-----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, QKKVkMhNF7KMClZ0Oqsd+5F2nUKQlDYdDTLgO4UR7cOzJOmHEHRCeW9Q9pZhPkiw F6+TDjQJ2hAtSkbLgBPpxw== 0001042610-99-000001.txt : 19990218 0001042610-99-000001.hdr.sgml : 19990218 ACCESSION NUMBER: 0001042610-99-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990217 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRB SYSTEMS INTERNATIONAL INC CENTRAL INDEX KEY: 0001042610 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 223522572 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-07242 FILM NUMBER: 99543764 BUSINESS ADDRESS: STREET 1: 4 BECKER FARM RD CITY: ROSELAND STATE: NJ ZIP: 07068 BUSINESS PHONE: 2019944488 MAIL ADDRESS: STREET 1: 4 BECKER FARM RD CITY: ROSELAND STATE: NJ ZIP: 07068 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended December 31, 1998 OR [ ] TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from.......... to.......... Commission File Number: 333-7242 TRB SYSTEMS INTERNATIONAL INC. (Exact name of registrant as specified in its charter) DELAWARE 22-3522572 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 6 REGENT STREET, LIVINGSTON, NEW JERSEY 07039 (Address of principal executive offices) (Zip Code) (201) 994-4488 (Registrant's telephone number , including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) had been subject to such filing requirements for the past 90 days. [X] YES [ ] NO APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities exchange Act of 1934. [ ] YES [ ] NO APPLICABLE ONLY TO CORPORATE ISSUERS: There were 11,925,646 shares of common stock outstanding having a par value of $0.001 per share as of December 31, 1998. 1 INDEX Page Number Part I Financial Information Item 1. Auditor's Review Statement 3 Consolidated balance sheet, December 31, 1998 (unaudited) 4 Consolidated Statement of Operations for the Quarter ended December 31, 1998 (unaudited) 5 Consolidated Statement of Shareholders' Equity, December 31, 1998 (unaudited) 7 Consolidated Statement of Cash Flow for the Quarter ended December 31, 1998 (unaudited) 8 Notes to Financial Statements 9 Item 2. Management Discussion and Analysis of Financial Conditions and Results of Operations 15 Part II Other Information 17 2 Stan J.H. Lee & Co., CPA, CMA Tel) 201-944-7246 440 West St. 3rd Fl. Fax) 201-944-7759 Fort Lee, N.J. 07024-5058 E-Mail) sierra5533@aol.com INDEPENDENT AUDITOR'S REPORT To the Board of Directors and Shareholders of TRB Systems International Inc. Roseland, New Jersey We have reviewed the accompanying consolidated balance sheet of TRB Systems International Inc. as of December 31, 1998 the related consolidated statements of operations and retained earnings, statements of stockholders' equity and and the consolidated statement of cash flows for the three month period then ended in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accounts. All information included in these financial statements is the representation of the management of TRB Systems International Inc. A review consists principally of inquiries of Company personnel and analytic procedures applied to financial data. It is substantially less in scope than an examination in accordance with generally accepted auditing standards, the object of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financials statements in order to be in conformity with generally accepted accounting principles. The financial statements for the fiscal year ended June 30, 1998 were audited by us, and, we expressed an unqualified opinion on them in our report dated October 01, 1998, but we have not performed any auditing procedures since that date. /s/Stan J. H. Lee/s/ ----------------- Stan J.H. Lee, CPA February 12, 1999 Fort Lee, N.J. 3 TRB SYSTEMS INTERNATIONAL INC. CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1998 AND JUNE 30, 1998 (Notes 1,2,3) 12/31/98 6/30/98 ASSETS CURRENT ASSETS: Cash $254,455 $3,041 Accounts Receivable 1,117,114 Inventories 28,462 26,462 Deferred Tax Assets 127,196 402,772 1,527,226 402,772 OTHER ASSETS: Prepaid Expenses (Note 5) 38,052 27,267 Property & Equipment-net(Note 6) 546,271 574,136 Organization Costs, net 25,268 37,854 Security Deposits 1,043 1,043 610,633 651,085 TOTAL ASSETS $2,137,860 $1,083,360 LIABILITIES AND STOCKHOLDERS' EQUITY: CURRENT LIABILITIES: Accounts Payable and Accrued Expenses (Note 7) 514,290 210,939 Corporation Income Tax Payable 200 200 Obligation Payable to Distributors 230,000 Auto Loan 4,800 Payroll Taxes 7,213 1,109 526,503 442,248 Long-Term Liabilities: Loans from Individuals 38,200 58,200 Director's Loan (Note 9) 184,694 58,200 Auto Loan 9,200 232,094 176,794 SHAREHOLDERS' EQUITY: Common Stock, $.001 Par Value 30,000,000 shares authorized (Note 10) $11,926 $11,926 Additional Paid-in-Capital 1,816,548 1,816,548 Retained Earnings (Deficit) (449,210) (1,364,156) 1,379,264 464,318 TOTAL LIABILITIES AND SHAREHOLDERS EQUITY $2,137,860 $1,083,360 See accompanying notes which are an integral part of the Financial Statements. 4 TRB SYSTEMS INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS FOR THE THREE MONTH PERIOD AND FISCAL YEAR ENDED DECEMBER 31, 1998 AND JUNE 30, 1998 12/31/98 6/30/98 REVENUES FROM PRODUCT SALES $310,723 LICENSE AND DISTRIBUTOR FEES (Note 4) 50,000 COST OF GOODS SOLD (122,951) GROSS PROFIT 237,772 OPERATING EXPENSES: Promotion Expenses 16,682 85,223 Consulting 3,500 4,313 Commission 12,198 Professional Fees 13,281 24,215 Stock Issuance and Transfer Service 6,285 Contract Labor 17,699 Contribution 10,000 600 Travel 17,558 20,112 Meals & Entertainment 9,238 19,333 Auto Expense (Note 11) 1,672 6,001 Payroll Taxes 1,048 585 Leasing Expense 7,330 Rents (Note 12) 8,307 5,470 Research and Development 1,000 Communication 6,425 9,423 Office Expense 5,390 11,500 Sponsorship 25,500 Supplies 636 3,836 Insurance Expense 1,586 2,638 Bank Charges 1,833 4,165 Postage 865 2,234 Miscellaneous Expenses 1,216 307 Show and Exhibition 120,056 Shipping & Delivery 381 Advertising 56,854 5,657 Depreciation 25,932 90,918 Amortization Expenses 6,293 25,173 Employees Salaries 8,077 2,308 Oversea Operating Expense 12,400 Other Operating Expense 1,808 7,356 Utilities 189 320 217,471 515,456 See Accompanying Notes which are an Integral Part of Financial Statements 5 TRB SYSTEMS INTERNATIONAL INC. CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS FOR THE THREE MONTH PERIOD AND THE FISCAL YEAR ENDED DECEMBER 31, 1998 AND JUNE 30, 1998 (CONTINUED) INCOME FROM OPERATIONS BEFORE OTHER INCOME AND INCOME TAX EXPENSES 20,302 (515,456) OTHER INCOME AND EXPENSE: Dividend Income 19 33 Interest Expense (7,000) INCOME BEFORE INCOME TAXES 13,321 (515,423) Income Tax Expenses: Income Tax Expense Deferred Income Taxes (4,288) Current Income Taxes (200) Benefit due to Loss Carryforward (Note 8) 175,311 NET INCOME(LOSS) 9,033 (340,312) ACCUMULATED DEFICIT, at Beginning (458,243) (1,023,844) ACCUMULATED DEFICIT, at End $(449,210) $(1,364,156) Earnings(Loss) per Share(Note 13) $0.00 $(0.03) See accompanying notes which are an integral part of the Financial Statements. 6 TRB SYSTEMS INTERNATIONAL INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE THREE MONTH PERIOD AND THE FISCAL YEAR ENDED DECEMBER 31, 1998 AND JUNE 30, 1998 (Note 14) RETAINED TOTAL CAPITAL STOCKS EARNINGS STOCKHOLDERS NUMBER OF SHARES AMOUNT (DEFICITS) EQUITY BEGINNING BALANCE AS OF 6/30/97 11,863,383 $1,191,527 ($1,023,844) $167,683 Shared Issued 62,263 636,947 Net Income (Loss) (340,312) Balance as of 6/30/98 11,925,646 $1,828,474 ($1,364,156) $464,318 Shares issued between 07/01/98 and 12/31/98 Net Income (Loss) 914,946 Balance as of 12/31/98 11,925,646 $1,828,474 ($449,210) $1,379,264 See accompanying notes which are an integral part of the Financial Statements. 7 TRB SYSTEMS INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE THREE MONTH PERIOD AND THE FISCAL YEAR ENDED DECEMBER 31, 1998 AND JUNE 30, 1998 12/31/98 6/30/98 CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $9,033 ($340,312) Noncash item included in Net Loss 36,514 (59,220) Decrease (Increase) in Acct's Recievable (77,114) 12,500 Decrease (Increase) in Inventory 118,304 (18,962) Increase (Decrease) in Acct's Payable and Other Payables 118,218 16,807 Increase (Decrease) in Obligation to Distributors 70,000 204,955 (319,187) CASH FLOWS FROM INVESTING ACTIVITIES: Expenditure for Prepaid Expenses (13,645) Purchase of Property and Equipment (145,762) (159,407) CASH FLOW FROM FINANCING ACTIVITIES: Bank Overdraft 21,580 (18,106) Director's Loan (7,503) 63,594 Loans from Individuals (200,800) Issuance of Common Stock 636,947 Net Increase (Decrease) in Balance of Cash 219,032 3,041 Cash at Beginning of Period 35,423 Cash at End of Period $254,455 $3,041 See accompanying notes which are an integral part of the Financial Statements. 8 TRB SYSTEMS INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998 AND JUNE 30, 1998 1. Incorporation and Business Activity TRB Systems International Inc. the "Company", a Delaware Corporation incorporated on April 9, 1997, is a holding company whose only asset is 100 % of voting common stocks in TRB Systems Inc. TRB Systems Inc. was incorporated under the laws of Delaware on April 7, 1994, on which day it merged with TRB Systems Inc., a Corporation incorporated under the laws of New York on July 12, 1993, to form TRB Systems Inc., a Delaware Corporation. TRB Systems Inc. is in the business of manufacturing, distributing, and selling bicycle, fitness, and motorized two wheel transportation products. Currently all operations are run from the head office facilities in Roseland, New Jersey. 2. Summary of Significant Accounting Policies a) Principles of Consolidation TRB Systems Inc., the only subsidiary of TRB Systems International Inc. has been included in the consolidated financial statements, as it is the operating entity, with TRB Systems International Inc., a non-operating holding company. In accordance with the reverse takeover method of accounting, as referred to in Note 3 these consolidated financial statements of the Company include the accounts of TRB Systems International Inc. together with the results of TRB Systems Inc. for the quarter ended December 31, 1998. b) Revenue and Expense Recognition The Company prepares its financial statements on the accrual accounting basis. Consequently, certain revenue and related assets are recognized when earned rather than when received, and certain expenses are recognized when the obligation is incurred or the asset consumed, rather than when paid. c) Accounting Method The Company recognizes income and expenses on accrual basis. d) Depreciation Depreciation is computed by using the straight-line method for financial reporting purposes and the modified accelerated cost recovery method for federal income tax purposes. See Accompanying Accountant's Review Report which is an Integral Part of Financial Statements 9 TRB SYSTEMS INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998 AND JUNE 30, 1998 e) Income Taxes Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the bases of certain assets and liabilities for financial and tax reporting. The deferred taxes represent the future tax return consequences of those differences, which will either be taxable when the assets and liabilities are recovered or settled. f) Net Operating Loss Carryforward Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes for operating losses that are available to offset future taxable income. g) Intangible Assets Intangible assets subject to amortization include organization costs, loan closing costs, and in-force leasehold costs. Organization costs and in-force leasehold costs are being amortized using the interest method over the life of the related loan. h) Reclassifications Certain accounts in the prior-year financial statements have been reclassified for comparative purposes to conform with the presentation in the current-year financial statements. i) Property and Equipment Property and equipment are carried at cost. Depreciation of property and equipment is provided using the straight-line method for financial reporting purposes at rates based on the following estimated useful lives: Machinery and equipment 3-10 Furniture and fixtures 3-10 Engineering equipment 3-10 For federal income tax purposes, depreciation is computed using the modified accelerated cost recovery system. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. See Accompanying Accountant's Review Report which is an Integral Part of Financial Statements. 10 TRB SYSTEMS INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998 AND JUNE 30, 1998 j) Inventories Inventories are stated at the lower of cost (determined on the first-in, first-out basis) or market. 3. Business Combination Pursuant to an Agreement dated April 18, 1997, and effective on that date, TRB Systems International Inc. issued 9,750,000 common shares in exchange for all outstanding shares in the capital of TRB Systems Inc. As a result of this transaction, control of the combined companies passed to the former shareholders of TRB Systems Inc. This business combination situation is referred to as a "Reverse Takeover". Legally, TRB Systems International Inc. is the parent or continuing corporation; however, Generally Accepted Accounting Principles require that the former shareholders of TRB Systems Inc. be identified as the acquirer and that TRB Systems International Inc. and be treated as the acquired company. Accordingly, control of the assets and business of TRB Systems International Inc. has been acquired by TRB Systems Inc. in consideration for the issuance of common shares. 4. Accounts Receivable Accounts receivable reflect the non cash portion of Licensing and Distributorship agreements totaling $1,123,000 from the Ivory Coast, Tanzania, Benin/Nigeria, Vietnam, India, Massachusetts, Orange County, California, Maryland and Delaware. The licenses are for three years duration with automatic renewals so long as minimum royalties are paid; and by agreement with all licensees, the effective date of each contract was January 1, 1998. The contracts call for an ongoing royalty payment of 6% in the first year, 5% in the second year, and 4% thereafter, with a minimum royalty payment per year as set out in the following table: 1st Year 2nd Year 3rd Year Country Min. Royalties Min. Royalties Min. Royalties India $100,000 $220,000 $350,000 Benin/Nigeria $15,000 $25,000 $40,000 Ivory Coast & $10,000 $10,000 $10,000 5 other countries Tanzania $10,000 $20,000 $30,000 Vietnam $10,000 $20,000 $30,000 See Accompanying Accountant's Review Report which is an Integral Part pf Financial Statements 11 TRB SYSTEMS INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998 AND JUNE 30, 1998 5. Prepaid Expenses ABL Properties, wholly owned by Byung Yim, President and CEO of the Company, and under common control with the Company, owns the patents which are exclusively licensed to TRB Systems Inc. (TRB) for the worldwide manufacture and sale of the Transbar Power System (TPS). The timing, methodology and general details of the manufacture and sales are left to TRB, as is the design and utilization of the goods employing the technology. The rights licensed to TRB by ABL Properties Company call for a payment of $200,000 during the first year of active sales, a 1% royalty on annual sales to $10,000,000, 0.75% on sales over $10,000,000 but under $20,000,000, and 0.5% on all sales thereafter, and all profits gleaned from international sales to an aggregate limit of $3,325,000. It was agreed between ABL and the Company that the $200,000 would be deferred until the Company had suitable cash flow to meet its current needs, or March 1, 1999, whichever date was later. Any cost incurred by TRB Systems Inc. to maintain the patents is reimbursable by ABL and is credited toward the $ 200,000 license fees due to ABL on the first anniversary following the commencement of active bicycle sales. 6. Property and Equipment Cost Office equipment $ 6,275 Tools and machinery 30,000 Automobile 34,000 Moldings 539,062 Booth for Shows 69,970 Informercial tape and other promotional materials 50,000 729,307 Less accumulated depreciation (183,036) $ 546,271 The purchase of the property and equipment except the office equipment, booth, $39,000 in molds and automobile were from Marn Seol, a long time employee of TRB in Taiwan and was thus non arms length. As a result the property was purchased for book value in the sum of $559,000, which was paid for by the issuance of 500,000 shares of the Company to Marn Seol, said shares restricted and subject to Rule 144. 7. Accounts Payable and Accrued Expenses The accounts payable and accrued expenses also include the capitalized portion of legal and consulting expenses incurred in the development of standardized contracts, promotional materials and the filing and registration of patents, and are amortized over a sixty-month period. See Accompanying Accountant's Review Report which is an Integral Part of Financial Statements 12 TRB SYSTEMS INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998 AND JUNE 30, 1998 8. Operating Loss Carry Forward The Company has Loss Carryforwards which are expected to offset in its entirety this year's taxable Income. 9. Director's Loans and Loans From Individuals The loans payable to a director and Loans from Individuals are unsecured, non-interest bearing with no set terms of repayment. They will be retired as the company has surplus funds to repay these loans. 10. Common Stocks The Company is authorized to issue 30,000,000 at $ 0.001 par value share, and, as of December 31, 1998 , 11,925,646 voting common shares are issued and outstanding. 11. Related Party Transaction The Company has a policy of providing an executive with a Company-owned automobile for business purposes and the amount of such expense for the three month period ended December 31, l998 was $1,672. There were no other significant non arm's-length basis transactions between the Company and any related party during the three month period ended December 31, 1998. See Accompanying Accountant's Review Report which is an Integral Part of Financial Statements TRB SYSTEMS INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998 AND JUNE 30, 1998 12. Description of Leasing Arrangements The Company leases its executive office facilities under non-cancelable short-term operating leases. The future minimum lease payments required under the leases is minimal and immaterial in amount. 13. Earnings Per Shares Earnings (loss) per share is calculated using the weighted average number of common shares outstanding and common shares equivalents. The average number of shares outstanding under these assumptions would be 11,925,646 shares as of December 31, l998, and 11,909,611 as of June 30, 1998. 14. Payments In Shares of Common Stock A contract was signed on April 18, 1997 in which Alpha Bytes Inc. accepted 250,000 shares, to be issued directly to its shareholders, as payment for consulting services valued at $25,000 and rendered to TRB Systems, Inc. Alpha Bytes subsequently issued the shares as a dividend to its 13 TRB SYSTEMS INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS shareholders on October 2, 1997. As the shares were free trading and fully paid for, and the distribution was to its own shareholders for no consideration, Alpha Bytes felt that the shares were exempt from registration as free trading shares. However, the Company felt that there was a potential violation of Section 5 of the Securities Act of 1933 as well as the various State rules for the sale of shares, and it was decided that Alpha Bytes would treat the transaction as if the violations had occurred. For this reason, Alpha Bytes offered its shareholders a 30 day right of rescission (the maximum period required by any of the states in which shareholders of Alpha Bytes reside), commencing on August 12, 1998 the effective date of the Registration Statement on Form SB-2. The 30 day period has expired and no Shareholder asked that the transaction be rescinded. As of September 30, 1998, no shares were rescinded, and the right has expired. $305,816 of investments in TRB were converted into Equity by the issue of 594,009 shares to 45 individuals, at the rate of $0.51 per share. These shares are free trading pursuant to Rule 504 of Regulation D of the SEC and have been registered with the SEC on Form SB-2 (amended). The effective date of the Registration was August 22, 1998. See Accompanying Accountant's Review Report which is an Integral Part of Financial Statements 14 PART I Item 2. Management's Discussion and Analysis of Financial condition and Results of Operations The following discussion and analysis relate to factors which have affected the financial condition and results of operations of the Company for its Quarter ended December 31, 1998. On April 18, 1997 the Company purchased 100% of all the outstanding shares of TRB, as fully described in Other Information, below. TRB Systems Inc. is a Delaware corporation, formed in April 1994, to market and manufacture, worldwide, the Transbar Power System (TPS) technology and its applications to the bicycle, exercycle, electric bicycle and wheelchair. TRB's technology allows users to engage in a biomechanically correct exercise without the trauma associated with many alternate forms of exercise. Orthopedic doctors and physical therapists have prescribed the TPS bike for patients because of the variable stroke, non-impact motion it provides. TRB's products are also appealing to older consumers and TRB is well positioned to benefit from the aging of the U.S. population. The TPS motion provides older consumers with an exercise that is cardiovascular and anaerobic, while at the same time is safe and gentle. Discussion of Financial Information TRB is the active operating entity, producing, marketing, manufacturing, and supporting the products of the Company. The Company has no active income save for the activities of TRB. Therefore, the financial information regarding the parent company and its subsidiary are presented on a consolidated basis. TRB emerged from being a development stage company to an active operating company on July 1, 1998. During its first operating quarter, the company purchased $160,000 in inventory, of which $50,000 were sold. During the current quarter, $310,723 in bicycles were sold, and orders totalling over $200,000 have already been received for the next fiscal quarter. 15 For the quarter ended December 31, 1998, revenues in the sum of $50,000 from license sales and $310,723 from bicycle sales were recognized, while in the fiscal year ending June 30, 1998 there were no revenues. The Cost of goods sold (associated with bicycle sales only) was $122,951, netting a gross profit of $237,772. Total operating expenses were $217,471 for the quarter ended December 31, 1998, as compared to $515,456 for the year ended June 30, 1998. In both periods the major expenses were depreciation and amortization, professional fees, advertising and travel. The high costs of advertising reflect the Company's efforts to have our products well known throughout the United States. The cash and investment certificate position of the Company was $254,455 on December 31, 1998 as compared to $3,041 on June 30, 1998. Current assets, as a whole, increased significantly, from $432,275 on June 30, 1998 to $1,527,224 on December 31, 1998. The reason for the dramatic change was the recognition of sales of licenses in the last quarter and the current quarter. Liquidity Management believes that the Company has the cash funds and necessary liquidity to meet the needs of the company over the next year, assuming sales and development efforts conform to the standards historically set (See Note 4 to Financial Statements for minimum sales/royalty figures). Primarily, as TRB is now ready to deliver bicycles, with active manufacture and delivery and sale of product having commenced in the last and current quarters, liquidity needs, management feels, will be met through the sale of bicycles, both internationally and through domestic sales (See Current Plans, below). This will be done on a letter of credit basis, and through credit arrangements with the manufacturers in China, who have given TRB a $2,000,000 line of credit to apply against orders for bicycles. As well, royalty payments will become due from the distributors and licensees. On March 1, 1998 American 16 distributors were given all material necessary to commence domestic sales, and product sales began in September, 1998. However, to fully maximize the potential presented by the TPS technology, management believes that approximately $10,000,000 will need to be raised. The funds will be primarily used to increase the marketing effort and for the production of marketing material, to maintain domestic inventory levels, as well as for the continued development of the TPS technology. It is felt that the money would be utilized over a three year period. In the event only part of the funds are raised, then it will be allocated to marketing and to stockpiling inventory to meet anticipated domestic demand. The money will likely be raised through private placements of shares. In the event the funds are not raised, TRB will continue with its sales activities, and, management believes, meet its liquidity demands. The funds, as noted above, are for increased activity and sales, not for primary liquidity demands. Current Plans The key events that are anticipated by management to occur over the next quarter are the aggressive marketing of TPS based bicycles by the licensees and through active infomercial campaigns, as well as the aggressive sales of licenses for territorial exclusivity in the sale of TRB products. As well, TRB is ready to commence active marketing to USTU member and non-member Taekwondo centers. The Company has completed its first phase of infomercials, which had as a primary objective the familiarization of the public with our bicycle. The Company is in the final stages of its second stage of introducing the TRB bicycle to the general public. It is negotiating a contract that will have QVC produce and air a series of infomercials nationwide during the late spring and early summer of 1999. Management believes this will have a positive impact on our fourth quarter sales, and a definitive impact on sales in the first two quarters of the next fiscal year. The company has prepared a major sales campaign through the 20,000 affiliated and non affiliated centers of the U. S. Taekwondo Union which commenced in December 1998, with the full backing of the Union, which management and the Taekwondo Union both feel will yield over $10,000,000 in sales during the ensuing year. PART II Item 1. Legal Proceedings The Company is not a party to any material litigation. Item 2. Changes in Securities NONE 17 Item 3. Defaults Upon Senior Securities NONE Item 4. Submission of Matters to a Vote of Security Holders NONE Item 5. Other Information Acquisition of TRB On April 18, 1997, in exchange for 9,750,000 shares in the common stock of Company, 100% of the stock in TRB was sold by Motion Plus International Corporation, a Delaware Corporation, its owner, to the Company. Motion Plus International is a holding company, 20% of whose shares are owned by Byung Yim, president and CEO of the Company. Mr. Yim's children, Alexander B. Yim (age-21)and Lena B. Yim (age-19), hold 39% interest in MPI each, with the remaining 2% held by Hee J. Yim. Sale of Shares to Investors in TRB The Company issued 594,009 shares to 54 individuals who had invested in TRB and were unrelated parties on October 2, 1997. These persons had invested money between 1994-1997 in TRB, in the sum of $305,814, and their investment was converted into equity at the rate of $.514 per share. This is reflected in the financial statements, and described in Note 16 of the said statements. The said shares were duly registered for resale on Form SB-2, declared effective on August 12, 1998. Sales to former Employees and Consultants 44 employees and consultants of TRB who had worked with TRB since 1994 in developing the TPS system were issued 376,617 shares, said shares were restricted from sale subject to Rule 144 of the Securities and Exchange Commission (the "Commission"). The issuance of shares to the employees was exempt from registration through reliance on Rule 701 of the Commission. The Consultants were Certified Public Accountants who had provided financial consulting services to TRB. The consultants are Andy Chapkin, Stephen Nappen, and Jeffrey Zudack of 4 Becker Farm Road, Roseland New Jersey, and each received 1,599 shares at a price of $0.50 per share. The issuance of shares to these consultants was exempt from registration through reliance on Section 4(2) of the Securities Act of 1933, in that these were each sophisticated purchasers. The said shares were duly registered for resale on Form SB-2, declared effective on August 12, 1998. 19 Sale to Byung Yim 500,000 shares were issued to Byung Yim, the Company president, The said shares were restricted, exempt from Registration through reliance on Section 4(2) of the Securities Act of 1933, in that Mr. Yim was a sophisticated purchaser, and subject to Rule 144. The shares were to retire $218,162 in debt owed to Mr. Yim, and in lieu of salaries not drawn. Purchase of Equipment from M. T. Seol 500,000 shares were issued to M. T. Seol for the purchase of property and equipment valued at $559,545. This equipment consisted of office equipment for $5,000, tools and machinery for $30,000, an automobile for $10,000, moldings for $464,545, and an informercial tape and other promotional materials for $50,000. The purchase took place in April of 1997. The said shares were restricted and issued subject to Rule 144, and exempt from registration through reliance on Section 4(2) of the Securities Act of 1933, in that Mr. Seol was a sophisticated purchaser. The equipment value was strictly based on book value of the goods, as this was a non-arms length transaction in that Mr. Seol is an employee of the Company (SEE: FINANCIAL STATEMENTS, BALANCE SHEET, ASSETS and the accompanying footnote). Sale of Shares to Alpha Bytes, Inc. Alpha Bytes, Inc., 7050 Woodbine Ave., Suite 205, Markham, Ont., Canada L3R 4G8, a Colorado public corporation presently traded on the NASDAQ Bulletin Board market, provided consulting services to the Company regarding software development for the inventory control and Management Information Systems to be used by the Company for consideration in the sum of $25,000, which sum Alpha Bytes invested in the Company for 250,000 shares acquired on April 18, 1997. The shares issued were exempt from registration pursuant to Rule 504 of Regulation D of the SEC, in that the total investment in TRB for the year was less than the maximum allowed by the rule. The holdings accounted for less than 2.2% of the outstanding shares of the Company. Alpha Bytes subsequently issued the shares as a dividend to its shareholders on October 2, 1997. The said shares were subject to a 30 day right of rescission by the shareholders, which was never exercises. The thirty day period expired on September 12, 1998, and no shares were returned to Alpha Bytes for rescission of their issuance. Commencement of Trading on the NASDAQ OTC Bulletin Board On August 21, 1998 the Company began active trading on the NASDAQ OTC Bulletin Board under the trading symbol TRBX. 19 Item 6. Exhibits and Reports on Form 8-K 23.1 Consent of Auditors for including Review Report page 24 27 Financial Data Schedule 99.1 Registration Statement on Form SB-2, Filed with the Commission on July 27, 1998, and declared effective August 12, 1998* * The Registration Statement is incorporated herein by reference, as are the Exhibits thereto, also duly filed on July 27, 1998. SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. TRB SYSTEMS INTERNATIONAL INC. By /s/ BYUNG YIM /s/ Byung Yim, President and Director (Principal Executive Officer) Date: February 12, 1999. Pursuant to the requirements of the Securities Exchange Act of 1934, This report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. TRB SYSTEMS INTERNATIONAL INC. By /s/ BYUNG YIM /s/ Byung Yim, President and Director (Principal Executive Officer) Date: February 12, 1999. 20 Registration Number 333-7242 ======================================================================= SECURITIES & EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report On Form 10-Q TRB Systems International Inc. ======================================================================= EXHIBITS ======================================================================= December 31, 1998 21 EXHIBIT 23.1 Consent of Registrant's Auditors To Include Review Report in Quarterly Report on Form 10-Q February 12, 1999 Securities and Exchange Commission Washington, D.C. 20549 RE: TRB Systems International Inc. Gentlemen: We have reviewed the balance sheet and accompanying statements of the Registrant, as found in the Prospectus which forms part of this Quarterly Report on Form 10-Q, for the fiscal quarter ending December 31, 1998 and fiscal year ended June 30, 1998, and consent to the Review reports, statements, and notes being filed with the Quarterly Report of which this exhibit forms a part, and with any amendment thereto. This accounting firm hereby consents to the filing of this consent as an exhibit to the Registration Statement. /s/Stan J. H. Lee/s/ Stan J. H. Lee, CPA 440 West St., 3rd Fl. Fort Lee, NJ 07024-5058 22 Blank back sheet 23 [ARTICLE] 5 [PERIOD-TYPE] 3-MOS [FISCAL-YEAR-END] JUN-30-1999 [PERIOD-END] DEC-31-1999 [CASH] 254,455 [SECURITIES] 0 [RECEIVABLES] 1,117,114 [ALLOWANCES] 0 [INVENTORY] 28,462 [CURRENT-ASSETS] 1,527,226 [PP&E] 38,052 [DEPRECIATION] 0 [TOTAL-ASSETS] 2,137,860 [CURRENT-LIABILITIES] 526,503 [BONDS] 0 [PREFERRED-MANDATORY] 0 [PREFERRED] 0 [COMMON] 11,926 [OTHER-SE] 1,367,338 [TOTAL-LIABILITY-AND-EQUITY] 2,137,860 [SALES] 360,723 [TOTAL-REVENUES] 360,723 [CGS] (122,951) [TOTAL-COSTS] (122,951) [OTHER-EXPENSES] 217,471 [LOSS-PROVISION] 0 [INTEREST-EXPENSE] (6,981) [INCOME-PRETAX] 13,321 [INCOME-TAX] (4,288) [INCOME-CONTINUING] 0 [DISCONTINUED] 0 [EXTRAORDINARY] 0 [CHANGES] 0 [NET-INCOME] 9,033 [EPS-PRIMARY] 0 [EPS-DILUTED] 0
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