SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended Commission File Number 333-7242
June 30, 1998
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)
Registrant's telephone number, including area code: (201) 994-4488
Securities registered pursuant to Section 12 (b) of the Act:: None.
Securities registered pursuant to Section 12 (g) of the Act:: None.
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), YES X NO
and (2) had been subject to such filing requirements for the past 90
days YES NO X .
The aggregate market value of voting stock held by non-affiliates of the
Registrant was $6,082,070 based on THE AVERAGE PRICE PAID FOR SHARES
REGISTERED ON FORM SB-2, SAID FORM DECLARED EFFECTIVE AUGUST 12, 1998.
There were 11,925,626 shares of common stock outstanding having a par
value of $0.001 per share as of JUNE 30, 1998.
DOCUMENTS INCORPORATED BY REFERENCE:
Registration Statement on Form SB-2, filed on July 27, 1998, declared
effective August 12, 1998; Articles of Incorporation of the Registrant
dated April 9, 1997, and Bylaws of Registrant, previously filed as an
exhibit to the Company's Form SB-2, made effective August 12, 1998.
<PAGE> 1
PART I
ITEM 1 GENERAL DEVELOPMENT OF BUSINESS.
TRB Systems International Inc. (the "Company") was incorporated in the
State of Delaware on April 9, 1997. Currently, the Company is a holding
company with one subsidiary, TRB Systems Inc., (TRB), a
development stage company, which was purchased on April 18, 1997.
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.
These technology rights were licensed by TRB Systems Inc. from ABL Properties
Company, the owner of the patent rights to the TPS technology (See Licenses,
Patents). TRB commenced taking orders in March 1998, and anticipates to
commence shipping bicycles in the first quarter of the 1998-1999 fiscal year.
Neither the Company nor TRB have ever been a party to any material
reclassification, merger, consolidation, or purchase or sale of a significant
amount of assets not in the ordinary course of business, other than with
respect to TRB's acquisition by the Company.
Background Information
Between 1983 and 1993, over $7.9 million was spent by Alenax Corporation
(TRB's predecessor), owned and operated by Mr. Byung Yim, president of both
TRB and TRB Systems International Inc., developing and marketing a line of
TPS bicycles. In April, 1994, TRB Systems Inc. was incorporated to continue TPS
technology development, and to manufacture and market the finished product
lines worldwide. To date 1,060 bicycles have been produced and sold.
TRB, licensed from ABL Properties Corp., the company owning the patent
rights to the TPS technology, the exclusive rights to market and enhance
products using the Transbar Power System (See Licenses). TRB intends to
create what management believes is a new generation of cycling and fitness
products using the patented TPS technology. The characteristics of the TPS
technology are similar to that used in stepper machines, which are currently
one of the fastest growing segments of exercise equipment industry. TRB's
technology provides a natural walking, jogging motion, creating reduced
stress during exercise on the back, hips, knees, and ankles.
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.
Business Development
Over the past year TRB has focussed on developing the Bicycle sales segment
of its product line. Agreements were signed with TriCom Pictures and Shop
T.V., both of Florida, for the production of Infomercials and Commercials
set to air in the second quarter of the next fiscal year. These will serve
both to educate the public with respect to the TPS technology, and to
generate direct sales of product.
TRB has signed an agreement with the U. S. Taekwondo Union (USTU) allowing
TRB to directly market its bicycles to the students of the over 20,000
member and non-member Taekwondo Centers. The USTU used TRB bicycles to enter
the stadium at the 1998 World Taekwondo Championships, and has indicated that
at the annual meeting of the USTU in California in November, 1998, TRB will
be allowed to make a presentation regarding TRB's products and their
benefits, to the attendees. Sales are anticipated to start in the second or
third quarter of the next fiscal year.
<PAGE> 2
TRB commenced taking orders for its bicycles in March of 1998 from its
distributors, licensees, and some Taekwondo Centers which wanted bicycles
on hand to demonstrate to their students. A total of over $300,000 in orders
were taken. Delivery is expected in early November, 1998.
Product Development
Preliminary market research indicates that the therapeutic market is driven
primarily by product performance, while non-therapeutic markets are more
sensitive to price. The Company intends to focus its product development and
production efforts for the first year on three lines of products: bicycles,
electric bicycles, and ergometers. TRB's introductory bicycle line,
propelled exclusively by the TPS, will consist of models with multiple
sizes for men and women. This initial line will closely resemble the current
popular cruiser and mountain bikes that offer a comfortable upright riding.
Product development will continue with the introduction of an adult
tricycle. Lightweight, higher performance bicycles will eventually also
be introduced to appeal to the performance biking community. Other term
products will be developed to meet the dynamic and continually changing
needs of the market.
Patent Protection
Patents covering the speed change and/or propulsion mechanism of the
Transbar Power System have been obtained and are owned by ABL in the U.S.,
China, India, Australia, Taiwan, Japan, and Korea, and patents are pending
in Europe and Canada. TRB has the exclusive worldwide licensing rights under
all TPS patents, except for Taiwan and South Korea. A copy of the patents has
been files as a exhibits to the Registration on Form SB-2 files on
July 27, 1998.
TRB Products and Technology
The TPS technology has many applications. TRB will initially focus on
three main product groups; a select line of bicycles, electric bicycles,
and two types of ergometers. Other new product lines and licensing
opportunities will be pursued through third party alliances.
TPS Bicycle
TPS bicycles are high quality, sophisticated products that closely
resemble conventional bicycles. The TPS bicycle's unique design provides a
smooth, up and down pumping, or stepping action, which closely resembles
the body's natural walking and running motion. This is the most powerful
movement a leg can make, reaching a maximum when almost fully extended. TRB's
system takes advantage of these biomechanical facts. The bicycle's operating
principles are relatively simple. The pedal levers travel up and down through
the maximum power range that has an arc of 135 degrees. As the lever on one
side is depressed, the opposing lever is raised. A full lever stroke or a
partial stroke may be applied to propel the bicycle. Lever strokes require far
less leg motion than the 360 degree movement required with a conventional
bicycle.
Research conducted by TRB leads management to believe that the TPS
bicycle provides a significant increase in propulsion power versus conventional
circular pedaling models. The propelling force of the TPS lever is constant,
as opposed to the variable, circular ascending and descending crank motion of
conventional bicycles. The levers which drive the transbar system do not
revolve, and their length can therefore be increased to take advantage of
the power of leverage. Since the levers do not revolve, the TPS bike permits
greater ground pedal clearance over rough terrain and around turns. Propulsion
of a bicycle using the TPS results in significantly greater distance traveled,
for a given expenditure of effort, than on the same bicycle using
conventional bicycle technology.
<PAGE> 3
The overall appearance of the TRB bicycle closely resembles that of the
conventional bicycle. The major difference between TRB's bike and
conventional bikes is the TPS, which has two main components: TRANSBAR Two
opposing bars that are attached directly to the pedal levers. The pedal
lever is attached to the Transbar at a precise angle to allow maximum power
transfer from rider to machine. REAR HUB A dual ratcheting sprocket which is
engaged by the drive chain.
The TRB BIKE is offered in five (5) models; Mountain Bike(MTB), Leisure
Bike, BMX(Children), ATB(all-terrain), and CROSS TRAINING-BIKE. In mass
production, TRB will offer a pedal arm in lengths of either 225mm or 250mm.
This will increase the force of each stroke and increase speed considerably
compared to the conventional pedal length of 170mm. TRB plans to focus
initially on the single action, natural stepping motion in all the bikes with
the exception of a 20" JUVENILE BIKE that will be introduced with our
proprietary multifunctional pedal action within a 9-12 months train after
the TRB rollout. Our tricycle will follow within one (1) year. TRB will
attack the high-end professional rider market in the second phase of our
business plan. TRB is currently conducting care research to verify the speed
and efficiency of our racing prototype (i.e., longer pedal arm, therefore
greater force stroke).
TRB's in house research, consisting of trials on the bicycle and
questionnaires responded to by over 100 people indicates that first time
riders or the older population like the feel of the TRB BIKE better than a
conventional bike. Women like the fact they can wear a skirt with comfort while
riding, and those with stiff joints, limited range of motion will attest to the
ease of natural motion of TRB BIKE's pedal action compared to that of the
conventional bike.
Most conventional bikes are not structurally or functionally designed
specifically for rehabilitation per se. The "transbar technology" fills a
large void in this huge untapped market, especially in the "middle-aged"
population. It also is an easier motion for the beginner. The transbar
configuration in TRB's bike allows the rehabilitating person (a market with
growth of 430,000 annually in the US) who uses TRB's bike in a stationary mode
(sitting on a stand) to transfer the natural gait motion of 135 degrees
from the inside to the outdoor with the same bike (without the stand).
Fitness/ Home Trainer
TRB's fitness and home trainer was an outgrowth of the Company's experience
with physical therapists who used our "outdoor bike" concept of the natural
gait motion for their patients. They wanted a graded capability of ROM
(Range of Motion) in the stationary bike, as the patient moved from a narrow
range of motion to a wider and eventually to the 360 degree, circular motion
that they were accustomed to, in typical rehabilitative procedure. TRB's
VersiTraniner meets that demand with a training and rehabilitative device that
provides six (6) different sets of exercises, which are summarized below:
1. Alternate up and down pumping motion
2. Simultaneous with both feet parallel to each other
3. Bilateral-One foot pumps while the other foot rests motionless
4. One foot pumps 360 degrees while the other foot rest motionless
5. 360 degree rotation-conventional bike pedaling-opposed pedals
6. Parallel pedaling-360 degree rotation
<PAGE> 4
The Versi-Trainer allows an individual to exercise their abdominals,
hips(lateral rotators), quadriceps, hamstrings, and gluteus(butt) muscles.
All actions are performed in the correct biomechanical positions.
Electric Bike
POWER+BIKE is an outdoor bike that uses the same natural "up-down" motion
of all the TRB bicycles but with the ability to, with the twist of the
handle, become an electric bike with speed capability of 23mph. TRB's POWER+
BIKE is strategically positioned, not specifically for the luxury market,
which has three new entries this year Bricklin, Mercedes, and Porsche.
All three are designed similar to a moped, are heavy (50lbs or more), and
costly, at prices between $1400-$5000. By comparison, TRB's POWER+BIKE is
23lbs, light and efficient enough for the senior citizen and women's market
(can be pedaled comfortably in a business skirt or suit) and sleek enough for
the "Generation X" market appeal, sophisticated enough for the urban
businessman, cool and convenience for the outdoor family and RV enthusiasts,
and safe and practical for the recovering heart attack patient who wants to
exercise but does not want to be struck too far from home. With a retail
cost of $600 and manufacturing costs at $200, along with the added
capabilities of folding the POWER+BIKE into a POWER PACK so it can be hung
upon the back of a door, TRB's management believes the POWER+BIKE can
capture a major market share within this emerging market.
The marketing strategy for this product is as follows:
Senior Market over the age of 50: TRB will focus on the Sunbelt States:
Florida, Arizona, New Mexico, Nevada, California, Texas as well as North
Carolina, South Carolina, and Virginia. Organization such as AARP
(American Association of Retired Persons) with over 5 million members will
be a main target. This market will be cross-prospected by other major
pyschographics such Recreational Vehicle and TimeShare enthusiasts.
Recreation Vehicle Enthusiasts: Reports by the Recreational Vehicle
International Association(RVIA) have shown that there are 9 million RVs
with 2.5 users per RV, making a total of 22.5 million RV enthusiasts.
TRB has targeted RV camps in Palms Desert (California), Lake Conroe(Houston),
as well as KOA(Campgrounds of America) and Coast-to-Coast Florida, two of
the larger leaders in RV and Campgrounds.
TimeShare Market: There are 2,500 TimeShare Properties. TRB has contacted
key sales personnel in a new site and are currently involved in preliminary
negotiations to have the TRB POWER PLUS BIKE be a promotional premium when
buying a TimeShare unit.
Universities/Colleges: Nationally, there are 14 million university/college
students. Alenax had set-up a College Campus Student Leader Program in the
past with the TPS outdoor bicycle(Alenax), and TRB intends to mimic the same
marketing and sales campaign to colleges and universities. TRB will
roll-out a similar campaign at a later date to the Prep School market, a
market with close to 1 million students.
TRB will also select large specialty stores, as well as a consortium that
sell Health Clubs in over 19 Western States. TRB plans to develop a
campaign with International Spa, a professional spa organization and
will exhibit at their international trade show. There are over 2,500 Spas
in this organization.
Future Product Development
The TPS technology has many applications for future products. Some
products under consideration include:
1. wheelchair
2. adult tricycles
3. outdoor recumbent (reclining) bicycles
4. arm/shoulder ergometers
<PAGE> 5
The outdoor recumbent bicycle has been extremely well received by several
Fortune 500 companies, based on a working prototype presented to such
companies by Dr. Dennis Colacino, COO of the Ergometer Division of TRB.
The Market
TRB will focus on the six markets indicated below in its first year of
operation:
Alternative Transportation, Recreation & Leisure, Health & Fitness
This market is made up of more than 60 million individuals who currently
exercise regularly. The TRB products that will appeal to this market are
the Versi-Trainer and the outdoor TRB bicycle.
Retail Market
From 1985 to 1995, the U.S. bike market grew at close to a 6% annual rate.
The retail industry has averaged approximately $3 billion annually through
the 1980's and is expected to reach $5 billion by 2000. According to the
National Sporting Goods Association ("NSGA"), the retail market for home
exercise and fitness equipment grew at a compound annual growth rate of
10.5%, from approximately $1.2 billion in 1987 to an estimated $2.5 billion
in 1997. The sale of aerobic conditioning equipment, including stair
climbing equipment, treadmills, cross country ski exercisers, etc.,
accounted for $2.0 billion in 1995, or 73.7% of this total. In this
industry, the stepper market is the fastest growing segment. The TPS
bicycle will be attractive to this segment because it allows the stepper
motion and muscle conditioning to be taken outdoors.
Health and Fitness Facilities
To stay competitive, commercial health and fitness facilities have
generally found that they must continue to offer their members state-of-the-
art equipment and programs. As a consequence, health and fitness facilities
typically will spend increasingly more on equipment just to keep pace.
With the number of health and fitness facilities in the U.S. estimated at
12,500 (IRSA estimate), there is significant competition among neighboring
clubs that are facing a saturated market. These facilities find they must
offer their members every possible means of motivation to keep them coming
back. Consequently, health and fitness facilities are driven by the market
to respond very quickly to new products. TRB's recumbent ergometer (Versi-
Trainer) will offer health club goers the opportunity to combine conventional
circular motion with the TPS stepper motion in a single machine.
Senior Citizens
The senior market is the segment of the population over the age of 50,
which includes approximately 64 million Americans (25.6% of the U.S.
population). With the aging of the Baby Boomers, this number is
going to change markedly over the next two decades. By 2010, it is
projected that 96 million Americans (32.1% of the population) will be over
the age of 50.
The aging of the U.S. population, combined with the rapidly escalating cost
of health care services, has resulted in an intensifying concern about the
efficiency and effectiveness of the U.S. health care system. As a result,
there is a growing need for individuals, particularly older adults, to
participate regularly in safe, functional and efficient exercise which
combines aerobic conditioning and resistance training, as can be seen from the
table outlining historical and projected U.S. population demographics, on
the next page.
<PAGE> 6
Historical and Projected U.S. Population Demographics
(in millions)
1970 1992 2000 2005 2010
Total Population 204.0 254.8 274.2 286.3 298.9
Population Age 50
& Over 49.9 65.2 75.6 85.0 95.8
% of Total 24.5 25.6 27.6 29.7 32.1
Population Age 65
& Over 20.0 32.1 34.4 35.8 38.8
% of Total 9.8 12.6 12.5 12.5 13.0
Historical data from U.S. Department of Commerce. Projected data from
Woods & Poole Economics.
Only recently has the medical community begun seriously to evaluate and
appreciate the importance of exercise for older adults. Properly prescribed,
exercise can combat the muscular atrophy associated with aging, improve
cardiovascular conditioning, and strengthen and protect the body against
injury. In addition, exercise can preserve and extend an individual's level
of physical independence and quality of life.
To date, walking has been the number one form of exercise for seniors.
Walking is practiced more than twice as much as any other activity, and
almost 50% of all seniors walk for exercise on a regular basis. TRB's TPS
technology offers these individuals an alternative form of exercise, comparable
to walking, that generates better cardiovascular results while using similar
muscles with less joint impact.
Rehabilitation & Therapeutic
The Rehabilitation & Therapeutic market consists of four segments: 1) post
surgical (i.e. hip and knee), 2) acute injury, 3) individuals with a
restrictive ROM (range of motion), and 4) other (i.e. arthritic,
biomechanical). There are approximately 500,000 surgeries and 1.5 million
hip and knee injuries every year. According to a recent survey conducted
by the American Hospital Association, there are approximately 6,600 registered
hospitals in the U.S. The following table sets forth, by type of facility,
the percentage of hospitals which make use of therapeutic exercise as a
form of treatment:
Percentage of Percentage of
Facility U.S. Hospitals(1) Facility U.S. Hospitals(1)
Physical Therapy Services 78.4% Orthopedic Surgery 66.0
Comprehensive Geriatric Outpatient Rehabilitation
Assessment 20.3 Unit 48.2
Occupational Therapy Inpatient Rehabilitation
Service 54.3 Unit 13.4
Cardiac Rehabilitation Geriatric Clinic 8.1
Program 39.0
Sports Medical Clinic 18.2 Fitness Center 14.6
(1) AHA, 1992 Annual Survey.
<PAGE> 7
In addition, according to statistics compiled by the U.S. Department of
Health and Human Services, there were approximately 16,000 nursing homes in
the U.S. in 1995, with an aggregate total of approximately 1.7 million beds.
This market segment, including all categories, exceeds 8 million people. To
be successful in this market requires that exercise equipment be both
medically sound and appropriate for a wide array of therapeutic applications.
Medical institutions are acutely aware of the need for accurate and reliable
feedback from the exercise equipment used in the therapeutic process.
Product characteristics such as restrictive ROM, precise variable resistance,
and the accurate control and measurement of workout intensity are of critical
importance.
The TRB product that will address the needs of this market is the Fitness
Versi-Trainer and the TPS bike. Today the major form of therapy for post
hip and knee surgery is the conventional stationary bike. The 360 degree
fixed stroke is limiting because initial therapy methods limit ROM to less
than 120 degrees. This causes a time lag before the conventional 360 degree
bike can be implemented.
The ROM of the TPS is variable and can accommodate all ROM restrictions,
which allows patients to begin rehabilitation sooner. The biomechanical
design of the TPS also puts less strain on limbs and joints by generating a
force along the muscle belly, rather than at the insertion (joints). This
enables patients to recover from surgery faster than with current techniques,\
while reducing the probability of reinjury.
International
In 1995, worldwide bicycle sales were over $15 billion, equating to over 120
million bicycles sold. Based on historical trends, worldwide sales are
expected to grow at a rate of 5% annually over the next five years. The two
largest international markets, in units, are China and India, with the U.S.
placing third.
40 million bicycles were sold in China in 1995. Because of China's
population and its use of the bicycle as a primary source of transportation,
compound five year growth has been over 6%. India's market growth is
similar to China. In 1995, 20 million bicycles were sold in India.
Japan, with approximately 7 million units sold in 1995, represents a market
that is skewed toward higher priced bicycles. Europe, if looked at as one
market, is similar in both dollars and units to the U.S.; however, the
number of bicycles per capita is double that of the U.S. (55 bikes per 1,000
people in Europe versus 25 in the U.S.)
The international market offers TRB a tremendous opportunity in producing
short term and long term revenue with its TPS products.
Distribution Methods of the Products or Services
Marketing Plans & Products
Currently, bicycles are sold mainly through retail outlets and specialty
bike shops; while institutional exercise equipment is sold through trade
shows, magazines and direct mail. The bicycle industry has seen many
significant changes over the past decade in how products are distributed.
TRB intends to take advantage of the newest techniques. The Company's
long-term strategy is to use regional distributors in the U. S. market
and licensees overseas to sell its products through a network of specialized
bike and sporting goods shops.
In the near term, however, the Company plans to hire an advertising and
public relations firm, as well as TRICOM Productions and SHOP T.V. of
Florida, to begin to promote ergometers, electric bicycles, and bicycles
through a variety of media, i.e. infomercials on cable television and
general television commercials. TRB will establish market awareness through
such direct marketing and will generate cash flow. For the line of
ergometers, TRB plans to investigate possible alliances with existing
sporting goods manufacturers. The Company anticipates that after brand
awareness and an established corporate image have been achieved, TRB
<PAGE> 8
will be able to market its bicycles, ergometers and electric bicycles
through a network of bike retailers, in accordance with the Company's long
term strategy.
Manufacturing/Technology Licensing Agreements
In order to gain access to international and domestic markets, TRB's
products will be manufactured through contracts with existing manufacturers
around the world. Licensing and marketing agreements will be established
with capable individuals and enterprises in selected markets. Ongoing
royalty fees will also be received from licensees. These royalties are 6% in
the first year, 5% in the second year, and 4% thereafter, with a minimum
royalty payment per year (see table below) TRB's licensing agreement
requires the licensees to meet minimum volume and quality standards. The
quality standards refer to obligatory training in the products and their
maintenance as well as customer service, which TRB shall monitor through
comment sheets, and tracking complaints.
The royalty/volume requirements are presented below:
1st Year 2nd Year 3rd Year
Min. Royalties Min. Royalties Min. Royalties
Country
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
Moreover, the agreement also provides that any product enhancement developed
by TRB's licensees becomes the property of TRB.
TRB is manufacturing its proprietary parts through a non-exclusive
relationship with Kun Teng Industries (Taiwan) to produce medium and high
end bicycles, and plans to use Sino-Danish Enterprises Co., Ltd.(China) as a
supplier of proprietary parts and assembled bicycles in the lower price
ranges. Sino-Danish is now ready to begin mass production and TRB has
received a line of credit in China for $2 million to support these
production plans.
International licensing and marketing agreements have been reached with
licensees for a total of $1,125,000 from the Ivory Coast, Tanzania,
Benin/Nigeria, Vietnam and India, 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. In addition, TRB is negotiating agreements with
a potential licensee in China. Under the terms of the Chinese license
proposal, Sino-Danish Enterprises Co., Ltd. will sell a minimum of 100,000
bicycles in the first year. Sino-Danish intends to achieve its sales goals
by advertising the product throughout China on television during prime time
hours, for one full year. TRB expects to sign this agreement, thereby
granting Sino-Danish with an exclusive sales and marketing right for China.
TRB's ergometers are currently ready for mass production by Pretty Wheel
Ind. Co., Ltd., a leading sports equipment manufacturer based in Taiwan.
<PAGE> 9
Competitive Business Conditions and Competitive Position in the Industry and
Methods of Competition
There is no direct competition for the products offered by TRB. The general
competition is the bicycle industry, which is, as aforementioned,
differentiable from the TRB product line.
Sources and Availability of Raw Materials and the Names of Principal Suppliers
TRB uses commercially available raw materials, and does not foresee any
shortage in supply. No Supplier accounts for greater than 5% of the raw
material needs of TRB.
Dependence on One or a Few Major Customers
No customer of the Company accounts for more than 5% of its business.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or
Labor Contracts, Including Duration
Patents
Patents covering the speed change and/or propulsion mechanism of the
Transbar Power System have been obtained and are owned by ABL in the U.S.,
China, India, Australia, Taiwan, Japan, and Korea, and patents are pending
in Europe and Canada. TRB has the exclusive worldwide licensing rights under
all TPS patents, except for Taiwan and South Korea. A copy of the patents is
included as an exhibit to the Registration Statement on Form SB-2 files with
the Securities and Exchange Commission on July 27, 1998.
Licenses
The TPS technology rights were Licenses from ABL Properties , the owner of
the patent rights to the TPS technology, by TRB Systems Inc. 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. ABL is 100% owned by Byung Yim, president
and CEO of TRB Systems International Inc.
Copies of the license and underlying patents are included as exhibits to the
Registration Statement on Form SB-2 filed on July 27, 1998.
Other Intellectual Rights
No other patents, trademarks, licenses, franchises, concessions, royalty
agreements or labor contracts are used by the Company.
Need for Any Government Approval of Principal Products or Services
To the best of the Company's knowledge, there are no special requirements
for government approval of its principal products or services, not generally
applicable to normal business operations.
Effect of Existing or Probable Governmental Regulations on the Business
The Company is unaware of any probable regulation of its business, other
than as will apply to businesses in general.
<PAGE> 10
Estimate of the Amount Spent During Each of the Last Two Fiscal Years on
Research and Development Activities, and if Applicable the Extent to Which
the Cost of Such Activities are Borne Directly by Customers
During the past two years TRB spent approximately $111,100 on R&D, all of
which will be borne by the customer as reflected in the price of the
products of TRB.
Costs and Effects of Compliance with Federal, State and Local Environmental
Laws
The Company is not aware of any expenses directly attributable to
compliance with federal, state or local environment laws or regulations.
Number of Total Employees and Number of Full Time Employee
The Company has 4 full time employees, and no part time employees.
Equipment
The fixed assets of the Company as valued for accounting purposes have a
depreciated book value of $574,136, and an non-depreciated book value of
$758,275. The assets are principally comprised of tools and dies for the
manufacture of the components for the TPS system.
Operating Subsidiaries of the Company
The subsidiary of the Company, TRB, generates all revenue for the Company,
and the discussions and tables referring to operations in this prospectus
refer to the revenues generated by the subsidiary.
Investment Policies
The Company has no investment policies with respect to investments in real
estate or interests in real estate or investments in real estate mortgages.
Item 2 PROPERTIES.
The Company currently rents approximately 1,000 square feet for its staff, at 6
Regent Street, in New Jersey, as well as 2,500 square foot R&D facility in
Taiwan, with a rent of $12,864 per anum.
Management is of the opinion that its current facilities are adequate for
its immediate needs. As the Company's business increases, additional
facilities will be required, however the current facilities are expected
to suffice until after December 31, 1998.
Item 3 LEGAL PROCEEDINGS.
The Company is not a party to any material litigation.
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
NONE.
<PAGE> 11
PART II
Item 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company is authorized to issue 30,000,000 shares of Common Stock, with a
par value of $.001. Immediately prior to this offering 11,925,626 shares of
Common Stock were outstanding and held of record by 278 persons as of June
30, 1998. The holders of Common Stock have one vote per share on all matters
(including election of directors) without provision for cumulative voting.
Thus, holders of more than fifty percent (50%) of the shares voting for the
election of directors can elect all of the directors, if they choose to do so.
The Common Stock currently is not redeemable and has no conversion or
pre-emptive rights. The Common Stock currently outstanding is (and the
Shares being issued pursuant to this prospectus will be) validly issued,
fully paid and non-assessable.
In the event of liquidation of the Company's assets available for Common
Stock will share equally in any balance of the Company's assets available
for distribution to them after satisfaction of creditors and the holders of
the Company's senior securities. The Company may pay dividends, in cash or
in securities or other property when and as declared by the board of
directors from funds legally available therefor, but has paid no cash
dividends on its Common Stock.
Transfer Agent
The transfer agent for the Company's Capital Stock is Continental Stock
Transfer Company of New York.
Price Range of Common Stock and Dividends
The Common Stock of the Company commenced trading in the United States
over-the-counter market 0n August 21, 1998. At the end of the 1997-1998
fiscal year there was no market for the shares of the Company, and to the
best of the Company's knowledge no shares were sold by any shareholder to
any third party. As a result of the foregoing it was impossible to set any
price for the stock of the company.
Bid
Quarter Ended High Low
June 31, 1997 none none
September 30, 1997 none none
December 31, 1997 none none
March 31, 1998 none none
June 30, 1998 none none
The number of record holders of Common Stock of the Company as of June 30,
1998 was 278.
Holders of Common Stock are entitled to receive dividends as may be declared
by the Board of Directors out of funds legally available therefore. No
dividends have been declared to date by the Company, nor does the Company
anticipate declaring and paying cash dividends in the foreseeable future.
<PAGE> 12
Item 6 SELECTED FINANCIAL DATA.
Set forth below is selected financial information of the Company and its
consolidated subsidiary. The provided information is derived from the more
detailed consolidated financial statements as of June 30, 1998, and should be
read in conjunction with the consolidated financial statements included
elsewhere in this Report and are qualified in their entirety by reference
thereto (see "FINANCIAL STATEMENTS").
OPERATING RESULTS*
Cumulative Fiscal year ended June 30
Since 1998 1997
Inception
CONTINUING OPERATIONS:
Revenues:
Sales $161,354 $ 0 $ 0
Cost of Sales 146,362 0 0
Gross Profit 14,992 0 0
Other Income 346 33 59
Total Income 15,338 33 59
Expenses:
Total Expenses 1,781,700 515,456 474,712
Net profit (loss)
before taxes (1,766,362) (515,423) (474,653)
Net Profit(Loss) (1,364,156) (340,312) (319,980)
Net profit (loss)
per share $(0.03) $(0.03)
FINANCIAL POSITION:
Current Assets 432,275 20,000
Other Assets 651,085 835,230
Total Assets 1,083,360 855,230
Current Liabilities 442,248 373,547
Other Liabilities 176,794 314,000
Total Liabilities 619,042 687,547
Stockholder's equity 464,318 167,683
Item 7 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
years ended June 30, 1997 and June 30, 1998.
On April 18, 1997 the Company purchased 100% of all the outstanding shares
of TRB, as fully described in Material Events, below. As a result of the
aforementioned transaction, the Company gained TRB, whose activities are
fully described herein.
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
<PAGE> 13
information regarding the parent company and its subsidiary are presented on a
consolidated basis. The comparative data (pro-forma) for the period ending
June 30, 1997 is solely that of the Subsidiary.
TRB is a development stage company, anticipating active production of
bicycles to commence in the fourth quarter of the current fiscal year which
ends on June 30, 1998, and sales to commence in the first quarter of the
next fiscal period. International licenses for marketing TRB's products
totaling $1,125,000 have been granted to the Ivory Coast, Tanzania,
Benin/Nigeria, Vietnam and India, 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 (the details of the license agreements, as well as
the payment and royalty arrangements are fully discussed in "Manufacturing/
Technology Licensing Agreements" at page 9). Management 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 to date is deemed a liability of the Company's until
bicycles are actually shipped.(See Financial Statements, Balance Sheet,
Liabilities, and the associated footnote).
For the fiscal years ended June 30, 1997 and 1998, there were no revenues.
The overall loss during the development period to the end of June 30, 1998
was $1,364,156, with losses during the fiscal year June 30, 1998 being
$340,312 as compared to $319,980 for the fiscal year ended June 30, 1997.
Total operating expenses were $515,456 for the year ended June 30, 1998, as
compared to 474,712 for the year ended June 30, 1997. For the development
period to June 30, 1998, expenses were $1,762,232, with the major costs
being consulting fees, R&D, and professional fees. The major operating
expenses in the year ended June 30, 1998 reflected TRB readying itself for
emergence from the development phase, with promotions and show and
exhibition expenses accounting for 40% of the year's expenditures. Similarly,
in the previous fiscal year, consulting and advertising expenditures
accounted for 1/3 of the expenses. In the fiscal year ended June 30,1997,
commissions and professional fees, reflecting the expenses
associated with preparing to become a public company, were about 10% of
total expenses. Both fiscal periods had amortization and depreciation costs
of about 15% of total expenses.
The cash and investment certificate position of the Company was $3,041 on
June 30, 1998 as compared to $0 on June 30, 1997. Current assets, as a
whole, increased significantly, from $20,000 on June 30, 1997 to $432,275 on
June 30,1998. The reason for the dramatic change was the recognition of
deferred tax assets which would be available to offset income anticipated
in the next fiscal period.
Material Events
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.
Sales 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.
<PAGE> 14
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.
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 (See:
"SECURITY OWNERSHIP OF MANAGEMENT" at page 33 of this Registration Statement.) .
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. 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 feels 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
will offer its shareholders a 30 day right of rescission,
<PAGE> 15
commencing on August 12, 1998, the effective date Registration Statement on
Form SB-2, registering the said shares. Alpha Bytes had informed the Company
that it would retain any shares that were returned. The thirty day period
expired on September 12, 1998, and no shares were returned to Alpha Bytes for
rescission of their issuance.
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 table
on page 15 for minimum royalty payments). Primarily, as TRB is now ready to
deliver bicycles, with active manufacture to commence in the fourth quarter
of the current fiscal year, liquidity needs, management feels, will be met
through the sale of bicycles internationally. 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 distributors were given all material
necessary to commence domestic sales.
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
year 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.
The Company has received in excess of $500,000 in bicycle orders since
March, 1998, and delivery of $160,000 in bicycles is due in the first or
early second quarter of the next fiscal year, with the second order to
be delivered shortly thereafter. Over $1,000,000 in distributorships and
license issuances have been sold by the company and will be recognized as
income for the first quarter of the 1998-1999 fiscal year, the first
operational quarter for the Company.
Shooting for a series of infomercials/commercials has been completed, and
airing will commence on the major networks in the second quarter of the
1998-1999 fiscal year.
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.
Accounting Policies and Procedures
The Company follows generally accepted accounting principles in preparing
its financial statements, and has audited statements produced annually, with
its quarterly statements produced by its management and accountants.
<PAGE> 16
Revenue Recognition
Revenue is recognized using the accrual method of accounting.
Statements of Cash Flows
Statements of Cash Flow are prepared quarterly, on a consolidated basis,
using generally accepted accounting principles and guidelines.
Inventory
The Company keeps minimal inventory, manufacturing goods in response to orders.
Fixed Assets
Fixed assets are valued based on their depreciated value. Depreciation is
calculated using the straight line method.
Principles of Consolidation
All Financial Statements are produced on a consolidated basis, as the
subsidiary, TRB, accounts for all operating revenue of the Company.
Statement Re: Computation of Earnings Per Share
The Company has a simple capital structure as defined by APB Opinion Number
15. Accordingly, earnings per share is calculated by dividing net income by
the weighted average shares outstanding.
Provision for Income Taxes
Provisions for income tax are computed quarterly using the guidelines as
defined in the Federal and State Statutes.
The Company's Immediate Capital Requirements
The Company requires about $10,000,000 to continue the growth and market
penetration of its TPS products and its R&D (For discussion, See "Liquidity").
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Included at Pages 24 through 38 hereof.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
The Company has not had any reported or material disagreement with its
accountants on any matter of accounting principals, practices, or financial
statement disclosure.
<PAGE> 17
PART III
Item 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth the names and ages of all the Directors and
Executive Officers of the Company, positions held by such person, length of
service, when first elected or appointed and term of office.
First Elected
Name Age or Appointed/Term Position
Byung D. Yim 56 April 18, 1997* President
* Elected on December 18, 1994, by the board of directors at the
recommendation of the Company's stockholders, to serve as a director until
the next annual meeting of the Company's stockholders, and until her
successors are elected, qualified and assume their offices. Service as an
officer is at the pleasure of the board of directors.________________________
Biographies of Directors, Officers and Director Nominees
Byung D. Yim, Chairman/CEO
Mr. Yim's responsibilities include long term vision and international
development. He was the founder of both ProMaster Corp. and Alenax Corp.
He directly managed the development and prototype manufacturing, market
research and business planning for Transbar Power System products in the
past. Mr. Yim has experience with the U.S. import/export business, marketing
and distribution of products from the Far East. He was the exclusive Middle
Eastern distributor of perma stamp lines of Johnson Wax products. Mr. Yim's
experience in the bicycle industry is extensive, including having been the
exclusive sales and distribution agent for Upstate New York and Eastern
Pennsylvania for H. J. Sports, Inc., the exclusive agent for the third
largest bicycle manufacturer in Japan. Mr. Yim is a graduate of Han Yang
University with a B.A. in Nuclear Engineering and Electronics. For the last
five years Mr. Yim served as President of TRB Systems Inc., and its
predecessor, Alenax Corp., devoting his full time to the bicycle industry and
developing and bringing the TPS technology to market.
Item 11 EXECUTIVE COMPENSATION
Compensation of Directors
Standard Arrangements
All members of the Company's board of directors are paid a per diem fee
of for attendance at meetings of the board of directors and committees
thereof. In addition, if required, they are reimbursed for travel expenses
and lodging is arranged for them, at the Company's expense. At such time as
adequate funds are available, all director (and officers) of the Company
will be covered by liability insurance. Directors are reimbursed for all
out of pocket expenses incurred in the performance of their roles, subject
to provision of receipts in form and substance adequate to satisfy Internal
Revenue Service audit requirements (e.g., long distance telephone, postage,
etc.).
<PAGE> 18
Other Arrangements
Neither the Company nor any of its subsidiaries have any other arrangements
to compensate its directors.
Employment contracts, termination of employment & change-in-control arrangements
The Company does not have any compensatory plan or arrangement, including
payments to be received from the Company, with respect to a named executive
officer that results or will result from the resignation, retirement or any
other termination of such executive officer's employment with the Company and
its subsidiaries or from a change-in-control of the Company or a change in
the named executive officer's responsibilities following a chance-in-control,
which, including all periodic payments or installments, exceeds $100,000.
Mr. Yim drew a salary of $50,000 during the fiscal year ending June 30,
1997. As well, he was provided with an automobile and operating expenses for
the said automobile were paid on his behalf. The value of this was $4,370.
Mr. Yim will draw a salary of $50,000 during the fiscal year ending June 30,
1998, although payment is deferred until the Company has suitable funds with
which to pay him. Automobile expenses for the car provided to Mr. Yim by the
Company were $6,001.
Prior to the 1996 fiscal year, Mr. Yim took no salaries, and infused
$163,126 into the TRB. In lieu of the repayment of the loan, and charging
the company for salaries not claimed in previous years, Mr. Yim was
issued 500,000 shares in the capital stock of the Company.
SUMMARY, COMPENSATION TABLE
Annual Compensation Awards Payouts
Other Rest-
Annual ricted
Compen- Stock Aw- SU SA
Name and sation ards OP RS LTIP Other
Position Year* Salary ($) Bonus ($) (#) ($) __ ($) ___ ($)
Byung YIM** 1998+ 0++ 0 6,001*** **** 0 0 0 0 0
Byung YIM** 1997 50,000 0 4,370*** **** 0 0 0 0 0
Byung YIM** 1996 0 0 11,302*** 0 0 0 0 0 0
+ Fiscal year ended June 30, 1998.
++ This sum is due and owing to Mr. Yim, and has been converted to a
director's loan. See Note 9 in the accompanying financial statements.
* Fiscal Year Ending
** President, CEO, and Sole Director
*** Automobile Expenses
**** Received 500,000 shares of common stock in the Company in lieu of
$163,126 loaned to the Company as Operating Expenses in 1994-1996, and
in lieu of Executive Compensation for the same years, during which he
did not draw a salary.
<PAGE> 19
Item 12 Security Ownership of Certain Beneficial Owners and Management
Parents of the Company
The following table discloses all persons who are parent of the Company (as
such term is defined in Securities and Exchange Commission Regulation C),
showing the basis of control and as to each parent, the percentage of voting
securities owned or other basis of control by its immediate parent if any.
Basis Percentage of Other Basis
Name For Control Voting Securities owned For Control
Motion Plus Int'l.
Corporation(MPI) Share Ownership 86% None
NOTE: Motion Plus International Corporation (MPI) is controlled by Byung Yim,
the president of the Company, and his children. Mr. Yim's children, Alexander
B. Yim (age-21)and Lena B. Yim (age-19), hold 39% interest in MPI each. Mr.
Yim has a 20% interest in MPI, and the remaining 2% is held by Hee J. Yim.
Alexander and Lena Yim reside at 595 Windflower Court, Morganville, NJ 07751.
Transaction with Promoters, if Organized Within the Past Five Years
There have been no transactions with Promoters over the past five years.
Principal Stockholders
As of the date of this Prospectus, the following persons (including any
"group" are, based on information available to the Company, beneficial owners
of more than five percent of the Company's common stock (its only class of
voting securities):
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owner Beneficial Ownership of Class
Common Byung Yim 2,450,000 Shares* 20.9
Stock 21 Hutton Ave., Apt.
West Orange NJ 07025
Common Alexander B. Yim 3,802,500 Shares* 33.5
Stock 595 Windflower Court
Morganville NJ 07751
Common Lena B. Yim 3,802,500 Shares* 33.5
Stock Address as for A.B.Yim
* Motion Plus International Corporation (MPI), 4 Becker Farm Road, Roseland,
NJ 07068 owns 9,750,000 shares of the Company. Byung Yim, the president of
the Company, owns 20% of the shares in MPI. Mr. Yim's children, Alexander
B. Yim (age-21) and Lena B. Yim (age-19), each hold a 39% interest in MPI.
Mr. Yim received a further 500,000 shares from the Company.
Security Ownership of Management
As of the date of this Prospectus, the following table discloses, as to each
class of equity securities of the registrant or any of its parents or
subsidiaries other than directors' qualifying shares, beneficially owned by
all directors and nominees, the names of each executive officer (as defined
in Item 402[a][2] of Securities and Exchange Commission regulation S-B), and
directors and executive officers of the registrant as a group, the
total number of shares beneficially owned and the percent of class so owned.
Of the number of shares shown, the associated footnotes indicate the amount
of shares with respect to which such persons have the right to acquire
beneficial ownership as specified in Securities and Exchange Commission Rule
13(d)(1).
<PAGE> 20
Name and Amount and
Title Address of Nature of Percent
of Beneficial Beneficial of
Class Owner Owner Class
Common
Stock Byung Yim 9,750,000* 86%*
Common
Stock Byung Yim 500,000** 4.3
* Motion Plus International Corporation, 4 Becker Farm Road, Roseland, NJ
07068 owns 86% of the stock on the Company and Byung Yim, the president
and sole director of the Company who resides at 21 Hutton Ave., Apt.3,
West Orange, NJ 07025, has a 20% interest in MPI.
** Mr. Yim Received the shares as compensation for funds loaned to the
Company between 1994-1996 and in lieu of salary which he did not draw
during those years.
Item 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Transactions
The following information pertains to all transaction during the last two
year, or proposed transactions, to which the Company was or is to be a party,
in which any of the following persons had or is to have a direct or indirect
material interest: any director or executive officer of the Company: any
nominee for election as a director; any principal security holder listed
below; and, any member of the immediate family (including spouse, parents,
children, siblings, and in-laws) of any of the foregoing persons.
Relationship Nature of Interest Amount of Fiscal
Name to Company in the Transaction Interest Year Ending
Byung Yim* President and Conversion of 500,000 1997
Sole Director loan to equity * Shares
Byung Yim* President and Salary and funds $55,000** 1997
Sole Director advanced to TRB
* Mr. Yim was owed $163,126 for monies advanced to TRB, and drew no salary
during the development period. The 500,000 shares represent the retirement
of the liability and recognition of salary for the years 1994-1997.
** Mr. Yim did not draw his salary during the fiscal period ended June 30,
1997 or the year ended June 30, 1998, and the director's loan (See
"Financial Statements") reflects the company's indebtedness to Mr. Yim for
$13,128 advanced to TRB and for his salary.
<PAGE> 21
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) The following documents are filed as a part of this Report:
(1) Financial Statement. The following Financial Statements are filed as
part of this Report:
Page
Report of Independent Public Accountants. 26
Balance Sheets: June 30, 1998, June 30, 1997, June 30, 1996. 27
Statements of Operations: Year Ended June 30, 1998,
Year Ended June 30, 1997 and June 30, 1996. 28
Statement of Cash Flows: Year Ended June 30, 1998,
Year Ended June 30, 1997, and Year Ended June 30, 1996. 30
Statement of Stockholders' equity: July 1, 1995- June 30, 1998. 31
Notes to Financial Statements. 32
(2) Exhibits. The following exhibits are filed as part of this Report:
Exhibit No. Item Page
2.0 + Registration Statement on Form SB-2.
2.1 ++ Exhibits to Registration Statement on Form SB-2.
3.1 * Articles of Incorporation of Registrant dated April 9, 1997.
3.2 ** Bylaws of Registrant.
__________________________________
Notes:
+ Filed on July 27, 1998, and declared effective on August 12, 1998, and
incorporated by reference.
++ Filed on July 27, 1998, and declared effective on August 12, 1998, and
incorporated by reference.
* Filed as an Exhibit to the Registration Statement on Form SB-2 on July 27,
1998, and declared effective on August 12, 1998, and incorporated by
reference.
** Filed as an Exhibit to the Registration Statement on Form SB-2 on July
27, 1998, and declared effective on August 12, 1998, and incorporated by
reference.
<PAGE> 22
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 12, 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 12, 1998.
<PAGE> 23
TRB SYSTEMS INTERNATIONAL INC.
Consolidated Financial Statements and
Accountant's Audit Report
For the Fiscal Years Ended June 30, 1998, June 30, 1997,
and June 30, 1996
<PAGE> 24
TRB SYSTEMS INTERNATIONAL INC.
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
______________________________________________________________________
Page
Accountant's Audit Report 26
Financial Statements:
Balance Sheet 27
Statements of Operations and Retained Earning 28
Statement of Stockholder's Equity 30
Statements of Cash Flows 31
Notes to Financial Statements 32
______________________________________________________________________
<PAGE> 25
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 audited the accompanying consolidated balance sheet of TRB Systems
International Inc. as of June 30, 1998, June 30, 1997, and June 30, 1996,
and the related consolidated and pro-forma statements of operations and
retained earnings, statements of stockholders' equity and statements of cash
flows for the periods then ended, as well as the cumulative totals from
inception to June 30, 1998 for the statements of operations and retained
earnings, stockholders equity, and statements of cash flows. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of TRB
Systems International Inc. as at June 30, 1998, June 30, 1997, and the pro-
forma position as at June, 1996, and the cumulative totals from the
inception of the company to June 30, 1998, and the results of its
operations and its cash flow for the periods then ended in conformity with
United States generally accepted accounting principles.
/s/ Stan J. H. Lee/s/_
Stan J.H. Lee, CPA
November 1, 1998
Fort Lee, N.J.
<PAGE> 26
TRB SYSTEMS INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEET
FOR FISCAL YEARS ENDED JUNE 30, 1996, JUNE 30, 1997
AND JUNE 30, 1998
(Notes 1,2,3,4)
6/30/98 6/30/97 6/30/96
ASSETS
CURRENT ASSETS:
Cash $3,041 $0 $206
Accounts Receivable- other 0 12,500 0
Inventories 26,462 7,500 6,994
Deferred Tax Assets 402,772 0 0
432,275 20,000 7,200
OTHER ASSETS:
Prepaid Expenses (Note 5) 38,052 24,407 14,547
Property & Equipment (Note 6) 574,136 519,292 0
Organization Costs, net of
Accumulated Amortization 37,854 63,027 75,182
Security Deposits 1,043 1,043 0
Deferred Tax Assets 0 227,461 72,788
651,085 835,230 162,517
TOTAL ASSETS $1,083,360 $855,230 $169,717
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts Payable and Accrued
Expenses (Note 7) 210,939 195,192 455,215
Bank Overdraft 0 18,106 0
Accrued Corporation Income
Tax Payable 200 249 0
Obligation Payable to
Distributors (Note 8) 230,000 160,000 190,000
Payroll Taxes 1,109 0 0
442,248 373,547 645,215
Long-Term Liabilities:
Loans from Individuals (Note 9) 58,200 259,000 0
Director's Loan (Note 9) 118,594 55,000 218,126
176,794 314,000 218,126
SHAREHOLDERS' EQUITY:
Common Stock, $.001 Par
Value (Note 10) $11,926 $11,863 $9,750
Additional Paid-in-Capital 1,816,548 1,179,664 490
Retained Earnings (Deficit) (1,364,156) (1,023,844) (703,864)
$464,318 $167,683 ($693,624)
TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY $1,083,360 $855,230 $169,717
See accompanying notes which are an integral part of the Financial Statements.
<PAGE> 27
TRB SYSTEMS INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FISCAL YEARS ENDED JUNE 30, 1996, AND JUNE 30, 1997,
AND JUNE 30, 1998
CUMULATIVE
FROM
INCEPTION 6/30/98 6/30/97 6/30/96
SALES $161,354 $0 $0 $161,354
COST OF SALES 146,362 0 0 146,363
GROSS PROFIT 14,992 0 0 14,982
OPERATING EXPENSES:
Promotion Expense 94,693 85,223 0 3,275
Consulting 236,783 4,313 97,000 38,000
Commission 56,780 12,198 29,582 15,000
Research & Development (Note 11) 355,338 0 29,600 81,494
Professional Fees 120,379 24,215 46,164 0
Stock Issuance and Transfer
Service 6,285 6,285 0 0
Show and Exhibition 120,056 120,056 0 0
Travel 45,604 20,112 13,979 4,511
Meals & Entertainment 62,517 19,333 6,918 6,086
Auto Expense (Note 12) 55,200 6,001 4,370 11,302
Officer's Salaries 50,000 0 50,000 0
Payroll Taxes 6,442 585 5,857 0
Leasing Expense 24,155 7,330 16,825 0
Rent (Note 13) 21,531 5,470 5,395 5,249
Telephone 36,973 9,423 7,298 6,062
Office 85,172 11,500 17,795 14,270
Supplies 3,836 3,836 0 0
Insurance Expense 8,364 2,638 2,925 1,289
Bank Charges 10,923 4,165 2,611 1,827
Postage 6,066 2,234 1,798 580
Miscellaneous 7,004 307 0 5,504
Shipping & Delivery 460 0 0 460
Dues & Fees 1,896 0 0 1,896
Contributions 700 600 0 100
Advertising 69,136 5,657 63,479 0
Sponsorship 25,500 25,500 0 0
Depreciation 131,171 90,918 40,253 0
Amortization 88,011 25,173 23,990 19,791
Employees Salaries 2,308 2,308 0 0
Oversea Operating Expense 17,400 12,400 5,000 0
Other Operating Expense 11,229 7,356 3,873 0
Utilities 320 320 0 0
Total Operating Expenses $1,762,232 $515,456 $474,712 $216,706
See accompanying notes which are an integral part of the Financial Statements.
<PAGE> 28
TRB SYSTEMS INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(CONTINUED)
CUMULATIVE
FROM
INCEPTION 6/30/98 6/30/97 6/30/96
INCOME (LOSS) FROM
OPERATIONS BEFORE
OTHER INCOME AND INCOME
TAX EXPENSE (1,747,240) (515,456) (474,712)(201,714)
OTHER INCOME AND
EXPENSE:
Dividend Income 346 33 59 135
Interest Expense (19,468) 0 0 (12,672)
INCOME BEFORE INCOME
TAXES (1,766,362) (515,423) (474,653)(214,251)
Income Tax Expenses:
Income Tax Expense (566) (200) 0 (366)
Benefit Due to Loss
Carryforward (Note 4) 402,772 175,311 154,673 72,788
Net Income (Loss) (1,364,156) (340,312) (319,980)(141,829)
ACCUMULATED DEFICIT,
at beginning 0 (1,023,844) (703,864)(562,035)
ACCUMULATED DEFICIT,
at end (1,364,156) (1,364,156)(1,023,844)(703,864)
Earnings (Loss) per share
(0.03) (0.03) (0.01)
See accompanying notes which are an integral part of the Financial Statements.
<PAGE> 29
TRB SYSTEMS INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY
FOR THE FISCAL YEARS ENDED-JUNE 30, 1996, 1997 AND 1998
TOTAL
CAPITAL STOCKS RETAINED STOCKHOLDERS
NUMBER OF SHARES AMOUNT EARNINGS EQUITY
BEGINNING BALANCE
AS OF 6/30/95 100 $10,240 (562,035) (551,795)
Shared Issued (Conversion) 9,749,900
Net Loss (141,829)
Balance As Of
6/30/96 9,750,000 $10,240 ($703,864)($693,624)
Shares Issued as Compensation
for Consulting Services 250,000 25,000
Shares Issued as Repayment
of Director's Loan 500,000 163,126
Shares Issued for Purchase
of Property and Equipment 500,000 559,545
Shares Issued to Various
Individuals 863,363 433,616
Net Loss (319,980)
Beginning Balance
As Of 6/30/97 11,863,363 $1,191,527 ($1,023,844) $167,683
Shares Issued to Various
Individuals 62,263 638,947
Net Loss (340,312)
Balance As Of
6/30/98 11,925,646 $1,828,474 ($1,364,156) $464,318
See accompanying notes which are an integral part of the Financial Statements.
<PAGE> 30
TRB SYSTEMS INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FISCAL YEARS ENDED JUNE 30, 1996, JUNE 30, 1997
AND JUNE 30, 1998
CUMULATIVE 6/30/98 6/30/97 6/30/96
CASH FLOWS FROM
OPERATING ACTIVITIES:
(Net Loss) Earnings ($802,121) ($340,312)($319,980)($141,829)
Noncash item includ. in (Net
Loss) Earnings (202,647) (59,220) (90,430) (52,997)
Increase (Decrease) in Acct's
Recievable- other 0 12,500 (12,500) 0
Increase (Decrease)
in Inventory (19,468) (18,962) (506) 0
Increase (Decrease)in Acct's
Payable and Other Payables (140,892) 16,807 (259,774) 102,075
Increase in Obligation
to Distributors 105,000 70,000 (30,000) 65,000
(1,060,128) (319,187) (713,190) (27,751)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Expenditure for Prepaid
Expenses (20,999) (13,645) (9,860) 2,506
Purchase of Property and
Equipment ($705,307) ($145,762)($559,545) $0
Expenditure in
Security Deposits (1,043) 0 (1,043) 0
Expenditure for Organization
Cost (41,424) 0 (11,835) (29,589)
(768,773) (159,407) (582,283) (27,083)
CASH FLOW FROM
FINANCING ACTIVITIES:
Bank Overdraft $0 ($18,106) 18,106 $0
Loans from Director (44,980) 63,594 (163,126) 54,552
Loans from Individuals 58,200 (200,800) 259,000 0
Issuance of Common Stock 1,818,234 636,947 1,181,287 0
1,831,454 481,635 1,295,267 54,552
Net Increase (Decrease)
in Balance of Cash 2,553 3,041 (206) (282)
Cash at Beginning of Period 488 0 206 488
Cash at End of Period $3,041 $3,041 $0 $206
See accompanying notes which are an integral part of the Financial Statements.
<PAGE> 31
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
fiscal period ended June 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> 32
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> 33
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. Proforma Statements
The proforma statements are the audited statements of TRB Systems
Inc., the sole subsidiary of the parent company, with shareholders equity
having been restated, based on the number of shares received by the
shareholders of TRB Systems Inc. on the sale of the company. The parent
company is a non-operating holding company with its sole asset being TRB
Systems. Pro-forma statements were used to obtain comparison figures for
the year ended June 30, 1996.
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.
<PAGE> 34
TRB SYSTEMS INTERNATIONAL INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
Effective the third quarter of the current fiscal year TRB has
commenced taking orders for bicycles, and management feels active
manufacture is expected to commence in the next quarter, with delivery to
commence in the first or second quarter of the next fiscal year.
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 10,000
Moldings 539,062
Booth for Show 69,970
Informercial tape and other
promotional materials 50,000
705,307
Less accumulated depreciation (131,171)
$ 574,136
The purchase of the property and equipment except the office
equipment 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 $545,000, 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. For the fiscal year ended June 30, l998, such capitalized
expenditure amounts to $ 11,835.
Payable for legal and other professional expenses $ 141,000
Other various accrued expenses 54,192 $ 195,192
8. Obligations payable to distributors
Licensing and Distributorship agreements have been reached for a total of
$1,125,000 from the Ivory Coast, Tanzania, Benin/Nigeria, Vietnam, India,
Massachusetts, and Orange County, California, and payments totaling $210,000
have been received, as well as $10,000 for the right of first refusal to be the
licensee in Canada. The funds received are a liability of the Company's until
products are shipped to the licensees, at which time the basic consideration
will have been provided and the value of the contracts taken into income.
<PAGE> 35
TRB SYSTEMS INTERNATIONAL INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
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
Min. Royalties Min. Royalties Min. Royalties
Country
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
9. Director's Loans and Loans From Individuals
The loans payable to a director are unsecured, non-interest bearing
with no set terms of repayment. On April 19, l997, balance of director's
loans in the amount of $ 163,126 has been converted into equity in
exchange for 500,000 shares in the TRB Systems International, Inc. On
April 19, 1997, $259,000 of loans from individuals have been converted
from current liabilities into long-term liabilities. The conversion was
made to properly reflect the status of the loans, namely that they are
outstanding liabilities with no set repayment schedule, to be paid as TRB
had the funds to pay for them.
10. Common Stocks
The Company is authorized to issue 30,000,000 at $ 0.001 par value
share, and, as of June 30, 1998 , 11,925,626 voting common shares are
issued and outstanding. TRB had authorized capital of 200 shares, of which
100 were outstanding to Motion Plus International Corp'n. (MPI) the sole
owner of TRB. Based on the principals of accounting for a reverse takeover
See Note 3,4 above), this was restated based on the 9,750,000 shares with
a par value of $.001 that was paid by the Company to MPI for 100% of the
outstanding stock of TRB when the Company purchased TRB from MPI.
<PAGE> 36
TRB SYSTEMS INTERNATIONAL INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
11. Research and Development Cost
SFAS No.2 - Accounting for research and development costs,
generally, requires all research and development costs to be charged to
expenses when incurred, rather than recording them as inventory or
elements of overhead. Costs that are expensed as research and development
are as follows; a) intangibles purchased from others, and materials and
equipment b) salaries and related costs of personnel engaged in research
and development activities c) services performed by others in connection
with research and development activities and d) reasonable allocation of
indirect costs except general and administrative costs not clearly related
to research and development activities.
Amount of research and development costs charged to expenses are as
follows;
Fiscal year ended Amount
June 30, l994 $ 87,359
June 30, l995 156,885
June 30, l996 81,494
June 30, l997 29,600
June 30, 1998 0
12. 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 fiscal year ended June 30, l997 was $ 4,370, and for the year
ended June 30, 1998, was $6,001.
There were no other significant non arm's-length basis transactions
between the Company and any related party during the fiscal period ended
June 30, 1998, except for conversion of director's loan to equity and
purchase of property (see Note 6 and 9).
13. 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.
<PAGE> 37
TRB SYSTEMS INTERNATIONAL INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
14. Earnings Per Shares
Earnings (loss) per share is calculated using the weighted average
number of common shares outstanding and common shares equivalents. For
periods prior to the purchase of TRB by the Company, the number of shares
has been restated utilizing the 9,750,000 shares paid by the Company to
MPI for the purchase of TRB. 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 June 30, 1998, and 9,750,000 as of June 30, 1996 (See
Note 10, above).
15. 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.
16. Conversion of Investment into Equity
$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)
filed on June 27, 1998.
<PAGE> 38
<PAGE> 39
