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, 1999.
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 12,015,646 shares of common stock outstanding having a par
value of $0.001 per share as of September 30, 1999.
<PAGE> 1
INDEX
Page Number
Part I Financial Information
Item 1. Auditor's Review Statement 3
Consolidated Balance Sheet, as of September 30, 1999
and September 30, 1998 (unaudited) 4
Consolidated Statement of Operations for the quarter ended
September 30, 1999 and September 30, 1998 (unaudited) 5&6
Consolidated Statement of Stockholders'
Equity for September 30, 1999 and September 30, 1998(unaudited) 7
Consolidated Statement of Cash Flow for the quarter ended
September 30, 1999 and September 30, 1998 (unaudited) 8
Notes to Financial Statements 9-14
Item 2. Management Discussion and Analysis of
Financial Conditions and Results of
Operations 15
Part II Other Information 18
<PAGE> 2
Stan J.H. Lee & Co., CPA, CMA Tel) 201-944-7246
440 West St. 3rd Fl. Fax) 201-944-7759
Fort Lee, NJ 07024-5058 E-mail- [email protected]
INDEPENDENT REVIEW REPORT
To the Board of Directors and
Shareholders of
TRB Systems International Inc.
Livingston, New Jersey
We have reviewed the accompanying consolidated balance sheet of TRB Systems
International Inc. as of September 30, 1999, the related consolidated
statements of operations and retained earnings, the consolidated statements of
stockholders' equity, and the consolidated statement of cash flows for the
three month period then ended in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accounts. 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
analytical procedures applied to financial data. It is substantially less
in scope than an examination in accordance with generally accepted auditing
standards, the objective 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 15, 1999
Fort Lee, NJ
<PAGE> 3
TRB SYSTEMS INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998
(Notes 1,2,3)
09/30/99 09/30/98
ASSETS
CURRENT ASSETS:
Cash $ 14,546 $ 35,423
Accounts Receivable(Note 4) 1,323,450 1,040,000
Inventories 21,002 146,766
Deferred Tax 133,507 1,484
1,492,505 1,223,873
OTHER ASSETS:
Prepaid Expenses(Note 5) 28,117 38,052
Property & Equipment-net(Note 6) 675,820 572,203
Organization Costs,net 6,389 31,561
Security Deposits 1,043 1,043
711,369 642,859
TOTAL ASSETS 2,203,874 $1,866,532
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses(Note 7) 328,818 374,534
Bank Overdraft - 1,945
Loan Payable 395,289 -
Corporation Income Tax Payable 400 200
Obligation to Distributors - -
Auto Loan - 4,210
Salaries Payable 1,075 892
Payroll Taxes - 4,334
725,582 386,115
LONG-TERM LIABILITIES:
Loans from Individuals 75,510 38,200
Director's Loan(Note 9) 165,815 192,197
Auto Loan 9,074 9,790
250,399 240,187
STOCKHOLDERS' EQUITY:
Common Stock, $.001 Par- Value 30,000,000
Shares authorized(Note 10) $ 12,016 $ 11,926
Additional Paid-in-Capital 2,018,515 1,816,548
Retained Earnings (Deficit) (802,638) (588,244)
1,227,893 1,240,230
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY: $2,203,874 $1,866,532
See accompanying notes which are an integral part of the Financial Statements.
<PAGE> 4
TRB SYSTEMS INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF EARNINGS AND DEFICIT
FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 1999, AND SEPTEMBER 30, 1998
09/30/99 09/30/98
REVENUES FROM PRODUCT SALES $ - $ 50,000
LICENSE AND DISTRIBUTOR FEES (Note 4) - 1,273,000
COST OF GOODS SOLD - 40,112
GROSS PROFIT - 1,282,888
OPERATING EXPENSES:
Promotion Expenses 417 1,387
Consulting - -
Commission - 11,009
Professional Fees 2,814 10,696
Stock Issuance and Transfer Service - 1,975
Contract Labor - -
Contribution 150 -
Travel 5,412 5,411
Meals & Entertainment - 3,415
Auto Expense(Note 11) 1,171 2,200
Payroll Taxes 677 1,394
Leasing Expense - -
Rents (Note 12) 7,950 4,133
Research and Development - -
Communication 1,531 4,087
Office Expense 1,518 853
Sponsorship - -
Supplies 98 88
Insurance Expense - -
Bank Charges 978 1,488
Postage 397 602
Miscellaneous Expenses 559 726
Show and Exhibition - -
Shipping & Delivery 735 2,000
Advertising 190 5,970
Depreciation 26,534 25,932
Amortization Expenses 6,293 6,293
Employee Benefits - 2,363
Employees Salaries 6,448 8,077
Oversea Operating Expense 5,000 1,500
Other Operating Expense - 4,098
Utilities - -
68,871 105,697
See accompanying notes which are an integral part of Financial Statements
<PAGE> 5
TRB SYSTEMS INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF EARNINGS AND DEFICIT
FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 1999, AND SEPTEMBER 30, 1998
09/30/99 09/30/98
INCOME FROM OPERATIONS BEFORE
OTHER INCOME AND INCOME TAX
EXPENSES (68,871) 1,177,191
OTHER INCOME AND EXPENSE:
Dividend Income 9 9
Interest Expense - -
(68,862) 1,177,200
INCOME BEFORE INCOME TAXES
Income Tax Expenses:
Income Tax Expense
Deferred Income Taxes - (401,288)
Current Income Taxes - -
Benefit due to Loss
Carryforward(Note 8) - -
NET INCOME(LOSS) (68,862) 775,912
ACCUMULATED DEFICIT,
at Beginning (733,776) (1,364,156)
ACCUMULATED DEFICIT, $(802,638) $ (588,244)
at End
Earnings(Loss) per
Share(Note 13) $ (0.006) 0.07
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 PERIOD ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998
(Note 14)
RETAINED TOTAL
CAPITAL STOCKS EARNINGS STOCKHOLDERS
NUMBER OF SHARES AMOUNT (DEFICITS) EQUITY
BEGINNING
BALANCE
AS OF 9/30/98 11,925,646 $1,828,474 ($1,364,156) $464,318
Shares Issued - - - -
between 07/01/98
and 03/31/99
Net Income(Loss) - - 630,380 -
Balance as of
6/30/98 $11,925,646 $1,828,474 ($733,776) $1,094,698
Shares issued between
06/30/98 and 09/30/99 90,000 202,057 - -
Net Income(Loss) - - (68,862) -
Balance as of
9/30/99 $12,015,646 $2,030,531 ($802,638) $1,227,893
See accompanying notes which are an integral part of the Financial Statements.
<PAGE> 7
TRB SYSTEMS INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1999, AND SEPTEMBER 30, 1998
09/30/99 09/30/98
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Profit (Loss) $ (68,862) $ 775,912
Noncash item included in
Net Loss 47,604 433,513
Decrease (Increase) in Acct's
Receivable - (1,040,000)
Decrease (Increase)
in Inventory - (120,304)
Increase (Decrease) in Acct's
Payable and Other Payables (15,140) 167,713
Increase (Decrease) in
Obligation to Distributors - (230,000)
(36,398) (13,166)
CASH FLOWS FROM
INVESTING ACTIVITIES: (1,937) -
Expenditure for Prepaid Expenses
Purchase of Property and
Equipment (145,762) (24,000)
(147,699) (24,000)
CASH FLOW FROM
FINANCING ACTIVITIES:
Bank Overdraft - 1,945
Auto Loan Payable (1,171) 14,000
Director's Loan (2,243) 73,603
Loans from Individuals - (20,000)
Issuance of Common Stock 202,057 -
198,643 69,548
Net Increase (Decrease)
in Balance of Cash 14,546 32,382
Cash at Beginning of Period - 3,041
Cash at End of Period $ 14,546 $ 35,423
See accompanying notes which are an integral part of the Financial Statements.
<PAGE> 8
TRB SYSTEMS INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1999
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 Livingston, 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 three month period ended September 30, 1999.
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.
See Accompanying Accountant's Review Report, which is an Integral Part of
Financial Statements.
<PAGE> 9
TRB SYSTEMS INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1999
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
betterment's that extend the useful lives of property and equipment are
capitalized. Expenditures for maintenance and repairs are charged to
expense as incurred.
See Accompanying Account's Review Report, which is an Integral Part of
Financial Statements.
<PAGE> 10
TRB SYSTEMS INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1999
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 $1,323,450 from the Ivory Coast,
Tanzania, Benin/Nigeria, Vietnam, India, Massachusetts, Maryland, Delaware 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% 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
Tanzania $10,000 $20,000 $30,000
Vietnam $10,000 $20,000 $30,000
See Accompanying Accountant's Review Report, which is an Integral Part of
Financial Statements.
<PAGE> 11
TRB SYSTEMS INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1999
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, 2000, 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 681,919
Booth for Shows 137,470
Infomercial tape and other promotional materials 50,000
939,664
Less accumulated depreciation (263,844)
$675,820
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.
See Accompanying Accountant's Review Report, which is an Integral part of
Financial Statements.
<PAGE> 12
TRB SYSTEMS INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1999
8. Operating Loss Carry Forward
The Company has Loss Carryforwards which are expected to offset
Portions of 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, 1999, 12,015,656 voting common shares are
issued and outstanding.
11. Related Party Transaction
The Company has a policy of providing an executive with a Company-owned
automobile for business purposes and the amount of such expense for
the three month period ended September 30, l999 was $1,171.
There were no other significant non arm's-length basis transactions
between the Company and any related party during the three month
period ended September 30, 1999.
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 11,925,646 as of September 30, 1998 and 12,015,646 as of
September 30, 1999.
See Accompanying Accountant's Review Report, which are an Integral Part of
Financial Statements.
<PAGE> 13
TRB SYSTEMS INTERNATIONAL INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999
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
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 the date of filing of the Registration
Statement on Form SB-2. Alpha Bytes has informed the company that it will
retain any shares that are returned. Both Alpha Bytes and the Company feel
that as there was no consideration for the said shares, none of the
shares will be returned, and the right of rescission is more one of strict
compliance and form, rather than a right which will be relied on by any
shareholder of Alfa Bytes. In the event any shares are returned, Alpha
Bytes has indicated that it will be the Selling Shareholder for the said
shares, and the Company will file any documents necessary to give effect
to the registration of the said shares. However, as of March 31, 1999,
no shares were rescinded, and the right expired. $305,816 of investments
in TRB were converted into Equity by the issue of 594,009 shares to 54
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. Additional shares of 50,000 were issued to
Pretty Wheel Ind. Co., LTD on September 30, 1999 for moldings, and to Thomas
Wills, for consulting Services.
See Accompanying Accountant's Review Report, which is an Integral Part of
Financial Statements.
<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, 1999.
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 on July 1, 1998. During the current operating quarter,
the Company had no sales, as compared to $50,000 in sales for the quarter ended
September 30, 1998. The company concentrated its efforts in preparing its new
product line and commencing manufacture of the same. The company anticipates
sales in excess of $400,000 in the next quarter, based on orders taken
and requiring filling.
For the quarter ended September 30, 1999, no revenues from license sales were
recognized, as compared to $1,323,000 for the period ended September 30, 1998.
The Cost of goods sold (associated with bicycle sales only) was $0 for the
current quarter, as compared to $9,888 for first quarter of 1998, netting a
gross profit of $0 for the current quarter, and $1,282,888 for the quarter
ended September 30, 1998.
Total operating expenses were $68,861 for the quarter ended September 30, 1999,
as compared to $105,697 for the period ended September 30, 1998.
In each period reviewed the major expenses were depreciation and amortization,
promotion, advertising and travel. The high costs of advertising and promotion
reflect the Company's efforts to have their products well known throughout the
United States.
<PAGE> 15
The cash and investment certificate position of the Company was $14,564 on
September 30, 1999 as compared to $35,423 on September 30, 1998.
Current assets, as a whole, increased significantly, from $1,223,673 on
September 30, 1998 to $1,492,505 on September 30, 1999.
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).
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 by TRB's sales staff. TRB has hired as V. P. of Marketing, Theodore
Kutrumbos, who was a past president of Cannondale Corporation, and
V. P. Sales and marketing for Spinergy Corporation. Mr. Kutrumbos experience
will be utilized by TRB by allowing him implement the worldwide sales
strategy of the Company. It is felt that by the third quarter of the
current fiscal year Mr. Kutrumbos' efforts will have a direct and significant
impact on TRB's bottom line.
TRB has entered into a $10,000,000 line of credit arrangement with its
manufacturer, Pretty Wheel Industries Co., Ltd., whereby the manufacturer
will produce and ship, on credit, a minimum of $250,000 worth of product to
TRB monthly.
TRB has finished its testing of its electric bicycle, and manufacture should
begin in the next quarter, with sales commencing in the third quarter of the
current fiscal year.
The Company has hired Dr. Dennis Colacino to head up the exercycle and
institutional sales division of TRB, with product delivery and sales
expected to commence in the current fiscal year.
The Company has completed its first phase of infomercials, which had as a
primary objective the familiarization of the public with our bicycle. The
Company is in the final stages of its second stage of introducing the TRB
bicycle to the general public.
<PAGE> 16
The Company has prepared a major sales campaign through the 20,000 affiliated
and non affiliated centers of the U. S. Taekwondo Union which commenced in
September 1999, 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.
TRB has formed an alliance with the NFL Alumni, providing bicycles to many
major charity events, increasing the exposure of the bicycle, and of the
company. The New York Giants will be using the TRB bicycle as a cross-
trainer at their training camp in Albany, New York.
PART II
Item 1. Legal Proceedings
There is an outstanding action in the Supreme Court of New York
with respect to Hyun Hong. This action is, in management's opinion,
without merit. It refers to a claim made for a return of funds that were never
advanced to TRB in the first place. It would appear highly unlikely that this
will result in any judgment as against the Company.
There exists an outstanding action in the Supreme Court of New Jersey for the
collection of a debt by Bernard Koff for moneys lent to TRB in 1995. The
action appears premature, and has been settled as of this date for the issue
of shares as against the debt, in the total sum of $190,000. The settlement
is for shares already paid to Mr. Koff, and it is unlikely the Company will
have to pay any further sums to him.
There is an action in the Supreme Court of New Jersey by Cherenson Group for
fees and disbursements incurred in their role as Public Relations Specialists
for the Company. They seek recovery of approximately $110,000. They have
indicated that there may be a settlement for $60,000. It is likely that the
Company will settle this claim in the vicinity of $50,000.
Sawtooth Group of New Jersey has commenced an action in New Jersey Supreme
Court for $111,000 for services rendered as Public Relations Consultants for
the Company. It is believed that this is a meritless claim, as Sawtooth
failed to provide the services contracted for in a professional manner, and
caused the Company to suffer losses. It is however likely that this claim
will eventually be settled for some amount inn the vicinity of $40,000.
Item 2. Changes in Securities
NONE
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders
NONE
<PAGE> 17
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.
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.
Sale to Thomas Wills
40,000 shares were issued to Thomas Wills, a consultant to the Company for
past and present work, in lieu of cash payments due.
Sale of Shares to Pretty Wheel Industries Co., Ltd.
50,000 shares were issued in lieu of cash to Pretty Wheel as payment for
molds and engineering with respect to the electric bicycle now ready for
delivery and sale.
<PAGE> 18
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 infomercial 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.
Item 6. Exhibits and Reports on Form 8-K
23.1 Consent of Auditors for including Review Report page 22
27 Financial Data Schedule
99.1 Registration Statement on Form SB-2, Filed
with the Commission on July 27, 1998, and declared
effective August 12, 1998
<PAGE> 19
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 15, 1999.
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 30, 1999.
<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, 1999
<PAGE> 21
EXHIBIT 23.1
Consent of Registrant's Auditors
To Include Review Report in
Quarterly Report on Form 10-Q
November 15, 1999
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, for the fiscal quarter ending September 30, 1999,
the quarter ending September 30, 1998, 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
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> SEP-30-1999
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<SECURITIES> 0
<RECEIVABLES> 1,323,450
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<PP&E> 939,664
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<CURRENT-LIABILITIES> 725,582
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0
0
<COMMON> 12,016
<OTHER-SE> 2,191,858
<TOTAL-LIABILITY-AND-EQUITY> 2,203,874
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (68,871)
<LOSS-PROVISION> 0
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<INCOME-PRETAX> (68,862)
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