UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from.......... to..........
Commission File Number: 333-7242
TRB SYSTEMS INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-3522572
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6 REGENT STREET, LIVINGSTON, NEW JERSEY 07039
(Address of principal executive offices) (Zip Code)
(201) 994-4488
(Registrant's telephone number , including area code)
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) had been
subject to such filing requirements for the past 90 days.
[X] YES [ ] NO
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13, or 15(d) of the
Securities exchange Act of 1934.
[ ] YES [ ] NO
APPLICABLE ONLY TO CORPORATE ISSUERS:
There were 11,925,626 shares of common stock outstanding having a par value
of $0.001 per share as of September 30, 1998.
<PAGE> 1
INDEX
Page Number
Part I Financial Information
Item 1. Auditor's Review Statement 3
Consolidated balance sheet, September 30,
1998 (unaudited) 4
Consolidated Statement of Operations for
the Quarter ended September 30, 1998 (unaudited) 5
Consolidated Statement of Shareholders'
Equity, September 30, 1998 (unaudited) 7
Consolidated Statement of Cash Flow for
the Quarter ended September 30,1998 (unaudited) 8
Notes to Financial Statements 9
Item 2. Management Discussion and Analysis of
Financial Conditions and Results of
Operations 15
Part II Other Information 17
<PAGE> 2
Stan J.H. Lee & Co. , CPA, CMA Tel) 201-944-7246
440 West St. 3rd Fl. Fax) 201-944-7759
Fort Lee, N.J. 07024-5058 E-Mail) [email protected]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and
Shareholders of
TRB Systems International Inc.
Roseland, New Jersey
We have reviewed the accompanying consolidated balance sheet of TRB Systems
International Inc. as of September 30, 1998, and September 30, 1997, and
the related consolidated statements of operations and retained earnings,
statements of stockholders' equity and statements of cash flows for the
periods then ended. The Review was conducted in accordance with Statements
on Standards for Accounting and Review Services issued by the American
Institute of Certified Public Accountants. All information included in these
financial statements is the representation of the management of TRB Systems
International Inc.
A review consists principally of inquiries of Company personnel and analytic
procedures applied to financial data. It is substantially less in scope than
an examination in accordance with generally accepted auditing standards, the
object of which is the expression of an opinion regarding the financial
statements as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financials statements in order to be in
conformity with generally accepted accounting principles.
/s/ Stan J. H. Lee/s/_
Stan J.H. Lee, CPA
November 1, 1998
Fort Lee, N.J.
<PAGE> 3
TRB SYSTEMS INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1998 AND 1997
(Notes 1,2,3)
9/30/98 9/30/97
ASSETS
CURRENT ASSETS:
Cash $35,423 $3,671
Accounts Receivable (Note 4) 1,040,000
Inventories 146,766 7,500
Deferred Tax Assets 131,484 0
1,353,673 11,171
OTHER ASSETS:
Prepaid Expenses (Note 5) 38,052 27,267
Property & Equipment-net(Note 6) 572,203 498,969
Organization Costs,
net of amortization 31,561 56,734
Security Deposits 1,043 1,043
Deferred Tax Assets 0 252,461
642,859 836,474
TOTAL ASSETS 1,996,532 847,645
LIABILITIES AND STOCKHOLDERS'EQUITY:
CURRENT LIABILITIES:
Accounts Payable and Accrued
Expenses (Note 7) 374,534 195,192
Bank Overdraft 1,945
Accrued Corporation Income
Tax Payable 200 249
Obligation Payable to
Distributors 160,000
Auto Loan 4,210
Salaries Payable 892
Payroll Taxes 4,334 0
386,115 355,441
Long-Term Liabilities:
Loans from Individuals(Note 9) 38,200 250,500
Director's Loan (Note 9) 192,197 55,000
Auto Loan 9,790
240,187 305,500
SHAREHOLDERS' EQUITY:
Common Stock, $.001 Par
Value 30,000,000
shares authorized (Note 10) $11,926 $11,883
Additional Paid-in-Capital 1,816,548 1,227,369
Retained Earnings (Deficit) ($458,243)($1,102,548)
$1,370,231 $136,704
TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY $1,996,532 $847,645
See accompanying notes which are an integral part of the
Financial Statements.
<PAGE> 4
TRB SYSTEMS INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED
EARNINGS
FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 1998
AND SEPTEMBER 30, 1997
9/30/98 9/30/97
REVENUE FROM PRODUCT SALES $50,000 $0
LICENSE AND DISTRIBUTOR FEES
(Note 4) 1,273,000 0
COST OF GOODS SOLD 40,112
GROSS PROFIT 1,282,888 0
OPERATING EXPENSES:
Promotion Expense 1,387 0
Consulting 4,200
Commission 11,009 10,775
Professional Fees 10,696 15,671
Stock Issuance and Transfer
Service 1,975 0
Travel 5,411 14,995
Meals & Entertainment 3,415 8,328
Auto Expense (Note 11) 2,200 627
Payroll Taxes 1,394
Leasing Expense 0 2,500
Rent (Note 12) 4,133 925
Telephone 4,087 2,264
Office Expense 853 4,947
Supplies 88 0
Insurance Expense 0 828
Bank Charges 1,488 970
Postage 602 625
Miscellaneous Expenses 725 401
Shipping & Delivery 2,000 0
Advertising 5,970 0
Depreciation 25,932 20,323
Amortization 6,293 6,293
Employees Benefits 2,363 0
Employees Salaries 8,077 0
Oversea Operating Expense 1,500 5,000
Other Operating Expense 4,098 4,078
Total Operating Expenses $105,696 $103,750
See accompanying notes which are an integral part of the
Financial Statements.
<PAGE> 5
TRB SYSTEMS INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED
EARNINGS (CONTINUED)
9/30/98 9/30/97
INCOME (LOSS) FROM
OPERATIONS BEFORE
OTHER INCOME AND INCOME
TAX EXPENSE 1,177,193 (103,704)
OTHER INCOME AND
EXPENSE:
Dividend Income 9 46
Interest Expense 0 0
INCOME BEFORE INCOME
TAXES 1,177,202 (103,704)
Income Tax Expenses:
Income Tax Expense 0
Current Income Taxes
Deferred Income Taxes (271,288) 0
Benefit due to Loss
Carryforward (Note 8) 0 25,000
Net Income (Loss) 905,913 (78,704)
ACCUMULATED DEFICIT,
at beginning (1,364,166) (1,023,844)
ACCUMULATED DEFICIT,
at end (458,243) (1,102,548)
Earnings (Loss) per share
(Note 13) (0.08) (0.01)
See accompanying notes which are an integral part of the
Financial Statements.
<PAGE> 6
TRB SYSTEMS INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY
FOR THE THREE MONTH PERIODS ENDED
SEPTEMBER 30,1998 AND 1997
(Note 14)
RETAINED TOTAL
CAPITAL STOCKS EARNINGS STOCKHOLDERS
NUMBER OF SHARES AMOUNT (DEFICITS) EQUITY
BEGINNING BALANCE
AS OF 6/30/97 11,863,383 $1,191,527 ($1,023,844) $167,683
Shared Issued 20,000 $97,725
Net Income (Loss) ($78,704)
Balance as of
9/30/97 11,883,383 $1,289,252 ($1,102,548) $186,704
Shares issued between
10/1/97 and 9/30/98 42,263 $539,222
Net Income (Loss) $644,305
Balance as of
9/30/98 11,925,646 $1,828,474 ($458,243) $1,370,231
See accompanying notes which are an integral part of the
Financial Statements.
<PAGE> 7
TRB SYSTEMS INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1997
9/30/98 9/30/97
CASH FLOWS FROM
OPERATING ACTIVITIES:
(Net Loss) Earnings $905,913 ($78,704)
Noncash item includ. in (Net
Loss) Earnings 303,513 1,616
Increase (Decrease) in Acct's
Recievable- other (1,040,000) 12,500
Increase (Decrease)
in Inventory (120,304)
Increase (Decrease)in Acct's
Payable and Other Payables 167,712
Increase in Obligation
to Distributors (230,000)
(13,166) (64,588)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Expenditure for Prepaid
Expenses (2,860)
Purchase of Property and
Equipment (24,000)
Expenditure in
Security Deposits
Expenditure for Organization
Cost (24,000) (2,860)
CASH FLOW FROM
FINANCING ACTIVITIES:
Bank Overdraft 1,945 (18,106)
Loans from Director 73,603
Loans from Individuals (20,000) (8,500)
Issuance of Common Stock 97,725
Auto Loan 14,000
69,548 71,119
Net increase (decrease)
in Balance of Cash 32,382 3,671
Cash at Beginning of Period 3,041
Cash at End of Period $35,423 $3,671
See accompanying notes which are an integral part of the
Financial Statements.
<PAGE> 8
TRB SYSTEMS INTERNATIONAL INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
1. Incorporation and Business Activity
TRB Systems International Inc. (the "Company"), a Delaware Corporation
incorporated on April 9, 1997, is a holding company whose only asset is
100 % of voting common stocks in TRB Systems Inc. TRB Systems Inc. was
incorporated under the laws of Delaware on April 7, 1994, on which day it
merged with TRB Systems Inc., a Corporation incorporated under the laws of
New York on July 12, 1993, to form TRB Systems Inc., a Delaware Corporation.
TRB Systems Inc. is in the business of manufacturing, distributing, and
selling bicycle, fitness, and motorized two wheel transportation products.
Currently all operations are run from the head office facilities in Roseland,
New Jersey.
2. Summary of Significant Accounting Policies
a) Principles of Consolidation
TRB Systems Inc., the only subsidiary of TRB Systems International Inc. has
been included in the consolidated financial statements, as it is the
operating entity, with TRB Systems International Inc., a non-operating
holding company.
In accordance with the reverse takeover method of accounting, as referred to
in Note 3 these consolidated financial statements of the Company include the
accounts of TRB Systems International Inc. together with the results of TRB
Systems Inc. for the quarter ended September 30, 1998.
b) Revenue and Expense Recognition
The Company prepares its financial statements on the accrual accounting basis.
Consequently, certain revenue and related assets are recognized when earned
rather than when received, and certain expenses are recognized when the
obligation is incurred or the asset consumed, rather than when paid.
c) Accounting Method
The Company recognizes income and expenses on accrual basis.
d) Depreciation
Depreciation is computed by using the straight-line method for financial
reporting purposes and the modified accelerated cost recovery method for
federal income tax purposes.
<PAGE> 9
TRB SYSTEMS INTERNATIONAL INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
e) Income Taxes
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the bases of certain assets and
liabilities for financial and tax reporting. The deferred taxes represent
the future tax return consequences of those differences, which will either
be taxable when the assets and liabilities are recovered or settled.
f) Net Operating Loss Carryforward
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
for operating losses that are available to offset future taxable income.
g) Intangible Assets
Intangible assets subject to amortization include organization costs, loan
closing costs, and in-force leasehold costs. Organization costs and
in-force leasehold costs are being amortized using the interest method over
the life of the related loan.
h) Reclassifications
Certain accounts in the prior-year financial statements have been
reclassified for comparative purposes to conform with the presentation in
the current-year financial statements.
i) Property and Equipment
Property and equipment are carried at cost. Depreciation of property and
equipment is provided using the straight-line method for financial reporting
purposes at rates based on the following estimated useful lives:
Machinery and equipment 3-10
Furniture and fixtures 3-10
Engineering equipment 3-10
For federal income tax purposes, depreciation is computed using the modified
accelerated cost recovery system. Expenditures for major renewals and
betterments that extend the useful lives of property and equipment are
capitalized. Expenditures for maintenance and repairs are charged to expense
as incurred.
<PAGE> 10
TRB SYSTEMS INTERNATIONAL INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
j) Inventories
Inventories are stated at the lower of cost (determined on the first-in,
first-out basis) or market.
3. Business Combination
Pursuant to an Agreement dated April 18, 1997, and effective on that date, TRB
Systems International Inc. issued 9,750,000 common shares in exchange for
all outstanding shares in the capital of TRB Systems Inc. As a result of
this transaction, control of the combined companies passed to the former
shareholders of TRB Systems Inc.
This business combination situation is referred to as a "Reverse Takeover".
Legally, TRB Systems International Inc. is the parent or continuing
corporation; however, Generally Accepted Accounting Principles require that
the former shareholders of TRB Systems Inc. be identified as the acquirer
and that TRB Systems International Inc. and be treated as the acquired
company. Accordingly, control of the assets and business of TRB Systems
International Inc. has been acquired by TRB Systems Inc. in consideration
for the issuance of common shares.
4. Accounts Receivable
Accounts receivable reflect the non cash portion of Licensing and
Distributorship agreements totaling $1,123,000 from the Ivory Coast,
Tanzania, Benin/Nigeria, Vietnam, India, Massachusetts, and Orange County,
California.
The licenses are for three years duration with automatic renewals so long as
minimum royalties are paid; and by agreement with all licensees, the
effective date of each contract was January 1, 1998. The contracts call for
an ongoing royalty payment of 6% in the first year, 5% in the second year,
and 4% thereafter, with a minimum royalty payment per year as set out in the
following table:
1st Year 2nd Year 3rd Year
Country Min. Royalties Min. Royalties Min. Royalties
India $100,000 $220,000 $350,000
Benin/Nigeria $15,000 $25,000 $40,000
Ivory Coast & $10,000 $10,000 $10,000
5 other countries
Tanzania $10,000 $20,000 $30,000
Vietnam $10,000 $20,000 $30,000
<PAGE> 11
TRB SYSTEMS INTERNATIONAL INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
5. Prepaid Expenses
ABL Properties, wholly owned by Byung Yim, President and CEO of the Company,
and under common control with the Company, owns the patents which are
exclusively licensed to TRB Systems Inc. (TRB) for the worldwide manufacture
and sale of the Transbar Power System (TPS). The timing, methodology and
general details of the manufacture and sales are left to TRB, as is the
design and utilization of the goods employing the technology. The rights
licensed to TRB by ABL Properties Company call for a payment of $200,000
during the first year of active sales, a 1% royalty on annual sales to
$10,000,000, 0.75% on sales over $10,000,000 but under $20,000,000, and
0.5% on all sales thereafter, and all profits gleaned from international
sales to an aggregate limit of $3,325,000. It was agreed between ABL and
the Company that the $200,000 would be deferred until the Company had
suitable cash flow to meet its current needs, or March 1, 1999, whichever
date was later.
Any cost incurred by TRB Systems Inc. to maintain the patents is reimbursable
by ABL and is credited toward the $ 200,000 license fees due to ABL on the
first anniversary following the commencement of active bicycle sales.
6. Property and Equipment
Cost
Office equipment $ 6,275
Tools and machinery 30,000
Automobile 34,000
Moldings 539,062
Booth for Shows 69,970
Informercial tape and other promotional materials 50,000
729,307
Less accumulated depreciation (157,104)
$ 572,203
The purchase of the property and equipment except the office equipment, booth,
$39,000 in molds and automobile were from Marn Seol, a long time employee of
TRB in Taiwan and was thus non arms length. As a result the property was
purchased for book value in the sum of $559,000, which was paid for by the
issuance of 500,000 shares of the Company to Marn Seol, said shares
restricted and subject to Rule 144.
7. Accounts Payable and Accrued Expenses
The accounts payable and accrued expenses also include the capitalized
portion of legal and consulting expenses incurred in the development of
standardized contracts, promotional materials and the filing and
registration of patents, and are amortized over a sixty-month period.
<PAGE> 12
TRB SYSTEMS INTERNATIONAL INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
8. Operating Loss Carry Forward
The Company has Loss Carryforwards of $589,162 which are expected to offset
in its entirety this year's taxable Income.
9. Director's Loans and Loans From Individuals
The loans payable to a director and Loans from Individuals are unsecured,
non-interest bearing with no set terms of repayment. They will be retired as
the company has surplus funds to repay these loans.
10. Common Stocks
The Company is authorized to issue 30,000,000 at $ 0.001 par value share,
and, as of September 30, 1998 , 11,925,626 voting common shares are issued
and outstanding.
11. Related Party Transaction
The Company has a policy of providing an executive with a Company-leased
automobile for business purposes and the amount of such expense for the
Quarter ended September 30, l997 was $2,200.
There were no other significant non arm's-length basis transactions between
the Company and any related party during the fiscal period ended September
30, 1998.
12. Description of Leasing Arrangements
The Company leases its executive office facilities under non-cancelable
short-term operating leases. The future minimum lease payments required
under the leases is minimal and immaterial in amount.
13. Earnings Per Shares
Earnings (loss) per share is calculated using the weighted average number of
common shares outstanding and common shares equivalents. The average number
of shares outstanding under these assumptions would be 11,863,363 shares as
of June 30, l997, 11,925,626 as of September 30, 1998.
14. Payments In Shares Of Common Stock
A contract was signed on April 18, 1997 in which Alpha Bytes Inc. accepted
250,000 shares, to be issued directly to its shareholders, as payment for
consulting services valued at $25,000 and rendered to TRB Systems, Inc.
Alpha Bytes subsequently issued the shares as a dividend to its
<PAGE> 13
TRB SYSTEMS INTERNATIONAL INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
shareholders on October 2, 1997. As the shares were free trading and fully
paid for, and the distribution was to its own shareholders for no
consideration, Alpha Bytes felt that the shares were exempt from registration
as free trading shares. However, the Company felt that there was a potential
violation of Section 5 of the Securities Act of 1933 as well as the various
State rules for the sale of shares, and it was decided that Alpha Bytes
would treat the transaction as if the violations had occurred. For this
reason, Alpha Bytes offered its shareholders a 30 day right of rescission
(the maximum period required by any of the states in which shareholders of
Alpha Bytes reside), commencing on August 12, 1998, the effective date of the
Registration Statement on Form SB-2. The 30 day period has expired and no
Shareholder asked that the transaction be rescinded.
As of September 30,1998, no shares were rescinded, and the right has expired.
$305,816 of investments in TRB were converted into Equity by the issue of
594,009 shares to 45 individuals, at the rate of $0.51 per share. These
shares are free trading pursuant to Rule 504 of Regulation D of the SEC and
have been registered with the SEC on Form SB-2 (amended). The effective date
of the Registration was August 22, 1998.
<PAGE> 14
PART I
Item 2. Management's Discussion and Analysis of Financial condition and
Results of Operations
The following discussion and analysis relate to factors which have affected
the financial condition and results of operations of the Company for its
Quarter ended September 30, 1998.
On April 18, 1997 the Company purchased 100% of all the outstanding shares of
TRB, as fully described in Other Information, below. TRB Systems Inc. is a
Delaware corporation, formed in April 1994, to market and manufacture,
worldwide, the Transbar Power System (TPS) technology and its applications
to the bicycle, exercycle, electric bicycle and wheelchair.
TRB's technology allows users to engage in a biomechanically correct exercise
without the trauma associated with many alternate forms of exercise.
Orthopedic doctors and physical therapists have prescribed the TPS bike for
patients because of the variable stroke, non-impact motion it provides.
TRB's products are also appealing to older consumers and TRB is well
positioned to benefit from the aging of the U.S. population. The TPS motion
provides older consumers with an exercise that is cardiovascular and
anaerobic, while at the same time is safe and gentle.
Discussion of Financial Information
TRB is the active operating entity, producing, marketing, manufacturing, and
supporting the products of the Company. The Company has no active income save
for the activities of TRB. Therefore, the financial information regarding
the parent company and its subsidiary are presented on a consolidated basis.
TRB emerged from being a development stage company to an active operating
company in the current quarter. The first $160,000 of inventory was purchased
from the company's Taiwan manufacturing facility. Of the $160,000 purchased,
$50,000 were sold. International licenses for marketing TRB's products
totaling $1,273,000 have been granted to the Ivory Coast, Tanzania,
Benin/Nigeria, Vietnam and India, as well as Distributorships for LA County
and Orange County in California and Long Island, New York; and payments
totaling $210,000 have already been received, as well as $10,000
for the right of first refusal to be the licensee in Canada (See Financial
Statements, Note 4). Management had felt that until bicycles were shipped
to the licensees and active production and sales commenced, the sale of
licenses could not be deemed a source of revenue, and the money collected
was deemed a liability of the Company's until bicycles were actually shipped.
As TRB has sold $50,000 worth of bicycles to its distributors, has
$146,766 in inventory, has another $90,000 worth of bicycles en route from
Taiwan, and has over $300,000 in current orders from licensees and
<PAGE> 15
distributors; management felt that the revenue associated with license
agreements and distributorship agreements could be rightfully recognized
(See Financial Statements, Statement of Operations, Revenues, and Note 4 to
the said Statements).
For the quarter ended September 30, 1998, revenues in the sum of $1,273,000
from license sales and $50,000 from bicycle sales were recognized, while in
the comparable period ending September 30, 1997 there were no revenues. The
Cost of goods sold (associated with bicycle sales only) was $40,112,
netting a gross profit of $1,282,888.
Total operating expenses were $105,696 for the quarter ended September 30,
1998, as compared to $103,750 for the quarter ended September 30, 1997. In
both periods the major expenses were depreciation and amortization,
accounting for about 1/3 of the operating expenses. Professional fees
accounted for approximately 11% of the expenses in the current quarter, and
for 15% in the comparable quarter of the last fiscal year. These fees
represented the cost of becoming a public trading company. Commissions
accounted for about 10% of expenses in each of the two quarters, but were
relatively small when compared to sales of licenses. The company pays 10% of
the value of a license or distributorship as a commission. As sales of bicycles
begin to climb, the overall ratio of commissions to sales will drop, as the
salesmen receive no commission of the sale of bicycles by the licensees and
distributors.
The cash and investment certificate position of the Company was $35,423 on
September 30, 1998 as compared to $3,671 on September 30, 1997. Current
assets, as a whole, increased significantly, from $11,171 on September 30,
1997 to $1,353,673 on September 30,1998. The reason for the dramatic change
was the recognition of sales as noted above, and the recognition of deferred
tax assets in the sum of $131,484 from the development period.
Liquidity
Management believes that the Company has the cash funds and necessary
liquidity to meet the needs of the company over the next year, assuming sales
and development efforts conform to the standards historically set (See Note 4
to Financial Statements for minimum sales/royalty figures). Primarily, as TRB
is now ready to deliver bicycles, with active manufacture and delivery and
sale of product having commenced in the current quarter, liquidity needs,
management feels, will be met through the sale of bicycles, both
internationally and through domestic sales (See Current Plans, below). This
will be done on a letter of credit basis, and through credit arrangements
with the manufacturers in China, who have given TRB a $2,000,000 line of
credit to apply against orders for bicycles. As well, royalty payments will
become due from the distributors and licensees. On March 1, 1998 American
<PAGE> 16
distributors were given all material necessary to commence domestic sales,
and product sales began in September, 1998.
However, to fully maximize the potential presented by the TPS technology,
management believes that approximately $10,000,000 will need to be raised.
The funds will be primarily used to increase the marketing effort and for
the production of marketing material, to maintain domestic inventory levels,
as well as for the continued development of the TPS technology. It is felt
that the money would be utilized over a three year period. In the event only
part of the funds are raised, then it will be allocated to marketing and to
stockpiling inventory to meet anticipated domestic demand. The money will
likely be raised through private placements of shares. In the event the
funds are not raised, TRB will continue with its sales activities, and,
management believes, meet its liquidity demands. The funds, as noted above,
are for increased activity and sales, not for primary liquidity demands.
Current Plans
The key events that are anticipated by management to occur over the next
quarter are the aggressive marketing of TPS based bicycles by the licensees
and through active infomercial campaigns, as well as the aggressive sales of
licenses for territorial exclusivity in the sale of TRB products. As well,
TRB is ready to commence active marketing to USTU member and non-member
Taekwondo centers.
Shooting for a series of infomercials/commercials has been completed,
and airing will commence on the major networks in the next fiscal quarter.
The company is preparing a major sales campaign through the 20,000 affiliated
and non affiliated centers of the U. S. Taekwondo Union to commence in December
1998, with the full backing of the Union, which management and the Taekwondo
Union both feel will yield over $10,000,000 in sales during the ensuing year.
PART II
Item 1. Legal Proceedings
The Company is not a party to any material litigation.
Item 2. Changes in Securities
NONE
<PAGE> 17
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders
NONE
Item 5. Other Information
Acquisition of TRB
On April 18, 1997, in exchange for 9,750,000 shares in the common stock of
Company, 100% of the stock in TRB was sold by Motion Plus International
Corporation, a Delaware Corporation, its owner, to the Company. Motion Plus
International is a holding company, 20% of whose shares are owned by Byung
Yim, president and CEO of the Company. Mr. Yim's children, Alexander B. Yim
(age-21)and Lena B. Yim (age-19), hold 39% interest in MPI each, with the
remaining 2% held by Hee J. Yim.
Sale of Shares to Investors in TRB
The Company issued 594,009 shares to 54 individuals who had invested in TRB
and were unrelated parties on October 2, 1997. These persons had invested money
between 1994-1997 in TRB, in the sum of $305,814, and their investment was
converted into equity at the rate of $.514 per share. This is reflected in
the financial statements, and described in Note 16 of the said statements.
The said shares were duly registered for resale on Form SB-2, declared
effective on August 12, 1998.
Sales to former Employees and Consultants
44 employees and consultants of TRB who had worked with TRB since 1994 in
developing the TPS system were issued 376,617 shares, said shares were
restricted from sale subject to Rule 144 of the Securities and Exchange
Commission (the "Commission"). The issuance of shares to the employees was
exempt from registration through reliance on Rule 701 of the Commission.
The Consultants were Certified Public Accountants who had provided financial
consulting services to TRB. The consultants are Andy Chapkin, Stephen Nappen,
and Jeffrey Zudack of 4 Becker Farm Road, Roseland New Jersey, and each
received 1,599 shares at a price of $0.50 per share. The issuance of shares
to these consultants was exempt from registration through reliance on
Section 4(2) of the Securities Act of 1933, in that these were each
sophisticated purchasers. The said shares were duly registered for resale
on Form SB-2, declared effective on August 12, 1998.
<PAQGE> 19
Sale to Byung Yim
500,000 shares were issued to Byung Yim, the Company president, The said
shares were restricted, exempt from Registration through reliance on Section
4(2) of the Securities Act of 1933, in that Mr. Yim was a sophisticated
purchaser, and subject to Rule 144. The shares were to retire $218,162 in
debt owed to Mr. Yim, and in lieu of salaries not drawn.
Purchase of Equipment from M. T. Seol
500,000 shares were issued to M. T. Seol for the purchase of property and
equipment valued at $559,545. This equipment consisted of office equipment for
$5,000, tools and machinery for $30,000, an automobile for $10,000, moldings
for $464,545, and an informercial tape and other promotional materials for
$50,000. The purchase took place in April of 1997. The said shares were
restricted and issued subject to Rule 144, and exempt from registration
through reliance on Section 4(2) of the Securities Act of 1933, in that
Mr. Seol was a sophisticated purchaser.
The equipment value was strictly based on book value of the goods, as this
was a non-arms length transaction in that Mr. Seol is an employee of the
Company (SEE: FINANCIAL STATEMENTS, BALANCE SHEET, ASSETS and the accompanying
footnote).
Sale of Shares to Alpha Bytes, Inc.
Alpha Bytes, Inc., 7050 Woodbine Ave., Suite 205, Markham, Ont., Canada L3R
4G8, a Colorado public corporation presently traded on the NASDAQ Bulletin
Board market, provided consulting services to the Company regarding software
development for the inventory control and Management Information Systems
to be used by the Company for consideration in the sum of $25,000, which
sum Alpha Bytes invested in the Company for 250,000 shares acquired on
April 18, 1997. The shares issued were exempt from registration pursuant to
Rule 504 of Regulation D of the SEC, in that the total investment in TRB for
the year was less than the maximum allowed by the rule. The holdings
accounted for less than 2.2% of the outstanding shares of the Company.
Alpha Bytes subsequently issued the shares as a dividend to its shareholders
on October 2, 1997. The said shares were subject to a 30 day right of
rescission by the shareholders, which was never exercises. The thirty day
period expired on September 12, 1998, and no shares were returned to
Alpha Bytes for rescission of their issuance.
Commencement of Trading on the NASDAQ OTC Bulletin Board
On August 21,1998 the Company began active trading on the NASDAQ OTC
Bulletin Board under the trading symbol TRBX.
<PAGE> 19
Item 6. Exhibits and Reports on Form 8-K
23.1 Consent of Auditors for including Review Report page 24
99.1 Registration Statement on Form SB-2, Filed
with the Commission on July 27, 1998, and declared
effective August 22, 1998*
* The Registration Statement is incorporated herein by reference, as are the
Exhibits thereto, also duly filed on July 27, 1998.
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.
TRB SYSTEMS INTERNATIONAL INC.
By /s/ BYUNG YIM /s/
Byung Yim, President and Director
(Principal Executive Officer)
Date: November 13, 1998.
Pursuant to the requirements of the Securities Exchange Act of 1934, This
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
TRB SYSTEMS INTERNATIONAL INC.
By /s/ BYUNG YIM /s/
Byung Yim, President and Director
(Principal Executive Officer)
Date: November 13, 1998.
<PAGE> 20
Registration Number 333-7242
========================================================================
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report
On
Form 10-Q
TRB Systems International Inc.
========================================================================
EXHIBITS
========================================================================
September 30, 1998
<PAGE> 21
EXHIBIT 23.1
Consent of Registrant's Auditors
To Include Review Report in
Quarterly Report on Form 10-Q
November 9, 1998
Securities and Exchange Commission
Washington, D.C. 20549
RE: TRB Systems International Inc.
Gentlemen:
We have reviewed the balance sheet and accompanying statements of the
Registrant, as found in the Prospectus which forms part of this Quarterly
Report on Form 10-Q, for the fiscal quarter ending September 30, 1998 and
September 30, 1997, and consent to the Review reports, statements, and notes
being filed with the Quarterly Report of which this exhibit forms a part,
and with any amendment thereto.
This accounting firm hereby consents to the filing of this consent as an
exhibit to the Registration Statement.
/s/Stan J. H. Lee/s/
Stan J. H. Lee, CPA
440 West St., 3rd Fl.
Fort Lee, NJ 07024-5058
<PAGE> 22
Blank back sheet
<PAGE> 23
