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: June 30, 2000
CLASS Outstanding at June 30, 2000
---------------------------- ----------------------------
Common stock $.001 Par Value 5,049,182
<PAGE>
TRIMFAST GROUP, INC. AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION PAGE
----
Accountants Review Report 3
Consolidated Balance Sheets as of
June 30, 2000 and 1999 (Unaudited)
and December 31, 1999 (Audited) 4
Consolidated Statements of Operations for
One Year Ending December 31, 1999 (Audited)
and the Three and Six Month Periods Ending
June 30, 2000 and 1999 (Unaudited) 5
Consolidated Statement of Cash Flows
for the Six Months Ending June 30, 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 Six Months Ended June 30, 2000 (Unaudited) 7-8
Notes to Consolidated Financial Statements
(Unaudited) as of June 30, 2000 9-14
Management Discussion and Analysis of Financial
Condition and Results of Operations 15-16
PART II. OTHER INFORMATION AND SIGNATURES
Signatures
<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
August 18, 2000
Trimfast Group, Inc.
Tampa, Fl. 33602
Gentlemen,
We have reviewed the accompanying balance sheet of Trimfast Group, Inc. as of
June 30, 2000, and the related statements of income, retained earnings and cash
flows for the three and six 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
<PAGE>
<TABLE>
<CAPTION>
TRIMFAST GROUP, INC.
INTERIM CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999 (AUDITED) AND JUNE 30, 1999 AND 2000 (UNAUDITED)
ASSETS
------
CURRENT ASSETS
DECEMBER 31, 1999 JUNE 30, 1999 JUNE 30, 2000
(AUDITED) (UNAUDITED) (UNAUDITED)
------------------- --------------- ---------------
<S> <C> <C> <C>
Cash $ 35,858 $ 1,060,975 $ 10,902
Short-term investments 8,406 $ 20,297 $ 0
Accounts Receivable- Trade 88,281 295,618 131,483
Accounts Receivable- Other 279,250 80,988 286,441
Inventory 281,313 126,501 477,969
------------------- --------------- ---------------
Total Current Assets 693,108 1,584,379 906,795
PROPERTY AND EQUIPMENT - NET 1,417,381 246,806 1,768,498
OTHER ASSETS
Prepaid expenses 42,857 0 34,884
Deposits 15,200 10,619 115,985
Other long term investments 0 5,968,750
Cash surrender value of life insurance 12,636 8,107 12,636
Software - Net 210,814 40,000 213,355
Goodwill - Net 52,754 58,616 2,619,234
------------------- --------------- ---------------
Total Other Assets 334,261 117,342 6,746,094
------------------- --------------- ---------------
TOTAL ASSETS $ 2,444,750 $ 1,948,527 $ 11,640,137
=================== =============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 718,362 $ 751,359 $ 1,051,294
Income taxes payable 20,600 20,600 20,600
Notes and loans payable 218,675 123,475 2,280,643
Stock Repurchase Commitment 1,317,500 0 1,472,500
Convertible debentures 1,000,000 1,000,000 2,000,000
------------------- --------------- ---------------
Total Current Liabilities 3,275,137 1,895,434 6,825,036
LONG TERM LIABILITIES
Notes and loans payable 0 0 63,718
------------------- --------------- ---------------
Total Long Term Liabilities 0 0 63,718
------------------- --------------- ---------------
TOTAL LIABILITIES 3,275,137 1,895,434 6,888,754
------------------- --------------- ---------------
STOCKHOLDERS' EQUITY
Preferred Stock, Class A, $0.01 par value; 20,000,000 shares authorized
0, 15,000 and 15,000 shares issued and outstanding as of June 30,
1999, December 31, 1999 and September 30, 2000 respectively 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
4,501,682; 4,620,620 and 5,049,182 shares issued and outstanding as of
December 31, 1999, June 30, 1999 and June 30, 2000 respectively 4,501 4,621 5,049
Common Stock to be issued (20,000 shares) as of December 31, 1999
and June 30, 2000 and 0 as of June 30, 1999 20 0 20
Additional Paid-in capital 9,399,109 3,068,777 16,676,185
Accumulated deficit (9,646,805) (3,020,305) (11,364,396)
Other comprehensive loss (21,737) 0 0
Less common stock subscriptions receivable (90,625) 0 (90,625)
Less common stock shares issued as security deposit (475,000) 0 (475,000)
------------------- --------------- ---------------
Total Stockholders' Equity (830,387) 53,093 4,751,383
------------------- --------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,444,750 $ 1,948,527 $ 11,640,137
=================== =============== ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRIMFAST GROUP, INC.
INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE ONE YEAR ENDED DECEMBER 31, 1999 (AUDITED)
AND THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 2000 (UNAUDITED)
FOR THE ONE YEAR FOR THE THREE MONTHS ENDED
DECEMBER 31, 1999 JUNE 30, 1999 JUNE 30, 2000 JUNE 30, 1999
(AUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
NET SALES 631,388 161,034 593,132 374,136
COST OF SALES 396,072 141,848 708,006 303,378
------------------ -------------- -------------- --------------
GROSS PROFIT 235,316 19,186 (114,874) 70,758
------------------ -------------- -------------- --------------
OPERATING EXPENSES
Salaries and other compensation 1,094,575 178,869 336,410 264,183
Commissions 5,235 765 152,965 2,565
Depreciation and amortization 78,211 5,256 66,302 8,369
Professional fees 5,513,080 1,183,291 88,144 1,435,589
Bad debt expense 293,977 0 6,040 0
Selling, general and administrative expenses 975,931 312,334 372,981 388,868
Travel and entertainment 149,908 75,280 26,365 78,008
------------------ -------------- -------------- --------------
Total Operating Expenses 8,110,917 1,755,794 1,049,206 2,177,583
------------------ -------------- -------------- --------------
INCOME FROM OPERATIONS (7,875,601) (1,736,609) (1,164,080) (2,106,825)
------------------ -------------- -------------- --------------
OTHER INCOME (EXPENSE)
Realized gain on sale of trading securities - net (1,957) 0 0 0
Unrealized gain on sale of trading securities - net (21,737) 0 0 0
Gain on sale of equipment 2,250 0 0 0
Write-off of leasehold improvements (2,476) 0 0 0
Interest expense (302,408) 0 0 0
------------------ -------------- -------------- --------------
Total Other Income (Expense) (326,328) 0 0 0
------------------ -------------- -------------- --------------
------------------ -------------- -------------- --------------
NET INCOME/ (LOSS) (8,201,929) (1,736,609) (1,164,080) (2,106,825)
================== ============== ============== ==============
EXTRAORDINARY ITEM
Loss on extinguishment of debt (150,979) 0 0 0
Loss on repurchase commitment
------------------ -------------- -------------- --------------
NET LOSS (8,352,908) (1,736,609) (1,164,080) (2,106,825)
================== ============== ============== ==============
NET LOSS PER COMMON SHARE -
BASIC AND DILUTETD (2.02) (0.40) (0.23) (0.56)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING - BASIC AND DILUTED 4,119,893 4,370,977 5,091,934 3,751,859
FOR THE SIX MONTHS ENDED
JUNE 30, 2000
(UNAUDITED)
--------------
<S> <C>
NET SALES 814,298
COST OF SALES 827,077
--------------
GROSS PROFIT (12,779)
--------------
OPERATING EXPENSES
Salaries and other compensation 486,490
Commissions 154,850
Depreciation and amortization 101,174
Professional fees 211,057
Bad debt expense 6,040
Selling, general and administrative expenses 525,465
Travel and entertainment 94,930
--------------
Total Operating Expenses 1,580,005
--------------
--------------
INCOME FROM OPERATIONS (1,592,784)
--------------
OTHER INCOME (EXPENSE)
Realized gain on sale of trading securities - net (7,776)
Unrealized gain on sale of trading securities - net 0
Gain on sale of equipment 0
Write-off of leasehold improvements 0
Interest expense 0
--------------
Total Other Income (Expense) (7,776)
--------------
--------------
NET INCOME/ (LOSS) (1,600,560)
==============
EXTRAORDINARY ITEM
Loss on extinguishment of debt 0
Loss on repurchase commitment (155,000)
--------------
NET LOSS (1,755,560)
==============
NET LOSS PER COMMON SHARE -
BASIC AND DILUTETD (0.33)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING - BASIC AND DILUTED 4,857,514
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
TRIMFAST GROUP, INC.
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 2000 (UNAUDITED)
FOR THE SIX MONTHS ENDED
JUNE 30, 1999 JUNE 30, 2000
(UNAUDITED) (UNAUDITED)
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) (2,106,825) (1,755,560)
Adjustments to reconcile net income (loss)
to net cash flows from operating activities:
Depreciation and amortization 8,369 101,174
Issuance of common stock for professional services 1,312,340 48,750
Increase in repurchase commitment 0 155,000
Changes in operating assets and liabilities
(Increase) decrease in :
Accounts receivable (18,717) (43,202)
Prepaid expenses 0 7,973
Inventory 62,236 (196,656)
Increase (decrease) in :
Accounts payable and other liabilities 125,592 332,932
-------------- --------------
Total adjustments 1,489,820 412,011
-------------- --------------
Net cash (used in) provided by operating activities (617,005) (1,343,549)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in :
Short term investments (5,000) 8,406
Due from employees 5,800 (7,191)
Property and equipment (230,151) (207,492)
Due from affiliate 5,945 0
Deposits 0 (100,785)
-------------- --------------
Net cash (used in) provided by investing activities (223,406) (307,062)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 1,051,375 1,262,243
Proceeds from issuance of common stock 744,370 0
Due to stockholder/ officer 0 363,413
-------------- --------------
Net cash provided by (used in) financing activities 1,795,745 1,625,655
-------------- --------------
CHANGE IN CASH AND CASH EQUIVALENTS 955,334 (24,956)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 105,641 35,858
-------------- --------------
-------------- --------------
CASH AND CASH EQUIVALENTS - PERIOD END 1,060,975 10,902
============== ==============
</TABLE>
<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 SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
COMMON STOCK AND COMMON ADDITIONAL
STOCK TO BE ISSUED PAID-IN PREFERRED 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 - - -
Reclass converted Preferred stock to liabilities - - ($1,500,030) - - -
Issuance of common stock for acquistion of
Nutrition Clubstores 570,000 $ 570 $ 2,778,180 - - -
Return of common stock from cancelled contracts (40,000) ($40) ($37,929) - - 37,969
Securities issued for acquisitioin of Max Muscle 7,500 $ 8 $ 19,365 - - -
Contributed capital - - $ 3,750,000 - - -
Long term investment mark to market - - $ 2,218,750 - - -
Sale of securities held for sale - - - - - -
Net Loss as of June 30, 2000 - - - - - (1,755,560)
---------- -------- ------------- ------ ------- -------------
Balance June 30, 2000 5,069,182 $ 5,069 $ 16,676,185 15,000 $ 150 ($11,364,396)
========== ======== ============= ====== ======= =============
SHARES ISSUED
SUBSCRIPTIONS AS A 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
Reclass converted Preferred stock to liabilities - - - - ($1,500,030)
Issuance of common stock for acquistion of
Nutrition Clubstores - - - - $ 2,778,750
Return of common stock from cancelled contracts - - - - $ 0
Securities issued for acquisitioin of Max Muscle - - - - $ 19,373
Contributed capital - - - - $ 3,750,000
Long term investment mark to market - - - - $ 2,218,750
Sale of securities held for sale 21,737 - - - $ 21,737
Net Loss as of June 30, 2000 - - - - ($1,755,560)
------------ ---------- --------- ---------- -------------
Balance June 30, 2000 $ 0 ($475,000) ($90,625) $ 0 $ 4,751,383
============ ========== ========= ========== =============
</TABLE>
<PAGE>
TrimFast Group, Inc.
Notes to Interim Consolidated Financial Statements
As of June 30, 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
--------------------
Revenue for products ordered through our website NutritionCafe.com 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.
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.
<PAGE>
TrimFast Group, Inc.
Notes to Interim Consolidated Financial Statements
As of June 30, 2000
(Unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION - (Cont'd)
--------------------------------------------------------------------------------
(A) Revenue Recognition - (Cont'd)
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 6/30/99 6/30/00
-------- ------- -------
Millennium - related party $279,250 $28,058 $281,251
Due from Immmu/Immcel 0 $50,000 0
Other 0 0 5,190
-------- ------- --------
$279,250 $77,425 $286,441
======== ======= ========
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 6/30/99 6/30/00
-------- ------- -------
Finished Goods $224,784 $125,410 $445,375
Product Components 56,529 1,091 32,594
-------- -------- --------
Total $281,313 $126,501 $477,969
======== ======== ========
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.
(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.
<PAGE>
TrimFast Group, Inc.
Notes to Interim Consolidated Financial Statements
As of June 30, 2000
(Unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION - (Cont'd)
(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 - EQUITY TRANSACTIONS
--------------------------------
A. Common Stock
In May we canceled 20,000 shares of the Company's common stock that was returned
as a result of our cancellation of the consulting contract from 1999. In June we
canceled 20,000 shares of the Company's common stock that was returned as a
result of our cancellation of the consulting contract from 1999. In June we
issued 7,500 shares of the Company's common stock in accordance with the asset
purchase agreement with Max Muscle (See Note 4 (B)). 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. 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.
<PAGE>
TrimFast Group, Inc.
Notes to Interim Consolidated Financial Statements
As of June 30, 2000
(Unaudited)
NOTE 3 - EQUITY TRANSACTIONS - Cont'd
-------------------------------------------
C. 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 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. (See
Note 5)
NOTE 4 - ACQUISITIONS
------------------------
(A) - Nutrition Clubstores
In June, we received audited financial statements for Nutrition Clubstores as of
February 29, 2000 as required in our acquisition agreement. We are reviewing the
statements and have been discussing them with the previous owners to determine
the most appropriate way to complete the transaction.
(B) - Max Muscle
On June 9, 2000 we acquired all of the assets of the business named Max Muscle,
a retail location in Tampa, Florida. The purchase price was $35,000 cash plus
7,500 shares of our common stock valued at $2.56 per share based average quoted
trading price a few days before and after the transaction based on EITF 95-19
for a total of $54,200, which includes approximately $100 in transaction costs.
The acquisition will be accounted for under the purchase method. The allocation
of the purchase price of this acquisition is as follows: inventory $26,000,
fixed assets $20,000, goodwill $8,200. The goodwill balance will be amortized
over 60 months.
The $35,000 cash used in the acquisition was advanced to the Company by the
principal stockholder.
<PAGE>
TrimFast Group, Inc.
Notes to Interim Consolidated Financial Statements
As of June 30, 2000
(Unaudited)
NOTE 5 - LITIGATION
----------------------
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. On July 18, 2000
the Company entered into a settlement agreement whereby we agreed to execute a
secured promissory note in the total amount of $620,000 at a 7% per annum simple
interest which is due on or before July 31, 2001. In exchange, the Plaintiff
will return 53,000 shares of the Company's common stock and dismiss all claims
alleged in this case.
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. On July 31, 2000 the parties signed a joint
stipulation for dismissal with prejudice order releasing all claims based on a
settlement that was reached. The case was settled by Mr. Muzio and Mr. Goelo
personally, and has no impact on the Company.
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 June 30, 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.
Sheri Peck v. Trimfast Group, Inc., et al. Case No.1:99CV374) During June, we
negotiated a settlement whereby we agree to pay $3,000 cash and 10,000 shares
of the Company's restricted common stock. We have instructed our attorney to
accept the settlement and anticipate the resolution of this case during August
2000.
<PAGE>
TrimFast Group, Inc.
Notes to Interim Consolidated Financial Statements
As of June 30, 2000
(Unaudited)
NOTE 5 - LITIGATION (Cont'd)
--------------------------------
Cranshire Capital, LP, S. Robert Productions, LLC, and The DOTCOM Fund, LLC vs
TrimFast Group, Inc. (case number 00C3510) On June 9, 2000 the a lawsuit was
filed in the U.S. District Court for the Northern District of Illinois, Eastern
Division against the Company for (i) breach of contract for failing to file the
required registration statement with the SEC and (ii) pay liquidated damages
arising from its failure to file the required registration statement; (iii)
confirm receipt of the investors' redemption notices and (iv) redeem the
investors preferred stock. The suit seeks damages of an unspecified amount
exceeding $75,000.
NOTE 6 - SUBSEQUENT EVENTS
------------------------------
On July 21, 2000 the Company entered into a settlement with Slim-fast Foods Co.
on their claim of patent infringement. The settlement allows TrimFast to
continue selling our weight loss pills under the TrimFast name, but restricts us
from selling weight loss bars labeled with the TrimFast name after current
inventory is sold or September 20, 2000, at which time the Company agreed to
provide Slim-fast an affidavit attesting to the destruction of any remaining
bars.
Mark Sansom vs. InsiderStreet.com, Inc., TrimFast Group, Inc. Florida Atlantic
Stock Transfer, Inc. Michael J. Muzio (Case No. 000904440). In an action filed
in the Third Judicial District Court for Salt Lake City, Utah. The complaint is
a multi-count complaint and alleges that the signature of Mark Sansom contained
on a rescission agreement in connection with a consulting agreement for 300,000
shares of the Companys' common stock is not genuine. Plaintiff also alleges
conversion on the part of TrimFast and wrongful refusal to register/transfer the
shares. Mr. Sansom has also filed a breach of contract count against Mr. Muzio
for failing to purchase 36,000 shares of TrimFast common stock at a price of
$7.00 per share.
<PAGE>
TRIMFAST GROUP, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
FINANCIAL STATEMENT PRESENTATION
RESULTS OF OPERATIONS.
June 30, 2000 as compared to June 30, 1999
Sales for the six months ended June 30, 2000 were $814,298 as compared to
$374,136 for six months ended June 30, 1999. Cost of sales increased from
$303,378 as of June 30, 1999 to $827,077 as of June 30, 2000. This increase in
cost of sales is a result of our acquisition of Nutrition Clubstores and the
lower margins on the products in inventory we acquired. Additionally, we felt
the inventory levels carried in each store were too high, and decided to
discount prices on items we decided not to carry any longer. We also reduced
prices to help make room for our own line of products which we anticipate
introducing during August 2000.
Our salaries and compensation increased from $264,183 for the six months ended
June 30, 1999 to $486,490 for the six months ended June 30, 2000 for several
reasons. The 1999 balance does not include a full 3 months compensation for
Nutrition Caf , which we opened in June 1999, or the Cooler Group, which we
acquired in May 1999. The largest portion of the June 2000 balance is from
salaries and wages for Nutrition Clubstores employees. During the quarter we
dramatically changed the pay structure for all employees and terminated the
higher paid salaried employees, however, it took several months to fully
implement our plan. The balance of the change relates to upgrading positions at
the corporate level 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.
For the six months ended June 30, 2000, we recorded $211,057 in
professional fees as compared to $ 1,435,589 for the six months ended June 30,
1999. Approximately $50,000 represents non-cash issuance of common stock in
exchange for legal services related to SEC filings. Approximately $60,000 were
for legal fees associated with various lawsuits. Approximately $75,000 were
accounting costs associated with the year end audit and SEC filings. Of the
remaining balance, approximately $5,000 was paid for filing fees associated with
SEC filings and approximately $8,000 was paid to various business consultants.
Selling general and administrative expenses were $525,465 and $388,981 for
the six months ended June 30, 2000 and 1999 respectively. The increase is
related to the additional locations associated with Nutrition Clubstores.
Net loss for the six months ended June 30, 2000 was $1,755,560. Net loss
for the six months ended March, 31 1999 was $2,106,825.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES.
June 30, 2000 as compared to June 30, 1999
Total cash and cash equivalents as of June 30, 2000 were $10,902 as
compared to $1,060,975 as of June 30, 1999. The June 1999 cash balance is
artificially inflated as a result of the convertible debenture proceeds that had
just been received prior to the report date.
Trade receivables were $131,483 as of June 30, 2000 and $295,618 as of June 30,
1999 including $267,240 related to Cutting Edge that was written off in
December 1999.
Inventory as of June 30, 2000 was $477,969 as compared to $126,501 as of June
30, 1999. The large increase in inventory is attributable to the acquisition
of Nutrition Clubstores, the build up in inventory for Nutrition Caf which
opened in June 1999 and was not fully stocked with inventory as of June 30,
1999. Additionally, the June 2000 inventory balance includes an adjustment to
reduce inventory by approximately $175,000 from that reported for March 31, 2000
based on the audited financial statements we received in June. Goodwill was
increased to offset the inventory reduction until final resolution of the entire
financial statements can be completed and an adjusted purchase price is agreed
upon.
Total current assets were $906,795 as of June 30, 2000 and $1,584,379 as of
June 30, 1999 the change is related to the increase in inventory and decline in
trade receivables and cash as discussed above.
Property and equipment increased from $246,806 on June 30, 1999 to $1,768,498
on June 30, 2000. The largest asset we acquired is the building used for
Nutrition Caf and warehouse facility and the assets acquired with Nutrition
Clubstores. To a lesser amount, the increase is the result of assets purchased
to run Nutrition Caf and the Cooler Group.
We also experienced a significant increase in liabilities. Accounts payable
increased from $751,359 on June 30, 1999 to $1,051,294 on June 30, 2000. The
large increase is the result of our acquisition of Nutrition Clubstores which
had approximately $300,000 in outstanding payables as of June 30, 2000.
Management believes that we have sufficient revenue and reserves to finance
ongoing business activities.
<PAGE>
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/ John Troy
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By: John Troy, CFO
Dated: This 21 st day of August, 2000
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<PAGE>
