TMOL Trimol Group Inc (CE)

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED

 

March 31, 2009

 

 

TRIMOL GROUP, INC.

(Exact Name of Small Business Issuer as it appears in its charter)

 

DELAWARE

(State or other Jurisdiction of Incorporation or Organization)

 

13-3859706

(I.R.S. Employer Identification No.)

 

1285 Avenue of the Americas, 35 ^th Floor

New York, New York 10019

(Address of principal executive offices)

 

212. 554.4394

(Issuer’s Telephone Number)

 

Indicate by check mark whether the Registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes  o    No o

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. Large accelerated filer o Accelerated filer o Non-accelerated filer o Small reporting company x

 

Indicate by checkmark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act Yes o No x

 

As of March 31, 2009, there were 79,472,328 issued and outstanding shares of the Registrant’s common stock.

 

 

TRIMOL GROUP, INC.

 

FORM 10-Q

 

QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2009

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION

 

 

 

 

PART I - FINANCIAL INFORMATION

 

 

CONSOLIDATED FINANCIAL STATEMENTS
            AS OF MARCH 31, 2009

 

 

 

TRIMOL GROUP, INC.

 

The accompanying notes are an integral part of the financial statements

 

 

TRIMOL GROUP, INC.

                                                                                                                 

The accompanying notes are an integral part of the financial statements

 

 

 

 

TRIMOL GROUP, INC.

The accompanying notes are an integral part of the financial statements

 

 

TRIMOL GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 - BASIS OF PRESENTATION

 

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X relating to smaller reporting companies. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three periods ended March 31, 2009 are not necessarily indicative of the results that may be expected for the year ended December 31, 2009.

 

The balance sheet at March 31, 2009 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

 

For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission.

 

NOTE 2 – GOING CONCERN

 

The Company does not have any current operations that generate revenue and did not generate any revenue in year 2009 to date, nor in years 2008 or in 2007. Further, as shown on the accompanying balance sheet, the Company’s liabilities exceeded its assets by approximately $4,100,000. These circumstances, among others, raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

NOTE 3 – OPERATIONS

 

The Company owns all of the outstanding shares of Intercomsoft Limited (“Intercomsoft”) a company which, until April 2006, was engaged in the operation of a computerized photo identification and database management system utilized in the production of secure essential government identification documents such as passports, drivers’ licenses, national identification documents and other forms of essential personal government identification. As more detailed in Note 5, the Company is pursuing certain legal action related to the operation of Intercomsoft and since April 2006 has not generated any revenue from business operations.

 

Additionally, as more detailed in Note 4, until May 30, 2008, the Company had an exclusive worldwide license to an aluminum-air fuel cell technology solely for use with portable consumer electronic devices, all rights and title to certain technology relating to aluminum-air fuel cells, and the design and know-how to a converter designed and developed by a related company. However, the Company ceased development of this technology in 2003.

 

NOTE 4 – TERMINATION AGREEMENT

 

On May 30, 2008 the Company entered into a termination agreement (the “Termination Agreement”) with Aluminum Power Inc. (API), the Company’s majority shareholder at that time, which is beneficially owned and controlled by the Company’s Chairman of the Board. The Termination Agreement terminated the Technology Acquisition Agreement and the Research and Development Agreement entered into by the Company and API in 2001.

 

In consideration of the Termination Agreement Royal HTM Group, Inc, a company also beneficially owned

 

 

and controlled by the Company’s Chairman of the Board, cancelled $400,000 of the Company’s indebtedness to it. The forgiveness of debt was accounted for as a credit to additional paid in capital on the accompanying consolidated balance sheet as of September 30, 2008

 

In addition, the Company entered into an amendment of the Termination Agreement dated as of July 9, 2008 (the “Amendment”). Pursuant to the terms of the Amendment, API transferred 21,000,000 shares of the Company’s common stock owned by it to the Company as further consideration in connection with the Termination Agreement, to be utilized by the Company solely in connection with certain acquisitions that the Company is currently exploring. The Amendment provides that in the event that the Company does not conclude any of such acquisitions by December 31, 2008, API has the right to require the Company to reconvey such 21,000,000 shares to it for an aggregate purchase price of $1,000. A further Amendment No. 2 to the Termination Agreement dated as of September 24, 2008, extended the December 31, 2008 reconveyance date to September 23, 2009. Such transaction reduced the number of our issued and outstanding shares by 21,000,000 resulting in a total of 79,472,328 issued and outstanding shares as of the date of this quarterly report.

 

NOTE 5 - RISKS AND UNCERTAINTIES

 

The following risk factors relating to the Company and its business should be carefully considered:

 

The Company has no current source of revenue.  

 

The Company had no source of revenue for the three month period ended March 31, 2009, nor did it have any source of revenue the years ended December 31, 2008 and December 31, 2007.

 

The Company has commenced a legal action against the Government of Moldova.

 

On September 18, 2006, Intercomsoft commenced an action with the International Chamber of Commerce (the “ICC”), International Court of Arbitration, in Geneva, Switzerland against the Ministry of Economics of the Republic of Moldova and the Government of the Republic of Moldova (the “Moldovan Defendants”) seeking damages of approximately $41 million for breach of contract and an injunction prohibiting Moldova from producing further essential government documents in accordance with the terms of the Supply Agreement. Although Intercomsoft performed all of its obligations and responsibities under the Supply Agreement dururing its ten year term without objectiom by the Moldovan defendants, the Moldova Defendants nevertheless interposed counterclaims against Intercomsoft in amounts totaling $30 million. Intercomsoft has denied any wrongdoing and contested the counterclaims.

 

The Moldovan Defendants contested the action and objected to the ICC’s jurisdiction to hear the arbitration. Hearings were held before an ICC Arbitral Tribunal in Switzerland on the jurisdictional issue. By Final Award of the ICC dated July 30, 2008, the Arbital Tribunal declined jurisdiction over the arbitration. In addition, the Final Award also assessed costs and fees against Intercomsoft in the amount of $635,000. The Final Award relates to costs and fees of the arbitration only and is not a determination on the merits of the action.

 

On March 25, 2009, Intercomsoft filed a request in the court of the first instance in Geneva Switzerland for the appointment of an arbitration tribunal.

 

In addition, the Moldova Defendants have commenced an action before the International Commercial Court of Arbitration attached to the Chamber of Commerce and Industry of the Republic of Moldova (“Moldovan Arbitration Court”), claiming that it is the proper body to administer any arbitration between the parties. The claims asserted in the current action are the same claims asserted by the Moldovan Defendants in the ICC arbitration. Intercomosoft has objected to the Jurisdiction of the Moldovan Arbitration Court. There have been no hearings in such arbitration.

 

There can be no assurance as to the outcome of such arbitration proceedings and actions.

 

 

 

The Company has no current business activities that generate revenue.

 

Although the Company is currently exploring opportunities, it is not currently engaged in any business activities that generate revenue.

 

NOTE 6 - RELATED PARTY TRANSACTIONS AND BALANCES

 

Transactions

 

 

 

 

 

Balances

 

 As of March 31, 2009 payables to related parties consist of the following:
 

 

These amounts are non-interest bearing and due on demand.

 

 

During the three months ended March 31, 2009, the Company did not issue any options to purchase its common stock. As of March 31, 2009 the total options outstanding were 6,870,000, of which 3,870,000 were issued pursuant to the 2001 Omnibus Plan, as amended.

 

 

 

NOTE 8 - SEGMENT INFORMATION

 

The Company’s operations are classified into two reportable segments. The segments consist of Intercomsoft, and general and administrative expenses incurred for corporate purposes.

 

THRE E MONTHS ENDED MARCH 31, 2009

 

 

THRE E MONTHS ENDED MARCH 31, 2008

 

 

 

ITEM 2.        MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND                 RESULTS OF OPERATION

 

The following management’s discussion and analysis of financial condition and results of operation should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2008, as well as our unaudited consolidated financial statements and notes thereto contained elsewhere in this Quarterly Report on Form 10-Q. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those described. We expressly disclaim any obligation or undertaking to update these statements in the future.

OPERATIONS

Business Development

Since 1998 and through April 2006 we operated our wholly-owned subsidiary, Intercomsoft Limited, a company established to operate a computerized photo identification and database management system.

 

Additionally, until May 30, 2008, we had an exclusive worldwide license to a mechanically rechargeable aluminum-air fuel cell technology for use with portable consumer electronic devices, a technology that we acquired in January 2001 but had discontinued efforts to develop in 2003.

 

However, other than certain legal actions related to Intercomsoft’s Supply Agreement as more detailed in Part II Item 1 of this report entitled Legal Proceedings, although we are seeking other opportunities, we are not currently engaged in any business operations or activities that generate revenue.

 

Intercomsoft Ltd.

 

Intercomsoft, Ltd. was established to operate a computerized photo identification and database management system utilized in the production of secure essential government identification documents such as passports, driver’s licenses, national identification documents and other such forms of essential personal identification.

 

Intercomsoft’s only customer since inception was the Government of the Republic of Moldova, pursuant to a ten (10) year Contract on Leasing Equipment and Licensing Technology (the “Supply Agreement”) entered into in April 1996. The Supply Agreement expired in April 2006 and was not renewed.

We are currently involved in a number of legal actions in connection with the Supply Agreement, which are set forth in detail in Part II Item 1 of this Report entitled Legal Proceedings .

Aluminum-Air Fuel Cell Technology

 

In January 2001 we acquired an exclusive worldwide license to a mechanically

 

 

rechargeable aluminum-air fuel cell technology solely for use with portable consumer electronic devices, all rights and title to a certain technology relating to aluminum-air fuel cells and the design and know how to a converter designed and developed by Aluminum-Power, Inc. (“Aluminum Power”), our majority shareholder at that time, an entity beneficially owned and controlled by our Chairman of the Board.

 

As of the second quarter of 2003 we discontinued our research and development efforts on such technology and did not actively pursue the development of it since such time.

 

On May 30, 2008 we entered into a termination agreement (the “Termination Agreement”) with Aluminum Power terminating the Technology Acquisition Agreement and the Research and Development Agreement entered into by us and Aluminum Power in 2001. In consideration of the Termination Agreement, Royal HTM Group, Inc, a company beneficially owned and controlled by the Company’s Chairman of the Board, cancelled $400,000 of our indebtedness to it.

 

Additionally, we entered into an amendment of the Termination Agreement dated as of July 9, 2008 (the “Amendment”). Pursuant to the terms of the Amendment, Aluminum Power transferred to us 21,000,000 shares of our common stock owned by it as further consideration in connection with the Termination Agreement. Such shares are to be utilized by us solely in connection with certain acquisitions that we are currently exploring. The Amendment provided that in the event that we do not conclude any of such acquisitions by December 31, 2008, Aluminum Power has the right to require us to reconvey such 21,000,000 shares to it for a purchase price of $1,000. A further Amendment No. 2 to the Termination Agreement dated as of September 24, 2008, extended the December 31, 2008 reconveyance date to September 23, 2009.

RESULTS OF OPERATIONS

General

During the three month period ended March 31, 2009, our operations consisted solely of administrative activities, activities surrounding exploration of certain acquisitions and those related to pursuing the breach of contract claims against the Republic of Moldova as more fully described in Part II Item 1 herein.

Comparison of Three Month Period Ended March 31, 2009 to March 31, 2008

During the three months ended March 31, 2009, we generated no revenues from operations and similarly generated no revenues in the comparative period in 2008.

Total expenses for the three months ended March 31, 2009, were approximately $207,000, all of which consisted of general corporate and administrative expenses. For the same period in 2008, general and administrative expenses aggregated approximately $245,000, which consisted of $8,000 of Intercomsoft expenses, which were machinery and equipment depreciation, and $237,000 of which were general and corporate administrative expenses. The decrease in general and administrative expenses in the three months ended March 31, 20090, when compared to the same period in 2008, resulted from a further reduction of costs and expenses due to limited business

 

 

operations.

We had net loss from operations of approximately $207,000 for the three month period ended March 31, 2009, as compared to a net loss of approximately $245,000 for the same period in 2008.

Liquidity & Capital Resources

 

Intercomsoft’s Supply Agreement expired by its terms in April 2006. Moldova failed to pay us for certain amounts due thereunder and our sole source of revenue ended at that time. For additional information on this matter, see Part II Item 1 of this report entitled Legal Proceedings .

We have not generated any revenue since the first quarter 2006 and have funded our limited operations through loans and advances from our Chairman of the Board and companies owned or controlled by him.

Our assets are nominal and our liabilities currently exceed our assets by $4,134,000. These circumstances, among others, raise substantial doubt about our ability to continue operations.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Stock Compensation Plans

There were no options to purchase shares of our common stock cancelled, issued or exercised during the three month period ended March 31, 2009. As of March 31, 2009, the total number of shares of our common stock reserved for issuance under options outstanding was 6,870,000, of which options to purchase 3,870,000 shares were issued pursuant to our 2001 Omnibus Plan, as amended.

 

Available information

 

Reports Filed with the Securities and Exchange Commission

 

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and, in accordance therewith, file reports, proxy and information statements and other information with the Securities and Exchange Commission (the “SEC”).

 

All reports filed by us with the SEC are available free of charge via EDGAR through the SEC web site at www.sec.gov . In addition, the public may read and copy materials we file with the SEC at the public reference facilities maintained by the SEC at its public reference room located at 100 F Street, N.E. Washington, D.C. 20549. We will also provide copies of such material to investors upon written request.

 

 

 

representation other than as contained or incorporated by reference in this Annual Report and, if given or made, such information or representation must not be relied upon as having been authorized by us.

 

Not applicable.

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports, as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 15d-15(e) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of the end of the period covered by this Quarterly Report, we carried out, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures to ensure that information required to be disclosed by us in this Quarterly Report was recorded, processed, summarized and reported within the required time periods. In carrying out that evaluation, management identified a material weakness (as defined in Public Company Accounting Oversight Board Standard No. 2) in our internal control over financial reporting regarding a lack of adequate segregation of duties. Accordingly, based on their evaluation of our disclosure controls and procedures as of March 31, 2009, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of that date, our controls and procedures were not effective for the purposes described above.

There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the period ended March 31, 2009 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

 

 

 

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. We have assessed the effectiveness of those internal controls as of March 31, 2009, using the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) Internal Control – Integrated Framework as a basis for our assessment.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects our ability to initiate, authorize, record, process, or report external financial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a material misstatement of our annual or interim financial statements that is more than inconsequential will not be prevented or detected. In the course of making our assessment of the effectiveness of internal controls over financial reporting, we identified a material weakness in our internal control over financial reporting. This material weakness consisted of inadequate staffing and supervision within the bookkeeping and accounting operations of our company. The relatively small number of individuals who have bookkeeping and accounting functions prevents us from segregating duties within our internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews.

As we are not aware of any instance in which we failed to identify or resolve a disclosure matter or failed to perform a timely and effective review, we determined that the addition of personnel to our bookkeeping and accounting operations is not an efficient use of our very limited resources at this time and not in the interest of our shareholders.

This Quarterly Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Quarterly Report.

 

 

 

 

On September 18, 2006, Intercomsoft commenced an action with the International Chamber of Commerce (the “ICC”), International Court of Arbitration, in Geneva, Switzerland against the Ministry of Economics of the Republic of Moldova and the Government of the Republic of Moldova (the “Moldovan Defendants”) seeking damages of approximately $41 million for breach of contract and an injunction prohibiting Moldova from producing further essential government documents in accordance with the terms of the Supply Agreement. Although Intercomsoft performed all of its obligations and responsibilities under the Supply Agreement during its ten year term without objection by the Moldovan Defendants, the Moldova Defendants nevertheless interposed counterclaims against Intercomsoft in amounts totaling $30 million. Intercomsoft has denied any wrongdoing and contested the counterclaims.

 

The Moldovan Defendants contested the action and objected to the ICC’s jurisdiction to hear the arbitration. Hearings were held before an ICC Arbitral Tribunal in Switzerland on the jurisdictional issue. By Final Award of the ICC dated July 30, 2008, the Arbitral Tribunal declined jurisdiction over the arbitration. In addition, the Final Award also assessed costs and fees against Intercomsoft in the amount of $635,000. The Final Award relates to costs and fees of the arbitration only and is not a determination on the merits of the action. On March 25, 2009, Intercomsoft filed a request in the court of first instance in Geneva Switzerland for the appointment of an arbitration tribunal.

 

In addition, the Moldovan Defendants commenced an action before the International Commercial Court of Arbitration attached to the Chamber of Commerce and Industry of the Republic of Moldova, claiming that it is the proper body to administer any arbitration between the parties. The claims asserted in the current action pending before the Swiss courts are the same claims asserted by the Moldovan Defendants in the ICC arbitration. Intercomsoft has objected to the jurisdiction of the Moldovan Arbitration Court. There have been no hearings in such action.

 

There can be no assurance as to the outcome of such arbitration proceedings and actions.

 

 

For information regarding factors that could affect the Company’s results of operations, financial condition or liquidity, see the risk factors as disclosed in the Company’s most recent Annual Report on Form 10-K. There have been no material changes from the risk factors previously disclosed in the Company’s most recent Annual Report on Form 10-K.

 

 

 

 

PROCEEDS

 

 

 

 

 

None.

 

 

Related Party Transactions

 

During the three month period ended March 31, 2009, we accrued an aggregate of $69,000 ($23,000 per month) in compensation and $5,400 ($1,800 per month) in expenses due to Boris Birshtein related to his performance as our Chairman of the Board.

 

During the three month period ended March 31, 2009 we borrowed an aggregate of approximately $171,000 from our Chairman of the Board and Royal HTM Group, Inc., a Canadian company beneficially owned and controlled by such individual, to meet on-going operational expenses. Such amount is non-interest bearing and is due on demand.

Royal HTM Group renders certain business development services to us on on-going basis. During the three month period ended March 31, 2009 we accrued an aggregate of $30,000 ($10,000 per month) for consulting fees due to Royal HTM Group for such services. Such amount is non-interest bearing and is due on demand

 

Subsequent Events

 

On May 1, 2009, Yuri Benenson and Walter Perchal resigned as members of the Company’s Board of Directors. Additionally, on such date, Mr. Benenson resigned as the Company’s Chief Executive Officer. Boris Birshtein, the Company’s Chairman of the Board, was appointed as the Company’s Chief Executive Officer effective with Mr. Benenson’s resignation.

 

On May 1, 2009, the Company amended its By Laws providing for, among other things, a Board of Directors that consists of not less than two, but not more than fifteen members.

 

On May 1, 2009 the Company established a Code of Ethics establishing general guidelines for conducting the Company’s business consistent with the highest standards of business ethics.

 

 

 

The exhibits listed below are filed as part of this Quarterly Report for the period ended March 31, 2009:

 

 

 

 

Oxley Act of 2002.

 

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.