SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(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
<PAGE>
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
<PAGE>
JOHN P. SEMMENS CPA A PROFESSIONAL CORPORATION
24501 DEL PRADO SUITE A DANA POINT, CALIFORNIA 92629
TEL: (949) 496-8800 FAX: (949) 443-0642
June 13, 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 cash
flows 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
<PAGE>
<TABLE>
<CAPTION>
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
DECEMBER 31, 1999 MARCH 31, 1999 MARCH 31, 2000
------------------- ---------------- ----------------
<S> <C> <C> <C>
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 Receivable- Other 279,250 77,425 283,291
Inventory 281,313 195,164 890,751
Total Current Assets 693,108 945,085 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 3,750,000
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 6,553,225
-------------------------------------------------------
TOTAL ASSETS $ 2,444,750 $ 1,023,983 $ 9,681,456
=======================================================
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 1,317,500
Convertible debentures 1,000,000 0 1,000,000
-------------------------------------------------------
Total Current Liabilities 3,275,137 543,953 4,335,749
-------------------------------------------------------
TOTAL LIABILITIES 3,275,137 543,953 4,335,749
-------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred Stock, Class A, $0.01 par value; 20,000,000
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 15,976,029
Accumulated deficit (9,646,805) (1,253,220) (10,069,949)
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 5,345,706
-------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,444,750 $ 1,023,983 $ 9,681,456
=======================================================
See Accompanying Accountants Review Report and Notes to Consolidated Financial Statements
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
TRIMFAST GROUP, INC.
INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
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
--------------- ---------------
<S> <C> <C>
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
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)
=============== ===============
NET INCOME/(LOSS)PER COMMON SHARE - BASIC AND DILUTED (0.09) (0.09)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING -
BASIC AND DILUTED 4,000,870 4,597,836
</TABLE>
See Accompanying Accountants Review Report and Notes to Consolidated Financial
Statements
5
<PAGE>
<TABLE>
<CAPTION>
TRIMFAST GROUP, INC.
INTERIM CONSOLIDATED STATEMENT 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)
--------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) (369,740) (423,143)
Adjustments to reconcile net income (loss)
to net cash flows from operating activities:
Depreciation and amortization 3,113 34,872
Bad debt expense 0 0
Unrealized gain on short term investments 0 0
Issuance of common stock for professional services 324,796 48,750
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 (217,714)
--------------------------------
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 (370,520)
Due from affiliate 5,945 0
Deposits 0 (100,000)
Goodwill from acquisition of Nutrition Clubstores 0 (2,335,004)
Long term investment in marketable securities 0 (3,750,000)
--------------------------------
Net cash (used in) provided by investing activities 6,745 (6,547,118)
--------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings (500) 171,899
Proceeds from issuance of common stock 512,000 0
Issuance of common stock for acquisitions 0 2,778,750
Due to stockholder/ officer 0 525,230
APIC from contributed marketable securities 0 3,750,000
--------------------------------
Net cash provided by (used in) financing activities 511,500 7,225,879
--------------------------------
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
================================
See Accompanying Accountants Review Report and Notes to Consolidated Financial Statements
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
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 Stock Additional Preferred
to be Issued Paid-In Stock Issued Accumulated
Shares Amount Capital SHARES Amount Deficit
---------- -------- ------------- ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE JANUARY 1, 1998 1,286,625 $ 1,287 ($287) - - ($151,846)
Issuance of common stock for cash 63,924 $ 64 $ 187,736 - - -
Issuance of common stock in exchange to related
party in exchange for $40,000 debt 19,500 $ 19 $ 39,981 - - -
HLHK equity at August 12, 1998 817,749 $ 818 $ 441,083 - - (1,122,218)
Reclassification pursuant to recapitalization - - ($1,122,218) - - 1,122,218
Common stock issued to employees 500 - - - - -
Common stock issued to attorney for services 5,000 $ 5 ($5) - - -
Common stock issued in exchange for debt of HLHK
principal stockholder 75,000 $ 75 $ 491,123 - - -
Issuance of common stock in exchange for
stockholder loans 70,358 $ 70 $ 126,574 - - -
Compensation to principal stockholder - - $ 762,000 - - -
Purchase of treasury stock at cost - - - - - -
Net income 1998 - - - - - (739,974)
---------- -------- ------------- ------ ------- ------------
Balance, December 31, 1998 2,338,656 $ 2,338 $ 925,987 - - ($891,820)
---------- -------- ------------- ------ ------- ------------
Issuance of common stock for cash 1,058,005 $ 1,058 $ 1,659,817 - - -
Issuance of common stock in exchange for
consulting and other professional services 918,300 $ 918 $ 4,744,143 - - -
Issuance of common stock to employees 104,900 $ 105 $ 500,075 - - -
Issuance of convertible debentures - - $ 250,000 - - -
Issuance of Preferred Stock - - $ 1,874,901 15,000 150 (375,011)
Issuance of common stock option - - $ 413,780 - - -
Return of common stock in repayment of debt (50,000) ($50) ($399,950) - - -
Issuance of common stock as a security deposit for
inventory line of credit 100,000 $ 100 $ 474,900 - - -
Issuance of common stock in exchange for loans 51,821 $ 52 $ 272,956 - - -
Purchase and sale of treasury stock - net - - - - - (48,803)
Unrealized losses on available-for-sale securities - - - - - -
Commitment to repurchase shares of treasury stock - - ($1,317,500) - - -
Net Loss 1999 - - - - - (8,331,171)
---------- -------- ------------- ------ ------- ------------
Balance, December 31, 1999 4,521,682 $ 4,521 $ 9,399,109 15,000 $ 150 ($9,646,805)
========== ======== ============= ====== ======= ============
Issuance of common stock for professional services 10,000 $ 10 $ 48,740 - - -
Issuance of common stock for acquisition of
Nutrition Clubstores 570,000 $ 570 $ 2,778,180 - - -
Contributed capital - - $ 3,750,000 - - -
Sale of securities held for sale - - - - - -
Net Loss as of March 31, 2000 - - - - - (423,143)
---------- -------- ------------- ------ ------- ------------
Balance March 31, 2000 5,101,682 5,101 15,976,029 15,000 150 (10,069,948)
========== ======== ============= ====== ======= ============
7
<PAGE>
Shares Issued
as a
Subscriptions Security Shares Treasury
Receivable Deposit Advanced Stock Total
----------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE JANUARY 1, 1998 - - - ($150,846)
Issuance of common stock for cash - - - $ 187,800
Issuance of common stock in exchange to related
party in exchange for $40,000 debt - - - $ 40,000
HLHK equity at August 12, 1998 - - - ($680,317)
Reclassification pursuant to recapitalization - - - $ 0
Common stock issued to employees - - - $ 0
Common stock issued to attorney for services - - - $ 0
Common stock issued in exchange for debt of HLHK
principal stockholder - - - $ 491,198
Issuance of common stock in exchange for
stockholder loans - - - $ 126,644
Compensation to principal stockholder - - - - $ 762,000
Purchase of treasury stock at cost - - (23,534) ($23,534)
Net income 1998 - - - ($739,974)
----------- ---------- --------- ----------- -------------
Balance, December 31, 1998 - - - ($23,534) $ 12,971
----------- ---------- --------- ----------- -------------
Issuance of common stock for cash - - (90,625) - $ 1,570,250
Issuance of common stock in exchange for
consulting and other professional services - - - - $ 4,745,061
Issuance of common stock to employees - - - - $ 500,180
Issuance of convertible debentures - - - - $ 250,000
Issuance of Preferred Stock - - - - $ 1,500,040
Issuance of common stock option - - - - $ 413,780
Return of common stock in repayment of debt - - - - ($400,000)
Issuance of common stock as a security deposit for
inventory line of credit - (475,000) - - $ 0
Issuance of common stock in exchange for loans - - - - $ 273,008
Purchase and sale of treasury stock - net - - - 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)
Net Loss 1999 - - - - ($8,331,171)
----------- ---------- --------- ----------- -------------
Balance, December 31, 1999 ($21,737) ($475,000) ($90,625) - ($830,387)
=========== ========== ========= =========== =============
Issuance of common stock for professional services - - - - $ 48,750
Issuance of common stock for acquisition of
Nutrition Clubstores - - - - $ 2,778,750
Contributed capital - - - - $ 3,750,000
Sale of securities held for sale 21,737 - - - $ 21,737
Net Loss as of March 31, 2000 - - - - ($423,143)
----------- ---------- --------- ----------- -------------
Balance March 31, 2000 0 (475,000) (90,625) 0 5,345,707
=========== ========== ========= =========== =============
</TABLE>
SEE ACCOMPANYING ACCOUNTANTS REVIEW REPORT AND NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
8
<PAGE>
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
<PAGE>
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 the
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
<PAGE>
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 childrens 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 not
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
<PAGE>
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
<PAGE>
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.
The Company is subject to a course of action premised on a Letter of Agreement
between the two parties whereby the Plaintiff alleges the Company committed to
purchase 155,000 shares of the Company's common stock at a stipulated price.
The second count of the action is a mortgage foreclosure action, which is based
upon an alleged lien upon real property that is to have collateralized the
Agreement. The Company has filed a motion to dismiss the complaint because the
Agreement sued upon call for arbitration in the event of dispute. The Company
also filed a motion to dismiss the mortgage foreclosure action since the cause
of action is premised upon documents that cannot be recorded. Discovery is
beginning and no opinion is available as to the likely result.
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
<PAGE>
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.
A lawsuit filed against the Company, its Chief Executive Officer, principal
stockholder and certain affiliates demanding an excess of $790,000 in
compensatory and punitive damages, alleges that the plaintiff had purchased
approximately 22,000 shares of the Company's common stock for approximately
$77,000, but has not received the same. On May 3, 2000 plaintiff offered to
settle this matter whereby he would accept $95,750 and 20,000 shares of TrimFast
Group, Inc. common stock. In addition, the settlement offer provides that the
parties will enter into a joint stipulation for dismissal of the action and
execution of a general release.
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
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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
[was/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.
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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
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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 $423,143. 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
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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.
Management believes that we have sufficient revenue and reserves to finance
ongoing business activities.
Part II. Other Information
Item 6 Exhibits
Exhibit 27
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
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By: Michael Muzio, President
Dated: This 14th day of June, 2000
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