SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
Amendment No. 1
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
( ) TRANSACTION REPORT UNDER SECTION 14 OR 15(D) OF THE EXCHANGE ACT
For the transition period from -------- to ---------
TRIMFAST GROUP, INC.
--------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Nevada 0-26675 88-0367136
------ ------- ----------
(State or other jurisdiction of (Commission File (IRS Employer
incorporation or organization) No.) Identification No.)
777 S. Harbour Island Boulevard #780 Tampa, FL. 33602 (813) 275-0050
- --------------------------------------------------------------------------------
(Address and Telephone number of principal executive offices)
Check whether the issuer has (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months, (or
such shorter period that the Registrant was required to file such report(s),
and (2) has been subject to such filing requirements for the past 90 days.
Yes(X) No ( )
APPLICABLE ONLY TO CORPORATE ISSUERS
- ----------------------------------------
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the Latest practicable date: March 31, 2000
CLASS Outstanding at March 31, 2000
- --------------------------------- ---------------------------------
Common stock $.001 Par Value 5,101,682
TRIMFAST GROUP, INC. AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION PAGE
Accountants Review Report 3
Consolidated Balance Sheets as of
March 31, 2000 and 1999 (Unaudited)
and December 31, 1999 (Audited) 4
Consolidated Statements of Operations for
the Three Month Periods March 31, 2000
and 1999 (Unaudited) 5
Consolidated Statement of Cash Flows
for the Three Months Ended March 31, 2000
and 1999 (Unaudited) 6
Consolidated Statement of Changes in
Stockholders' Equity for the one year ended
December 31, 1998 and 1999 (Audited) and
for the Three Months Ended March 31, 2000 (Unaudited) 7-8
Notes to Consolidated Financial Statements
(Unaudited) as of March 31, 2000 9-14
Management Discussion and Analysis of Financial
Condition and Results of Operations 15-17
JOHN P. SEMMENS CPA A PROFESSIONAL CORPORATION
24501 DEL PRADO SUITE A DANA POINT, CALIFORNIA 92629
TEL: (949) 496-8800 FAX: (949) 443-0642
August 28, 2000
Trimfast Group, Inc. Tampa, Fl. 33602
Gentlemen,
We have reviewed the accompanying balance sheet of Trimfast Group, Inc. as of March 31, 2000, and the
related statements of income, retained earnings and cashflows for the three months then ended, in
accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants. All information included in these financial statements is the representation
of the management of Trimfast Group, Inc.
A review consists principally of inquires of company personnel and analytical procedures applied to financial
data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the financial statements taken
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
financial statements in order for them to be in conformity with generally accepted accounting principles.
Respectfully submitted,
/s/ John P. Semmens, CPA
John P. Semmens CPA
3
TRIMFAST GROUP, INC.
INTERIM CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2000 AND 1999 (UNAUDITED) AND DECEMBER 31, 1999 (AUDITED)
ASSETS
CURRENT ASSETS Audited Unaudited Unaudited
Accounts Receivable Trade December 31, 1999 March 31, 1999 March 31, 2000
------------------ --------------- --------------
Cash 35,858 363,814 73,762
Short-term investments 8,406 20,297 0
Accounts Receivable- Trade 88,281 288,385 117,820
Accounts Receivabe-Other 279,250 77,425 283,291
Inventory 281,313 195,164 890,751
----------- ----------- ------------
Total Current Assets 693,108 945,164 1,365,624
PROPERTY AND EQUIPMENT - NET 1,417,381 30,292 1,762,607
OTHER ASSETS
Prepaid expenses 42,857 29,880 42,857
Deposits 15,200 10,619 115,200
Other long term investments 0 0 3,687,500
Cash surrender value of life insurance 12,636 8,107 12,636
Software - Net 210,814 0 208,670
Goodwill - Net 52,754 0 2,423,861
----------- ----------- ------------
Total Other Assets 334,261 48,606 6,490,725
----------- ----------- ------------
TOTAL ASSETS 2,444,750 $1,023,983 $9,618,956
----------- ------------ -------------
----------- ------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $718,362 $451,753 $1,060,045
Income taxes payable $20,600 $20,600 20,600
Notes and loans payable 218,675 71,600 937,604
Stock repurchase commitment 1,317,500 0 1,433,750
Convertible debentures 1,000,000 0 1,000,000
----------- ----------- ------------
Total Current Liabilities 3,275,137 543,953 4,451,999
----------- ----------- ------------
TOTAL LIABILITIES 3,275,137 543,953 4,451,999
----------- ----------- ------------
STOCKHOLDERS' EQUITY
Preferred Stock, Class A, $ 0.01 par value; 20,000,00
shares authorized; 0 and 15,000 shares issued and outstanding
as of March 31, 2000 150 0 150
Preferred Stock, Class B, $ 0.01 par value;
20,000,000 shares authorized; none issued and outstanding 0 0 0
Common Stock, $0.001 par value; 100,000,000 shares authorized
4,521,682 and 4,000,870 and 5,101,682 shares issued and outstanding
as of December 31, 1999, March 31, 1999 and March 31, 2000
respectively 4,521 4,001 5,101
Additional Paid-in capital 9,399,109 1,752,783 15,913,529
Accumulated deficit (9,646,805) (1,253,220) (10,186,199)
Other comprehensive loss (21,737)
Less cost of Treasury Stock (23,534)
Less common stock shares issued as security deposit (475,000) 0 (475,000)
Less common stock advanced (90,625) 0 (90,625)
---------- ---------- -----------
Total Stockholders' Equity (830,387) 480,030 5,166,956
---------- ---------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,444,750 $1,023,983 $9,618,956
------------ ----------- -----------
------------ ----------- -----------
See Accompanying Notes to Consolidated Financial Statements
4
TRIMFAST GROUP, INC.
INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
For the Three For the Three
Months Ended Months Ended
March 31, 1999 March 31, 2000
----------------- ----------------
NET SALES 213,102 225,431
COST OF SALES 161,098 112,329
--------- ---------
GROSS PROFIT 52,005 113,102
--------- ---------
OPERATING EXPENSES
Salaries and other compensation 85,271 151,314
Commissions 1,800 1,885
Depreciation and amortization 3,113 34,872
Professional fees 252,298 122,702
Bad debt expenses
Selling, general and administrative expenses 76,534 149,130
Travel and entertainment 2,729 68,565
---------- ---------
Total Operating Expenses 421,745 528,468
--------- ---------
INCOME FROM OPERATIONS (369,740) (415,366)
--------- ---------
OTHER INCOME (EXPENSE)
Realized gain on sale of trading securities - net 0 (7,777)
--------- --------
Total Other Income (Expense) 0 (7,777)
--------- --------
NET INCOME/ (LOSS)
(369,740) (423,143)
--------- ---------
EXTRAORDINARY ITEM
Loss on repurchase commitment 0 (116,250)
-------- ---------
NET LOSS (369,740) (589,393)
--------- --------
--------- --------
NET INCOME/ (LOSS) PER COMMON SHARE - BASIC (0.09) (0.12)
WEIGHTED AVERAGE COMMON 4,000,870 4,597,836
SHARES OUTSTANDING - BASIC AND DILUTIVE
5
Trim Fast Group, Inc.
Consolidated Statements of Cash Flows
For the three Months ended March 31, 2000 and 1999 (Unaudited)
For the Three For the Three
Months Ended Months Ended
March 31, 1999 March 31, 2000
(Unaudited) (Unaudited)
---------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) (369,740) (539,393)
Adjustments to reconcile net income (loss)
to net cash flows from operating activities:
Depreciation and amortization 3,113 34,872
Issuance of common stock for professional services 324,796 48,750
Increase in repurchase commitment 0 116,250
Changes in operating assets and liabilities
(Increase) decrease in :
Accounts receivable (7,920) (33,581)
Prepaid expenses (29,880) 0
Inventory (6,427) (609,438)
Increase (decrease) in :
Accounts payable and other liabilities (174,014) 341,683
--------- ---------
Total adjustments 109,668 (178,964)
-------- ---------
Net cash (used in) provided by operating activities (260,072) (640,857)
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in :
Short term investments (5,000) 8,406
Due from employees 5,800 0
Property and equipment 0 (2,672)
Due from affiliate 5,945 0
Deposits 0 (100,000)
--------- ---------
Net cash (used in) provided by investing activities 6,745 (94,266)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings (500) 171,899
Proceeds from issuance of common stock 512,000 0
Due to stockholder/ officer 0 601,128
--------- ---------
Net cash provided by (used in) financing activities 511,500 773,027
--------- ---------
CHANGE IN CASH AND CASH EQUIVALENTS 258,173 37,904
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 105,641 35,858
--------- ---------
CASH AND CASH EQUIVALENTS - PERIOD END 363,814 73,762
--------- ---------
6
TRIMFAST GROUP, INC.
INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
FOR THE ONE YEAR PERIODS ENDED DECEMBER 31, 1998 and 1999 (Audited)
AND THE THREE MONTHS ENDED MARCH 31, 2000 (Unaudited)
Common Stock and Common
Additional Shares Issued
Stock to be Issued Paid-In Preferred Stock Isued Accumulated Subscriptions as a Security Shares Treasury
Shares Amount Capital Shares Amount Deficit Receivable Deposit Advanced Stock Total
----------- ----------- ------------ ------------ ----------- ------------- ------------ ----------- ----------- ----------- -----------
BALANCE JANUARY 1, 1998 1,286,625 $1,287 ($287) - - ($151,846) - - - ($150,846)
Issuance of common stock for cash 63,924 $64 $187,736 - - - - - - $187,800
Issuance of common stock in exchange to related
party in exchange for $40,000 debt 19,500 $19 $39,981 - - - - - - $40,000
HLHK equity at August 12, 1998 817,749 $818 $441,083 - - (1,122,218) - - - ($680,317)
Reclassification pursuant to recapitalization - - ($1,122,218) 1,122,218 - - - $0
Common stock issued to employees 500 - - - - - - - - $0
Common stock issued to attorney for services 5,000 $5 ($5) - - - - - - $0
Common stock issued in exchange for debt of HLHK
principal stockholder 75,000 $75 $491,123 - - - - - - $491,198
Issuance of common stock in exchange for
stockholder loans 70,358 $70 $126,574 - - - - - - $126,644
Compensation to principal stockholder - - $762,000 - -
Purchase of treasury stock at cost - - - - - - - - (23,534) ($23,534)
Net income 1998 - - - - - (739,974) - - - ($739,974)
------------ ---------- ----------- ------------ ----------- --------------- ----------- ------------ ----------- ------------
Balance, December 31, 1998 2,338,656 $2,338 $925,987 - - ($891,820) - - ($23,534) $12,971
------------ ---------- ----------- ------------ ----------- --------------- ----------- ------------ ----------- ------------
Issuance of common stock for cash 1,058,005 $1,058 $1,659,817 - - - - (90,625) - $1,570,250
Issuance of common stock in exchange for
consulting and other professional services 918,300 $918 $4,744,143 - - - - - - $4,745,061
Issuance of common stock to employees 104,900 $105 $500,075 - - - - - - $500,180
Issuance of convertible debentures - - $250,000 - - - - - - $250,000
Issuance of Preferred Stock - - $1,874,901 15,000 150 (375,011) - - - $1,500,040
Issuance of common stock option - - $413,780 - - - - - - $413,780
Return of common stock in repayment of debt (50,000) ($50) ($399,950) - - - - - - ($400,000)
Issuance of common stock as a security deposit for
inventory line of credit 100,000 $100 $474,900 - - - (475,000) - - $0
Issuance of common stock in exchange for loans 51,821 $52 $272,956 - - - - - - $273,008
Purchase and sale of treasury stock - net - - - - - ( 48,803) - 23,534 ($25,269)
Unrealized losses on available-for-sale securities - - - - - - (21,737) - - - ($21,737)
Commitment to repurchase shares of treasury stock - - ($1,317,500) - - - - - - - ($1,317,500)
Net Loss 1999 - - - - - (8,331,171) - - - - ($8,331,171)
------------- --------- ------------- ----------- ----------- ------------- -------------- ---------- ------------ ------------- ------------
Balance, December 31, 1999 4,521,682 $4,521 $9,399,109 15,000 $150 $9,646,805) ($21,737) ($475,000) ($90,625) - ($830,387)
-------------- ---------- -------------- ------------ ---------- -------------- --------------- ----------- ------------ ------------- ------------
-------------- ---------- -------------- ------------ ---------- -------------- --------------- ----------- ------------ ------------- ------------
Issuance of common stock for professional services 10,000 $10 $48,740 - - - - - - - $48,750
Issuance of common stock for acquistion of
Nutrition Clubstores 570,000 $570 $2,778,180 - - - - - - - $2,778,750
Contributed capital - - $3,750,000 - - - - - - - $3,750,000
Long term investments mark to market - - $62,500) - - - - - - - ($62,500)
Sale of securities held for sale - - - - - - 21,737 - - - $21,737
Net Loss as of March 31, 2000 - - - - - (539,393) - - - - ($539,393)
Balance March 31, 2000 5,101,682 5,101 15,913,529 15,000 150 (10,186,199) 0 (475,000) (90,625) 0 5,166,156
---------- -------- ---------- ------- -------- -------------- --------- --------- -------- ------------ ----------
---------- -------- ---------- ------- -------- -------------- --------- --------- -------- ------------ ----------
8
PART II. OTHER INFORMATION AND SIGNATURES
Signature
TrimFast Group, Inc.
Notes to Interim Consolidated Financial Statements
As of March 31, 2000
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
- - - -----------------------------------
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally
accepted accounting principles and the rules and regulations of the Securities and Exchange Commission for
interim financial information. Accordingly, they do not include all the information and footnotes necessary
for a comprehensive presentation of financial position and results of operation.
It is management's opinion, however that all material adjustments (consisting of normal recurring
adjustments) have been made which are necessary for a fair financial statements presentation. The results
for the interim period are not necessarily indicative of the results to be expected for the year.
For further information, refer to the consolidated financial statements and footnotes included in the company's
Form 10-SB, as amended for the year ended December 31, 1998 and Form 10KSB, as amended for the year ended
December 31, 1999.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
- - - -----------------------------------------------------------------------------
(A) Revenue Recognition
--------------------
Nutrition Cafe charges a monthly membership fee for access to order products at discounted prices.
Memberships are sold on a pay-as-you-go basis in one month increments. Members choose whether or not to continue
their membership each month; no long term agreements are required. The membership fees are recognized as
revenue in the month they are paid. Effective January 2000, the monthly membership fees have been eliminated.
Management believes the increased revenues from allowing everyone who visits the site to place orders will
offset the decrease in revenue from membership fees. Revenue for products ordered is recognized and an accrual
for returns is posted when the product is shipped. To date returns of products sold has been immaterial. We
believe the products we sell are of a high quality and our customers are knowledgeable enough about the products
they purchase to ensure returns will continue to be immaterial. Therefore, no accrual for estimated returns
has been made for these financial statements.
9
TrimFast Group, Inc.
Notes to Interim Consolidated Financial Statements
As of March 31, 2000
(Unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION - (Cont'd)
- - - --------------------------------------------------------------------------------
Sales of our products offered through TrimFast, Inc. (weight loss bars, WCW bars, and Max Impact supplements)
are sold utilizing food brokers, distributors and directly to vendors. We use brokers and distributors to
identify new vendors, all sales are made directly to the vendor with them distributor or broker informed of any
sales through their efforts. Because we ship to, invoice and receive payments directly from the end user, our
policy is to record any returns against current sales. Due to the nature of the products offered, and customers
ordering product conservatively, we have experienced no material product returns, therefore no accrual for
returns have been made in these financial statements.
Revenue for the Cooler Group is earned through rental of water coolers and delivery of water. A contract is
signed for cooler rental and/or water delivery service, and is invoiced monthly. Revenue is recognized for cooler
rental each month when invoiced and for water service based on usage when delivered.
(B) Accounts Receivable - Other
------------------------------
Components of A/R - Other is as follows: 12/31/99 3/31/99 3/31/00
- - --------- -------- ---------
Millennium - related party $ 279,250 $ 27,425 $ 281,251
Due from Immmu/Immcel 0 $ 50,000 0
Other 0 0 2,040
--------- -------- ---------
$ 279,250 $ 77,425 $ 283,291
========= ======== =========
The receivable from Millennium represents cash advances to an affiliated
---------------------------------------------------------------------------
company during the year.
------------------------
(C) Inventory
-----------------
Components of inventory are as follows: 12/31/99 3/31/99 3/31/00
--------- -------- --------
Finished Goods $ 224,784 $146,164 $834,680
Product Components 56,529 49,000 56,070
--------- -------- --------
Total $ 281,313 $195,164 $890,750
The Company performs quarterly inspections of inventory to identify expired or obsolete items. Any merchandise,
which has past its expiration date, or has been deemed obsolete by management, is removed from inventory and
written off. The March 31, 2000 inventory balance includes $410,885 in inventory acquired with Nutrition
Clubstores.
10
TrimFast Group, Inc.
Notes to Interim Consolidated Financial Statements
As of March 31, 2000
(Unaudited)
(D) Advertising Costs
------------------
Advertising costs are expensed as incurred unless a direct measurable response exists. All advertising
related costs have been recognized as expense in these Interim Financial Statements.
(E) Software Development
---------------------
The Company accounts for software obtained for internal use in accordance with the Accounting Standards Executive
Committee Statement of Position No. 98-1 "Accounting For the Costs of Computer Software Developed or
Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 generally requires the capitalization of all internal
or external direct costs incurred in developing or obtaining internal use software and expensing all
internal or external costs incurred during the preliminary project stage and the post-implementation stage.
The Company generally amortizes software developed or obtained for internal use over an estimated life
of three years.
NOTE 3 - MARVEL LICENSE AGREEMENT
- - - --------------------------------------
On February 25, 2000 the Company executed a licensing agreement with Marvel Characters, Inc. to produce and
market a children's chewable Multi-Vitamin and mineral supplement of the character Spider-Man .
The license commences on March 1, 2000 and expires on December 1, 2001. The agreement includes a 9% royalty
rate to be paid to Marvel on net sales with the following minimum royalty guarantees. $100,000 was paid at
signing of the agreement and is posted to prepaid expenses and will be amortized over the life of the agreement.
$50,000 to be paid on or before March 1, 2001.
NOTE 4 - EQUITY TRANSACTIONS
- - - --------------------------------
A. Issuance of Common Stock
In March we issued 570,000 shares of our common stock for the acquisition of Nutrition Clubstores, Inc.
(see Note 5) and 10,000 shares of our common stock in exchange for legal services associated with SEC filings.
These shares were issued pursuant to Section 4(2) of the Securities Act of 1933. We believed section 4(2)
was available because there was no general solicitation or advertising used in connection with the
offering and the transaction did involve a public offering.
B. Additional Paid-In Capital
In February Michael Muzio contributed 500,000 shares of restricted stock of Insiderstreet.com, Inc. to the
Company. The shares were valued at the $7.50 based on the quoted trading price on the date of contribution.
The shares contributed are less than 20% of issued and outstanding shares of Insiderstreet.com, Inc. and
is accounted for as a long-term investment.
11
TrimFast Group, Inc.
Notes to Interim Consolidated Financial Statements
As of March 31, 2000
(Unaudited)
NOTE 5 - ACQUISITIONS
- - - ------------------------
On March 20, 2000 we acquired from Nutrition Superstores.com, Inc. all of the issued and outstanding shares of
common stock in its wholly owned subsidiary, Nutrition Clubstores, Inc. The purchase price was $150,000 cash plus
570,000 shares of our common stock valued at $4.80 per share based average quoted trading price a few days
before and after the announcement of the transaction based on EITF 95-19 for a total of $2,886,000, which includes
approximately $5,000 in transaction costs. In addition, for a period beginning three months following the Closing
and continuing for a period of twelve months thereafter,the Seller shall receive a royalty equal to three percent
(3%) of the gross sales generated by the kiosks operated by Nutrition Clubstores, Inc. The number of shares
issuable to the Seller of the Nutrition Clubstores, Inc. is subject to adjustment based upon the audited financial
statements, which are to be provided by the sellers of Nutrition Clubstores, Inc. To the extent that the Nutrition
Clubstores audited financial statements for February 29, 2000 show a net worth which is less than 85% of the
unaudited financial statements, for every $5.00 reduction or portion thereof in net worth, Seller shall be entitled
to receive one less share of common stock.
The acquisition will be accounted for under the purchase method. Subject to the completion of the Nutrition
Clubstores audit, we anticipate allocating the purchase price of this acquisition as follows: inventory $410,885,
fixed assets $367,848, goodwill $2,335,004 accounts payable $162,422 and notes payable $65,315. The
allocation to goodwill would be reduced dollar for dollar to the extent of any downward adjustment of the
purchase price based on the audit.
The goodwill balance will be amortized over 60 months. The Company will review the audited financial statements
when received and adjust our books accordingly.
The $150,000 cash used in the acquisition was advanced to the Company by the principal stockholder.
NOTE 6 - LITIGATION
- - - ----------------------
In early 1999, pursuant to a voluntary arrangement with the Food and Drug Administration, the Company's product,
Revivarant, was recalled and removed from sale. Since the time of the recall, the Company has been subject to five
known lawsuits and 3 claims relating to consumer use of the product. As of the date of this report, only one
lawsuit has specified a dollar amount, that being, $400,000 of compensatory damages and $350,000 of punitive damages.
Management has referred all lawsuits to the insurance carrier of its third party manufacturer, however,
the Company has received notice from the insurance carrier denying all claims. Management intends to contest
the claim denials.
12
TrimFast Group, Inc.
Notes to Interim Consolidated Financial Statements
As of March 31, 2000
(Unaudited)
NOTE 6 - LITIGATION - Continued
- - - ------------------------------------
The Company obtained its own insurance policy in May 1999 and believes it would not be covered under its own policy
for these prior occurrences. With regard to any punitive damage claims, the Company intends to vigorously oppose any
factual basis for imposition of punitive damages based upon research and efforts made prior to the distribution of
the Revivarant product to determine its safety. The Company's management and outside legal counsel are unable to
evaluate and determine the likely outcome of each cause of action. Accordingly, pursuant to the Financial Accounting
Standards Board, Statement of Financial Accounting Standards No. 5, no liabilities have been accrued as of March 31,
2000 relating to the above matters. Any future liabilities required to be recorded pursuant to SFAS 5 will be
recorded gross of any expected insurance recovery pursuant to SAB5:Y. The above litigation related to Revivarant may
have an adverse effect on the Company's results of operations and financial condition.
On February 8, 2000, a suit was filed against us in Pinellas County Circuit Court (Case No. 00-802) Aryeh Trading
Inc., Plaintiff vs. TrimFast Group, Inc. The action in Pinellas County Circuit Court seeks specific performance
pursuant to an agreement for us to purchase 155,000 shares of our common stock from Aryeh. The Plaintiff also seeks
to foreclose on our warehouse facility located at 2555 Blackburn St., Clearwater, Florida, the facility from which
we operate Nutrition Cafe and in which we warehouse 2,000 products. We have filed a Motion to Dismiss with respect
to both causes of action. Discovery is beginning and no opinion is available as to the likely result. Aryeh Trading
Inc. was formerly market maker for our securities until approximately November 1, 1999.
The Company is subject to a cause of action seeking damages and specific performance of an agreement to purchase
stock. The Agreement called for certain shares of stock to be sold pursuant to a letter agreement. The
Complaint contains seven counts alleging cause of action for specific performance, equitable relief, fraud,
civil theft damages, and lost profits. Discovery is beginning and settlement discussions have been on going.
The Company is unable to assess the likely outcome of this suit at this time.
An action has been commenced against the Company, by a former principal stockholder, and other parties
alleging that 600,000 shares of the Company, previously owned by the former principal stockholder, were improperly
canceled by the Company while still validly owned by the Plaintiff. The Plaintiff has demanded the removal of the
stop transfer order from their share certificates or alternatively the Company re-issue new share certificates.
The action also alleges a consulting agreement for which the Company has not tendered the required consideration
of 270,000 shares of the Company's common stock.
13
TrimFast Group, Inc.
Notes to Interim Consolidated Financial Statements
As of March 31, 2000
(Unaudited)
NOTE 6 - LITIGATION - Continued
- - - ------------------------------------
The action also seeks $100,000 for breach of fiduciary duty and $10,000,000 in punitive damages. An adverse
judgment may have an adverse affect on the
Company's results of operations and financial condition.
Francois Goelo had filed an action in Hillsboro County Circuit Court (Case No. 00-1444) against TrimFast Group,
Inc., Michael Muzio and certain other parties in connection with alleged non-delivery of 22,000 shares of TrimFast
and 100,000 shares of common stock of Sierra Holdings Group. The complaint, is a multi-count complaint and
included counts for breach of contract, specific performance, fraud and civil theft. The complaint alleged that
a total of $95,750 ($77,000 for the TrimFast shares) was delivered as per the instructions of Mr. Muzio. The shares
of common stock that had not been delivered to Mr. Goelo, as Mr. Muzio has advised the Company, were shares of
common stock personally owned by Mr. Muzio. The Plaintiff sought delivery of the shares of common stock pursuant
to the agreement and sought compensatory and punitive damages in excess of $790,000. On May 3, 2000 plaintiff
offered to settle this matter whereby Mr. Muzio would pay $95,750 and transfer to the plaintiff 20,000 shares of
TrimFast common stock. In addition, the settlement offer provided that the parties will enter into a joint stipulation
for dismissal of the action and execution of a general release. We subsequently signed a written settlement agreement
with Mr. Goelo and Mr. Muzio, and Mr. Goelo has released the other parties, including the Company, from all liabilities
or obligations. As part of this settlement, the litigation was dismissed and the Company was not required to make
any payment, or give any shares, to Mr. Goelo.
The Company is subject to various other lawsuits, investigations and claims primarily relating to amounts due
to vendors which, in the opinion of management, arise in the normal course of conducting Company
business. Appropriate amounts have been accrued at March 31, 2000. In the opinion of the Company's management,
after consultation with outside legal counsel, the ultimate disposition of such remaining proceedings will
not have a materially adverse effect on the Company's consolidated financial position or future results of
operations.
NOTE 7 - SUBSEQUENT EVENTS
- - - ------------------------------
A. Convertible Debenture.
On April 25, 2000 the Company entered into a convertible debenture agreement for a total of $3,000,000 due July 13,
2001 with interest at 12%. The proceeds will be used to open additional Nutrition Clubstores and produce
and air the commercial spots for our WCW Ultra Energy Bars. On April 28, 2000 we received the first $1,000,000.
B. Notice of Default
We have received notice from Cranshire Capital, L.P., The DotCom Fund, LLC, S Roberts Productions, LLC and Keyway
Investments Limited, the subscribers to the Company's Series A Convertible Preferred Stock that each seeks redemption
of its holdings, a total of 15,000 preferred shares issued to these investors. The investors seek a total
of $1,875,000 for the redemption of their Series A Preferred Stock plus all accrued but unpaid dividends and all
accrued but unpaid liquidated damages. The redemption requirement applies unless the Company has registered the
Common Stock issuable upon conversion by the holders. The Company is unable to register the underlying common
stock at this time because it cannot file a registration statement with the Securities and Exchange Commission
that complies with the accountants' report requirements. The Company is required to cause a registration statement
covering the shares to be declared effective before November, 2000. There can be no assurances that we will ever
be in a position to file a registration statement that complies with the applicable requirements.
14
TRIMFAST GROUP, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
FINANCIAL STATEMENT PRESENTATION
RESULTS OF OPERATIONS.
March 31, 2000 as compared to March 31, 1999
Sales for the three months ended March 31, 2000 were $225,431 as compared to $213,102 for three months ended
March 31, 1999. Cost of sales declined from $161,098 as of March 31, 1999 to $112,329 as of March 31, 2000. This
decline in cost of sales is a result of managements efforts to promote our higher margin products.
Our salaries and compensation increased from $85,271 for the three months ended March 31, 1999 to $151,314 for the
three months ended March 31, 2000 for several reasons. The 1999 balance does not include compensation for Nutrition
Cafe, which we opened in June 1999, or the Cooler Group, which we acquired in May 1999. This accounts for
approximately 25% of the increase. The balance of the change relates to upgrading positions to handle the increased
responsibilities associated with being a publicly traded company and additional support staff. Moreover, the
employment market in Tampa has been highly competitive in 2000 resulting in our company paying higher wages
to all employees to retain and recruit qualified employees.
Management believes that a significant boost to its revenues will be generated from its licensing agreement with
World Championship Wrestling ("WCW"), once other wrestling stars agree to promote our energy bars. We intend to
sell high nutrition, energy bars with the WCW logo and images of the various wrestling personalities. Both food
brokers and retail stores have shown tremendous interest in the product. Although we have made shipments to small
retailers, we anticipate that our shipments to large retailers will commence with the launch of our national
advertising campaign, which we are attempting to reschedule production of. While there can be no assurance that
the product will meet anticipated demand, management believes that the sale of the WCW energy bars will be a
significant source of revenues for the Company.
We believe the acquisition of Nutrition Clubstores will have an immediate positive impact on the Company's
cashflows and revenue stream. Prior to our acquisition, Nutrition Clubstores had a negative cashflow of
approximately $10,000 per month. However, during our analysis of the company, we identified several areas where
we believe they were operating inefficiently and implemented these changes immediately upon closing the deal. Based
on our changes Nutrition Clubstores had a positive cashflow of approximately $5,000 for the eleven days we owned it
in March. We have continued to implement other cost cutting measures including promoting our products in each
location to increase margins and further changes to the management structure in each location which should
continue to increase the positive cashflow each month.
For the three months ended March 31, 2000, we recorded $122,702 in
15
professional fees. Approximately $50,000 represents non-cash issuance of common stock in exchange for legal
services related to SEC filings. Approximately $42,000 were accounting costs associated with the year end audit
and SEC filings. $20,000 relates to legal fees associated with various lawsuits described above.
Selling general and administrative expenses were $149,130 and $76,534 for the three months ended March 31, 2000
and 1999 respectively. During 2000, we spent approximately $68,000 on various trade shows to introduce and promote
our WCW ultra energy bars.
Net loss for the three months ended March 31, 2000 was $539,393 including a charge of $116,250 for increased cost
of repurchasing shares from Aryeh Trading (See note 6). Net loss for the three months ended March, 31 1999 was
$369,740.
LIQUIDITY AND CAPITAL RESOURCES.
March 31, 2000 as compared to March 31, 1999
Total cash and cash equivalents as of March 31, 2000 were $73,762 as compared to $363,814 as of March 31,
1999.
We expended $150,000 in cash in March 2000 to acquire Nutrition Clubstores and incurred related transaction costs of
approximately $5,000.
Trade receivables were $117,820 as of March 31, 2000 and $288,385 as of March 31, 1999 including $267,240 related
to Cutting Edge that was written off in December 1999. The first quarter of 1999 was a transition period from the
sales of Revivarant to our TrimFast line of products which did not reach the sales levels reached previously
with Revivarant.
Inventory as of March 31, 2000 was $890,751 as compared to $195,164 as of March 31, 1999. The large increase in
inventory is attributable to the acquisition of Nutrition Clubstores which had inventory of $410,885.
Additionally, we increased our inventory of WCW ultra energy bars in January 2000 in anticipation of the production
and airing of our commercial. Because of an injury to the wrestler we developed the ad campaign around, we are
considering ad campaigns utilizing other wrestling personalities, but have made no firm commitment at this time.
Total current assets were $1,365,624 as of March 31, 2000 and $945,085 as of March 31, 1999 the increase is related
to the increase in inventory and decline in trade receivables as discussed above.
Property and equipment increased from $1,417,381 on March 31, 1999 to $1,762,607 on March 31, 2000. The
increase relates to the property and equipment we acquired with Nutrition Clubstores, consisting primarily of kiosks.
We also experienced a significant increase in liabilities. Accounts payable increased from $451,753 on March 31,
1999 to $1,060,045 on March 31, 2000. The large increase is the result of our acquisition of Nutrition Clubstores
which had approximately $160,000 in outstanding payables and our increase in payables
16
associated with our WCW bars inventory build up which accounts for approximately $300,000 of the increase.
Additionally, the 1999 payables balance does not include Nutrition Cafe and Cooler Group payables which are included
in the 2000 balance of approximately $100,000.
On April 25, 2000 the Company entered into two convertible debenture agreements, with Gibralt U.S., Inc., a Colorado
Corporation and FAC Enterprises, Inc. a Pennsylvania Corporation, each providing for the sale of $500,000 of its
convertible debentures due July 13, 2001 with interest at 12%. This sale was part of a private placement in which the
Company intends to sell an aggregate of $3,000,000 of debentures, but no assurance is made that we will be able to do so.
The proceeds will be used to open additional Nutrition Clubstores and produce and broadcast the commercial spots for our
WCW Ultra Energy Bars. On April 28, 2000 we received the first $1,000,000. The outstanding principal amount of debentures
is convertible at the option of the holder into the Company's Common Stock at the lower of (I) Two and 50/100 Dollars
($2.50) per share; or (ii) seventy-five percent (75%) of the closing bid price of the Company's publicly traded common
stock on the Closing Date. As to the Closing on April 28, 2000, the conversion price is therefore about $2.00 per share
for the first $1,000,000 of debentures. No later than June 9, 2000, the Company was required to fi1e a registration
statement on Form S-2 under the Securities Act and under all applicab1e Blue Sky laws covering the Common Stock.
By August 26, 2000, the Company is required to have caused such registration statement to be declared effective by the
SEC, all at the Company's sole cost and expense.
Because the Company (a) has failed to file a registration statement covering the Common Stock issuable upon conversion
of the Convertible Debentures, within 45 days of the first Closing Date and (b) in the event the Company fails to have
a registration statement declared effective by the Securities and Exchange Commission within 120 days of the first
Closing Date, Company shall automatically be subjected to penalties. The Company for each month or partial month while
the default is continuing shall either: (a) Make a payment of Fifty Thousand Dollars ($50,000) to the Purchaser; or
(b) deliver Twenty Thousand (20,000) shares of the Company's common stock to the Purchaser, whichever the Purchaser
elects. The purchasers in the aggregate therefore, may receive up to One Hundred Thousand Dollars ($100,000) in cash
per month commencing June 9, 2000. We cannot predict when a registration statement will be filed and be declared
effective. As of August 9, 2000, the liquidated damages amounted to $200,000, in cash, or 80,000 shares of Common
Stock. We have granted the purchasers a security interest in all of the 500,000 shares of common stock of
Insiderstreet.com (NSDR) that our Company owns to secure our obligations to the debentureholders.
The aggregate amount of the price to redeem the 155,000 shares of Common Stock from Aryeh Trading is $1,782,500 as
of August 15, 2000. The price per share increases $.25 per share per month thereafter. On February 8, 2000, a
suit was filed against us in Pinellas County Circuit Court (Case No. 00-802) Aryeh Trading Inc., Plaintiff vs.
TrimFast Group, Inc. The action in Pinellas County Circuit Court seeks specific performance pursuant to an agreement
for us to purchase 155,000 shares of our common stock from Aryeh. The Plaintiff also seeks to foreclose on
our warehouse facility located at 2555 Blackburn St., Clearwater, Florida, the facility from which we operate
Nutrition Cafe and in which we warehouse 2,000 products. We have filed a Motion to Dismiss with respect to both
causes of action. Discovery is beginning and no opinion is available as to the likely result. Aryeh Trading Inc.
was formerly market maker for our securities until approximately November 1, 1999.
Commencing April 25, 2000, we have received notices from Cranshire Capital, L.P., The DotCom Fund, LLC, S Roberts
Productions, LLC and Keyway Investments Limited, the subscribers to the Company's Series A Convertible Preferred Stock
that each seeks redemption of its holdings, a total of 15,000 preferred shares issued to these investors. The
investors seek $1,875,000 for the redemption of their Series A Preferred Stock plus all accrued but unpaid
dividends and all accrued but unpaid liquidated damages. The redemption requirement (See Item. 8 entitled
"Description of Securities" under the heading "PREFERRED \STOCK-Redemption" as set forth in the Company's Form 10-SB/A
as filed on or about August 24, 2000) applies unless the Company performs as required under its agreements with
the holders, including registering the Common Stock issuable upon conversion by the holders. The Company
has not filed the registration statement, as and when required. The Company is also required to cause a registration
statement covering the shares to be declared effective before November, 2000. The Company is unable to pay the
redemption price at this time. The Company's funds are insufficient to redeem the preferred stock and also
thereafter provide for the payment of all of its creditors, and therefore the present default situation is expected
to continue at least until a registration statement is filed and declared effective as required of the Company
under these Series A Preferred Stock registration rights. Until this redemption price shall have been paid by
the Company, the holders who have demanded redemption will continue to have the ability to convert their shares
of Preferred Stock into previously unissued shares of TrimFast common stock. The Company issued 15,000 shares
of Series A Convertible Preferred Stock for $100 per share, and each is convertible any time after the issuance
date at the face amount divided by the lesser of (a) $8.5938 or (b) 80% of the market price of the common stock
as defined in the Agreement, which is defined based on a relevant average during a period before a given conversion
date. The redemption notices were given commencing April 25, 2000. Therefore, the Company has decided that it will
in its June 30, 2000 financial reports reclassify the preferred stock as a short-term liability in light of the
present demands for redemption, and reduce stockholders' equity by about $1,875,000, which is the amount of its
redemption obligation at the date of the balance sheet, plus all accrued dividends and liquidated damages accrued,
as required according to Rules 5-02.28 of Regulation S-X and SAB Topic 3C. The redemption rights were triggered
by the existence of a triggering event, as defined by the Certificate of Designations, Preferences and Rights for
such preferred shares, and therefore each holder of Series A preferred shares shall have the right, at their option,
to require us to redeem all or a portion of such holder's preferred shares.
The Company has already defaulted under the Registration Rights that belong to the holders of the outstanding
Preferred Stock, and this default will continue so long as the Company (a) has failed to file a registration
statement covering the Common Stock issuable upon conversion of the Preferred Stock or (b) fails to have a
registration statement declared effective by the Securities and Exchange Commission. While the default continues,
Company shall automatically be subjected to penalties. The Company for each month or partial month while the
default is continuing shall be required to make a payment to the holder. We cannot predict when a registration
statement will be filed and be declared effective. The Registration Rights Agreement is filed as Exhibit 10.11
to the Company's Form 10-SB/A amendment number 5 filed on or about August 24, 2000. The Preferred Share Agreement
is filed as Exhibit 4.4 to the Company's Form 10-SB/A filed on December 23, 1999.
The amount payable on redemption of one share is $125 multiplied by the number of shares redeemed
(which is 15,000 shares, or $1,875,000), plus accrued dividends to the date of redemption, at the rate of $8.00
per share per year from June 1999, plus applicable liquidated damages. Liquidated damages accrue under the
Registration Rights Agreement and under the Series A Preferred Share Agreement.
If the Company violates any provision of or fails to fulfill any of its obligations or duties to the holders
of outstanding Preferred Stock, other than the Registration Rights Agreement, the Company agrees to pay liquidated
damages to each Buyer following the occurrence of such violation in an amount determined by multiplying (i)
$2.00 per Preferred Share then held by such Buyer by (ii) the percentage derived by dividing (A) the actual number
of days elapsed from the last day of the date of the Company Violation or the prior 30-day period, as applicable,
to the day such Company Violation has been completely cured by (B) 30, in cash, or at the Buyer's option, in the
number of shares of Company common stock equal to the quotient of (v) the dollar amount of the Liquidated Damages
on the Payment Date (as defined below) divided by (w) the closing bid price of the Company's common stock as of the
date of the Company Violation (as quoted in the Principal Market or the market or exchange where the Company's common
stock is then traded). The Liquidated Damages payable pursuant hereto shall be payable within five (5) business days
from the end of the calendar month commencing on the first calendar month in which the Company's violation occurs.
In the event the Buyer elects to receive the Liquidated Damages amount in shares of Company common stock, such shares
shall also be considered Conversion Shares and shall have the registration rights set forth in the Registration
Rights Agreement.
Since each of the Series A shareholders seeks redemption, the Company is obligated to redeem them pro rata in
accordance with their holdings. The Company, a Nevada corporation, is subject to the provisions of Nevada law
concerning a corporation's right to pay dividends, which is limited by the legal availability of funds for the
payment thereof. A Nevada corporation can pay dividends that do not impair the corporation's capital, but no more
than that. The Company is legally prohibited from making dividends unless or until making such payment will not
impair the Company's capital after the payment. The Series A Preferred stock is also junior to all Company debts,
obligations, accounts payable or absolute liabilities, whether or not there are any liens recorded. However, Series
A Preferred is entitled to payment before any dividend, distribution or redemption of the holders of the Company's
Common Stock. A total of $1,875,000 as of May 25, 2000 was the amount that the Company is obligated to pay to redeem
all of the presently outstanding Series A Preferred. In addition to the redemption price above, the Preferred
stockholders assert that the Company remains obligated to pay all accrued but unpaid regular dividends, totaling
$120,000 at July 1, 2000, and liquidated damages of in an amount of $468,750. When the Company does not promptly
pay this redemption price, which we so shall be restricted from doing by the provisions of the Nevada law we referred
to above in this paragraph, any of these above-mentioned or other creditors may seek available remedies to recover or
establish their respective priorities as well. Regardless of the outcome, these creditors' remedies may distract
management's time and attention and cause the Company to incur expenses, which may include costs of any such suit or
action, such as opposing any actions which might include involuntary bankruptcy, involuntary liquidation or dissolution
or others, or costs incurred by us or others to whom we may owe a duty of indemnification or defense, which may include
affiliates of the Company or its principal shareholder or any of its Board of Directors or management.
Unless and until the Company has made or could provide for all such payments, the holders of Common Stock will not
be entitled to any dividend, redemption or redemption payment from the Company. The Company from time to time may
enter agreements with creditors prohibiting such payments to Common Stock and no assurance is offered that the
creditors would furnish a waiver of these restrictions or that the Company will request any such waiver. In addition,
the Nevada law prohibits any distribution, whether or not in liquidation, from being made that will impair the
corporation's capital. The Articles of Incorporation of TrimFast and certain laws where that corporation does
business also would prohibit payments to shareholders if wrongful as against any of a corporation's creditors or
shareholders. Under its legal limitations, our Board of Directors could make distributions to the holders of its
Common Stock in the form of cash or property only if the distribution does not impair capital or violate the terms of
a series of Preferred Stock, although in either case the Board could declare and pay a dividend if payable in shares
of its Common Stock, a future series of Preferred Stock, or as rights to purchase shares of Common Stock or a series
of Preferred Stock, or similar securities or rights of exchange or conversion. If the Company has sufficient assets
and net worth, the Company's Board of Directors may pay dividends payable in the form of cash or property to holders
of its shares in certain instances. In a liquidation of the Company, the holders of the Company's Common Stock will
receive no payment for or on account of their shares unless and until the Company has sufficient net worth in order
to pay all of its liabilities to creditors and secondly to pay the liquidation preference of the Series A Preferred
and any other future securities or subordinated obligations senior to the Common Stock.
Management believes that we have sufficient revenue and reserves to finance ongoing business activities,
assuming that matters can be favorably resolved with Aryeh and the Preferred Stock holders.
Part II. Other Information
Item 1. Legal Proceedings.
On February 8, 2000, a suit was filed against us in Pinellas County Circuit Court (Case No. 00-802) Aryeh Trading
Inc, Plaintiff vs. Trimfast Group, Inc.
The action in Pinellas County Circuit Court seeks specific performance pursuant to an agreement for us to purchase
155,000 shares of our common stock from Aryeh. The Plaintiff also seeks to foreclose on our warehouse facility
located at 2555 Blackburn St., Clearwater, Florida, the facility from which we operate Nutrition Cafe and in which we
warehouse 2,000 products. We have filed a Motion to Dismiss with respect to both causes of action. Discovery is
beginning and no opinion is available as to the likely result. Aryeh Trading Inc. was formerly market maker for our
securities until approximately November 1, 1999. On July 13, 1999 we issued 155,000 restricted shares of our common
stock for $4.00 each to Aryeh Trading. On October 22, 1999 the Company entered into a stock repurchase agreement
with Aryeh Trading where we agreed to repurchase the 155,000 shares at $8.25. Our intent was to repurchase these shares
at the market value for cash. The agreement sets out a schedule for repurchase and the shares were to be fully
repurchased by December 15, 1999. If the shares were not repurchased by December 15th the Company agreed to a $0.25 per
share premium for each two weeks subsequent to December 15th. On November 10, 1999 the Company entered into an agreement
with Aryeh Trading to modify the repurchase schedule. This agreement calls for the Company to repurchase all shares
before January 25, 2000. Any shares not repurchased by January 25th are subject to a $0.25 per share per month premium.
As additional security, in the November 10th agreement we pledged our warehouse facility located at 2555 Blackburn St.,
Clearwater, Florida, the facility from which we operate Nutrition Cafe and in which we warehouse 2,000 products as
security against the October 22, 1999 purchase agreement. Our original commitment was at $8.25 per share. As of
December 31, 1999, we recorded a charge to additional paid-in capital for the October 22, 1999 stock repurchase
commitment for the 155,000 shares at $8.50 per share. As of July 25, 2000, the repurchase price had increased by
$1.25 since December 31, 1999 to $9.75 per share. The additional $1.25, plus increases thereafter, is or will be
treated for financial reporting purposes as an expense rather as a reduction of paid-in capital. Redemption accruals
or payments will not be treated as an expense for tax purposes. To date, we have not repurchased any of the 155,000
shares. The relevant agreements are filed as Exhibits with Amendment No. 4 to the Company's Form 10-SB filed on
June 6, 2000.
Item 2. Changes in Securities and Use of Proceeds
Since each of the Series A shareholders seeks redemption, the Company is obligated to redeem them pro rata in accordance
with their holdings. The Company, a Nevada corporation, is subject to the provisions of Nevada law concerning a
corporation's right to pay dividends, which is limited by the legal availability of funds for the payment thereof. A
Nevada corporation can pay dividends that do not impair the corporation's capital, but no more than that. The Company
is legally prohibited from making dividends unless or until making such payment will not impair the Company's capital
after the payment. The Series A Preferred stock is also junior to all Company debts, obligations, accounts payable or
absolute liabilities, whether or not there are any liens recorded. However, Series A Preferred is entitled to payment
before any dividend, distribution or redemption of the holders of the Company's Common Stock. A total of $1,875,000
as of May 25, 2000 was the amount that the Company is obligated to pay to redeem all of the presently outstanding
Series A Preferred. In addition to the redemption price above, the Preferred stockholders assert that the Company
remains obligated to pay all accrued but unpaid regular dividends, totaling $120,000 at July 1, 2000, and liquidated
damages of in an amount of $468,750. When the Company does not promptly pay this redemption price, which we so shall
be restricted from doing by the provisions of the Nevada law we referred to above in this paragraph, any of these
above-mentioned or other creditors may seek available remedies to recover or establish their respective priorities
as well. Regardless of the outcome, these creditors' remedies may distract management's time and attention and cause
the Company to incur expenses, which may include costs of any such suit or action, such as opposing any actions which
might include involuntary bankruptcy, involuntary liquidation or dissolution or others, or costs incurred by us or
others to whom we may owe a duty of indemnification or defense, which may include affiliates of the Company or its
principal shareholder or any of its Board of Directors or management.
Item 3. Defaults under Senior Securities
Commencing April 25, 2000, we have received notices from Cranshire Capital, L.P., The DotCom Fund, LLC, S Roberts
Productions, LLC and Keyway Investments Limited, the subscribers to the Company's Series A Convertible Preferred Stock
that each seeks redemption of its holdings, a total of 15,000 preferred shares issued to these investors.
The investors seek $1,875,000 for the redemption of their Series A Preferred Stock plus all accrued but unpaid
dividends and all accrued but unpaid liquidated damages. The redemption requirement (See Item. 8 entitled "Description
of Securities" under the heading "PREFERRED STOCK-Redemption" as set forth in the Company's Form 10-SB/A as filed on
or about August 24, 2000) applies unless the Company performs as required under its agreements with the holders,
including registering the Common Stock issuable upon conversion by the holders. The Company has not filed the
registration statement, as and when required. The Company is also required to cause a registration statement covering
the shares to be declared effective before November, 2000. The Company is unable to pay the redemption price at this time. The Company's funds are insufficient to redeem the preferred stock and also thereafter provide for the payment of all of its
creditors, and therefore the present default situation is expected to continue at least until a registration statement is filed and declared effective as required of the Company under these Series A Preferred Stock registration rights. Until this
redemption price shall have been paid by the Company, the holders who have demanded redemption will continue to have the ability to convert their shares of Preferred Stock into previously unissued shares of TrimFast common stock. The Company issued
15,000 shares of Series A Convertible Preferred Stock for $100 per share, and each is convertible any time after the issuance date at the face amount divided by the lesser of (a) $8.5938 or (b) 80% of the market price of the common stock as defined in the
Agreement, which is defined based on a relevant average during a period before a given conversion date. The redemption notices were given commencing April 25, 2000. Therefore, the Company has decided that it will in its June 30, 2000 financial reports
reclassify the preferred stock as a short-term liability in light of the present demands for redemption, and reduce stockholders' equity by about $1,875,000, which is the amount of its redemption obligation at the date of the balance sheet, plus all
accrued dividends and liquidated damages accrued, as required according to Rules 5-02.28 of Regulation S-X and SAB Topic 3C. The redemption rights were triggered by the existence of a triggering event, as defined by the Certificate of Designations,
Preferences and Rights for such preferred shares, and therefore each holder of Series A preferred shares shall have the right, at their option, to require us to redeem all or a portion of such holder's preferred shares.
The Company has already defaulted under the Registration Rights that belong to the holders of the outstanding Preferred
Stock, and this default will continue so long as the Company (a) has failed to file a registration statement covering
the Common Stock issuable upon conversion of the Preferred Stock or (b) fails to have a registration statement declared
effective by the Securities and Exchange Commission. The Company for each month or partial month while the default
is continuing shall be required to make a payment to the holder. We cannot predict when a registration statement
will be filed and be declared effective. The Registration Rights Agreement is filed as Exhibit 10.11 to the Company's
Form 10-SB/A amendment number 5 filed on or about August 24, 2000. The Preferred Share Agreement is filed as Exhibit
4.4 to the Company's Form 10-SB/A filed on December 23, 1999.
The amount payable on redemption of one share is $125 multiplied by the number of shares redeemed (which is 15,000
shares, or $1,875,000), plus accrued dividends to the date of redemption, at the rate of $8.00 per share per year
from June 1999, plus applicable liquidated damages. Liquidated damages accrue under the Registration Rights
Agreement and under the Series A Preferred Share Agreement.
If the Company violates any provision of or fails to fulfill any of its obligations or duties to the holders of
outstanding Preferred Stock, other than the Registration Rights Agreement, the Company agrees to pay liquidated
damages to each Buyer following the occurrence of such violation in an amount determined by multiplying (i)
$2.00 per Preferred Share then held by such Buyer by (ii) the percentage derived by dividing (A) the actual number
of days elapsed from the last day of the date of the Company Violation or the prior 30-day period, as applicable,
to the day such Company Violation has been completely cured by (B) 30, in cash, or at the Buyer's option, in the
number of shares of Company common stock equal to the quotient of (v) the dollar amount of the Liquidated Damages
on the Payment Date (as defined below) divided by (w) the closing bid price of the Company's common stock as of the
date of the Company Violation (as quoted in the Principal Market or the market or exchange where the Company's common
stock is then traded). The Liquidated Damages payable pursuant hereto shall be payable within five (5) business days
from the end of the calendar month commencing on the first calendar month in which the Company's violation occurs. In the
event the Buyer elects to receive the Liquidated Damages amount in shares of Company common stock, such shares shall
also be considered Conversion Shares and shall have the registration rights set forth in the Registration Rights
Agreement.
Item 6 Exhibits
Exhibit 10.5(1) Convertible Debenture Subscription Agreement between
the Company and FAC Enterprises and Convertible Debenture Subscription
Agreement between the Company and Gribalt U.S., Inc., including Annex A,
Intercreditor Agreement, Pledge and Security Agreement, including
Exhibits thereto, and Escrow Agreement
Exhibit 10.11 (1) Registration Rights Agreement entered into by and between the Company and certain
investors in its Series A Preferred Stock, dated as of July 16, 1999
Exhibit 27 (2) Financial Data Schedule
- - -------------------------
(1) Incorporated by reference to Form 10-SB, Amendment Number 5, as filed with the SEC on or about August 29, 2000.
(2) Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TrimFast Group, Inc.
/s/ Michael Muzio
- - - ----------------------------------------------
By: Michael Muzio, President
Dated: This 29th day of August, 2000
17
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