- Quarterly Report (10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number: 333-07242

TRB Systems International, Inc.

(Exact name of registrant as specified in its charter)

DELAWARE		22-3522572
(State of incorporation)		(I.R.S. Employer Identification No.)

121 Winterset Dr.

Rochester, New York 14625

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: [phone]

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) has been subject to such filing requirements for the past 90 days.    Yes þ 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 (§ 232.405 of this chapter) 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 smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o		Smaller reporting company þ
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes o   No þ

Applicable Only to Corporate Issuers

Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 33,119,922 shares of common stock, par value $0.001, as of November 15, 2010.

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TRB SYSTEMS INTERNATIONAL, INC.

 

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Consolidated Balance Sheets as of September 30, 2010 and June 30, 2010	3
		Consolidated Statements of Operations for the Three Months Ended September 30, 2010 and 2009	4
	Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2010 and 2009	5
		Notes to Consolidated Financial Statements	6
Item 2.		Management’s Discussion and Analysis of Financial Conditions and Results of Operations	7
Item 3.		Quantitative and  Qualitative Disclosure about Market Risk	9
Item 4 (T).		Controls and Procedures	9
PART II – OTHER INFORMATION
Item 6.		Exhibits	10
SIGNATURES			10

 

PART I — FINANCIAL INFORMATION

 

Item 1.  Financial Statements

 

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TRB SYSTEMS INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

		September 30, 2010			June 30, 2010
ASSETS		(Unaudited)					(Audited)
CURRENT ASSETS
Cash		$	512				$	840
Accounts receivable, net of allowance of doubtful accounts			6,512				6,512
License fee receivable			1,522,615					1,522,615
Inventory			35,768				35,768
Total Current Assets			1,565,407					1,565,735
PROPERTY AND EQUIPMENT ,  net			102,095					116,114
OTHER ASSETS
Prepaid and other assets			157,554				157,544
Total Other Assets			157,544					157,544
TOTAL ASSETS		$	1,825,046				$	1,839,393
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued liabilities		$	18,703				$	18,703
Notes and interest payable			1,999,423				1,959,665
Advance from a customer			150,000					150,000
Convertible debt			142,611				142,611
Legal judgment payable			381,000					381,000
Corporation income tax payable			935				935
Total Current Liabilities			2,692,672					2,652,914
Indebtedness to related party			1,290,811					1,263,520
TOTAL LIABILITIES			3,983,483					3,916,434
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $0.001 par value, 60,000,000 shares authorized; 33,119,922 shares
issued and outstanding as of September 30, 2010 and June 30, 2010, respectively			33,120					33,120
Additional paid in capital			3,750,488				3,750,488
Retained earnings (deficit)			(5,935,125)					(5,853,097)	)
Other comprehensive loss-foreign currency			(6,920)	)			(7,552 )	)
Total Stockholders' Equity (Deficit)			(2,158,437)	)				(2,077,041)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)		$	1,825,046				$	1,839,393

See Notes to Consolidated Financial Statements

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TRB SYSTEMS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

		2010			2009
REVENUES
Sales		$	-			$	403
Cost of revenues			-				348
GROSS PROFIT			-				55
License fee and distribution revenue			-				-
TOTAL OPERATING REVENUES			-				55
OPERATING COSTS
General, administrative and selling expenses			28,885				116,710
Depreciation expense			14,019				21,917
Total operating costs			42,904				138,627
OPERATING INCOME (LOSS)			(42,904)				(138,572)
OTHER INCOME (EXPENSE)
Foreign currency translation			632				(34)
Interest income			2				4
Interest expense			(39,758)				(39,758)
Total Other Income & (Expenses)			(39,124)				(39,788)
NET LOSS BEFORE INCOME TAX & BENEFIT			(82,028)				(178,360)
Current income taxes			-				-
NET INCOME (LOSS)		$	(82,028)			$	(178,360)
Basic and Diluted Loss Per Common Share		$	(0.00)				(0.01)
Weighted average number of common shares outstanding :			33,119,922				29,319,922

See Notes to Consolidated Financial Statements

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TRB SYSTEMS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

(Unaudited)

		2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES :
Net income (loss)		$	(82,028)			$	(178,360)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense			14,019				21,917
Changes in operating assets and liabilities
(Increase) decrease in accounts receivable							7,317
(Increase) decrease in inventory							(960)
Increase in other current assets							4,361
Increase in accounts payable and accrued liabilities							3,128
Net cash used in operating activities			(68,009)				(142,597)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase of notes and accrued interest			39,758				39,758
Increase in indebtness to related parties			27,291				113,841
Net cash provided by financing activities			67,049				153,599
Effect of exchange rate on cash			632				-
Net Increase (Decrease) in Cash			(328)				11,002
Cash at Beginning of Year			840				1,580
Cash at End of Year		$	512			$	12,582
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid during year for interest		$	-			$	-
Cash paid during year for taxes		$	-			$	-

  

See Notes to Consolidated Financial Statements

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TRB SYSTEMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

September 30, 2010

1.   UNAUDITED INFORMATION

The consolidated balance sheet of TRB Systems International Inc. (the “Company”) as of September 30, 2010, and the consolidated statements of operations for the three months period ended September 30, 2010 and 2009 have not been audited.  However, in the opinion of management, such information includes all adjustments (consisting only of normal recurring adjustments) which are necessary to properly reflect the financial position of the Company as of September 30, 2010, and the results of operations for the three months ended September 30, 2010 and 2009

Certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, although management believes that the disclosures are adequate to make the information presented not misleading.  Interim period results are not necessarily indicative of the results to be achieved for an entire year.  These financial statements should be read in conjunction with the financial  statements and notes to financial statements included in the Company’s consolidated financial statements as filed on Form 10-K for the year ended June 30, 2010.

2.    ORGANIZATION, NATURE OF BUSINESS

TRB Systems International Inc. ("the Company") is a holding company incorporated in Delaware on April 11, 1997. The Company has established a new subsidiary, Alenax (Tianjin) Bicycle Corp. ("Alenax") to conduct business in China. Alenax was incorporated on February 22, 2005 under the laws of People's Republic of China or PROC. On December 22, 2008, Alenax’s name was changed to Alenax Parts Mfr. (Tianjin) Corp.

The Company was established to produce and market bicycle, fitness and motorized two wheel transportation products. For the period from its inception to date, the Company has been a development stage enterprise, and accordingly, the operations have been directed primarily toward developing business strategies, raising capital, research and development activities, conducting testing of its products, exploring marketing channels and recruiting personnel.

3.   PRINCIPLES OF CONSOLIDATION  

The consolidated financial statements include the accounts of TRB Systems International Inc. and its subsidiary. Significant intercompany accounts and transactions have been eliminated in consolidation.

The consolidated financial statements include TRB Systems International, Inc., non-operating company and its wholly-owned subsidiary operating outside the United States of America. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Our year end is June 30th. Our consolidated statements include the accounts of the Company and its wholly-owned subsidiary. All significant inter-company account balances and transactions have been eliminated.

4.   EARNINGS PER SHARE

Basic earnings per share are calculated on the weighted average number of common shares outstanding during each period.  Diluted earnings per share is computed by dividing net income by the weighted average number of common shares and common stock equivalents outstanding for the period. Common stock equivalents are excluded from the computation if such inclusion would have an anti-dilutive effect.

5.   RELATED PARTY TRANSACTION

A shareholder of the Company paid expenses in the quarter of $28,885. The Company currently has no agreement with the shareholder and the loan bears no interest and is due on demand.

6.   SUBSEQUENT EVENT

None.

7.   GOING CONCERN

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The Company will need working capital for its future planned activity, which raises substantial doubt about its ability to continue as a going concern. Continuation of the Company as a going concern is dependent upon obtaining sufficient working capital to be successful in that effort. The management of the Company has developed a strategy, which it believes will accomplish this objective, through short term loans, and equity funding, which will enable the Company to operate for the coming year. In order to continue as a going concern, we require additional financing. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to continue as a going concern, we would likely be unable to realize the carrying value of our assets reflected in the balances set out in the preparation of the consolidated financial statements.

Item 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                AND RESULTS OF OPERATIONS

This quarterly report on Form 10-Q and the materials incorporated herein by reference contain forward-looking statements that involve risks and uncertainties. We use words such as "may," "assumes," "forecasts," "positions," "predicts," "strategy," "will," "expects," "estimates," "anticipates," "believes," "projects," "intends," "plans," "potential," and variations thereof, regarding matters that are not historical facts and are forward-looking statements. Because these statements involve risks and uncertainties, as well as certain assumptions, actual results may differ materially from those expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date that they are made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

The Company conducts its business through its wholly owned subsidiary, Alenax Parts Mfr (Tianjin) Corp., which develops, markets, and manufactures a line of NMT product.  For the year ended June 30, 2010 and 2009, the Company had net sales of $8,436 and $8,980, respectively.

For the past two years, the Company has focused its efforts on redesigning products, improving product quality, conducting product tests, including strength, durability and road tests. To date, this process is basically completed, and the Company has started to focus on market and sales of our products, but the Company has not been successful in selling its products. As a result, the Company recently changed its business plan from being a high-end bicycle manufacturer and marketer to being a bicycle part manufacturer. The Company will mainly focus on selling and

marketing Uni-Set as a bike part maker. Accordingly, the name of the Company’s operating subsidiary, Alenax (Tianjin) Bicycle Corp., was changed to Alenax Parts Mfr (Tianjin) Corp. on December 2, 2008. However, the Company will also take orders for manufacturing /assembling completed bicycles if customers ask us to do so.

On May 4, 2010, the Company entered into an exclusive license agreement with Ssolriche Co. Ltd, licensee, for the territory of South Korea valued at $1,791,311 of which $268,696 has been paid upon signing of agreement.  The remaining balance of $1,522,616 is due in two installments within one year with the final installment being due on May 2, 2011. Under the agreement, the Company is granting licensee the exclusive right and license in the Territory to assemble, use, import, sell/market and distribute product containing the inventions and improvements covered by the Patents.

There is no royalty payment due to the Company but the licensee is obligated to meet minimum sales quota; Year 1: 10,000 bikes except Uni-Set products, Year 2, 25,000, and Year 3 and thereafter, 50,000.

As of the date of this report, the Company finished the completion of the test as for commercial product for top quality lines of the most of Alenax Uni-Set, however we still need another three to six months to complete the entire top quality lines of Uni-Set.

The Company is also making the X-Bike model through the Morning-Star company for obtaining possible orders from their customers and for the home shopping sales in Korea and China. On marketing side, we are working with The Nike Inc, Portland, Oregon, the Reebok, Korea and China Basket Ball Association for sales and marketing.  

Results of Operations

For the Quarter Ended September 30, 2010 Compared to the Quarter Ended September 30, 2009

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Revenues

For the quarter ended September 30, 2010, we generated no revenues compared to $403 for the same period of the previous year.

Cost of Revenues

Cost of goods sold consists primarily of the material cost of goods sold, direct overhead, direct wages, and direct depreciation expense.  We had no cost of goods sold for the quarter ended September 30, 2010 because there were no sales. The cost of goods sold for the same period of 2009 was $348, approximately 86.4% of the sales.   

Operating Costs and Expenses

For the quarter ended September 30, 2010, our total operating costs and expenses significantly decreased from $138,627 for the three months ended September 30, 2009 to $42,904 for the same period of this year. The decrease in operating expenses was primarily as a result of a decrease of $35,647, or 94%, in marketing and advertising expense, a decrease of $27,446, or 62.6%, in research and development expense. Additionally, during the period, the depreciation expense was decreased to $14,019 for the three months ended September 30, 2010 from $21,917 for the same period of the prior year.

Other Income and Expenses

For the three months ended September 30, 2010, our total other expenses were $39,124, which primarily consisted of $39,758 of interest expense paid to promissory note-holders.  For the same period of the prior year, the total other expenses were $39,788, which also primarily consisted of $39,758 of interest expense.

Net Income (Loss)

Net loss for the quarter ended September 30, 2010 were $82,028, or $0.00 per share, as compared to net loss of $178,360, or $0.01 per share, for the same period of the prior year.

Liquidity and Capital Resources

Since inception, our operations have been primarily funded by equity capital and unsecured short-term loans from directors and shareholders.

On May 04, 2010, the Company entered into an exclusive license agreement with Ssolriche Co. Ltd, licensee, for the territory of South Korea valued at $1,791,311 of which $268,696 has been paid upon signing of agreement.  The remaining balance of $1,522,616 is due in two installments within one year with the final installment being due on May 2, 2011.

As of September 30, 2010, the Company’s cash and cash equivalents balance was $512. For the quarter ended September 30, 2010, the Company’s net cash used in the operating activities was $68,009, primarily due to our net loss of $82,028, and partially offset by decrease in depreciation and amortization expense of $14,019.  For the quarter ended September 30, 2010, the Company had no investing activities.  During the same period, the Company’s financing activities provided net cash of $67,049, which primarily consisted of an increase in accrued notes and accrued interest of $39,758 and increase in indedebness to related parties of $27,291.

As of September 30, 2010, the Company had outstanding judgment in a total of $381,000 incurred in 2000-2001.

The Company lacks liquidity and has limited revenues. The Company is currently actively seeking financing, including raising capital through the issuance of equity securities or through debts. There can be no assurance that we will be able to raise sufficient additional capital at all or on terms favorable to our stockholders or us.

Off-balance sheet arrangements

As of September 30, 2010 there were no off-balance sheet arrangements.

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Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, such as doubtful accounts, inventories, and impairment of long-lived assets. Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The accounting policies that we follow are set forth in Note 2 to our financial statements as included in this report. These accounting policies conform to accounting principles generally accepted in the United States, and have been consistently applied in the preparation of the financial statements.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Not applicable for smaller reporting companies.

Item 4 (T).  Controls and Procedures

(a) Disclosure Controls and Procedures

The principal executive officer and principal financial officer of the Company has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the Company has concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective.  

(b) Changes in internal controls over financial reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the period covered by this report that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.   Legal Proceedings

None

Item 1A. Risk Factors

Not applicable

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 5. Other Information

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None

 

Item 6.  Exhibits

Exhibit No.

Title of Document

      31.1     Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

      32.1     Certification pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-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.

TRB SYSTEMS INTERNATIONAL INC.

By: /s/ Byung Yim

Byung Yim, President, Chief Executive Officer and

Chief Financial Officer   

Date:   November 15, 2010

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