United States of America. PARITZ & COMPANY, P.A. Certified Public Accountants Hackensack, New Jersey Dated: March 17, 2003, except as to Note 3(b) which is dated March 31, 2003 F-1 TRIMOL GROUP, INC. CONSOLIDATED BALANCE SHEET YEAR ENDED DECEMBER 31, 2002 - ------------------------------------------------------------------------------- ASSETS Current assets: Cash $ 49,000 Accounts receivable 302,000 Prepaid expenses 17,000 --------- Total current assets 368,000 Property and equipment, net 95,000 --------- TOTAL ASSETS $ 463,000 ========= LIABILITIES Current liabilities: Trade accounts payable $ 106,000 Accrued expenses 201,000 Current portion of payables to related parties 341,000 --------- TOTAL LIABILITIES 648,000 PAYABLES TO RELATED PARTIES 379,000 SHAREHOLDERS' DEFICIENCY (564,000) --------- TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY $ 463,000 ========= - ------------------------------------------------------------------------------- The accompanying notes are an integral part of the financial statements. F-2 TRIMOL GROUP, INC. CONSOLIDATED STATEMENT OF OPERATIONS - --------------------------------------------------------------------------------
Year Ended Year Ended December 31, 2002 December 31, 2001 REVENUES $ 4,971,000 $ 3,886,000 ------------ ------------ OPERATING EXPENSES: Cost of revenues 1,170,000 1,206,000 Research and development 353,000 527,000 Marketing and promotion 1,447,000 950,000 General and administrative expenses 1,525,000 1,445,000 ------------ ------------ TOTAL OPERATING EXPENSES 4,495,000 4,128,000 ------------ ------------ NET INCOME (LOSS) $ 476,000 $ (242,000) ============ ============ Net income (loss) per share (Basic and Diluted) .005 (.002) ============ ============ WEIGHTED AVERAGE NUMBER OFSHARES OUTSTANDING-BASIC AND DILUTED 100,361,466 88,707,493 ============ ============
- -------------------------------------------------------------------------------- The accompanying notes are an integral part of the financial statements F-3 TRIMOL GROUP, INC. STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY - --------------------------------------------------------------------------------
ADDITIONAL RETAINED COMMON STOCK PAID-IN EARNINGS DEFERRED SHARES AMOUNT CAPITAL (DEFICIT) COMPENSATION TOTAL BALANCE - JANUARY 1, 2001 12,039,000 $ 120,000 $ 6,178,000 $(7,142,000) -- $ (844,000) Net loss -- -- -- (242,000) -- (242,000) Issuance of common stock in Exchange for assets (see Note 2) 88,000,000 880,000 (880,000) -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- BALANCE - DECEMBER 31, 2001 100,039,000 1,000,000 5,298,000 (7,384,000) -- (1,086,000) Net income -- -- -- 476,000 -- 476,000 Issuance of common stock for services performed 1,100,000 11,000 87,000 -- -- 98,000 Deferred compensation -- -- -- (52,000) (52,000) ----------- ----------- ----------- ----------- ----------- ----------- BALANCE - DECEMBER 31, 2002 101,139,000 $ 1,011,000 $ 5,385,000 $ 6,908,000 $ (52,000) $ (564,000) =========== =========== =========== =========== =========== ===========
- -------------------------------------------------------------------------------- The accompanying notes are an integral part of the financial statements. F-4 TRIMOL GROUP, INC. CONSOLIDATED STATEMENT OF CASH FLOWS - --------------------------------------------------------------------------------
Year Ended Year Ended December 31, 2002 December 31, 2001 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 476,000 $(242,000) ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH USED IN OPERATING ACTIVITIES Depreciation of property and equipment 8,000 -- Stock based compensation 46,000 -- Write-off of deferred offering costs 35,000 -- CHANGES IN ASSETS AND LIABILITIES Accounts receivable 178,000 (344,000) Prepaid expenses 41,000 (58,000) Accounts payable (425,000) 65,000 Accrued expenses (79,000) (341,000) --------- --------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 280,000 (920,000) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment (103,000) -- --------- --------- NET CASH USED IN INVESTING ACTIVITIES (103,000) -- --------- --------- CASH FLOW FROM FINANCING ACTIVITIES Repayment of loan to related party -- -- Net advances (repayments) to/from related parties (172,000) 892,000 Payment of deferred offering costs -- (35,000) --------- --------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (172,000) 857,000 --------- --------- INCREASE (DECREASE) IN CASH 5,000 (63,000) CASH - BEGINNING OF YEAR 44,000 107,000 --------- --------- CASH - END OF YEAR $ 49,000 $ 44,000 ========= =========
- -------------------------------------------------------------------------------- The accompanying notes are an integral part of the financial statements. F-5 TRIMOL GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1-SIGNIFICANT ACCOUNTING POLICIES Business organization Trimol Group, Inc. (the "Company") was incorporated in 1953 in Delaware and has since undergone several name changes and engaged in several different businesses. The Company owns all of the outstanding shares of Intercomsoft Limited ("Intercomsoft") a non-resident Irish company, which, pursuant to a lease agreement which expires in August 2005, provides proprietary technology, equipment and auxiliary materials used in the production of secure essential government documents (passports, drivers' licenses and ID cards). Currently Intercomsoft's only customer is the Government of the Republic of Moldova. As a result of the acquisition referred to in Note 2, the Company has an exclusive worldwide license to make, use and sell a mechanically rechargeable metal-air (aluminum) fuel cell solely for use with consumer portable electronic devices, all rights and title to certain technology relating to metal-air (aluminum) fuel cells, and the design and know-how to a DC/DC Converter designed and developed by a related company. Substantially all of the research and development costs related to this technology are allocated from the majority shareholder of the Company (see Note 6). Principles of consolidation The consolidated financial statements of the Company include the accounts of the Company and its wholly-owned subsidiary, Intercomsoft. Intercompany transactions and balances have been eliminated in consolidation. 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 reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Impairment of long-lived assets The Company reviews long-lived assets for impairment when circumstances indicate the carrying value of an asset may not be recoverable. If an impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. F-6 Property and equipment Property and equipment are recorded at cost. Depreciation is provided for financial reporting purposes on the straight-line method in amounts sufficient to amortize the cost of the related asset over its estimated useful live. Maintenance, repairs and minor renewals are charged to expense when incurred. Replacements and major renewals are capitalized. Research and development The Company charges all research and development costs to expense as incurred. Advertising costs The Company expenses all advertising costs as incurred. Revenue Recognition Revenue from the agreement by and between Intercomsoft and the Moldovan Ministry of Economics is recognized upon the quantity of product (number of computerized documents) produced during the period reported. Income taxes The Company accounts for deferred income taxes using Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). The statement requires that deferred income taxes reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their bases for financial reporting purposes. In addition, SFAS 109 requires the recognition of future tax benefits, such as net operating loss carryforwards. A valuation allowance related to deferred tax assets is recognized when, in management's judgment, it is more likely than not that all, or a portion of such deferred assets, will not be realized. Income per share Income per share of common stock have been computed on the basis of the weighted average number of shares of common stock outstanding. Diluted earnings per share is based on the weighted average number of shares and common stock equivalents outstanding. The Company had no common stock equivalents during the periods presented. Comprehensive income The Company adopted the provisions of the SFAS No. 130, "Reporting Comprehensive Income". Comprehensive income is defined as any change in equity from transactions and other events originating from non-owner sources, and is displayed as accumulated comprehensive income in the Statements of Changes in Shareholders' Equity. F-7 Fair value of financial instruments The carrying value of short-term financial instruments arising in the ordinary course of business, approximates fair value because of the relatively short period of time between their origination and expected realization. NOTE 2-ACQUISITION Pursuant to a series of agreements which were authorized by the Board of Directors in 2000 and closed in 2001 with Aluminum-Power, Inc, ("API"), a company owned and controlled by the principal shareholder of the Company, the Company sold its interest in three subsidiaries and transferred 88,000,000 shares of previously unissued common stock in exchange for the exclusive worldwide license referred to in Note 1. NOTE 3-RISKS AND UNCERTAINTIES The following factors relating to the Company and its business should be carefully considered: (a) Intercomsoft's only customer is the Republic of Moldova's Ministry of Economics. Moldova is a former Republic of the Soviet Union. The political and economic situation in Moldova has historically been unstable. Should the Government of the Republic of Moldova default on the lease agreement referred to in Note 1 or discontinue the use of Intercomsoft's services under the lease agreement, the Company would likely have limited recourse. If for any reason (or for no reason) the lease agreement was terminated, the terms were materially or adversely amended, or business reduced, such event would have a material adverse effect on Intercomsoft. (b) As a result of the transactions referred to in Note 2, Trimol has exchanged a substantial part of its assets for certain technology. Although the United States Patent and Trademark Office has issued several patents on the technology, there can be no assurances that such office will afford such technology additional patent protection and there can be no assurances that such technology will be marketable and/or profitable. Additionally, the Company believes that in order to further develop and market this technology, it will be necessary to seek additional capital. There can be no assurance that additional financing will be available on commercially reasonable terms or at all. If adequate funds are not available, or are not available on acceptable terms, the Company may not be able to further develop and market the technology. Such inability to obtain additional financing when needed would have a negative impact on the Company. If additional funds are raised through the issuance of equity or convertible debt securities, the percentage ownership of the existing shareholders will be reduced, and such securities may have rights, preferences and privileges senior to those of the existing shares of common stock. API advised the Company in a letter dated March 31, 2003, that although it has aggressively pursued licensing opportunities and sought venture partners, private financing and investment capital in an effort to support its ongoing research and development of the aluminum-air fuel cell technology, it has been unable to secure financing for such research and development efforts, other than through shareholder loans. Further, API indicated that over the past two years they have found the development time line and cost for research and development to be significantly in excess of what it had originally anticipated. In fact, API cited in its letter that a recent report by the Department of Energy concluded that there are significant and heretofore unforeseen barriers to the development of various fuel cell technologies, most specifically the onerous cost of development and commercialization. API concluded that in light of the above, as well as other considerations, it has elected to suspend any further research and development efforts of the aluminum-air fuel cell under the R&D Agreement at this time, advising that it does not believe that it would be prudent to expend F-8 any additional research and development funds on the technology until it can evaluate the prospects and feasibility of further development and access marketing opportunities. Accordingly, as of the second quarter 2003, research and development efforts were suspended until such time as API resumes its research and development efforts or the Company is able to obtain financing to proceed with such efforts. The Company continues to believe in the viability of the technology and has not changed its opinion as to the benefits the technology could make in the field of alternative power. However, management has concluded that due to the extraordinary time and enormous costs involved, continued research and development efforts are not justified at this time. NOTE 4-PROPERTY AND EQUIPMENT A summary of property and equipment and the estimated useful lives used in the computation of depreciation is as follows: Amount Life Document processing equipment $ 85,000 5 years Office equipment 18,000 5 years -------- 103,000 Less accumulated depreciation 8,000 -------- $ 95,000 ======== NOTE 5-SHAREHOLDERS' EQUITY Effective February 14, 2001, the Company amended its Articles of Incorporation to increase its authorized shares of common stock, $0.01 par value, from 30 million to 130 million shares. The Company has 10,000 $1.00 par value shares of Preferred Stock authorized, none of which are issued and outstanding. NOTE 6-RELATED PARTY TRANSACTIONS AND BALANCES (a) Transactions See Note 2 regarding transaction with API. On July 1, 2001, the Company entered into an agreement with API pursuant to which Trimol would reimburse API for its allocated portion of expenses attributable to the Company's technology referred to in Notes 1 and 2. During the two year period ended December 31, 2002 API operated a research and development center ("R&D Center") which housed a prototype development and assembly laboratory with a full complement of staff, including mechanical engineers, design engineers, scientists and a support staff. The agreement provides the Company with unlimited use of the R&D Center and unlimited use of all equipment and employees located at the center. The Company is obligated to pay API proportionately all costs and expenses associated with the use of the R&D Center. In addition, the Company pays API to lease its proportionate share of the center's equipment and improvements at a monthly rate of 1.2% of API's gross asset value. F-9 Allocated research and development expenses for the year ended December 31, 2002 aggregated $162,000. (b) Payables to related parties consist of the following: Cash advances from the Chairman of the Board ("Chairman") of the Company, and a company owned by the Chairman. (1) $208,000 Accrued compensation due to the Chairman. (See Note 9) (2) 393,000 Due to API. (3) 119,000 -------- 720,000 Less current portion 341,000 -------- $379,000 ========
(1) These amounts are non-interest bearing and due on demand. (2) Of this amount $260,000 is due June 1, 2004 and $133,000 is due on demand. (3) This amount bears interest at 2% per annum and is due July 1, 2006. NOTE 7-STOCK COMPENSATION PLANS (a) In February 2001, the Company adopted the 2001 Omnibus Plan in order to attract and retain qualified directors, officers, employees, consultants and advisors (the "Eligible Persons"). Eligible Persons may be granted (a) stock options which may be designated as nonqualified stock options or incentive stock options, (b) stock appreciation rights, (c) restricted stock awards, (d) performance awards, or (e) other forms of stock-based incentive awards. The maximum number of shares with respect to which the awards may be granted under the 2001 Omnibus Plan, as amended, is 10,000,000 shares of common stock; provided, however, that such number of shares of Common Stock may also be subject to adjustment, from time to time, at the discretion of the Board of Directors of the Company. The Company has also issued options outside of the Omnibus Plan. A summary of option activity is as follows: Inside Outside Plan Plan Total Balance - January 1, 2001 -- -- -- Granted 7,970,000 300,000 8,270,000 Exercised -- -- -- Cancelled -- -- -- ----------- ----------- ----------- Balance - December 31, 2001 7,970,000 300,000 8,270,000 Granted 1,750,000 2,250,000 4,000,000 Exercised -- -- -- Cancelled (1,600,000) -- (1,600,000) ----------- ----------- ----------- Balance - December 31, 2002 8,120,000 2,550,000 10,670,000 =========== =========== =========== F-10 The following table summarizes information regarding stock options outstanding at December 31, 2001:
Weighted Weighted Weighted Exercise Number of Average Average Number of Average Price Options Remaining Exercise Shares Exercise Range Outstanding Contractual Life Price Exercisable Price $0.01 200,000 3.8 0.01 -- -- $0.21 4,000,000 4.4 0.21 -- -- $0.50 6,020,000 3.5 0.50 -- -- $1.00 - 1.25 450,000 3.6 1.19 -- --
The per share weighted average fair value of stock options granted during the fiscal year ended December 31, 2002 was $0.21. The fair value of these options was determined at the date of grant using the Black-Scholes option pricing model with the following assumptions: Risk-free interest rate 3.83% Expected volatility of common stock 282.85% Dividend yield 0.00% Expected option term 4.4 years The Company applies APB 25 in accounting for its stock plans and, accordingly, no compensation costs have been recognized in the Company's financial statements for options granted. If, under SFAS 123, the Company determined compensation costs based on the fair value at the grant date for its stock options, net earnings and earnings per share for the year ended December 31, 2002 would have been reduced to the pro forma amounts as follows: Net Earnings: As reported $ 476,000 Pro forma (3,963,000) Basic Earnings per Share: As reported .005 Pro forma (.039) Diluted Earnings per Share As reported .005 Pro forma (.039) (b) In February 2000 the Company issued warrants to purchase 1,400,000 shares of its common stock (the "Warrants") to three employees, 400,000 of which were cancelled on January 28, 2003. The remaining Warrants may be exercised for a period of five years at an exercise price of $.50 per share and contain an anti-dilution provision. F-11 As of December 31, 2002, the Company and the warrant holder are in a disagreement concerning the validity and effect of an anti-dilution paragraph contained in the warrant agreement. In part, the paragraph at question provides that the warrant holder's exercise price, and the number and character of the shares of common stock underlying the warrants would be adjusted in the event that the Company sells or issues shares of common stock or any options exchangeable for, or convertible into, shares of common stock at a price per share of common stock less than the higher of either the then current market price per share of common stock or the exercise price. There can be no assurance that this matter will be resolved on terms acceptable to the Company, nor can there be any assurance that the resolution of this matter will not result in the adjustment of the exercise price and number and character of the underlying shares. In the event that the matter is not resolved on acceptable terms, and further that a court of law determines that the warrant holder's position is correct, then upon the full exercise of the warrants the Company may be legally bound and obligated to issue approximately 3.25 million additional shares of common stock, which would have an immediate and substantial dilutive effect on the shares of common stock outstanding. In addition, warrants to purchase up to 60,000 shares of the Company's Common Stock are outstanding, 30,000 of which are at an exercise price of $11.50 per share and 30,000 of which are at an exercise price of $.75 per share. NOTE 8-INCOME TAX The Company's income tax benefit differs from the expected income tax benefit by applying the U.S. Federal statutory rate of 34% to net income (loss) as follows:
December 31, 2002 December 31, 2001 Income tax (benefit) at statutory rate of 34% $ 162,000 $ (82,000) Net operating loss carryforward (used) not utilized (162,000) 82,000 ----------- ----------- $ -- $ -- =========== =========== December 31, 2002 December 31, 2001 Deferred tax assets: Net operating loss carryforward $ 218,000 $ 380,000 Capital loss carryforward 2,706,000 2,706,000 ----------- ----------- 2,924,000 3,086,000 Valuation allowance (see Note 1) 2,924,000 3,086,000 ----------- ----------- $ -- $ -- =========== ===========
NOTE 9-COMMITMENTS Intercomsoft has entered into an agreement for the purchase of equipment, software and consumables (collectively "the merchandise") for the production of computerized documents. As part of this agreement, Intercomsoft is provided with guidance and support required for installation and operation of the equipment, as well as the materials required for its maintenance. In addition to the cost of the merchandise under the above noted agreement, Intercomsoft is obligated to pay 25% of its profits to the supplier of the merchandise, as more clearly defined under the agreements. F-12 The Company has an employment agreement with the Chairman which expires December 31, 2003 and provides for base annual compensation of $250,000. The agreement provides that, among other things, the Chairman will receive a bonus equal to ten percent of the excess net pre-tax profits, as defined. In addition, the agreement provides that for every $1,000,000 of the Company's excess net pre-tax profits, as defined, generated by the Company in the determining year, the Chairman will receive incentive warrants ("Incentive Warrants") to purchase an aggregate of 100,000 shares of the Company's common stock up to a maximum of 1,000,000 shares of common stock per year at an exercise price equal to the closing price of common stock on the issue date, which was waived by the Chairman for the year ended December 31, 2002. As of December 31, 2002, no Incentive Warrants were outstanding. In the event that, upon the expiration of the employment agreement, it is not renewed the Company shall be obligated to pay the Chairman a lump sum amount equal to one-hundred-fifty percent (150%) of his then base salary and the bonus with respect to the last year of the employment agreement. NOTE 10-SEGMENT INFORMATION The Company's operations are classified into two reportable segments plus corporate and administrative functions. The segments consist of Intercomsoft, which produces computerized identification documents, research and development of the aluminum-air fuel cell technology, and general and administrative expenses incurred for corporate purposes. YEAR ENDED DECEMBER 31, 2002
Research and Corporate and Intercomsoft Development Administrative Total Net sales $ 4,971,000 $ -- $ -- $ 4,971,000 Operating expenses 2,686,000 353,000 1,456,000 4,495,000 --------------- --------------- --------------- --------------- Net income (loss) $ 2,285,000 $ (353,000) $ (1,403,000) $ 476,000 =============== =============== =============== ===============
YEAR ENDED DECEMBER 31, 2001
Research and Corporate and Intercomsoft Development Administrative Total Net sales $ 3,886,000 $ -- $ -- $ 3,886,000 Operating expenses 2,139,000 625,000 1,364,000 4,128,000 --------------- --------------- --------------- --------------- Net income (loss) $ 1,747,000 $ (625,000) $ (1,364,000) $ (242,000) =============== =============== =============== ===============
F-13 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 16 PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT Directors and Executive Officers The names and ages of our directors, executive officers and significant employees and consultants are set forth below. Our By-laws provide for not less than three and not more than fifteen directors. All directors are elected annually by the stockholders to serve until the next annual meeting of the stockholders and until their successors are duly elected and qualified. NAME AGE POSITION WITH COMPANY ---- --- --------------------- Boris Birshtein 55 Chairman of the Board of Directors Alexander M. Gordin 39 Director; President; Chief Executive Officer Michael Jay Solomon 65 Director John R. Loveland 65 Director (resigned November 19, 2002) Walter J. Perchal 51 Director Vijay Sharma 33 Director (resigned January 15. 2003) Shmuel Gurfinkel 56 Chief Financial Officer Gary Shokin 42 Vice President; Secretary Rafi Ferry 32 Marketing Director (outside consultant) Background of Executive Officers, Directors and Significant Employees Boris Birshtein has served as our Chairman of the Board of Directors since January 1998. Since 1999, Mr. Birshtein has served as the Chairman of Eontech Group Inc., of which he is the principal shareholder and of Aluminum-Power Inc., our principal shareholder. From 1996 Mr. Birshtein has served as the Chairman of World Assets (Media) Inc. Mr. Birshtein holds PhDs in Philosophy and Economics and heads the North American Informationology Academy. 17 Alexander M. Gordin has served as a member of the Board of Directors and our President since May 2000, and the Chief Executive Officer since November 2000. Mr. Gordin served as a Director of Eontech R&D, Inc., a former subsidiary, from August 2001 until its dissolution in March 2003. Since January of 2002, Mr. Gordin has served as the Managing Director for Broad Street Capital Group, a group of asset management and financial advisory companies controlled by Mr. Gordin and his immediate family. From 1998 until 2000, Mr. Gordin served as the Director of Strategic Business Development at Amdour Group located in Stamford, Connecticut. Mr. Gordin's duties at Amdour Group included extensive responsibility for direct investments and Mergers & Acquisitions in the areas of media, wireless communications, and commercial real estate. From 1996 until 1998, Mr. Gordin served as the Managing Director of Broad Street Capital LLC, a firm he co-founded and which is now owned by Broad Street Capital Group. From 1990 until 1996, Mr. Gordin was engaged as the President of Radio Communications International Corp., which was the first Motorola distributor located in the former Soviet Union. In 1995, Mr. Gordin was awarded an MBA from the Wharton School of the University of Pennsylvania. Michael Jay Solomon was appointed as a member of the Board of Directors on February 16, 2001 and elected in August 2001. Since March 2002 Mr. Solomon has served as the Chairman of the Board of Directors and Chief Executive Officer of El Camino Entertainment Group, Inc, which is dedicated to building major live family entertainment business in North America. From May 2000 to August 2002, Mr. Solomon served as the Chairman of the Board of Directors of Maxx International, Inc. Mr. Solomon currently serves as a Director on the Boards of New York University Stern School of Business, the Entertainment Business & Management Advisory Board at UCLA, the International Council of the National Academy of Television Arts and Sciences and the U.S.C. Annenberg School of Communication/London School of Economics Communication Degree Program. He has held the positions of Chairman/CEO of Telepictures Corporation, President of Lorimar-Telepictures Corp. and President of Warner Bros. International Television. John R. Loveland was appointed as a member of the Board of Directors on February 16, 2001, was elected in August 2001 and served continuously until his resignation from his position as a Director on November 19, 2002. From 1960 to 2000, Mr. Loveland served in a position of executive management of various entities related to and/or owned by O'Brien & Gere Limited. From 1980 to 1992, Mr. Loveland served as the President and CEO of O'Brien & Gere Engineers, Inc. From 1985 to 1995, he served as the President of O'Brien & Gere Limited and from 1985 until 2000, Mr. Loveland served as the President of O'Brien & Gere Property Development. Additionally, from June 1994 to February 2000, Mr. Loveland served as a Director and Chief Executive Officer of Op-Tech Environmental Services, Inc. Walter J. Perchal, Ph.D. was appointed as a member of the Board of Directors on February 16, 2001 and elected in August 2001. Since 1997, Mr. Perchal has served as the President and Chief Executive Officer of IC Inc., a consulting firm, which provides consulting services in North America, Europe and Asia. For the past 20 years, Mr. Perchal has served as an adjunct Professor at York University located in Toronto, Canada. Vijay Sharma was appointed as a member of the Board of Directors on February 16, 2001, was elected in August 2001 and served continuously until his resignation on January 15, 2003. In 18 addition he also served as our R&D Center Coordinator at the R&D Center from February 2001 to January 2003 and from March 16, 2001 to January 31, 2003 as the President of Aluminum-Power Inc., our majority shareholder, a corporation organized under the laws of the Province of Ontario, Canada. Since 1993, ATI Technologies employed Mr. Sharma initially as a Product Manager, then a Group Product Manager and finally as a Senior Group Manager of Business Management. Mr. Sharma received a Masters of Business Administration from Edinburgh Business School, Herlot-Watt University and a B.A.Sc. in Chemical Engineering from the University of Toronto. Shmuel Gurfinkel has been our Chief Financial Officer since January 1998. From 1998 until 2000, Mr. Gurfinkel served as a Director. Mr. Gurfinkel is also a member of the executive management team of Intercomsoft Limited, our subsidiary. Additionally, since 1996, Mr. Gurfinkel also has been a Director of Banca Commerciala pe Actiuni "Export-Import". For the past five years, Mr. Gurfinkel has been actively engaged in managing and operating the Shmuel Gurfinkel accounting firm in Ramat-Gan, Israel. Since 1997, Mr. Gurfinkel has served as a Director of Peker Plada Metals, Ltd., a subsidiary of Africa Israel Investments Ltd. Gary Shokin has served as a Vice President since May 2000 and as Secretary since January 2001. From May 2000 until January 2001, Mr. Shokin also served as a Director. Since March 2002 Mr. Shokin has been a shareholder and has served as President of the EZTEL Group, a privately held telecommunications company. Since 1995, Mr. Shokin has served as the President of Emerald Spa, Inc., a New York based company specializing in beauty enhancement, physical fitness and skin care. Since 1993, Mr. Shokin has served as the President of North Star Auto Center, Inc. Rafi Ferry was named our Marketing Director on February 1, 2001. From February 2001 to December 2002, Mr. Ferry also served as the Vice President of Marketing for Aluminum-Power Inc. From 1996 until 1998, Mr. Ferry was employed as a Sales Manager at Gestetner (Israel) Ltd. Mr. Ferry holds a Bachelor of Business Administration from York University. Section 16(a) Beneficial Ownership Reporting Compliance The Company is not aware of any person who was a director, officer, or beneficial owner of more than ten percent (10%) of the Company's common stock and who failed to file reports required by Section 16(a) of the Securities Exchange Act of 1934 in a timely manner. 19 ITEM 10. EXECUTIVE COMPENSATION The following table sets forth information concerning the annual and long-term compensation of the Company's Chief Executive Officer, and the most highly compensated employees and/or executive officers who served at the end of the fiscal year ended December 31, 2002, and whose salary and bonus exceeded $100,000 for the fiscal year ended December 31, 2002, for services rendered in all capacities to the Company and its subsidiaries during the Company's 2000 and 2001 and 2002 fiscal years. The listed individuals shall be hereinafter referred to as the "Named Executive Officers." Summary Compensation Table
Annual Compensation Long Term Compensation ---------------------------------------------------------------- AWARDS - ------------------------------------------------------------------------------------------------- Securities Name and Principal Other Annual Underlying All Other Position Year Salary ($) Compensation ($) Options/ SARs(#) Compensation - ------------------------------------------------------------------------------------------------- Boris Birshtein 2000 $250,000(1) $21,600(2) -- 600,000(3) (Chairman of the Board) 2001 $250,000(1) $21,600(2) -- -- 2002 $250,000(1) $74,500(2) -- -- - ------------------------------------------------------------------------------------------------- Alexander Gordin 2000 $80,000 -- -- (Director, President and Chief Executive 2001 $120,000 $21,600(4) 500,000(5) -- Officer) 2002 $130,000 $21,600(4) 500,000(5) - -------------------------------------------------------------------------------------------------
- ----------------- (1) Of the $250,000 that Mr. Birshtein was entitled to receive in each of fiscal years 2000 and 2001, $120,000 was paid in each year and $130,000 was accrued for each year but has not been paid. Of the $250,000 that Mr Birshtein was entitled to receive in fiscal year 2002, $170,000 was paid and $80,000 was accrued but has not been paid. (2) Mr. Birshtein receives a monthly office expense allowance of $1,800. totaling $21,600 annually. In addition, in year 2002, Mr. Birshtein was entitled to receive a bonus based on our annual Excess Net Pre-Tax Profit as defined in his Employment Agreement as set forth in further detail within this Item 10. See "Employment Agreements." Such bonus for the year 2002 was $52,900. which has not, as of this filing, been paid to Mr. Birshtein, but has been accrued as compensation due to him. (3) On February 28, 2000 we issued to Mr. Birshtein warrants to purchase 600,000 shares of common stock and simultaneously cancelled warrants previously issued to purchase the same 20 number of shares, which were exercisable at a purchase price of $11.50 per share. The newly issued warrants have a five year exercise period beginning on the date of issuance at an exercise price of $0.50 per share. The terms of the warrants include an anti-dilution clause for the adjustment of the exercise price and number and character of the underlying shares, under specific circumstances. Additionally, these warrants entitle Mr. Birshtein to "cashless exercise" rights and demand and "piggy-back" registration rights with respect to the warrants and the underlying shares of common stock. The original warrants issued to Mr. Birshtein were in consideration of the significant time an effort expended by Mr. Birshtein on our behalf for which he was not previously compensated. (4) Mr. Gordin receives a monthly office expense allowance of $1,800. (5) In January 2001 we issued to Mr. Gordin options to purchase 500,000 shares of our common stock under our 2001 Omnibus Plan, as amended. In September 2002 we cancelled such options and issued to Mr. Gordin 500,000 shares of our common stock in partial compensation of services to be rendered from such date through August 2003. Pursuant to a letter agreement entered into with Mr. Gordin, such stock is earned at a rate of 41,000 shares per month beginning September 2002. Should his employment terminate within the twelve-month term of the agreement, any unearned stock will be returned to us within ten days of such termination. Options/SAR Grants in Last Fiscal Year to Officers and Directors There were no options granted pursuant to the 2001 Omnibus Plan, as amended, or otherwise, to our officers or directors, nor were any options previously issued exercised, during the year 2002. Compensation of Directors All of our outside Directors are eligible to be paid an attendance fee of $2,000 for each meeting of the Board of Directors attended up to a maximum of $8,000 for a 12-month period. During the fiscal year ended December 31, 2002, three of our Directors received an attendance fee of $2,000. As of December 31, 2002, our Board of Directors consisted of Messrs. Birshtein, Gordin, Solomon, Perchal and Sharma. Mr. Loveland resigned as a member of the Board on November 19, 2002, prior to the year end, and Mr. Sharma resigned on January 15, 2003. In August 2001 the Board of Directors appointed Mr. Loveland and Mr. Birshtein as members of the Omnibus Committee to administer the 2001 Omnibus Plan, as amended. On November 19, 2002 Mr. Loveland resigned from his position as a member of the Omnibus Committee. At present, the Board of Directors has not established any other committees. o Mr. Birshtein has served as our Chairman of the Board since January 1998. He is compensated for such service pursuant to an Employment Agreement, which is detailed 21 in the following section entitled "Employment Agreements." o Mr. Solomon was appointed as a member of the Board of Directors on February 16, 2001 and was elected in August 2001. In 2002, Mr. Solomon received $2,000 for his attendance at a meeting of our Board of Directors. In addition, for his services, on August 15, 2001, Mr. Solomon was granted 100,000 options pursuant to the terms of the 2001 Omnibus Plan, as amended, with an exercise price of $1.00 per share and an expiration date of August 16, 2006. As of December 31, 2002, none of his options were exercised. o Mr. Loveland was appointed as a member of the Board of Directors on February 16, 2001, was elected in August 2001 and resigned from such position on November 19, 2002. In 2002 Mr. Loveland received $2,000 for his attendance at a meeting of our Board of Directors. In addition, for his services, on August 15, 2001, Mr. Loveland was issued an option to purchase 100,000 shares of the Company's common stock with an exercise price of $0.50 per share and an expiration date of August 16, 2005. These options were not issued pursuant to the terms of the 2001 Omnibus Plan, as amended. As of December 31, 2002, none of his options were exercised. o Mr. Sharma was appointed as a member of the Board of Directors on February 16, 2001, was elected in August 2001 and resigned from such position on January 15, 2003. In February 2001, Mr. Sharma entered into a Consulting Agreement with the Company and was named as the R&D Center Coordinator. Mr. Sharma's Consulting Agreement expired on February 1, 2003 and by mutual consent it was not renewed. Pursuant to his Consulting Agreement, Mr. Sharma received $48,000 during fiscal year 2002 and $44,000 during fiscal year 2001 for his services as R&D Center Coordinator. Additionally, for his services, Mr. Sharma was granted 250,000 options on August 15, 2001, pursuant to the terms of the 2001 Omnibus Plan, as amended, with an exercise price of $0.50 per share and an expiration date of August 16, 2006. As of December 31, 2002, none of his options were exercised. o Mr. Perchal was appointed as a member of the Board of Directors on February 16, 2001 and elected in August 2001. During fiscal year 2002, Mr. Perchal received $2,000 for his attendance at a meeting of the Board of Directors. Mr. Perchal has not received any other salary or fees from the Company nor did he receive any options pursuant to 2001 Omnibus Plan, as amended, or otherwise. Employment Agreements Currently, our only employment agreement is with Mr. Birshtein, our Chairman of the Board of Directors. Pursuant to this employment agreement, dated as of February 25, 1999, Mr. Birshtein has agreed to perform all necessary duties and responsibilities in connection with his position as our 22 Chairman of the Board, until December 31, 2003. In consideration of Mr. Birshtein's services, he was entitled to receive an annual salary for 2002 of $250,000, such salary to be paid in equal monthly installments. This salary may be increased (but not decreased) from time to time during the term of the employment agreement by the Board of Directors. We also agreed to pay Mr. Birshtein, in each calendar year during the term of the employment agreement, an amount equal to ten percent (10%) of the Excess Net Pre-Tax Profits (as defined below) (the "Bonus"). "Excess Net Pre-Tax Profits" means the amount in each calendar year that our consolidated net pre-tax profit in such calendar year exceed the amount of consolidated net pre-tax profit for the immediately preceding calendar year. Mr. Birshtein is entitled to receive a Bonus of $52,900 for the year ending December 31, 2002. Additionally, we agreed to grant Mr. Birshtein five year common stock purchase warrants, each of such warrants to provide for the purchase of one (1) share of our common stock at an exercise price equal to the closing price of our common stock on the date Mr. Birshtein is entitled to receive such warrants (the "Incentive Warrants"). Mr. Birshtein shall receive 100,000 Incentive Warrants for each $1,000,000 of Excess Net Pre-Tax Profits (or a pro-rated lesser number of Incentive Warrants based upon amounts of Excess Net Pre-Tax Profits which are less than $1,000,000 increments) in each calendar year during the employment agreement, up to a maximum of 1,000,000 Incentive Warrants in each such year. The Incentive Warrants entitle Mr. Birshtein to "cashless exercise" rights and demand and "piggy-back" registration rights with respect to the Incentive Warrants and the underlying shares of common stock. Mr. Birshtein was entitled to receive 52,900 Incentive Warrants for the year ending December 31, 2002, but has waived his rights to such Incentive Warrants. In the event that, upon the expiration of the employment agreement, it is not renewed or we and Mr. Birshtein have not entered into a successor employment agreement, we shall be obligated to pay Mr. Birshtein on such date, in cash, a lump sum amount equal to one-hundred-fifty percent (150%) of Mr. Birshtein's then base salary and the Bonus received by Mr. Birshtein with respect to the last year of the employment agreement. On February 28, 2000, we issued Mr. Birshtein 600,000 five-year common stock purchase warrants in consideration of the significant time and effort expended by him, on our behalf, for which he was not previously compensated for. Each warrant provides for the purchase of one (1) share of our common stock at an exercise price of $0.50 per share. The terms of the warrants include an anti-dilution clause for the adjustment of the exercise price and number and character of the underlying shares, under specific circumstances. These warrants also entitle Mr. Birshtein to "cashless exercise" rights and demand and "piggy-back" registration rights with respect to the warrants and the underlying shares of common stock. Simultaneously with the issuance of these warrants, we canceled warrants previously issued to Mr. Birshtein, for a like number of shares of our common stock, with an exercise price of $11.50 per share. Additionally, Mr. Birshtein receives a monthly office expense allowance of $1,800 on the first day of each month during the employment agreement. 23 Resignation of Theodore B. Shapiro as an Officer and Director; Termination of Employment Agreement Theodore B. Shapiro was elected as a Director and appointed President and CEO of the Company on January 6, 1998. On February 25, 1999, we entered into an Employment Agreement with Mr. Shapiro having a five-year term, which provided for an annual salary of $120,000. On February 28, 2000 we issued warrants to purchase 400,000 shares of common stock to Mr. Shapiro and simultaneously cancelled warrants previously issued to purchase the same number of shares, which were exercisable at a purchase price of $11.50 per share. The newly issued warrants have a five year exercise period beginning on the date of issuance at an exercise price of $0.50 per share. The warrants also entitle Mr. Shapiro to "cashless exercise" rights and demand and "piggy-back" registration rights with respect to the warrants and the underlying shares of common stock. The original warrants issued to Mr. Shapiro were in recognition of his uncompensated services expended on our behalf. As of December 31, 2002, we were in a disagreement with Mr. Shapiro concerning the validity and effect of an anti-dilution paragraph contained in his warrant agreement. In part, the paragraph at question provides that Mr. Shapiro's exercise price, and the number and character of the shares of common stock underlying Mr. Shapiro's warrants would be adjusted in the event that we sell or issue shares of common stock or any options exchangeable for, or convertible into, shares of our common stock at a price per share of our common stock less than the higher of either the then current market price per share of common stock or Mr. Shapiro's exercise price. There can be no assurance that this matter will be resolved on terms acceptable to us nor can there be any assurance that the resolution of this matter will not result in the adjustment of the exercise price and number and character of the underlying shares. In the event that we cannot resolve this matter on terms acceptable to us, and further that a court of law determines that Mr. Shapiro's position is the correct one, then upon the full exercise of Mr. Shapiro's warrants, we may be legally bound and obligated to issue additional shares of common stock to Mr. Shapiro of approximately 3.25 million shares, which would have an immediate and substantial dilutive effect on the shares of our common stock outstanding. Mr. Shapiro resigned as our President on May 1, 2000 and as Director and CEO on October 25, 2000, thereupon became Vice President. His Employment Agreement was terminated by mutual agreement on October 25, 2000. We, however, agreed to continue paying Mr. Shapiro an annual salary of $120,000 plus an expense allowance of $1,800 through January 10, 2001, when Mr. Shapiro resigned from his position as an officer and his salary and benefits were terminated. Resignation of Robert L. Blessey as an Officer and Director; Termination of Employment Agreement Robert L. Blessey was elected as a Director and appointed Secretary of the Company on January 6, 1998. On February 25, 1999, we entered into an Employment Agreement with Mr. Blessey having a five-year term, which provided for an annual salary of $120,000. 24 On February 28, 2000 we issued warrants to purchase 400,000 shares of common stock to Mr. Blessey and simultaneously cancelled warrants previously issued to purchase the same number of shares, which were exercisable at a purchase price of $11.50 per share. The newly issued warrants have a five-year exercise period beginning on the date of issuance at an exercise price of $0.50 per share. The warrants also entitle Mr. Blessey to "cashless exercise" rights and demand and "piggy-back" registration rights with respect to the warrants and the underlying shares of common stock. The original warrants issued to Mr. Blessey were in recognition of his uncompensated services expended on our behalf. On October 25, 2000, Mr. Blessey resigned as a Director and his Employment Agreement was terminated by mutual agreement. After his resignation as a Director, Mr. Blessey continued to act as Secretary and continued to receive an annual salary of $120,000 plus an expense allowance of $1,800. On January 10, 2001, Mr. Blessey resigned from his position as an officer and his salary and benefits were terminated. On January 28, 2003 Mr. Blessey agreed to the cancellation of 400,000 warrants and surrendered same to us. 2001 Omnibus Plan, As Amended In January of 2001, our Board of Directors adopted the 2001 Omnibus Plan, which became effective in February of 2001 after stockholder approval. In June of 2001, our Board of Directors approved a resolution to increase the maximum aggregate number of shares that may be issued under the 2001 Omnibus Plan. Thereafter, the stockholders approved to increase the authorized number of shares issuable pursuant to the 2001 Omnibus Plan from 4,000,000 to 10,000,000 shares. This amendment became effective in August of 2001. Summary of 2001 Omnibus Plan, as amended Qualified directors, officers, employees, consultants and advisors of ours and our subsidiaries are eligible to be granted (a) stock options ("Options"), which may be designated as nonqualified stock options ("NQSOs") or incentive stock options ("ISOs"), (b) stock appreciation rights ("SARs"), (c) restricted stock awards ("Restricted Stock"), (d) performance awards ("Performance Awards") or (e) other forms of stock-based incentive awards (collectively, the "Awards"). A director, officer, employee, consultant or advisor who has been granted an Option is referred to herein as an "Optionee" and a director, officer, employee, consultant or advisor who has been granted any other type of Award is referred to herein as a "Participant." The Omnibus Committee administers the 2001 Omnibus Plan, as amended, and has full discretion and exclusive power to (a) select the directors, officers, employees, consultants and advisors who will participate in the 2001 Omnibus Plan, as amended, and grant Awards to such directors, officers, employees, consultants and advisors, (b) determine the time at which such Awards shall be granted and any terms and conditions with respect to such Awards as shall not be 25 inconsistent with the provisions of the 2001 Omnibus Plan, as amended, and (c) resolve all questions relating to the administration of the 2001 Omnibus Plan, as amended. Members of the Omnibus Committee receive no additional compensation for their services in connection with the administration of the 2001 Omnibus Plan, as amended. The Omnibus Committee may grant NQSOs or ISOs that are evidenced by stock option agreements. A NQSO is a right to purchase a specific number of shares of common stock during such time as the Omnibus Committee may determine, not to exceed ten years, at a price determined by the Omnibus Committee that, unless deemed otherwise by the Omnibus Committee, is not less than the fair market value of the common stock on the date the NQSO is granted. An ISO is an Option that meets the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). No ISOs may be granted under the 2001 Omnibus Plan, as amended, to an employee who owns more than 10% of our outstanding voting stock ("Ten Percent Stockholder") unless the option price is at least 110% of the fair market value of the common stock at the date of grant and the ISO is not exercisable more than five years after it is granted. In the case of an employee who is not a Ten Percent Stockholder, no ISO may be exercisable more than ten years after the date the ISO is granted and the exercise price of the ISO shall not be less than the fair market value of the common stock on the date the ISO is granted. Further, no employee may be granted ISOs that first become exercisable during a calendar year for the purchase of common stock with an aggregate fair market value (determined as of the date of grant of each ISO) in excess of $100,000. An ISO (or any installment thereof) counts against the annual limitation only in the year it first becomes exercisable. The exercise price of the common stock subject to a NQSO or ISO may be paid in cash or, at the discretion of the Omnibus Committee, by a promissory note or by the tender of common stock owned by the Option holder or through a combination thereof. The Omnibus Committee may provide for the exercise of Options in installments and upon such terms, conditions and restrictions as it may determine. A SAR is a right granted to a Participant to receive, upon surrender of the right, but without payment, an amount payable in cash. The amount payable with respect to each SAR shall be based on the excess, if any, of the fair market value of a share of common stock on the exercise date over the exercise price of the SAR, which will not be less than the fair market value of the common stock on the date the SAR is granted. In the case of a SAR granted in tandem with an ISO to an employee who is a Ten Percent Stockholder, the exercise price shall not be less than 110% of the fair market value of a share of common stock on the date the SAR is granted. Restricted Stock is common stock that is issued to a Participant at a price determined by the Omnibus Committee, which price per share may not be less than the par value of the common stock, and is subject to restrictions on transfer and/or such other restrictions on incidents of ownership as the Omnibus Committee may determine. A Performance Award granted under the 2001 Omnibus Plan, as amended (a) may be denominated or payable to the Participant in cash, common stock (including, without limitation, Restricted Stock), other securities or other Awards and (b) shall confer on the Participant the right to receive payments, in whole or in part, upon the achievement of such performance goals during such performance periods as the Omnibus Committee shall establish. Subject to the terms of the 2001 Omnibus Plan, as amended, and any applicable Award agreement, the performance goals to be 26 achieved during any performance period, the length of any performance period, the amount of any Performance Award granted and the amount of any payment or transfer to be made pursuant to any Performance Award shall be determined by the Omnibus Committee. The Omnibus Committee may grant Awards under the 2001 Omnibus Plan, as amended, that provide the Participants with the right to purchase common stock or that are valued by reference to the fair market value of the common stock (including, but not limited to, phantom securities or dividend equivalents). Such Awards shall be in a form determined by the Omnibus Committee (and may include terms contingent upon a change of control of the Company); provided that such Awards shall not be inconsistent with the terms and purposes of the 2001 Omnibus Plan, as amended. The Omnibus Committee determines the price of any such Award and may accept any lawful consideration. The Omnibus Committee may at any time amend, suspend or terminate the 2001 Omnibus Plan, as amended; provided, however, that (a) no change in any Awards previously granted may be made without the consent of the holder thereof and (b) no amendment (other than an amendment authorized to reflect any merger, consolidation, reorganization or the like to which we are a party or any reclassification, stock split, combination of shares or the like) may be made increasing the aggregate number of shares of the common stock with respect to which Awards may be granted or changing the class of persons eligible to receive Awards, without the approval of the holders of a majority of our outstanding voting shares. In the event a Change in Control (as defined in the 2001 Omnibus Plan, as amended) occurs, then, notwithstanding any provision of the 2001 Omnibus Plan, as amended, or of any provisions of any Award agreements entered into between any Optionee or Participant and us to the contrary, all Awards that have not expired and which are then held by any Optionee or Participant (or the person or persons to whom any deceased Optionee's or Participant's rights have been transferred) shall, as of such Change of Control, become fully and immediately vested and exercisable and may be exercised for the remaining term of such Awards. If we are a party to any merger, consolidation, reorganization or the like, the Omnibus Committee has the power to substitute new Awards or have the Awards be assumed by another corporation. In the event of a reclassification, stock split, combination of shares or the like, the Omnibus Committee shall conclusively determine the appropriate adjustments. No Award granted under the 2001 Omnibus Plan, as amended, may be sold, pledged, assigned or transferred other than by will or the laws of descent and distribution, and except in the case of the death or disability of an Optionee or a Participant, Awards shall be exercisable during the lifetime of the Optionee or Participant only by that individual. No Awards may be granted under the 2001 Omnibus Plan, as amended, on or after January 2, 2011, but Awards granted prior to such date may be exercised in accordance with their terms. The 2001 Omnibus Plan, as amended, and all Award agreements shall be construed and enforced in accordance with and governed by the laws of the State of New York. As of December 31, 2002, of the 10,000,000 shares of our common stock reserved for 27 issuance under the 2001 Omnibus Plan, as amended, options to acquire 8,120,000 shares of our common stock were outstanding under the 2001 Omnibus Plan, as amended. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information concerning the beneficial ownership of shares of our common stock with respect to stockholders who were known by us to be beneficial owners of more than 5% of our common stock as of December 31, 2002, and our officers and directors, individually and as a group. Unless otherwise indicated, the beneficial owner has sole voting and investment power with respect to such shares of common stock. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. In accordance with the Securities and Exchange Commission rules, shares of our common stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become exercisable within 60 days of the date of the table are deemed beneficially owned by the optionees. Subject to community property laws, where applicable, the persons or entities named in the table above have sole voting and investment power with respect to all shares of our common stock indicated as beneficially owned by them.
As of December 31, 2002(1) AMOUNT AND NATURE OF NAME OF BENEFICIAL OWNER BENEFICIAL OWNER PERCENT OF CLASS ------------------------ ---------------- ---------------- Boris Birshtein (2)(3)(4) 96,747,000(2)(3)(4) 85.4% 1285 Avenue of the Americas, 35th Floor New York, New York, 10019 Aluminum-Power Inc. 87 Scollard Street Toronto, Ontario M5R 1G4 (2) 88,000,000(2) 77.7% Alexander M. Gordin (5) 500,000(5) .44% 1285 Avenue of the Americas, 35th Floor New York, New York, 10019 Gary Shokin (6) 500,000(6) .44% 1285 Avenue of the Americas, 35th Floor New York, New York, 10019 Shmuel Gurfinkel (7) -- -- 1285 Avenue of the Americas, 35th Floor New York, New York, 10019 Michael J. Solomon (8) 100,000(8) .09% 1285 Avenue of the Americas, 35th Floor New York, New York, 10019
28 John R. Loveland (9) 1285 Avenue of the Americas, 35th Floor 100,000(9) .09% New York, New York 10019 Walter J. Perchal (10) 1285 Avenue of the Americas, 35th Floor -- -- New York, New York, 10019 Vijay Sharma (11) 250,000(11) .22% 1285 Avenue of the Americas, 35th Floor New York, New York, 10019 Donald W. Kirk (12) 250,000(12) .22% 1285 Avenue of the Americas, 35th Floor New York, New York, 10019 Rafi Ferry (13) 504,000(13) .44% 1285 Avenue of the Americas, 35th Floor New York, New York, 10019 All Executive Officers and 98,951,000 87.4% Directors as a Group (10 persons) (14)
- ------------ (1) Based on a total of 113,269,000 shares of common stock, which includes: (i) 101,139,000 shares of common stock issued and outstanding as of December 31, 2002; (ii) warrants to purchase 1,460,000 shares of common stock (400,000 of which were cancelled in January 2003); (iii) 8,120,000 options to purchase common stock granted pursuant to the 2001 Omnibus Plan, as amended; and, (iv) 2,550,000 options to purchase common stock granted outside of the 2001 Omnibus Plan, as amended. Note that the total of 113,269,000 shares of common stock does not take into account a potential resolution of the Company's disagreement with Mr. Shapiro concerning the validity and effect of an anti-dilution paragraph contained in his respective warrant agreements, nor the exercise by Mr. Birshtein of the anti-dilution provision to his warrant. There can be no assurance that this matter will be resolved on terms acceptable to us nor can there be any assurance that the resolution of these matters will not result in the adjustment of the exercise price and number and character of the underlying shares. Should a court of law determine that the position of Mr. Shapiro is the correct one, then upon full exercise of their warrants, we may be obligated to fulfill the terms of these paragraphs and issue Mr. Shapiro additional shares of common stock of approximately 3.25 million shares, in the aggregate, which would have an immediate and substantial dilutive effect on the shares of our common stock outstanding. (2) Mr. Birshtein is an indirect owner of Aluminum-Power Inc. Aluminum-Power Inc.'s majority shareholder is Eontech Group Inc. Birshtein Holdings, Ltd. is the majority owner of Eontech Group Inc. Mr. Birshtein directly controls Birshtein Holdings, Ltd. (3) Mr. Birshtein currently serves as our Chairman of the Board. (4) Includes 4,237,000 shares of common stock and warrants to purchase 600,000 shares of 29 common stock owned directly by Mr. Birshtein; 3,910,000 owned by Magnum Associates, Inc., of which Mr. Birshtein is the sole shareholder; and, 88,000,000 shares of common stock owned by Aluminum-Power Inc. (5) Mr. Gordin currently serves as a Director and as our President and Chief Executive Officer. (6) Mr. Shokin currently serves as our Vice President and Secretary. (7) Mr. Gurfinkel currently serves as our Chief Financial Officer. Mr. Gurfinkel is also a member of the executive management team of Intercomsoft Limited, our subsidiary. (8) Mr. Solomon is a member of our Board of Directors and was granted 100,000 options to purchase common stock pursuant to the 2001 Omnibus Plan, as amended. (9) On February 16, 2001 Mr. Loveland was appointed as a member of the Board of Directors. For his services as a Director, Mr. Loveland was granted 100,000 options outside of the 2001 Omnibus Plan, as amended. Mr. Loveland resigned from his position as a Director on November 19, 2002. (10) Mr. Perchal is a member of our Board of Directors. Mr. Perchal owns approximately a 1% interest in Aluminum-Power Inc., beneficial owner of 88,000,000 shares of our common stock. (11) Mr. Sharma served as a member of the Board of Directors from January 16, 2001 until his resignation on January 15, 2003. Pursuant to Mr. Sharma's Consulting Agreement with the Company (which expired January 31, 2003), in 2001 Mr. Sharma was granted 250,000 options to purchase common stock pursuant to the 2001 Omnibus Plan, as amended, for his services as R&D Center Coordinator. (12) Mr. Kirk was named as our Chief Scientific Advisor in February of 2001. According to the terms of his Consulting Agreement with the Company (which expired January 31, 2003), in 2001 Mr. Kirk was granted 250,000 options to purchase common stock pursuant to the 2001 Omnibus Plan, as amended. (13) Mr. Ferry was named as our Marketing Director in February of 2001. In addition to 4,000 shares owned by Mr. Ferry, in 2001 Mr. Ferry was granted 500,000 options to purchase common stock pursuant to the 2001 Omnibus Plan, as amended, according to the terms of his Consulting Agreement with the Company (which expired January 31, 2003). Mr. Ferry's wife serves as Mr. Birshtein's Executive Assistant. As such, she owns 100 shares of common stock and was granted options to purchase 250,000 shares of common stock, pursuant to the 2001 Omnibus Plan, as amended. Mr. Ferry disclaims beneficial ownership of his wife's shares of common stock and options to purchase common stock. (14) Includes Messrs. Birshtien, Gordin, Solomon, Loveland, Perchal, Sharma, Gurfinkel, Shokin, Kirk and Ferry. 30 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - - At December 31, 2002 there are unpaid cash advances totaling approximately $208,000 that were made to us in 2001 by Mr. Boris Birshtein, our Chairman of the Board and indirect owner of a majority of our outstanding shares of common stock, or by entities effectively owned and controlled by Mr. Birshtein. Of such amount, Mr. Birshtein personally is owed approximately $120,000 and entities effectively owned and controlled by him, are owed approximately $88,000. All cash advances made to the Company are non-interest bearing and due on demand. - - On July 24, 2001, Eontech R&D, Inc. ("Eontech R&D") was incorporated under the laws of the State of Delaware for the purpose of conducting research and development of emerging technologies. The members of the Board of Directors of Eontech R&D include Alexander Gordin, one of our Directors, our CEO and President, and Alon Birshtein, the son of Mr. Birshtein, our Chairman of the Board and indirect owner of a majority of our outstanding shares of common stock. On August 28, 2001, we entered into an agreement with Eontech R&D, Aluminum-Power Inc., AGGI Limited and Eontech Group Inc. (the "August 28, 2001 Agreement") whereby Eontech R&D is to conduct research on our and Aluminum-Power Inc.'s aluminum-power fuel cell technology. Additionally, under the August 28, 2001 Agreement, we agreed to issue AGGI a stock option to purchase 2,000,000 shares of our common stock, with an exercise price of $0.50 per share, expiring August 23, 2003; provided, however, that if the closing price of our common stock is less than $1.00 per share, as listed on any exchange, at 5:00 p.m. (EST) on August 23, 2003, then we shall be obligated to pay to AGGI Limited for each share of stock which is subject to the option, whether the option has been exercised or unexercised, the difference between $1.00 and the price of our common stock at which the stock was last traded, but in no event more than $0.50 per share. On February 12, 2003 we entered into a Termination Agreement with Eontech R&D, Aluminum-Power Inc, AGGI Limited and Eontech Group, Inc. terminating each of the above noted agreements, options and obligations of all parties thereto. On March 12, 2003 Eontech R&D Inc. filed a Certificate of Dissolution with the State of Delaware dissolving the corporation. - - Mr. Birshtein directly controls Birshtein Holdings, Ltd., the majority owner of Eontech Group Inc. Eontech Group Inc. is the majority shareholder of Aluminum-Power Inc., the holder of a majority of the outstanding shares of our common stock. See "Directors, Executive Officers, Promoters and Control Persons", and "Security Ownership of Certain Beneficial Owners and Management." In July of 2001, Eontech Group Inc. entered into an agreement with Mr. Jerry Goodis and The DragonWyck Corporation, whereby Mr. Goodis and The DragonWyck Corporation have agreed to provide Eontech Group Inc., and its subsidiaries and affiliates, including us and Aluminum-Power Inc., with certain consulting services. As partial consideration for such services, we have agreed to grant options to The DragonWyck Corporation to purchase 200,000 shares of our 31 common stock, for a period of three years, at an exercise price of $0.50 per share of common stock. - - On June 1, 2001, with our cooperation and assistance, Aluminum-Power Inc. opened an International Research and Development Center in Toronto, Ontario, Canada (the "R&D Center"). The R&D Center is located in a 6,000 square foot facility that Aluminum-Power Inc. leased on March 31, 2001, for a five-year term. Pursuant to a Research & Development Agreement between Aluminum-Power Inc. and us, dated July 1, 2001, we have agreed to reimburse Aluminum-Power Inc. a percentage of its costs (as such costs relate to work specifically performed for and on behalf of us). During the period of this report, the R&D Center housed a prototype development and assembly facility and a laboratory with a full complement of research and development staff including mechanical engineers, design engineers, research and development scientists and support staff. The Research & Development Agreement provides us with unlimited use of the R&D Center, unlimited use of all equipment and unlimited use of all employees located at the R&D Center, for a period of five years, provided that we pay, proportionately, all costs and expenses associated with the use of the R&D Center. Under the Research & Development Agreement, for a period of five years, we are not obligated to pay any amount owed to Aluminum-Power Inc., with the exception of a monthly fee equal to 1.2% of Aluminum-Power Inc.'s fixed monthly expenses associated with the R&D Center. The accrued balance of the total amount owed to Aluminum-Power Inc. is payable on the fifth anniversary of the Research & Development Agreement, together with interest at a rate of two percent (2%) per annum. As of December 31, 2002, the Company owed Aluminum-Power Inc. approximately $119,000. Since our acquisition of the aluminum-air fuel cell for use in portable consumer electronic devices, we have continued to advance research and development with the goal of commercial exploitation of such technology. Aluminum-Power Inc, advised us in a letter dated March 31, 2003 that to date it has spent in excess of $3,000,000 on research and development related to our aluminum-air fuel cell technology. Aluminum Power Inc. further advised in such letter that although it has aggressively pursued licensing opportunities and sought joint venture partners, private financing and investment capital in an effort to support its on-going research and development efforts, at this time it has been unable to secure additional funding for the continuation of such efforts, other than shareholder loans, which has provided the funds noted above. Further, Aluminum-Power indicated that over the past two years they have found the development time line and cost for research and development to be significantly in excess of what it had originally anticipated. In fact, Aluminum-Power cited a recent report by the Department of Energy dated February 2003 and submitted to Congress on February 28, 2003, entitled "Fuel Cell Report to Congress: Fuel Cell Future Not Certain" that concluded that there are significant heretofore unforeseen barriers to the development of various fuel cell technologies, most specifically the onerous cost of development and commercialization. This report concurs with Aluminum-Power Inc.'s independent conclusions. Aluminum-Power Inc. further advised that the U.S governments' support of hydrogen based fuel cells, almost to the exclusion of all others, has cost had a significant adverse effect on its efforts to secure joint ventures, development partners and licensing. 32 Aluminum-Power Inc. concluded its letter advising that it has elected to suspend any further research and development efforts of the aluminum-air fuel cell under the R&D Agreement at this time advising that it does not believe that it would be prudent for either it or us to expend any additional research and development funds on the technology until it can evaluate the prospects and feasibility of further development and marketing opportunities. Accordingly, our research and developments efforts were suspended in the second quarter of 2003 and will remain so until such time as Aluminum-Power Inc. resumes its research and development efforts on our behalf, or we are able to obtain financing to proceed with such efforts on our own. Although research and development efforts have been suspended, we still continue to believe in the viability of our technology and have not changed our opinion as to the potential benefits our technology could make in the field of alternative power. However, management has concluded that due to the extraordinary time and enormous costs involved, continued research and development efforts at this time are not justified. - - On February 1, 2001, we entered into a Consulting Agreement with Mr. Donald W. Kirk, who was named as our Chief Scientific Advisor, for a two year term. According to the terms of his Consulting Agreement, Mr. Kirk received $2,750 per month and was granted 250,000 options to purchase common stock pursuant to the 2001 Omnibus Plan, as amended, with an exercise price of $0.50 per share and an expiration date of August 15, 2006. On May 31, 2002 such Consulting Agreement was amended by mutual agreement terminating the monthly payments due thereunder and providing for payment of services as rendered. Although Mr. Kirk continues to serve as an unpaid advisor, no services have been rendered to us by Mr. Kirk since such May 31, 2002 that has required any form of payment. - - On February 1, 2001, we entered into a Consulting Agreement with Mr. Vijay Sharma, who was named our R&D Center Coordinator, for a two year term. Mr. Sharma was subsequently appointed as a member of the Board of Directors on February 16, 2001, was elected in August 2001 and served continuously until his resignation on January 15, 2003. Pursuant to his Consulting Agreement, Mr. Sharma received $48,000 during fiscal year 2002 and $44,000 during fiscal year 2001 for his services as R&D Center Coordinator. Additionally, for his services, Mr. Sharma was granted 250,000 options on August 15, 2001, pursuant to the terms of the 2001 Omnibus Plan, as amended, with an exercise price of $0.50 per share and an expiration date of August 16, 2006. Mr. Sharma's Consulting Agreement expired on February 1, 2003 and by mutual agreement it was not renewed. Mr. Sharma also served as the President of Aluminum-Power Inc., beneficial owner of 88,000,000 shares of our common stock from March 16, 2001 to January 31, 2003. - - On February 1, 2001, we entered into a Consulting Agreement with Mr. Rafi Ferry, who was named as our Marketing Director, for a two year term. Pursuant to the terms of his Consulting Agreement, Mr. Ferry received a monthly consulting fee of $5,000 per month for his services totaling $60,000 for the year 2002 and $55,000 for the year 2001. Additionally, in 2001 Mr. Ferry was granted an option to purchase 500,000 shares of common stock pursuant to the 2001 Omnibus Plan, 33 as amended. Mr. Ferry's wife serves as Mr. Birshtein's Executive Assistant. She owns 100 shares of common stock and was granted options to purchase 250,000 shares of common stock, pursuant to the 2001 Omnibus Plan, as amended. Mr. Ferry disclaims beneficial ownership of his wife's shares of common stock and options to purchase common stock. Mr. Ferry's Consulting Agreement expired February 1, 2003 and by mutual agreement it was not renewed. However, Mr. Ferry continues to serve as our Marketing Director on a month-to-month basis at a reduced rate of $3,500 per month. - - Mr. Boris Birshtein effectively controls Eontech Group Inc., the entity that is the majority shareholder of Aluminum-Power Inc. As a result of Mr. Birshtein's interest in Aluminum-Power Inc., an introduction was made between Aluminum-Power Inc. and us. Discussions between the parties ensued and eventually resulted in an agreement by and between the parties for our acquisition of certain aluminum-air fuel cell technology from Aluminum-Power Inc. in exchange for a substantial part of our then operating assets located in the Republic of Moldova. Mr. Birshtein did not receive any form of compensation for his introduction of Aluminum-Power Inc. to us. On January 11, 2001, Mr. Birshtein, in his capacity as the beneficial owner of the majority of outstanding shares of our common stock, provided irrevocable written consent approving our acquisition and licensing of certain aluminum-air fuel cell technology from Aluminum-Power Inc., in exchange for our issuance of 88,000,000 shares of our common stock and our transfer of certain of our operating assets located in the Republic of Moldova to Aluminum-Power Inc. Additionally, in January 2001, our Board of Directors (with Mr. Birshtein abstaining as a result of his interest in the transaction with Aluminum-Power Inc.) approved such actions, including the transaction with Aluminum-Power Inc. See "Description of Business". Upon consummation of the Technology Acquisition Agreement with Aluminum-Power Inc., Mr. Birshtein effectively became the beneficial owner of 96,795,000 shares of our common stock, or approximately 95.7% of our outstanding shares as of the closing of the Technology Acquisition Agreement. See "Security Ownership of Certain Beneficial Owners and Management". 34 ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K (a) The exhibits listed below are filed as part of this Annual Report. Exhibit No. Document ----------- -------- 3(i) Articles of Incorporation (incorporated by reference to the Registration Statement on Form 10-SB filed with the Securities and Exchange Commission under File No. 000-28144) 3(ii) By-laws (incorporated by reference to the Registration Statement on Form 10-SB filed with the Securities and Exchange Commission under File No. 28144). 10(i) Technology Asset Acquisition Agreement Dated January 11, 2001 by and between Trimol Group, Inc. and Aluminum-Power, Inc. (incorporated by reference to the Definitive Information Statement filed with the Securities and Exchange Commission under File No. 000-28144) 10(ii) License Agreement Dated January 11, 2001 by the between Trimol Group, Inc. and Aluminum-Power, Inc. (incorporated by reference to the Definitive Information Statement filed with the Securities and Exchange Commission under File No. 000-28144) 10(iii) August 28, 2001 Agreement by and between Trimol Group, Inc., Eontech R&D, Inc., Aluminum-Power Inc., AGGI Limited, LLC and Eontech Group Inc. (incorporated by reference to Form 10-KSB as filed with the Securities and Exchange Commission for the year ending December 31, 2001). 10(iv) July 6, 2001 Letter Agreement (and Rider) between Eontech Group Inc. and Mr. Jerry Goodis and The DragonWyck Corporation (incorporated by reference to Form 10-KSB 35 filed with the Securities and Exchange Commission for the year ending December 31, 2001). 10(v) July 1, 2001 Research & Development Agreement between Aluminum-Power Inc. and Trimol Group, Inc. (incorporated by reference to Form 10-KSB as filed with the Securities and Exchange Commission for the year ending December 31, 2001). 10(vi) Consulting Agreement between Donald W. Kirk and Trimol Group, Inc., dated February 1, 2001 (incorporated by reference to Form 10-KSB filed with the Securities and Exchange Commission for the year ending December 31, 2001). 10(vii) Consulting Agreement between Vijay Sharma and Trimol Group, Inc., dated February 1, 2001 (incorporated by reference to Form10-KSB filed with the Securities and Exchange Commission for the year ending December 31, 2001). 10(viii) Consulting Agreement between Rafi Ferry and Trimol Group, Inc., dated February 1, 2001 (incorporated by reference to Form 10-KSB filed with the Securities and Exchange Commission for the year ending December 31, 2001). 21 Subsidiaries of the Registrant 23 Consent of Paritz & Company, P.A. 99.1 Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. CEO Certification. 99.2 Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. CFO Certification. 36 99.3 Chief Executive Officer Certification. 99.4 Chief Financial Officer Certification. (b) There were no Reports on Form 8-K filed during the period covered by this Report 37 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 14th day of April, 2003. TRIMOL GROUP, INC. By: /s/ Alexander M. Gordin --------------------------------- Name: Alexander M. Gordin Titles: President, Chief Executive Officer and Director By: /s/ Shmuel Gurfinkel --------------------------------- Name: Shmuel Gurfinkle Title: Chief Financial Officer In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dated indicated. By: /s/ Boris Birshtein Date: April 14, 2003 ------------------------------ Name: Boris Birshtein Title: Chairman of the Board and Director By: /s/ Alexander M. Gordin Date: April 14, 2003 ----------------------------- Name Alexander M. Gordin Titles: President, Chief Executive Officer, and Director By: /s/ Michael J. Solomon Date: April 14, 2003 ----------------------------- Name: Michael J. Solomon Title: Director By: /s/ Walter J. Perchal Date: April 14, 2003 -------------------------------- Name: Walter J. Perchal Title: Director 38 EX-21 3 d55198_ex21.txt SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Intercomsoft Limited - a company organized under the laws of Ireland Eontech R&D, Inc. a Delaware corporation (dissolved March 12, 2003) 39 EX-23 4 d55198_ex23.txt CONSENT OF INDEPENDENT AUDITORS Exhibit 23 PARITZ & COMPANY, P.A. CERTIFIED PUBLIC ACCOUNTANTS CONSENT OF INDEPENDENT AUDITORS We have issued our report dated March 17, 2003, except as to Note 3(b) which is dated March 31, 2003, accompanying the financial statements of Trimol Group, Inc. to be contained in the Annual Report on Form 10-KSB (the "10-KSB") for Trimol Group, Inc., a Delaware Corporation ("the Company") for its fiscal year ended December 31, 2002. We consent to the use of the aforementioned reports in the 10-KSB and to the use of our name as it appears therein. PARITZ & COMPANY, P.A. Certified Public Accountants April 11, 2003 40 EX-99.1 5 d55198_ex99-1.txt CERTIFICATION CEO EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Trimol Group Inc. (the "Company") on Form 10-KSB for the period ending December 31, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned Chief Executive Officer of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report. /s/ Alexander M. Gordin ----------------------------------- Alexander M. Gordin Chief Executive Officer TRIMOL GROUP, INC. April 14, 2003 41 EX-99.2 6 d55198_ex99-2.txt CERTIFICATION CFO EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Trimol Group Inc. (the "Company") on Form 10-KSB for the period ending December 31, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned Chief Financial Officer of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report. /s/ Shmuel Gurfinkel ---------------------------------- Shmuel Gurfinkel Chief Financial Officer TRIMOL GROUP, INC. April 14, 2003 42 EX-99.3 7 d55198_ex99-3.txt CEO CERTIFICATION EXHIBIT 99.3 CHIEF EXECUTIVE OFFICER CERTIFICATION I, Alexander M. Gordin, certify that: 1. I have reviewed this year end report on Form 10-KSB of Trimol Group, Inc. 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this repot; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant, and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of this registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the registrant's board of directors: a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying offers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. April 14, 2003 By /s/ Alexander M. Gordin --------------------------- Chief Executive Officer 43 EX-99.4 8 d55198_ex99-4.txt CFO CERTIFICATION EXHIBIT 99.4 CHIEF FINANCIAL OFFICER CERTIFICATION I, Shmuel Gurfinkel, certify that: 1. I have reviewed this year end report on Form 10-KSB of Trimol Group, Inc. 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this repot; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant, and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. evaluated the effectiveness of this registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c. presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the registrant's board of directors: a. All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying offers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. April 14, 2003 By /s/ Shmuel Gurfinkel ------------------------ Chief Financial Officer 44 -----END PRIVACY-ENHANCED MESSAGE-----