<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[ x ] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 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 September 30, 1999, 12,039,000
shares of Common Stock, par value $.01 per share.
Transitional Small Business Disclosure Format (check one):
Yes No X
----- ----
1
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
HEADING PAGE
<S> <C>
Item 1. Financial Statements............................................................................... F-1 - F-10
Consolidated Balance Sheet......................................................................... F-1
Consolidated Statement of Income and Comprehensive Income (Unaudited).............................. F-2
Consolidated Statement of Changes in Shareholders' Equity (Unaudited).............................. F-3
Consolidated Statement of Cash Flows (Unaudited)................................................... F-4
Notes to the Consolidated Financial Statements..................................................... F-5 - F-10
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
</TABLE>
(i)
<PAGE>
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
September 30, 1999 December 31, 1998
(Unaudited) (Audited)
- ------------------------------------------------------------------------------------------------------------
(In Thousands of US Dollars)
ASSETS
<S> <C> <C> <C> <C>
Cash and cash equivalents 4,683 4,173
Interest bearing deposit 111 215
Held to maturity securities 820 1,136
Loans 4,136 6,343
Less: allowance for possible loan losses (638) (912)
-------- --------
Loans, net 3,498 5,431
Reinsurance recoverable 89 148
Property, plant and equipment 5,268 7,165
Other assets 1,815 1,123
---------- ---------
TOTAL ASSETS 16,284 19,391
LIABILITIES
Non interest bearing deposits 3,794 2,330
Interest bearing deposits 2,044 4,532
-------- -------
Total deposits 5,838 6,862
Insurance policy and claim reserves 228 274
Other liabilities 2,243 2,490
----------- ---------
TOTAL LIABILITIES 8,309 9,626
MINORITY INTEREST 1,756 2,199
SHAREHOLDERS' EQUITY
Preferred stock: 10,000 shares authorized - -
$1.00 par value, no shares issued and outstanding
Common stock: 30,000,000 shares authorized
$0.01 par value, 12,039,000 shares issued and
outstanding as at September 30, 1999 and
12,023,000 shares issued and outstanding as at
December 31, 1998
120 120
Additional paid in capital 6,200 6,018
Deferred compensation (61)
-------- -----------
6,139
Accumulated other comprehensive income (1,862) -
Retained earnings 1,822 1,428
----------- ---------
TOTAL SHAREHOLDERS' EQUITY 6,219 7,566
----------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 16,284 19,391
- -----------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the unaudited consolidated financial statements.
</TABLE>
F-1
<PAGE>
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Nine months Nine months Three months Three months
ended ended ended ended
September September September September
30, 1999 30, 1998 30, 1999 30, 1998
- --------------------------------------------------------------------------------------------------------------
(In Thousands of US Dollars, except share per share data)
REVENUES
<S> <C> <C> <C> <C>
Revenues from hotel 1,580 1,953 513 543
Revenues from document processing 2,142 3,630 577 1,293
Loan interest 763 1,510 262 495
Other interest 336 507 92 185
Insurance premiums 58 170 18 28
Commissions and fees 1,064 1,161 473 349
----------------------------------------------------
TOTAL REVENUES 5,943 8,931 1,935 2,893
Interest expense 472 652 81 271
-----------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE 5,471 8,279 1,854 2,622
PROVISION FOR BENEFITS, CLAIMS AND CREDIT LOSSES
Provision for credit losses 327 103 215 68
Provision for benefits and claims 27 36 9 78
-----------------------------------------------------
354 139 224 78
OPERATING EXPENSES
Cost of revenue from hotel 829 1,099 296 326
Cost of revenue from document processing 569 1,472 126 484
Other operating expenses 3,116 2,016 1,398 552
----------------------------------------------------
TOTAL OPERATING EXPENSES 4,514 4,587 1,820 1,362
----------------------------------------------------
INCOME FROM OPERATIONS BEFORE INCOME TAXES AND MINORITY
INTEREST 603 3,553 (190) 1,182
Provision for income taxes 113 258 62 65
Minority interest, net of income taxes 96 135 10 29
-----------------------------------------------------
NET INCOME (LOSS) 394 3,160 (262) 1,088
Net income per share (basic and diluted) .03 .26 (.02) .09
----------------------------------------------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
(BASIC & DILUTED)) 12,035,542 12,023,000 12,039,000 12,023,000
- --------------------------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME
Net Income (loss) 394 3,160 (262) 1,088
Other comprehensive income-translation reserve
(1,862) 316
----------------------------------------------------
TOTAL COMPREHENSIVE INCOME (1,468) 3,160 54 1,088
- --------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the unaudited consolidated financial statements.
</TABLE>
F-2
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Nine months ended Year ended
September 30, 1999 December 31, 1998
(Unaudited) (Audited)
- --------------------------------------------------------------------------------------------------------------
(In Thousands of US Dollars)
<S> <C> <C>
PREFERRED STOCK
Balance, January 1 - -
ISSUE OF PREFERRED STOCK - -
---------------------------------------------
Balance, end of the period - -
COMMON STOCK
Balance, January 1 120 110
Issue of common stock - 10
---------------------------------------------
Balance, end of the period 120 120
ADDITIONAL PAID-IN CAPITAL
Balance, January 1 6,018 5,934
Issue of common stock 182 84
---------------------------------------------
Balance, end of the period 6,200 6,018
OTHER COMPREHENSIVE INCOME
Balance, January 1 - -
------------------ -------------------
Balance, end of period (1,862) -
DEFERRED COMPENSATION
Balance, January 1 - -
Issuance of shares (61) -
------------------ -------------------
Balance, end of period (61)
RETAINED EARNINGS
Balance, January 1 1,428 (338)
Net income of period 394 2,950
------------------ -------------------
Payment of dividends - (1,184)
------------------ -------------------
Balance, end of period 1,822 1,428
------------------ -------------------
---------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 6,280 7,566
- --------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the unaudited consolidated financial statements.
</TABLE>
F-3
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Nine months Nine months
ended September ended September
30, 1999 30, 1998
- --------------------------------------------------------------------------------------------------------------
(In Thousands of US Dollars)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income 394 3,160
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation 383 371
Provision for credit losses (294) 118
Increase (decrease) in minority interest (475) 135
Increase (decrease) in provision for insurance policy and claims reserves (49) 51
-------------------------
(435) 677
-------------------------
Decrease (increase) in other assets (579) 121
Increase (decrease) in other liabilities (287) 41
Decrease (increase) in reinsurance recoverable 63 (15)
-------------------------
(803) 147
-------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (844) 3,984
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from redemption of securities held to maturity (9,104) 10,770
Purchase of securities held to maturity 9,150 (11,041)
Proceeds from sale of equipment 51 39
Purchase of equipment (225) (230)
Net decrease (increase) in loans 2,365 (4,063)
Decrease in interest bearing deposits (979) 2,415
Acquisition of subsidiaries 4,079
Investments in investees (4)
Repayment of leasing transactions 8
-------------------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 1,258 1,973
CASH FLOW FROM FINANCING ACTIVITIES
Increase (decrease) in deposits
Payment of dividends - -
Proceeds from issue of share capital (121) (1,303)
-------------------------
NET CASH PROVIDED (USED BY) IN FINANCING ACTIVITIES (121) (1,303)
-------------------------
Foreign currency translation adjustment 339 131
Increase in cash and cash equivalents 510 4,785
Cash and cash equivalents at beginning of period 4,173 -
-------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 4,683 4,785
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid 472 271
Income taxes paid 113 65
- --------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the unaudited consolidated financial statements.
</TABLE>
F-4
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The unaudited consolidated financial statements of Trimol Group, Inc. (the
"Company") as of September 30, 1999 and for the three and nine month periods
ended September 30, 1999 and 1998 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 3. In the
opinion of management, all adjustments (consisting only of those which are
normal and recurring) necessary for a fair presentation have been included.
The results of operations for interim periods are not necessarily indicative of
the results to be expected for the full fiscal year.
Certain financial information that is normally included in annual financial
statements prepared in accordance with generally accepted accounting principles,
but is not required for interim reporting purposes, has been condensed or
omitted.
The accompanying unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and related notes
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1998.
NOTE 2 - RISKS
The Company's subsidiaries operate in the Republic of Moldova, a former Republic
of the Soviet Union. Accordingly, the current (and future) political and
economic situation in the Republic of Moldova could have a material adverse
effect on the Company and its subsidiaries. In addition, the Republic of Moldova
is heavily dependent on Russia and on a number of former Republics of the Soviet
Union. The current (and future) political and economic situation in Russia and
the former Republics of the Soviet Union, which have historically been unstable,
at times, could also have a material adverse effect of the Company and its
subsidiaries.
NOTE 3 - FOREIGN CURRENCY TRANSLATION
The Company operates in the Republic of Moldova and the currency in which the
Company transacts most 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%. A country is generally considered to be in hyperinflation
if the three year accumulated rate of inflation is 100% or more. During 1998,
the Company's consolidated financial statements were prepared assuming that the
Moldovan economy remained highly inflationary as the inflation rate had
historically been volatile and had just declined to a rate below 100%. The
United States Dollar was used as 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 was approximately 42.4%. Accordingly,
management concluded that the Company's functional currency should revert to the
Moldovan Leu from the United Stated Dollar as from that date.
During the nine months ended September 30, 1999 fluctuations in the Moldovan Leu
and the United States Dollar reduced the Company's net income in the amounts
reflected in the Company's Consolidated Statement of Income and Comprehensive
Income under the line item "Other Comprehensive Income", as a component of
Shareholders Equity. During the same period in 1998, such fluctuations were not
included in the Company's financial statements as the inflation rate was stable
and the matter was not material to the presentation of the Company's financial
condition.
F-5
<PAGE>
NOTE 4 - 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
closing price of the Common Stock on the securities market or exchange on which
the Common Stock is then trading on the date Messrs. Birshtein, Shapiro and
Blessey are entitled to receive the same.
As of September 30, 1999, no Incentive Warrants were outstanding.
In March 1999, the Company entered into a consulting agreement with Y.U.D.
Consulting, Ltd. In consideration of the services to be performed under such
consulting agreement, the Company issued 16,000 of its unregistered shares of
Common Stock to Y.U.D. Consulting, Ltd. Such shares of Common Stock are
restricted under the meaning of Securities and Exchange Commission Rule 144.
In May 1999, the Company issued warrants to purchase shares of its Common Stock
(the "Warrants") to each of Messrs. Birshtein, Shapiro and Blessey, in
consideration of the significant time and effort expended by such individuals on
the Company's behalf for which they were not compensated. The Company issued
warrants to purchase 600,000, 400,000 and 400,000 shares to Messrs. Birshtein,
Shapiro and Blessey respectively. The Warrants may be exercised for a period of
five years at an exercise price of $11.50 per share.
In May 1999, the Company appointed Jay J. Miller and Abdallah S. Mishrick to its
Board of Directors and established an Audit Committee of the Board consisting of
Messrs. Miller, Mishrick and Shapiro. Messrs. Miller and Mishrick were each
granted five year warrants to purchase up to 30,000 shares of the Company's
Common Stock at an exercise price of $11.50 per share, 15,000 of which vested on
the date of the grant and the remaining 15,000 vest on December 31, 1999
provided that each of such individuals are still members of the Board of
Directors.
As of September 30, 1999, Warrants to purchase 1,430,000 shares of Common Stock
were issued and outstanding.
F-6
<PAGE>
NOTE 5 - BUSINESS SEGMENT INFORMATION
<TABLE>
<CAPTION>
BUSINESS SEGMENT INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------
Bank Hotel Insurance Document Holding Eliminations Consolidated
Operations Operations Operations Processing Activities
- -------------------------------------------------------------------------------------------------------------------------
(In Thousands of US Dollars)
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenue 2,056 1,580 130 2,177 - 5,943
Interest expense (472) - - - - (472)
Total revenue net of
interest expense 1,584 1,580 130 2,177 - - 5,471
Provision for benefits,
claims and credit losses (327) - (27) - - - (354)
Operating expenses (1,018) (1,231) (68) (586) (1,611) - (4,514)
Income (loss) from
operations before income
taxes and minority
interest 239 349 35 1,591 (1,611) - 603
Provision for income
taxes (39) (74) - - - - (113)
Minority interest, net
of taxes - - - - (96) (96)
Net income (loss) 200 275 35 1,591 (1,611) (96) 394
Fixed assets 777 4,450 41 - - - 5,268
Total assets 9,200 4,910 425 1,568 292 (111) 16,284
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-7
<PAGE>
<TABLE>
<CAPTION>
BUSINESS SEGMENT INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------
Bank Hotel Insurance Document Holding Eliminations Consolidated
Operations Operations Operations Processing Activities
- -------------------------------------------------------------------------------------------------------------------------
(In Thousands of US Dollars)
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenue 3,055 1,965 281 3,630 8,931
Interest expense (652) (652)
Total revenue net of
interest expense 2,403 1,965 281 3,630 0 0 8,279
Provision for
benefits, claims and
credit losses (103) (36) (139)
Operating expenses (1,236) (1,521) (227) (1,596) (7) (4,587)
Income (loss) from
operations before income
taxes and minority
interest 1,064 444 18 2,034 (7) 0 3,553
Provision for income
taxes (136) (122) (258)
Minority interest, net
of taxes (135) (135)
Net income (loss) 928 322 18 2,034 (7) (135) 3,160
Fixed assets 963 6,242 84 -- -- -- 7,289
Total assets 17,137 6,716 349 1,345 84 -- 25,631
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-8
<PAGE>
<TABLE>
<CAPTION>
BUSINESS SEGMENT INFORMATION FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------
Bank Hotel Insurance Document Holding Eliminations Consolidated
Operations Operations Operations Processing Activities
- -------------------------------------------------------------------------------------------------------------------------
(In Thousands of US Dollars)
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenue 753 513 57 612 1,935
Interest expense (81) (81)
Total revenue net of
interest expense 672 513 57 612 1,854
Fixed assets 963 6,242 84 - - - 7,289
Total assets 17,137 6,716 349 1,345 84 - 25,631
Provision for benefits,
claims and credit losses (215) (9) (224)
Operating expenses (442) (459) (8) (133) (778) (1,820)
Income (loss) from
operations before income
taxes and minority
interest 15 54 40 479 (778) (190)
Provision for income taxes (36) (26) (62)
Minority interest, net of
taxes (10) (10)
Net income (loss) (21) 28 40 479 (778) (10) (262)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
BUSINESS SEGMENT INFORMATION FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------
Bank Hotel Insurance Document Holding Eliminations Consolidated
Operations Operations Operations Processing Activities
- -------------------------------------------------------------------------------------------------------------------------
(In Thousands of US Dollars)
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenue 1,000 543 57 1,293 0 0 2,893
Interest expense (271) 0 0 0 0 0 (271)
Total revenue net of
interest expense 729 543 57 1,293 0 0 2,622
Provision for benefits,
claims and credit losses (68) 0 (10) 0 0 0 (78)
Operating expenses (375) (437) (47) (503) 0 0 (1,362)
Income (loss) from
operations before income
taxes and minority
interest 286 106 0 790 0 0 1,182
Provision for income taxes (28) (37) 0 0 0 0 (65)
Minority interest, net of
taxes 0 0 0 0 0 (29) (29)
Net income (loss) 258 69 0 790 0 (29) 1,088
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-9
<PAGE>
NOTE 6 - SIGNIFICANT CONTRACTS
On May 18, 1999 TriTel Communications Group, Inc. (formerly Global Telcomm
Group, Ltd.), a wholly owned subsidiary of the Company, entered into a Stock
Purchase Agreement (the "Agreement") with the shareholders of I.D.M. Satellite
Division, Inc., a California facilities based telecommunications provider
("IDM"). The Company terminated the Agreement on November 4, 1999 without any
additional expenditure, current or contingent. The expenses incurred relating to
the potential acquisition were not significant.
NOTE 7 - RELATED PARTY TRANSACTIONS
In the third quarter 1999, the Hotel acquired ownership of a television series
that was recorded on its premises for approximately $58,000. The television
series was produced by a company controlled by the Company's Chairman of the
Board. The Hotel intends to display the television series on its internal
television network and to sell the rights, in part, to other hotels in Russian
speaking countries. The cost of the rights to the television series is amortized
over a period of five years.
NOTE 8 - HELD TO MATURITY SECURITIES
The Bank has an obligation under the regulations of the National Bank of Moldova
to maintain a portfolio of state securities at a level of 5% of its total
assets. The Bank has chosen to purchase only state securities that are
redeemable within 30 days. Consequently, the cash flow of the Company includes
relatively high volumes of purchases and proceeds from redemption of securities
held to maturity.
NOTE 9 - SUBSEQUENT EVENTS
In November 1999, the Company learned that the Ministry of Economy Affairs and
Reform of the Republic of Moldova (the "Ministry"), was soliciting bids to
select an audit company to review the contract between Intercomsoft and the
Government of Moldova pursuant to which Intercomsoft is granted the right to act
as the exclusive supplier of the technology required to produce secure essential
documents to the Government of the Republic of Moldova. The Company believes
that the review will involve the assessment of such contract comparing it with
international norms for prices charged for the services performed. No assurances
can be given when, if ever, such a review shall begin or the results therefrom.
A loss, or a substantial change in the terms of such contract could, however,
have a material adverse affect on Intercomsoft and the Company.
F-10
<PAGE>
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Company's consolidated financial statements and notes thereto appearing
elsewhere in this report.
General
The Company, through its wholly-owned subsidiaries; owns 65% of the
issued and outstanding shares of capital stock of the Jolly Alon Limited, a
Moldovan corporation ("Hotel"), 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"), an Irish corporation, which is the
exclusive supplier to the Government of the Republic of Moldova of the
technology, equipment 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.
The Company's subsidiaries operate in the Republic of Moldova and the
currency in which the Company transacts most 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% percent. A country is generally
considered to be in hyperinflation if the three year accumulated rate of
inflation is 100% or more. During 1998, the Company's consolidated financial
statements including the periods for and at 3rd Quarter 1998 and 9 Months 1998
were prepared assuming that the Moldovan economy remained highly inflationary as
the inflation rate had historically been volatile and had just declined to a
rate below 100%. Accordingly, the United States Dollar was used as the Company's
functional currency during 1998.
In the quarter ended June 30, 1999, it was determined that at January
1, 1999, the three year accumulated rate of inflation in the Republic of Moldova
was approximately 42.4%. Accordingly, management concluded the Republic of
Moldova was no longer in an hyperinflationary economy and that the Company's
functional currency should revert to the Moldovan Leu from the United States
Dollar as from that date. As a result, the consolidated financial statements of
the Company for the periods at and for the 3rd Quarter 1999 and for the 9 Months
1999 and were not prepared assuming a hyperinflated economy.
As the Company's subsidiaries all operate in the Republic of Moldova,
the current (and future) political and economic situation in the Republic of
Moldova and in Russia (which has historically, at times, been unstable) could
have a material adverse effect on the Company and its subsidiaries.
COMPARISON OF 3RD QUARTER 1999 TO 3RD QUARTER 1998
The Company
The Company's total revenues for the 3rd Quarter 1999 and 1998 were
$1,935,000 and $2,893,000, respectively. The Company believes such decrease in
total revenues resulted from the economic crisis in Russia causing an economic
slowdown in Moldova which resulted in less disposable income to the Moldovan
population. Operating expenses were $1,820,000 and $1,362,000 in 3rd Quarter
1999 and 3rd Quarter 1998, respectively.
In 3rd Quarter 1999 the Company had net loss of approximately $262,000
as compared to net income in 3rd Quarter of 1998 of approximately $1,088,000.
The Company believes the decline in net income in 3rd Quarter 1999 as compared
to 3rd Quarter 1998 is a result of the above discussed Russian economic crisis
as well as an increase in the Company's operating expenses which resulted, in a
large part, from certain employment and consulting agreements entered into in
1999 that were not in effect in 1998.
2
<PAGE>
The Bank
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 3rd Quarter 1999, the Bank had total revenues of approximately
$753,000 as compared to approximately $1,000,000 in the 3rd Quarter 1998. During
3rd Quarter 1999 the Bank had interest expense of approximately $81,000
comprised principally of interest paid on deposits. During 3rd Quarter 1998,
interest expense was approximately $271,000 also comprised principally of
interest paid on deposits. During 3rd Quarter 1999 and 3rd Quarter 1998, total
non-interest expenses of the Bank were approximately $442,000 and $375,000,
respectively, comprised principally of salaries and related costs, communication
and transportation expenses, and marketing and development costs, respectively.
For 3rd Quarter 1999, the Bank had a net loss of approximately $21,000
as compared to a net income during 3rd Quarter 1998 of $258,000. The decrease in
the Bank's income is primarily a result of a decrease in the Bank's loan
portfolio, and thus a loss in interest income, resulting from the above noted
economic crisis in Russia which was the cause of a number of banking
difficulties, including, but not limited to, the inability to identify credit
worthy borrowers. In addition, the Bank reserved $36,000 for income taxes in 3rd
Quarter 1999, as it believed it underestimated income taxes for the 1st and 2nd
Quarters 1999.
<TABLE>
<CAPTION>
COMPOSITION OF LOANS
------------------------------------------------------------------------------------------------
As at As at
September 30, 1999 September 30, 1998
------------------------------------------------------------------------------------------------
(In USD)
<S> <C> <C>
Commercial loans secured by real estate 1,138,047 1,039,803
Commercial loans, other 2,626,030 6,119,467
Agricultural 80,826 241,505
Consumer loans 241,918 1,300,201
Other loans 49,355 144,410
------------------------------------------------------
4,136,176 8,845,386
Allowance for possible loan losses (637,986) (639,950)
------------------------------------------------------
Total net loans 3,471,190 8,205,436
------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PROVISION FOR LOAN LOSSES MOVEMENT SCHEDULE
--------------------------------------------------------------
3 months ended 3 months ended
September 30, 1999 September 30 ,1998
--------------------------------------------------------------
(In USD)
<S> <C> <C>
Opening balance 801,609 608,628
FX translation (53,851) (36,468)
adjustment
Additions for the 214,964 67,790
period
Write offs (324,736) -
Closing balance 637,986 639,950
--------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
NON PERFORMING LOANS
-------------------------------------------------------------------------------------------------
As at September 30, 1999 As at September 30, 1998
-------------------------------------------------------------------------------------------------
(In USD)
<S> <C> <C>
Non accrual loans 1,377,796 1,845,530
-------------------------------------------------------------------------------------------------
</TABLE>
The Hotel
The Hotel derives its revenues principally from rental of guest
accommodations, restaurant operations and leasing or stores and offices
During 3rd Quarter 1999, the Hotel's total revenue of approximately
$513,000 as compared to 3rd Quarter 1998 which were approximately $543,000.
Total operating expenses for the Hotel were approximately $459,000 and
$437,000 for 3rd Quarter 1999 and 3rd Quarter 1998, respectively. The Hotel's
net income in 3rd Quarter 1999 was $28,000 as compared to $69,000 in the 3rd
Quarter of 1998.
The decline in revenues and net income from 3rd Quarter 1998 to 3rd
Quarter 1999 for the Hotel was principally caused by a decline in revenues from
room rentals and 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 crisis.
During 3rd Quarter 1999, the Hotel acquired ownership of a television
series that was recorded on its premises for approximately $58,000. The
television series was produced by a company controlled by the Company's Chairman
of the Board. The Hotel intends to display the television series on its internal
television network and to sell the rights, in part, to other hotels in Russian
speaking countries. The cost of the rights to the television series is amortized
over a period of five years.
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 3rd Quarter 1999 and 3rd Quarter 1998, Intercomsoft had revenues
from operations of approximately $612,000 and $1,293,000, respectively.
Management attributes this 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 $484,000 in 3rd Quarter
1998, to approximately $126,000 in 3rd Quarter 1999 which was the result of a
decline in equipment expenditures. Accordingly, Intercomsoft was able to
maintain its profitability with net income in 3rd Quarter 1999 of approximately
$479,000 from approximately $790,000 in 3rd Quarter 1998.
In November 1999, the Company learned that the Ministry of Economy
Affairs and Reform of the Republic of Moldova (the "Ministry"), was soliciting
bids to select an audit company to review the contract between Intercomsoft and
the Government of Moldova pursuant to which Intercomsoft is granted the right to
act as the exclusive supplier of the technology required to produce secure
essential documents to the Government of Moldova. The Company believes that the
review will involve the assessment of such contract comparing it with
international norms for prices charged for the services performed. No assurances
can be given when, if ever, such a review shall begin or the results therefrom.
A loss, or a substantial change in the terms of such contract could, however,
have a material adverse affect on Intercomsoft and the Company.
4
<PAGE>
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.
During the 3rd Quarter 1999 and the 3rd Quarter 1998, the Insurance
Company had total revenues of approximately $57,000 and $57,000, and
operating expenses of approximately $17,000 and $57,000, respectively. During
3rd Quarter 1999 the Insurance Company had a net income of $40,000 as
compared to breaking even in 3rd Quarter 1998.
COMPARISON OF 9 MONTHS 1999 TO 9 MONTHS 1998
The Company
During 9 Months 1999 and 9 Months 1998, the Company had total revenues
of approximately $5,943,000 and approximately $8,931,000, respectively. The
Company believes such decrease resulted from the above discussed economic crisis
in Russia causing an economic slowdown in Moldova which resulted in less
disposable income to the Moldovan population. Total operating expenses from the
Company was approximately $4,514,000 and $4,587,000, for 9 Months 1999 and 9
Months 1998, respectively. For the 9 Months 1999, the Company had net income of
approximately $394,000, and for the 9 Months 1998 the Company had net income of
approximately $3,160,000. The Company believes such decline in net income in the
9 Months 1999 as compared to the 9 Months 1998 is a result of the above
discussed Russian economic crisis as well as an increase in the Company's
operating expenses, which resulted, in a large part, from result of certain
employment and consulting agreements entered into in 1999 that were not in
effect in 1998.
The Bank
For the 9 Months 1999, the Bank had total revenue of approximately
$2,056,000 as compared to approximately $3,055,000 for the 9 Months 1998.
Offsetting the Bank's total revenues during the 9 Months 1999 and 8 months 1998
was interest expense of approximately $472,000 and $652,000, respectively.
During the 9 Months 1999 and the 9 Months 1998 the Bank had operating expenses
of approximately $1,018,000 and $1,236,000, respectively, comprised principally
of salaries and related costs, communication and transportation expenses and
marketing and development costs, respectively. For the 9 Months 1999, the Bank
had net income of approximately $200,000 as compared to net income of
approximately $928,000 in the comparable period of 1998 and is primarily a
result of the decrease in the Bank's loan portfolio, and thus a loss in interest
income, resulting from the above noted economic crisis in Russia which was the
cause of a number of banking difficulties, including the inability to identify
credit worthy borrowers. In addition, the Bank reserved $36,000 for additional
income tax expenses in 3rd Quarter 1999 as it believed it underestimated income
taxes for the 1st and 2nd Quarters 1999.
<TABLE>
<CAPTION>
PROVISION FOR LOAN LOSSES MOVEMENT SCHEDULE
-------------------------------------------------------------
9 months ended 9 months ended
September 30, 1999 September 30, 1998
-------------------------------------------------------------
(In USD)
<S> <C> <C>
Opening balance 911,837 571,878
FX translation (219,360) (35,025)
adjustment
Additions for the 327,120 103,097
period
Write offs (381,611) -
Closing balance 637,986 639,950
-----------------------------------------------------------
</TABLE>
5
<PAGE>
The Hotel
For the 9 Months 1999, the Hotel's revenues were approximately
$1,580,000 and revenues for the comparable period of 9 Months 1998 Hotel of
approximately $1,965,000. Total cost of revenues for the Hotel were
approximately $1,231,000 and $1,521,000 for the 9 Months 1999 and 9 Months 1998,
respectively. The end result of the foregoing was that for the 9 Months 1999 and
the 9 Months 1998 the Hotel had a net income of $275,000 and $322,000,
respectively.
During 3rd Quarter 1999, the Hotel acquired ownership of a television
series that was recorded on its premises for approximately $58,000. The
television series was produced by a company controlled by the Company's Chairman
of the Board. The Hotel intends to display the television series on its internal
television network and to sell the rights, in part, to other hotels in Russian
speaking countries. The cost of the rights to the television series is amortized
over a period of five years.
Intercomsoft
During the 9 Months 1999 and the 9 Months 1998, Intercomsoft had
revenues from operations of approximately $2,177,000 and $3,630,000,
respectively. Management attributes this 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
$1,473,000 in the 9 Months 1998, to approximately $569,000 in the 9 Months 1999
resulting from a decline in equipment expenditures. Intercomsoft was able to
maintain its profitability with a net income in the 9 Months 1999 of
approximately $1,591,000 from approximately $2,034,000 in the 9 Months 1998.
In November 1999, the Company learned that the Ministry of Economy
Affairs and Reform of the Republic of Moldova (the "Ministry"), was soliciting
bids to select an audit company to review the contract between Intercomsoft and
the Government of Moldova pursuant to which Intercomsoft is granted the right to
act as the exclusive supplier of the technology required to produce secure
essential documents to the Government of Moldova. The Company believes that the
review will involve the assessment of such contract comparing it with
international norms for prices charged for the services performed. No assurances
can be given when, if ever, such a review shall begin or the results therefrom.
A loss, or a substantial change in the terms of such contract could, however,
have a material adverse affect on Intercomsoft and the Company.
The Insurance Company
During the 9 Months 1999 and the 9 Months 1998, respectively, the
Insurance Company had total revenues of approximately $130,000 and approximately
$281,000. During the 9 Months 1999 and the 9 Months 1998, the Insurance Company
had operating expenses of approximately $95,000 and approximately $263,000,
respectively. During the 9 Months 1999 and the 9 Months 1998, the Insurance
Company had net income of approximately $35,000 and approximately $18,000,
respectively.
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.
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.
6
<PAGE>
Management of the Company, however, has assessed the Year 2000 exposure
and believes the potential effect on the Company's earnings will be limited.
The Company maintains its books and records on desk top PC's, all of
which are Year 2000 compliant. Further, the Company has received assurances from
its key service providers that they are Year 2000 compliant.
As to the Company's subsidiaries, most of the record keeping of the
Hotel, the 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. Additionally, in the Republic of Moldova computerized
record creation and maintenance is not widespread and the Hotel, Insurance
Company and Intercomsoft clientele and supply bases are not believed to be
heavily 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 for it, as the case may be, that the key
vendors software is Year 2000 compliant. However, failure of borrowers, or
servicers to address Year 2000 compliance may increase credit risk to the
Bank through the inability of these parties to meet the terms of their
contracts and make timely payments of principal and interest to the Bank.
Liquidity risk may result if depositors, or lenders experience Year 2000
related business disruption or operational failures and are unable to provide
funds or fulfill funding commitments to the Bank.
In addition, the Republic of Moldova is heavily dependent on Russia
and a number of the former Republics of the Soviet Union for electricity,
heating and other essential utilities and services. Such providers are not
confident of complete Year 2000 compliance. Accordingly, the Company
anticipates some disruption in, among other things, the public utilities in
the Republic of Moldova, the amount of which cannot be qualified. Realizing
that some disruption may occur, as such disruption is part of every day life
in the Republic of Moldova, the Company's subsidiaries have taken certain
steps to attempt to insure that operations can continue, in a limited manner,
until such disruption can be resolved.
No assurances can be given that if a disruption occurs, that such
disruption will not have a material adverse affect on the Company and its
subsidiaries.
Recent Developments
In November 1999, the Company learned that the Ministry of Economy
Affairs and Reform of the Republic of Moldova (the "Ministry"), was soliciting
bids to select an audit company to review the contract between Intercomsoft and
the Government of Moldova pursuant to which Intercomsoft is granted the right to
act as the exclusive supplier of the technology required to produce secure
essential documents to the Government of Moldova. The Company believes that the
review will involve the assessment of such contract comparing it with
international norms for prices charged for the services performed. No assurances
can be given when, if ever, such a review shall begin or the results therefrom.
A loss, or a substantial change in the terms of such contract could, however,
have a material adverse affect on Intercomsoft and the Company.
On May 18, 1999 TriTel Communications Group, Inc. (formerly Global
Telcomm Group, Ltd.), a wholly owned subsidiary of the Company, entered into a
Stock Purchase Agreement (the "Agreement") with the shareholders of I.D.M.
Satellite Division, Inc., a California facilities based telecommunications
provider ("IDM"). The Company terminated the Agreement on November 4, 1999
without any additional expenditure, current or contingent. The expenses incurred
relating to the intended acquisition were not significant.
During 3rd Quarter 1999, the Hotel acquired ownership of a television
series that was recorded on its premises for approximately $58,000. The
television series was produced by a company controlled by the Company's Chairman
of the Board. The Hotel intends to display the television series on its internal
television network and to sell the rights, in part, to other hotels in Russian
speaking countries. The cost of the rights to the television series is amortized
over a period of five years.
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 Incorporation2
3 By-Laws2
4 Specimen of Certificate of Common Stock2
21 List of Subsidiaries3
(B) REPORTS ON FORM 8-K
The Company filed no Current Report on Form 8-K during the 3rd
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: November 19, 1999 By: /s/ TED SHAPIRO
-----------------------------------------
Ted Shapiro, Chief Executive Officer
and President
Dated: November 19, 1999 By: /s/ SHMUEL GURFINKEL
-----------------------------------------
Shmuel Gurfinkel, Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 4,683
<SECURITIES> 820
<RECEIVABLES> 0
<ALLOWANCES> 638
<INVENTORY> 0
<CURRENT-ASSETS> 9,112
<PP&E> 5,268
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,284
<CURRENT-LIABILITIES> 8,309
<BONDS> 0
0
0
<COMMON> 120
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 16,284
<SALES> 0
<TOTAL-REVENUES> 1,935
<CGS> 0
<TOTAL-COSTS> 1,820
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 81
<INCOME-PRETAX> (190)
<INCOME-TAX> 62
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (262)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
