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