-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D/01Zq+LAwFoTuCaq/Tzej/eTAa1e27BEZaKjk5ZKunrZ44IRebuCYPbGqgQtMR2 jCME4m5TQ+Y1T7U1wQ6Wzw== /in/edgar/work/20000606/0001015402-00-001619/0001015402-00-001619.txt : 20000919 0001015402-00-001619.hdr.sgml : 20000919 ACCESSION NUMBER: 0001015402-00-001619 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 20000606 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRIMFAST GROUP INC CENTRAL INDEX KEY: 0001089297 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 880367136 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: SEC FILE NUMBER: 000-26675 FILM NUMBER: 649964 BUSINESS ADDRESS: STREET 1: 777 S HARBOUR ISLAND BLVD 260 CITY: TAMPA STATE: FL ZIP: 33602 BUSINESS PHONE: 8132750050 MAIL ADDRESS: STREET 1: 777 S. HARBOR ISLAND BLVD., SUITE 260 CITY: TAMPA STATE: FL ZIP: 33602 10QSB/A 1 0001.txt Securities and Exchange Commission Washington, D.C. 20549 FORM 10-QSB 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: September 30, 1999 ------------------ CLASS Outstanding at September 30, 1999 - ---------------------------- --------------------------------- Common stock $.001 Par Value 4,540,978 TRIMFAST GROUP, INC. AND SUBSIDIARIES PART I: FINANCIAL INFORMATION PAGE ---- Consolidated Balance Sheet as of September 30, 1999 (Unaudited) and December 31, 1998 3 Consolidated Statements of Operations for the Twelve Months Ended December 31, 1998 and for the Three and Nine Month Periods Ended September 30, 1999 (Unaudited) 4 Consolidated Statement of Cash Flows for the Year ended December 31, 1998 and for the Nine Months Ended September 30, 1999 (Unaudited) 5 Consolidated Statement of Changes in Stockholders' Equity for the one year ended December 31, 1998 and for the Nine Months Ended September 30, 1999 (Unaudited) 6 Notes to Consolidated Financial Statements (Unaudited) as of September 30, 1999 7-15 Management Discussion and Analysis of Financial Condition and Results of Operations 16-17 PART II. OTHER INFORMATION AND SIGNATURES Signatures 18
TRIMFAST GROUP, INC. INTERIM CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1998 AND SEPTEMBER 30, 1999 ASSETS ------ CURRENT ASSETS SEPTEMBER 30, 1999 DECEMBER 31, 1998 (UNAUDITED) ------------------- -------------------- Cash 105,641 $ 59,092 Short-term investments 15,297 $ 41,220 Accounts Receivable- Trade 357,889 318,407 Accounts Receivable- Other 11,745 512,278 Inventory 188,737 377,270 ------------------- -------------------- Total Current Assets 679,309 1,308,267 PROPERTY AND EQUIPMENT - NET 33,403 1,459,270 OTHER ASSETS Prepaid expenses 0 50,000 Rent deposit 10,619 15,000 Cash surrender value of life insurance 8,107 12,646 Software development 0 228,705 Goodwill - Net 0 54,708 ------------------- -------------------- Total Other Assets 18,726 361,060 ------------------- -------------------- TOTAL ASSETS $ 731,438 $ 3,128,596 =================== ==================== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES Accounts payable and accrued expenses $ 625,767 $ 926,612 Notes and loans payable 72,100 33,881 Income taxes payable 20,600 20,600 Convertible debentures 0 1,000,000 ------------------- -------------------- Total Current Liabilities 718,467 1,981,093 ------------------- -------------------- TOTAL LIABILITIES 718,467 1,981,093 ------------------- -------------------- 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 December 31, 1998 and September 30, 1999 respectively 0 150 Preferred Stock, Class B, $0.01 par value; 20,000,000 shares authorized; none issued and outstanding 0 0 Common Stock, $0.001 par value; 100,000,000 shares authorized, 2,260,775 and 4,540,978 shares issued and outstanding as of December 31, 1998 and September 30, 1999 respectively 2,260 4,541 Common Stock to be issued (77,881 shares) as of December 31, 1998 and (8,478 shares) as of September 30, 1999 78 8 Additional Paid-in capital 925,987 6,936,610 Accumulated deficit (891,820) (4,370,622) Less cost of treasury stock (5,500 as of December 31, 1998 and 32,500 as of September 30, 1999) (23,534) (139,547) Less common stock shares advanced 0 (925,312) Less common stock subscriptions receivable 0 (358,325) ------------------- -------------------- Total Stockholders' Equity 12,971 1,147,503 ------------------- -------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 731,438 $ 3,128,596 =================== ====================
TRIMFAST GROUP, INC. INTERIM CONSOLIDATED STATEMENT OF OPERATIONS FOR THE ONE YEAR ENDED DECEMBER 31, 1998 (AUDITED) AND THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED) FOR THE THREE FOR THE NINE FOR THE ONE YEAR MONTHS ENDED MONTHS ENDED ENDED SEPTEMBER 30, 1999 SEPTEMBER 30, 1999 DECEMBER 31, 1998 (UNAUDITED) (UNAUDITED) ------------------ ------------------- ------------------- NET SALES 1,925,332 207,201 581,337 COST OF SALES 567,472 89,925 408,495 ------------------ ------------------- ------------------- GROSS PROFIT 1,357,860 117,276 172,842 ------------------ ------------------- ------------------- OPERATING EXPENSES Salaries and other compensation 983,773 208,215 505,372 Commissions 41,700 14,302 18,117 Depreciation and amortization 10,498 54,202 54,202 Professional fees 49,511 505,576 1,467,900 Bad debt expense 503,839 102,723 102,723 Selling, general and administrative expenses 423,289 249,593 623,451 Travel and entertainment 64,187 54,240 132,249 ------------------ ------------------- ------------------- Total Operating Expenses 2,076,797 1,188,851 2,904,014 ------------------ ------------------- ------------------- INCOME FROM OPERATIONS (718,937) (1,071,575) (2,731,172) ------------------ ------------------- ------------------- OTHER INCOME (EXPENSE) Realized gain on sale of trading securities - net 1,905 499 499 Unrealized gain on sale of trading securities - net 922 0 (18,549) Interest expense (3,264) (354,569) (354,569) ------------------ ------------------- ------------------- Total Other Income (Expense) (437) (354,070) (372,619) ------------------ ------------------- ------------------- LOSS BEFORE INCOME TAXES (719,374) (1,425,645) (3,103,791) FEDERAL AND STATE INCOME TAXES 20,600 0 0 ------------------ ------------------- ------------------- NET INCOME/ (LOSS) (739,974) (1,425,645) (3,103,791) ================== =================== =================== Dividend on Preferred Stock (375,011) ------------------ ------------------- ------------------- NET INCOME/ (LOSS) APPLICABLE TO COMMON STOCK (739,974) (1,425,645) (3,478,802) ================== =================== =================== NET INCOME (LOSS) PER COMMON SHARE-BASIC AND DILUTED (0.43) (0.31) (0.87) WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED 1,710,860 4,574,887 4,028,972
TRIMFAST GROUP, INC. INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE ONE YEAR ENDED DECEMBER 31, 1998 (AUDITED) AND THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED) FOR THE NINE MONTHS FOR THE ONE YEAR ENDED ENDED SEPTEMBER 30, 1999 DECEMBER 31, 1998 (UNAUDITED) -------------------- ------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) (739,974) (3,103,791) Adjustments to reconcile net income (loss) to net cash flows from operating activities: Depreciation and amortization 10,498 54,202 Bad debt expense 503,839 6,498 Unrealized gain on short term investments (922) (18,459) Stock based compensation 762,000 0 Issuance of common stock for professional services 0 1,238,505 Changes in operating assets and liabilities (Increase) decrease in : Accounts receivable (856,839) (472,796) Prepaid expenses 0 (50,000) Inventory (165,038) (188,533) Increase (decrease) in : Accounts payable and other liabilities 496,181 300,845 Income taxes payable 20,600 0 -------------------- ------------------- Total adjustments 770,319 870,262 -------------------- ------------------- Net cash (used in) provided by operating activities 30,345 (2,233,529) -------------------- ------------------- CASH FLOWS FROM INVESTING ACTIVITIES: (Increase) decrease in : Short term investments (14,375) (25,923) Due from employees (5,800) 5,800 Property and equipment (37,821) (1,764,682) Due from affiliate (5,945) 5,945 Rent deposit (8,119) (4,381) Cash surrender value of life insurance (8,107) (4,529) -------------------- ------------------- Net cash (used in) provided by investing activities (80,167) (1,787,770) -------------------- ------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings 1,975 961,781 Purchase of treasury stock (23,534) (116,013) Proceeds from issuance of common stock 177,800 1,628,942 Proceeds from issuance of preferred stock 0 1,500,040 Due to stockholder/ officer (18,436) 0 -------------------- ------------------- Net cash provided by (used in) financing activities 137,805 3,974,750 -------------------- ------------------- CHANGE IN CASH AND CASH EQUIVALENTS 87,983 (46,549) CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 17,658 105,641 -------------------- ------------------- CASH AND CASH EQUIVALENTS - END OF YEAR 105,641 59,092 ==================== ===================
TRIMFAST GROUP, INC. INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY FOR THE ONE YEAR ENDED DECEMBER 31, 1998 (AUDITED) AND THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED) Common Stock and Common Additional Preferred Stock to be Issued Paid-In Stock Issued Accumulated SHARES Amount Capital SHARES Amount Deficit ---------- -------- ------------ ------ ------- ------------ 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) ---------- -------- ------------ ------ ------- ------------ Equity financing - 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 769,459 770 1,237,735 - - - Issuance of common stock acquisition of Immmu and Imcel. To be returned per rescission agreement. 235,000 235 925,077 - - - Issuance of common stock to employees 150,358 150 95,247 - - - Issuance of convertible debentures - - 250,000 - - - Return of common stock in repayment of debt (50,000) (50) (399,950) - - - Issuance of common stock held in escrow to secure loan 23,000 23 199,790 - - - Issuance of common stock for debt repayment 24,500 25 168,006 - - - Repurchase of treasury stock at cost - - - - - - Issuance of Preferred Stock - - 1,874,901 15,000 150 (375,011) Net Loss, year to date as of September 30, 1999 - - - - - (3,103,791) ---------- -------- ------------ ------ ------- ------------ Balance, September 30, 1999 4,540,978 $ 4,549 $ 6,936,610 15,000 $ 150 ($4,370,622) ========== ======== ============ ====== ======= ============ Subscriptions Shares Treasury Receivable Advanced Stock Total ----------- ---------- ---------- ------------- 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 ----------- ---------- ---------- ------------- Equity financing - issuance of common stock for cash - - - $ 1,660,875 Issuance of common stock in exchange for consulting and other professional services (358,325) - - $ 880,180 Issuance of common stock acquisition of Immmu and Imcel. To be returned per rescission agreement. - (925,312) - $ 0 Issuance of common stock to employees - - - $ 95,397 Issuance of convertible debentures - - - $ 250,000 Return of common stock in repayment of debt - - - ($400,000) Issuance of common stock held in escrow to secure loan - - - $ 199,813 Issuance of common stock for debt repayment - - - $ 168,031 Repurchase of treasury stock at cost - - (116,013) ($116,013) Issuance of Preferred Stock - - - $ 1,500,040 Net Loss, year to date as of September 30, 1999 - - - ($3,103,791) ----------- ---------- ---------- ------------- Balance, September 30, 1999 ($358,325) ($925,312) ($139,547) $ 1,147,503 =========== ========== ========== =============
TrimFast Group, Inc. Notes to Interim Consolidated Financial Statements As of September 30, 1999 (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. The financial statements are presented without comparable 1998 quarterly information. The Company was not publicly traded in 1998 and systems, though adequate to address annual audit needs, were not in place to allow for extracting reliable quarterly information. 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. TrimFast Group, Inc. Notes to Interim Consolidated Financial Statements As of September 30, 1999 (Unaudited) 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 of this, 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: Millennium - related party $259,558 Cash from rescission of IMMMU purchase 50,000 Stock held in escrow securing loan 199,790 Other 2,930 -------- $512,278 ======== (B) Accounts Receivable - Other (Cont'd) ---------------------------------------- On May 26, 1999 the company placed in an escrow account 23,000 shares of its' common stock valued at $199,790 to secure the loan to acquire Ice Cold Water, Inc. (See note 7B) The shares will be returned to authorized when the loan is satisfied. The receivable from Millennium represents cash advances to an affiliated company during the year. The balance at December 31, 1999 is $156,212. (C) Inventory --------- Components of inventory are as follows: Finished Goods $320,296 Product Components 56,974 -------- Total $377,270 ======== The Company performs periodic 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. TrimFast Group, Inc. Notes to Interim Consolidated Financial Statements As of September 30, 1999 (Unaudited) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION - (Cont'd) - -------------------------------------------------------------------------------- (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 has contracted with an outside software development firm to develop software that runs the website for Nutrition Caf . All costs associated with the development of the software have been capitalized while any costs associated with content have been expensed. NOTE 3 - ACQUISITION OF BUILDING - ------------------------------------- On July 30, 1999 the Company exercised its option to purchase the facility located at 2555 Blackburn Street, Clearwater, FL for $1,200,000. The property is used as the sales, storage and distribution facility for Nutrition Caf , Inc. The funds were raised through the sale of 15,000 shares of Class A Preferred Stock and 223,681 warrants to purchase common stock. (See Note 6) NOTE 4 - WCW LICENSE AGREEMENT - ----------------------------------- On June 2, 1999 the Company signed a license agreement with World Championship Wrestling, Inc (WCW) to utilize certain names, likeness, characters, trademarks and/or copyrights in connection with the manufacture, distribution, advertising, promotion and sale of certain articles of merchandise. The license extends through December 2002. The agreement includes a non-refundable advance of $50,000 which, has been capitalized as prepaid expense and will be amortized over the life of the agreement. Terms of the agreement include a royalty payment of 6% of net sales with the following guarantees: $100,000 Due No Later Than 12-31-99 $100,000 Due No Later Than 6-30-00 $100,000 Due No Later Than 9-30-00 $100,000 Due No Later Than 12-31-00 $100,000 Due No Later Than 6-30-01 TrimFast Group, Inc. Notes to Interim Consolidated Financial Statements As of September 30, 1999 (Unaudited) NOTE 5 - CONVERTIBLE DEBENTURE - ---------------------------------- On June 14, 1999 the Company issued $1,000,000 in Convertible Debentures in exchange for $1,000,000 in cash. The agreement, which contains a beneficial conversion feature, stipulates that the debentures may be converted as of the closing date at the lower of $8.50 or 80% of the fair market value of the common stock on the conversion date resulting in the recognition of $250,000 interest expense at closing. The Company accounts for the debentures in accordance with EITF 98-5 "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios." Accordingly, the Company has allocated a portion of the proceeds to additional paid-in capital equal to the intrinsic value of the features as computed on the commitment date, resulting in recognition on the closing date of $250,000 interest expense. NOTE 6 - EQUITY TRANSACTIONS - -------------------------------- Sale of Preferred Stock and Warrants On July 13, 1999 we issued 155,000 restricted shares of our common stock for $4.00 each to Aryeh Trading. Under this agreement, the Company is obligated repurchase these shares for $8.25 each with a $0.25 per share per month increase in price pursuant to an escalation clause in the agreement. 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. The following shares were issued in consideration other than cash: Pursuant to various agreements we issued the following shares of our restricted common stock: On July 7, 1999, we issued 10,000 shares of our common stock in exchange for Legal Services rendered for the Company. On July 19, 1999, we issued 30,000 shares of our common stock for consulting services rendered to the Company. In July 1999 we received 50,000 shares of our common stock from a principal stockholder in exchange for $400,000 owed to the company. 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. On August 3, 1999, we issued 10,000 share of our common stock in exchange for Business Consulting Services and 10,000 shares of our common stock in consideration for Legal Services rendered to the Company. 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. TrimFast Group, Inc. Notes to Interim Consolidated Financial Statements As of September 30, 1999 (Unaudited) The aforementioned issuances and sales were made in reliance upon the exemption from registration contained in Section 4(2) of the Act. The purchasers of the securities described above acquired them for their own account and not with a view to any distribution thereof to the public. The shares which have been issued pursuant to Section 4(2), bear legends stating that the securities may not be offered, sold or transferred other than pursuant to an effective Registration Statement under the Act, or an exemption from such registration requirements. The Registrant will place stop transfer instructions with its transfer agent with respect to all such securities. The Company entered into several consulting agreements with various individuals whereby the Company was to be provided with advice with regard to corporate strategy and business development including targeting of acquisitions. The Company advanced the consultants 490,000 shares in 1999 but minimal services as anticipated in the consulting agreements were performed in 1999 and no services were performed in 1998. Therefore on June 30, 1999 the consulting agreements were rescinded and the Company offered the consultants the restricted shares at a price of $0.25 per share resulting in a subscription receivable. The Company expects to receive the payment in the form of invoices for prior services rendered under the rescinded consulting agreements. As of the date of this report invoices for $15,625 has been received. When an invoice is received, the Company recognizes consulting expense for all shares issued based on the fair market value of the stock on the grant date. In July 1999, we issued 15,000 Class A convertible preferred shares and 223,881 warrants. Cranshire Capital purchased 5,000 preferred shares and 74,627 warrants for consideration of $300,010. Dotcom Fund purchased 3,000 preferred shares and 44,776 warrants for consideration of $500,010. Keyway Investments purchased 5,000 preferred shares and 74,627 warrants for $500,010. Robert Productions, Inc. purchased 2,000 preferred shares for consideration of $200,010. The warrants are exercisable at any time until July 16, 2002 at an exercise price of $10.00 per warrant. The Company relied upon the exemption from registration provided in Section 4(2) of the Act. We believed section 4(2) was available for the issuance of the preferred shares and warrants because there was no general solicitation or advertising used in connection with the offering and the transaction did not involve a public offering. As a result of accounting for the beneficial conversion feature, the Company charged a $375,011 dividend to retained earnings on the issuance date. (See Note 3) During the period ended September 30, 1999 the Company issued 108,000 warrants (i.e., stock options) to certain consultants and other service providers of the Company. The Company applies SFAS 123 for warrants and options issued to consultants and other service providers. For financial statement disclosure purposes and for purposes of valuing these stock options, the fair market value of each stock option granted was estimated on the date of grant using the Black-Scholes Option-Pricing Model in accordance with SFAS 123 using the following weighted-average assumptions: expected dividend yield 0%, risk-free interest rate of 5.3%, volatility 70% and expected term of one year. Accordingly, professional and consulting fees of TrimFast Group, Inc. Notes to Interim Consolidated Financial Statements As of September 30, 1999 (Unaudited) $413,780 was charged to operations in 1999. The deferred tax asset of $140,685 resulting from the professional and consulting fees of $413,780 was fully offset by a valuation allowance at December 31, 1999. A summary of the options issued to consultants as of September 30, 1999 is presented below:
Number of Weighted Average Options Exercise Price --------- ----------------- Stock Options Balance at beginning of period - $ - Granted 108,000 $ 4.55 Exercised - - Forfeited - $ - --------- ----------------- Balance at end of period 108,000 $ 4.55 ========= ================= Options exercisable at end of period 108,000 $ 4.55 Weighted average fair value of options granted during the period 108,000 $ 3.83
The following table summarizes information about stock options outstanding at September 30, 1999:
Options Outstanding Options Exercisable - --------------------------------------------------------------------------- Number Weighted Outstanding Average Weighted Number Weighted Range Of At Remaining Average Exercisable Average Exercise September 30, Contractual Exercise At September Exercise Price 1999 Life Price 30, 1999 Price $ 4.00 68,000 0.67 Years $ 4.00 68,000 $ 4.00 $4.00 - 7.00 40,000 0.46 Years $ 5.50 40,000 $ 5.50 ------------- ----------------------- 108,000 0.59 Years $ 4.55 108,000 $ 4.55 ============= ============
NOTE 7 - ACQUISITIONS - ------------------------ (A) Acquisitions of Subsidiaries and Subsequent Rescission ---------------------------------------------------------- On March 18, 1999 the Company acquired IMMMU, Inc. ("IMMMU") and IMMCEL Pharmaceuticals, Inc. ("IMMCEL"), two companies related through common stockholders, in a transaction accounted for as a purchase. Under terms of the agreement, 235,000 shares of the Company's common stock, $50,000 in cash and an option agreement for shares of TrimFast Group, Inc. Notes to Interim Consolidated Financial Statements As of September 30, 1999 (Unaudited the Company's common stock exercisable based on stipulated Company performance criteria were exchanged for all of the issued and outstanding capital stock of IMMMU and IMMCEL. Subsequently, the Company entered into a rescission agreement of the purchase. Activity from IMMMU and IMMCEL are not part of these consolidated statements. The common stock shares are recorded as "Common Shares Advanced" and deducted from stockholder equity and the $50,000 is recorded in Accounts Receivable - Other. The Company incurred a loss of $94,225 from operating the companies during 1999 which is recorded in Accounts Receivable - Other with a reserve for 100% recorded as bad debt. (B) Asset Accumulation ------------------- On May 24, 1999 the Company acquired certain assets of Ice Cold Water Co., Inc. ("ICW") including certain receivables, inventory, property and equipment, a customer list and the name "Ice Cold Water" and all other intellectual property rights associated with the name. Under terms of the agreement, the Company acquired the assets for $20,000 in cash and a $100,000 promissory note at 8.5% per annum which is due in four monthly installments of $25,000 plus accrued interest, commencing June 10, 1999. 23,000 shares of the Company's common stock were reserved in an escrow account to be released to ICW in the case of default of payments. The Company then formed a new subsidiary, The Cooler Group and transferred these assets into it. A balance of $30,406 remains outstanding as of September 30, 1999. NOTE 8 - LITIGATION - ---------------------- In 1999 the Company initiated a legal proceeding against a former major customer to collect amounts receivable from that customer aggregating approximately $535,000 at December 31, 1998. Such receivable related to products sold to that customer during 1998 that were voluntarily recalled by the Company, but never returned by the customer. As of December 31, 1998, it was management's assertion with regard to this matter that since the product was never returned to the Company, and is believed to have been resold by the customer, a successful outcome in favor of the Company was possible. The Company has therefore written off $267,240 or fifty percent of the total receivable as of December 31, 1998. Subsequent to the date of these financial statements, management does not expect to receive any further payments of this customer and therefore decided to write off the balance reduced by payments received during January, 1999. 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 an additional three consumer-protection 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. All lawsuits have been referred by management to the insurance carrier of our third party manufacturer, however, the Company has received notice from the insurance carrier denying all claims. Management intends to contest the claim denials. The Company obtained its own insurance policy in May 1999 and believes it would not be covered under its own policy for these prior TrimFast Group, Inc. Notes to Interim Consolidated Financial Statements As of September 30, 1999 (Unaudited) 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 September 30, 1999 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. 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. As of May 3, 2000 settlement negotiations are ongoing. An adverse judgment of this litigation may have an adverse effect on the Company's results of operations and financial condition. TrimFast Group, Inc. Notes to Interim Consolidated Financial Statements As of September 30, 1999 (Unaudited) 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 September 30, 1999. 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 9 - SUBSEQUENT EVENTS - ------------------------------ A. Contributed Capital On February 1, 2000 Michael Muzio contributed 500,000 shares of restricted stock to the Company. The shares were valued at the $7.50 based on the quoted trading price on the date of contribution. B. Acquisition of Nutrition Clubstores, Inc. 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. 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 28, 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 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. 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 TrimFast Group, Inc. Notes to Interim Consolidated Financial Statements As of September 30, 1999 (Unaudited) 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. C. Convertible Debenture. On April 25, 2000 the Company entered into a convertible debenture agreement with Gibralt U.S., Inc. a Colorado Corporation and FAC Enterprises, Inc. a Pennsylvania Corporation 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 the first $1,000,000 was wired to our account. TRIMFAST GROUP, INC. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. FINANCIAL STATEMENT PRESENTATION The September 30, 1999interim financial statements are presented without comparable 1998 quarterly information. We were not publicly traded in 1998 and systems, though adequate to address annual audit needs, were not in place to allow for extracting reliable quarterly information. We have presented the comparison with adjustments from the year end 1998 numbers. RESULTS OF OPERATIONS. December 31, 1997 and 1998 as compared to September 30, 1999 Sales for the nine months ended September 30, 1999 were $581,337 as compared to $1,925,332 for the year ended December 31, 1998 ($1,443,999 adjusted proportionately for the nine months ended September 30, 1998 and $22,338 as of December 31, 1997). The significant decline in sales from 1998 to 1999 is primarily attributable to our decision to discontinue the sale of Revivarant, a muscle replenishment supplement, which accounted for approximately $1.4 million of revenues during 1998. This decision was initiated by an industry wide investigation by the Food and Drug Administration into the active ingredient in Revivarant. Our salaries and compensation increased from $31,633 in 1997 to $993,773 in 1998 to $505,372 for the nine months ended September 30, 1999 for several reasons. The 1998 amount included $762,000 non-cash stock based compensation expense. Our 1999 salaries include increased expenses of support staff. Specifically, we added two administrative assistants, upgraded our accounting position to Chief Financial Officer and added a salesman to our staff. In addition, during 1999 we added two new subsidiaries, Ice Cold Water and Nutrition Cafe, which account for approximately 40% of the increased salary reported. Moreover, the employment market in Tampa has been highly competitive in 1999 resulting in our company paying higher wages to all employees to retain and recruit qualified employees. Management expected that the introduction of the IMMCEL and IMMMU product lines would add to revenues. However, customer acceptance proved disappointing and the prior owner, and key employee refused to honor his contractual commitments to manage the newly added subsidiaries. As a result, we have rescinded our agreement with the prior owners of IMMMU and IMMCEL and will focus on the expansion of our own line of nutritional supplements. All rights title and interest to the IMMMU/IMMCEL product lines will revert back to their prior owners, all consideration paid or received will be returned and any profits or losses generated from the operation on IMMMU and IMMCEL will be allocated to its prior owners. We recorded in the "Receivable - other" account the loss from operating IMMMU and IMMCEL for the period of time we managed those companies. We then recorded a 100% reserve against the balance at September 30, 1999. As of December 31, 1999, the receivable and reserve balances were written off. 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 is tentatively scheduled to begin in May. 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. With the acquisition, formation and expansion of business activities during 1999, operating expenses increased significantly. Salaries and compensation total $31,633 and $983,773 for the year ended December 31, 1997 and 1998 respectively, as compared to $505,372 for the nine months ended September 30, 1999. New employees had to be hired to handle the increased business activities of the Company. For the nine months ended September 30, 1999, we recorded $1,467,900 in professional fees. A significant portion of this amount is non-cash expense, representing the issuance of common stock to certain professionals in exchange for professional services. Management anticipates that professional fees will decline significantly in the future. Selling general and administrative expenses were $92,565 and $423,289 for the years ended December 31, 1997 and December 31, 1998 respectively, as compared to $623,451 for the nine months ended September 30, 1999. Approximately $175,000 of this increase was attributable to advertising for NutritionCafe. Approximately $250,000 of the interest expense of $354,569 is attributable to the intrinsic value of the convertible debenture executed by the Company. Net loss for the year ended December 31, 1997 was $151,846. Net loss for the year ended December, 31 1998 was $739,974. Loss before income taxes for the year ended December 31, 1998 was $719,374. We have generated a net loss of $3,478,802 for the nine months ended September 30, 1999 or net loss of $0.87 per share. LIQUIDITY AND CAPITAL RESOURCES. December 31, 1997 & 1998 as compared to September 30, 1999. Total cash and cash equivalents as of September 30, 1999 were $100,312 as compared to $120,938 as of December 31, 1998 and $17,658 as of December 31, 1997, a decline of approximately 17% from the period ending December 31, 1998 to the period ending September 30, 1999. Trade receivables were $4,889 at December 31, 1997 and $357,889 at December 31, 1998, including $267,240 related to Cutting Edge that was subsequently written off, but declined to $318,407 for the period ending September 30, 1999. Our 1998 trade receivables also included $11,745 related to IMMMU and IMMCEL, an amount for which we maintained adequate receivables and was fully reserved to cover an allowance for bad debt. We recorded $503,839 in bad debt expense in December 1998, $267,240 of which was due to unknown financial difficulties experienced by Cutting Edge. The bad debt expense of $267,240 attributable to Cutting Edge represented 50% of the receivable balance due from Cutting Edge at December 31, 1998 and was due to the Cutting Edge's failure to return product we sold them. We recorded the bad debt expense relating to Cutting Edge in December 1998 and ceased doing business with them at that time. In addition, the bad debt expense was due to the bankruptcy of another customer, Dynamic Health Concepts. During 1998 a total of two (2) customers, Cutting Edge and Dynamic Health Concepts, accounted for approximately seventy-two percent (72%) of our sales. Our decision to pull Revivarant from the market impacted our short-term income potential due to the large percent of 1998 revenues from this product. During 1999 we have made several decisions, which we believe will help replace the lost revenue. Specifically, we developed our Max Impact line of supplements and packaged them in a daily package of three pills each, which are marketed to convenience stores. Additionally, we signed an agreement with the WCW to produce and market the ultra energy bars, which include the likenesses of Hulk Hogan, Bill Goldberg and Randy "Macho Man" Savage. Additionally, during 1999 we increased our usage of outside brokers for sales to independent retail locations and hired sales personnel for direct marketing to our target industries. The result of these changes has been the elimination of our reliance on a few large customers for our revenue. We believe these changes will position us for increased revenues in the near future. Inventory was $23,699 at December 31, 1997, increased to $188,737 at December 31, 1998 and to $377,270 at September 30, 1999. This increase in inventory is attributable to the launch of Nutrition Cafe and the inventory that we are required to carry to meet customer orders. Total current assets were $46,246 at December 31, 1997 and $679,309 at December 31, 1998 and increased approximately 40% to $1,308,267 at September 30, 1999 Property and equipment increased from $5,481 on December 31, 1997 to $33,403 on December 31, 1998 and to $1,459,270 on September 30, 1999. This increase is due primarily to our purchase of the facility, which houses our warehouse operations for Nutrition Cafe, and the equipment purchased to operate this facility. The $228,705 attributable to software development represents our investment in the Nutrition Cafe website software. We also experienced a significant increase in liabilities. Accounts payable increased from $14,873 on December 31, 1997 to $625,767 on December 31, 1998 and to $926,612 on September 30, 1999. In addition, we issued a convertible debt instrument in the amount of $1,000,000 in 1999. The proceeds raised from this debt offering were used to purchase the warehouse facility. Management believes that we have sufficient revenue and reserves to finance ongoing business activities for the 12 months ending March 31, 2001. However, any judgment or claim in favor of a claimant regarding Revivarant could have a materially adverse effect on our operations, including that we may be unable to continue in business. 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 - ---------------------------- BY: Michael Muzio, President Dated: This 5th day of June, 2000 EX-27 2 0002.txt
5 1 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 59092 41220 1011054 (102723) 377270 1385913 1802572 (59889) 3128596 1981093 0 0 150 4541 1148812 3128596 581337 581836 408495 2801291 18549 102723 354569 (3103791) 0 (3103791) 0 (375011) 0 (3478802) (.87) (.87)
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