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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| TRB Systems International Inc (CE) | USOTC:TRBX | OTCMarkets | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.0002 | 0.00 | 00:00:00 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
Amendment No. 1
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Fiscal Year Ended June 30, 2007
[ ] TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to _____________
Commission file number: 333-07242
Delaware 22-3522572 ------------------------------------------ ---------------------------------- (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 1472 Cedarwood Drive, Piscataway, New Jersey 08854 --------------------------------------------------- ------------------------ Address of principal executive offices Zip Code |
Securities registered under Section 12(g) of the Exchange Act:
Check whether the issuer is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act. |__|
Check whether the issuer (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 |__|
Check if there is no disclosure of delinquent filers pursuant to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. |__|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes |__| No |X|
State issuer's revenues for its most recent fiscal year: $317,162.
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity as of a specified date within the past 60 days (See definition of affiliate in Rule 12b-2 of the Exchange Act: Approximately $2.98 million.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date: 23,699,922 shares as of October 22, 2007.
Transitional Small Business Disclosure Format (Check one): Yes |__| No |X|
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-KSB/A (this "Amendment") amends TRB Systems International, Inc.'s (the "Company") Annual Report on Form 10-KSB for the year ended June 30, 2007, originally filed with the Securities and Exchange Commission (the "Commission") on October 22, 2007 (the "Original Filing").
We are filing this Amendment for the purpose of restating the financial statements for the year ended June 30, 2007 and its accompanying notes to respond the Commission's comments dated December 5, 2007. Except as set forth in the immediately preceding sentence, this Amendment No. 1 does not alter or restate any of the information set forth in the Original Filing.
This Amendment No. 1 continues to speak as of the date of the Form 10-KSB filed on October 22, 2007 and we have not updated the disclosures contained herein to reflect events that have occurred since the filing of the Original Filing. Accordingly, this Amendment No. 1 should be read in conjunction with our other filings, if any, made with the Commission subsequent to the filing of the Original Filing.
As required, currently-dated certifications from the Company's Principal Executive and Principal Financial Officer have been included as exhibits to this Amendment.
TRB SYSTEMS INTERNATIONAL INC.
FORM 10-KSB/A
INDEX
PART I Item 1. Description of Business................................... 4 Item 2. Description of Property................................... 8 Item 3. Legal Proceedings......................................... 9 Item 4. Submission of Matters to a Vote of Security Holders....... 9 PART II Item 5. Market for Common Equity and Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities. 9 Item 6. Management's Discussion and Analysis or Plan of Operation. 11 Item 7. Financial Statements...................................... 14 Item 8. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure...................... 40 Item 8A. Controls and Procedures................................... 42 Item 8A(T). Controls and Procedures................................ 43 Item 8B. Other Information......................................... 43 PART III Item 9. Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange Act......................................... 43 Item 10. Executive Compensation.................................... 45 Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters............... 46 Item 12 Certain Relationships and Related Transactions; and Director Independence................................... 47 Item 13. Exhibits.................................................. 48 Item 14 Principal Accountant Fees and Services.................... 49 Signatures.......................................................... 50 |
PART I
Item 1. DESCRIPTION OF BUSINESS
TRB Systems International Inc. ("We" or the "Company") was incorporated in the State of Delaware on April 9, 1997. We established a new subsidiary Alenax (Tianjing) Bicycle Corp. ("Alenax") to conduct our business. Alenax was incorporated in China on February 22, 2005.
We engaged with Alenax for the business of developing, marketing, and manufacturing a line of Alenax- bicycles including Alenax-Exercise Bicycle, Alenax -Electric Bicycle, and Alenax-Wheelchair (collectively "Alenax-Product"). The technology applied at our Alenax Product is called Natural Motion Technology ("NMT"), which we are exclusively licensed from ABL Properties Company, a company jointly owned by Mr. Byung Yim, our President and Chief Executive Officer, his family members and other individuals.
The characteristics of the NMT are similar to that used in a stepper machine, which allows the users of our Alenax Product to exercise in a natural walking or jogging motion that is the bio-mechanically correct way of exercise without any trauma often associated with many alternate forms of exercise. We believe that our NMT bicycles and fitness trainers are able to provide our customers with the results they want, such as variable stroke and non-impact motion, but with much less the damage to their lower back, hips, knees, and ankles that traditional biking or jogging on pavement, may develop. We believe that our products are particularly good for elderly, because our products are not only safe and gentle, but also cardiovascular and anaerobic.
We intend to provide a new generation of cycling and products using the patented Natural Motion Technology. Our products include NMT's bicycles, fitness/home trainers, and electric bicycles.
Our major products are NMT- Bicycles, which are able to provide with more smoother, up and down pumping, or stepping action, similar to our body's natural walking and running motion.
The operating principles of NMT- bicycles are relatively simple. The pedal levers travel up and down through the maximum power range that has an arc of 135 degrees. As the lever on one side is depressed, the opposing lever is raised. A full lever stroke or a partial stroke may be applied to propel the bicycle. Lever strokes require far less leg motion than the 360-degree movement required with a conventional bicycle.
Our study showed that NMT- bicycles are able to increase bicycles' propulsion power significantly, compared to their conventional circular pedaling models. The propelling force of the NMT lever is constant, which is different from those conventional bicycles with variable, circular ascending and descending crank motion. The levers driving the Motion Plus Technology do not revolve. Accordingly, their length can be extended to take advantage of the power of leverage. Since the levers of NMT -bicycles do not revolve, greater ground pedal clearance over rough terrain and around turns is allowed. Propulsion of a bicycle using the NMT results in significantly greater distance traveled, for a given expenditure of effort, than a bicycle using conventional bicycle technology.
A NMT- bicycle looks like a conventional bicycle. What makes big difference is the NMT applied on the bicycle. A NMT- bicycle has two main components: (i) Controller: this parts control the 6-different pedaling motions of the multi- function bike and (ii) Rear Hub: a dual ratcheting sprocket which is engaged by a drive chain.
We have introduced a line of NMT -bicycle that is propelled exclusively by the NMT. This line of NMT- bicycle is in different models with multiple sizes for men and women, and looks like popular cruisers and mountain bikes that offer comfortable upright riding. In the later stage, we will introduce adult tricycle, outdoor recumbent (reclining) bicycles, and arm/shoulder ergometers. Lightweight, higher performance bicycles will also be introduced to appeal to the performance biking community and to meet the dynamic and continually changing needs of the market.
Therapeutic market is generally driven primarily by product performance, while non-therapeutic markets are more sensitive to price.
We offer five models of NMT- bicycles: Mountain Bike (MTB); Leisure Bike, BMX (Children); ATB (all-terrain); and Cross Trading -Bike. In mass production, Alenax will offer a pedal arm in lengths of either 225 mm or 250 mm. This will increase the force of each stroke and increase speed considerably compared to the conventional pedal length of 165 to 175 mm. We plan to focus initially on the single action, natural stepping motion in all the bikes with our proprietary multifunctional pedaling motion bikes. Our tricycle will follow within one year. We will tap the high-end professional rider market in the second phase of our business plan. We are currently conducting care research to verify the speed and efficiency of our racing prototype (i.e., longer pedal arm, therefore greater force stroke).
Most conventional bicycles are not structurally or functionally designed specifically for use of rehabilitation. Our technology may fill this huge untapped market, especially in the "middle-aged" population. The NMT configuration in NMT's bicycle allows the rehabilitating person who uses NMT's bicycle in a stationary mode (sitting on a stand) to transfer the natural gait motion of 135 degrees from the inside to the outdoor with the same bike (without the stand).
Our fitness/home trainers are a natural development of our experience with physical therapists using our "outdoor bike" concept of the natural gait motion for their patients. They wanted a graded capability of ROM (Range of motion) in the stationary bike, as patients move from a narrow range of motion to a wider and eventually to the 360 degree, circular motion that they were accustomed to, in typical rehabilitative procedure. Our Versi-Trainer meets that demand with training and rehabilitative device that provides the following six different sets of exercises:
* Alternate up and down pumping motion;
* Simultaneous with both feet parallel to each other;
* Bilateral-One foot pumps while the other foot rests motionless;
* One foot pumps 360 degrees while the other foot rests motionless;
* 360-degree rotation-conventional bike pedaling-opposed pedals; and
* Parallel pedaling-360 degree rotation.
The Versi-Trainer allows individuals to exercise their abdominals, hips (lateral rotators), quadriceps, hamstrings, and gluteus (butt) muscles. All actions are performed in the correct biomechanical positions.
POWER+BIKE is an outdoor bike that uses the same "up-down" motion of all the NMT bicycles but with the ability to, with the twist of the handle, become an electric bike with speed capability of 23 mph. Our POWER+BIKE is strategically positioned, not specifically for the luxury market, which has three new entries this year Bricklin, Mercedes and Porsche. All three are designed similar to a moped, are heavy (50 lbs or more), and costly at a price between $600 and $1,200. By comparison, NMT's POWER+BIKE is 23 lbs, light and efficient enough, which can be pedaled comfortably in a business skirt or suit, for the senior citizen and women's market and sleek enough for the "Generation X" market appeal, sophisticated enough for the urban businessman, cool and convenient for the outdoor family and RV enthusiasts, and safe and practical for the recovering heart attack patient who wants to exercise but does not want to be stuck too far from home. With a retail cost of $600 and manufacturing costs of $200, along with the added capabilities of folding the POWER+BIKE into a POWER PACK so it can be hung upon the back of a door, NMT 's management believes the POWER+BIKE can capture a major market share within this emerging market.
We don't own any manufacturing facility. We are currently in the process to improve the quality of our products. As soon as this process is completed, we plan to manufacture our products through contracts with existing manufacturers in China and Taiwan.
Currently we are manufacturing our proprietary parts of hub with Kun Teng Industries Ltd. in China and Taiwan who is one of the top hub maker in the world, other Alenax proprietary parts with the Ching Haur Ind.Co., Ltd who is one the largest axles and other bike parts maker in the world, medium and high end bicycles of 6-Way pedaling motion with Tianjin Fushida Bicycle Co., Ltd. who is the largest bike manufacturer in China and in the world, the 1-Way & 2-Way bikes with Pretty Wheel Ind. Co., Ltd., in China and Taiwan, and exercise bikes with Joong Chunn Ind. Co., Ltd who is one of the top leading sports and healthcare equipment manufacturer in Taiwan and the Weck Ind. Co., Ltd., in TaiChang, China.
We plan to market our products to the following markets, both domestically and internationally:
(a) Stepper Users: In this industry, the stepper market is one of the fastest growing segment. Our MTS-bicycles are attractive to this segment because our NMT-bicycles allow the stepper motion and muscle conditioning to be taken outdoors.
(b) Health and Fitness Facilities: To stay competitive, commercial health and fitness facilities must offer their members with state-of-the-art equipment and programs continuously. As a consequence, health and fitness facilities typically will spend increasingly more on equipment just to keep pace. Our recumbent ergometer (Versi-Trainer) will offer health club goers the opportunity to combine conventional circular motion with the NMT stepper motion in a single machine.
(c) Senior Citizens: The aging population combined with the rapidly escalating cost of health care services has resulted in an intensifying concern about the efficiency and effectiveness of the U.S. health care system. As a result, there is a growing need for individuals, particularly elderly, to participate regularly in safe, functional and efficient exercise that combines aerobic conditioning and resistance training.
(d) Rehabilitation & Therapeutic Market: The rehabilitation and therapeutic market consists of four segments: post surgical (hip or knee); acute injury; individuals with a restrictive ROM (range of motion); and other (arthritic, biomechanical). Today, the major form of therapy for post hip and knee surgery is the conventional stationary bicycle. The 360-degree fixed stroke is limiting because initial therapy methods keep ROM within less than 120-degree of bound. This causes a time lag before the conventional 360-degree bike can be implemented. If they use our Fitness Versi-Trainer and the NMT- bicycles, they will get more favorable results.
The ROM of the NMT is variable and can accommodate all ROM restrictions, which allows patients to begin rehabilitation sooner. The biomechanical design of the NMT also puts less strain on limbs and joints by generating a force along the muscle belly, rather than at the insertion (joints). This enables patients to recover from surgery faster than with current techniques, while reducing the probability of re-injury.
We plan to sell our products continuously through regional distributors, and we have entered into license and distribution agreements with distributors in Japan, Indian, Nigeria, Benin, Canada, Ivory Coast, Tanzania, Brazil, Vietnam, Korea, Taiwan and the United States.
Those agreements provide for compensation to be paid during the first year of the agreements and eventual royalties on the sale of the products. Terms of the agreements typically commence as of the date executed and continue for a period of three years, renewable every three years. Please see Note 2 to the financial statements for details.
We intend to hire sales personnel continuously to expand our distribution channels. We also plan to look for possible alliances with existing sporting goods manufacturers. It is anticipated that we are able to market our ergometers and electric bicycles through a network of bike retailers after brand awareness and an established corporate image have been achieved.
We focus our R&D activities on three main product groups, a select line of bicycles, electric bicycles, and three types of exercise bicycle. For the years ended June 30, 2007 and 2006, we spent $31,274 and $14,453, respectively, on our Research and Development activities.
ABL Properties Co., a company controlled by our president, owns patents of Natural Motion Technology which covers the speed change and/or propulsion mechanism of the NMT. ABL has obtained or patent pending such patent from the U.S., China, India, Australia, Taiwan, Japan, and Korea, Europe and Brazil. We have exclusive worldwide licensing rights under all NMT patents, except for Taiwan and South Korea.
Under the licensing agreement, we shall pay ABL $200,000 in the first year of our active sales, thereafter a 1% royalty on annual sales up to $10 million or 0.75% on sales over $10 million but under $20 million, and 0.5% on all sales thereafter, and all profits gleaned from international sales to an aggregate limit of $3,325,000.
We are not aware of any direct competition for the products offered by us. The general competition is the bicycle industry, which is, as aforementioned, differentiable from our NMT product line.
To our best knowledge, there are no special requirements for government approval of its principal products or services, other than those generally applicable to normal business operations. We are not aware of any probable regulation of its business, other than as will apply to businesses in general.
We do not anticipate that inflation will have a material impact on our current operations.
As of June 30, 2007, we have 18 full-time employees. We believe that we have good relations with our employees.
Item 2. DESCRIPTION OF PROPERTIES
We lease approximately 280 square meters of office at 1 Yong An Road in Tianjin, 300024, China, under a three-year lease which expires on March, 2008. The monthly rent is $1,100. We do not own any real estate. We believe the leased facilities will be sufficient to meet our needs for the next twelve months.
We have also leased approximately 1,400 square meters of R&D facility at 84 Ui Meon-Rd. Taichung, Taiwan. The monthly rent is $1,400.
We maintain a mailing address in the United States at 1472 Cedarwood Drive, Piscataway, NJ 08854, which is provided to us free of charge by a third party.
Item 3. LEGAL PROCEEDINGS
As of June 30, 2007, we had four outstanding judgments totaling in the amount of $381,000 against the Company, from unpaid loans (Bernard Koff , $192,000), attorney fees (Cole, Schotz, Meiser, Forman & Leonard, $89,000 and David, Kessler & Associates, LLC, $44,000), and marketing service fees (Sawtooth Marketing Group, $56,000). All judgments were back to the middle of 1990s. Negotiations have been initiated to have the amounts reduced but the outcome of such negotiations is uncertain.
Other than the judgments disclosed as above, there are no actions, suits, proceedings or claims pending against or materially affecting the Company.
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
From August 21, 1998 to June 28, 2004, our common stock was quoted on the OTC Bulletin Board ("OTCBB") under the symbol TRBX.OB. From June 28, 2004 to February 26, 2007, the quotation of our common stock was removed from the OTC Bulletin Board and quoted on the Pink Sheets due to the Company's delinquent filing of its Form 10-QSB with the SEC for the quarter ended March 31, 2004.
Since February 26, 2007, our common stock has been re-quoted on the OTC Bulletin Board under the symbol "RBX.OB." Trading in our common stock has been minimal with limited or sporadic quotations and there is no established public trading market for the Company's common stock.
As of October 22, 2006, there were 23,699,922 shares of Common Stock issued and outstanding, held by approximately 312 holders of record as indicated on the records of our transfer agent, which is Island Stock Transfer, St. Petersburg, Florida 33701.
We have never paid cash dividends and have no plans to do so in the foreseeable future. Our future dividend policy will be determined by our board of directors and will depend upon a number of factors, including our financial condition and performance, our cash needs and expansion plans, income tax consequences, and the restrictions that applicable laws, and our future credit arrangements may then impose.
Currently under Delaware law, unless further restricted in its certificate of incorporation, a corporation may declare and pay dividends out of surplus, or if no surplus exists, out of net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year (provided that the amount of capital of the corporation is not less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets).
There are no equity compensation plans.
There are no outstanding options or warrants to purchase securities of the Company.
In fiscal 2004, we issued 3,287,042 shares to August Rheem, a member of our Board of Directors, to retire shareholders loans of $428,304; and 912,000 shares to several individual investors for $228,000 in cash for our operations. These shares were issued in reliance upon the exemption contained in Section 4(2) of Securities Act of 1933.
On May 22, 2007, we issued 130,000 common shares to 2 individuals at a price of $0.04 per share for services provided. The shares were issued under the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended. No public offering was involved. The shares so issued bear a restrictive legend. The recipients took the shares for investment and not resale. No underwriters or agents were involved in the issuances and we did not pay any underwriting discounts or commissions.
On May 22, 2007, we issued 916,920 common shares to 13 individual investors in a private placement at a price of $0.15 per share for an aggregate of $118,038 in cash. The shares were issued under the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended. No public offering was involved. The shares so issued bear a restrictive legend. The investors took the shares for investment and not resale. No underwriters or agents were involved in the issuances and we did not pay any underwriting discounts or commissions.
During the fourth quarter of the Company's fiscal year covered by this report, there was no purchase made by or on behalf of the Company or any affiliated purchaser of shares or other units of any class of the Company's equity securities that is registered by the Company pursuant to Section 12 of the Exchange Act.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This annual report on Form 10-KSB 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.
We conduct our business through our wholly owned subsidiary, Alenax (Tianjin) Bicycle Corp., which develops, markets, and manufactures a line of NMT-product. For the years ended June 30, 2007 and 2006, we had product sales of $317,162 and $7,096, respectively.
In fiscal 2006, we focused our efforts on redesigning our products, improving the quality of our products, conducting product tests, including strength, durability and road tests, and focused on marketing our products. As of June 30, 2007, this process was basically completed. In fiscal first quarter of 2007, we started to market and sales of our products. We believe that we now have a modern, sophisticated, marketable, product line, which is ready for production and sale.
As of June 30, 2007, we have completed all phases of the product tests, and the quality of each of our products has been greatly improved. Accordingly, we gradually put more efforts on sales and marketing side. For the year ended June 30, 2007, we have achieved the following:
(1) For the first time since we had defective problems in July 1999, we began product sales again in June, 2006, and generated sale revenue of $$317,162 for the year ended June 30, 2007;
(2) We opened our first chain Store in Tianjin, China in August 2006;
(3) We entered into an agreement in August 2006 with Tianjin Bicycle and Sports Association ("TBSA") for the promotion and marketing of our Alenax Bike, and for the bike event with TBSA.
(4) In August 2006, we received a "Certificate" from China National Sports Bureau ("CNSB") on September 30, 2006, which says, "The China National Sports Bureau has chosen Alenax (Tianjin) Bicycle Corp. as the sole provider of recreational, Fitness, Sports and Training products for China National Bicycle Team until December, 2008".
In December, 2006, we received an honoring certificate from China National Quality Bureau, which says, "The product of Alenax (Tianjing) Bicycle Corp was appointed to one (1) of the top thirteen (13) famous product brands in Tianjin, China."
(5) During the year, we attended four international bike shows, Germany Bike Show, Interbike USA Bike Show, Taiwan International Bike Show, and Shanghai International Bike Show, with all types of our Alenax products. Those show results were great and all floor samples were sold out very quickly.
(6) We completed the final development and test of Uni-Set, a multi-function bike part. Now if you change a BB-Set of your conventional bike to our Uni-Set, you can ride a conventional pedaling motion along with five (5) more different pedaling motion bike. With this product, we attended Taiwan International Bike Show in April 2007, and exposed our Uni-Set to lots of potential buyers.
(7) We have completed the tests of a new electric bike, and attended to Shanghai International Bike Show in May 2007 successfully;
(8) We are testing the Exercise Bike for the use of health clubs. More tests are needed;
(9) We have received 800 bikes order from Korean and an initial 10 exercise bikes order from Tianjin Sports Gym, which belongs to Tianjin Sports Bureau of Tianjin City for public use. Furthermore, Tianjin Sports Gym has provided us a space (23 meter x 40 meter) to show our technology to public as soon as possible for the purpose of public health care. This is very honorable to us with good reputation;
(10) We have completed samples of Electric Bike, Spinning Bike, and Exercise Bike for uses in health club. Those products are sent to the United States for professionals' feedback and to complete tests.
In fiscal 2008, we intend to develop a new type of high-end bicycle with Alenax Uni-Set, especially designing for reducing weigh.
For the year ended June 30, 2007, we have product sales of $317,612, as compared to $7,093 for the year ended June 30, 2006.
Cost of goods sold consists primarily of the material cost of goods sold, direct overhead, direct wages, and direct depreciation expense. For the year ended June 30, 2007 and 2006, our cost of revenues was $211,160 and $3,096 respectively, approximately 66.6% and 43.6% of the revenues. As compared to 2006, the increase in cost of revenue was primarily due to the increase of sales.
For the year ended June 30, 2007, our total operating costs and expenses increased by 76.3%, from $322,863 in fiscal 2006 to $569,142 in fiscal 2007. The increase in operating expenses was largely due to adjustment of patent expenses of $200,000 in previous years and the increase in business activities and increase in sales. During the period, the depreciation expense was increased by 202% from $6,214 in 2006 to $18,770 in 2007 because of increased property and equipment.
For the year ended June 30, 2007, our total other expenses were $14,249, of which $302,073 was interest expense, and partially offset by income from forgiveness of debts in an amount of $294,283. In fiscal 2006, our total other expenses were $102,983, of which $104,244 was interest expense, and partially offset by $2,072 of interest income.
Net loss for the years ended June 30, 2007 and 2006 were $477,389, or $0.02 per share, and $134,818, or $0.01 per share, respectively.
Since inception, our operations have been primarily funded by equity capital and unsecured short-term loans from directors and shareholders.
As of June 30, 2007, the Company's cash and cash equivalents balance was $39,432.
For the year ended June 30, 2007, net cash was used in operating activities of $79,796, largely due to our net loss of $477,389, decrease in accounts payable of $176,768, and decrease in other payable of $141,958, and partially offset by reclassification of legal judgments payable from non-current liabilities in an amount of $381,000, decrease in inventory of $162,104, and increase in indebtness of related party of $100,793.
During 2007, net cash used in the Company's investing activities were $419,725,725, of which $381,000 was due to the reclassification of legal judgments payable to current liabilities, and $38,725 was used in investing activities to purchase property and equipment. During the same period, the Company's financing activities provided net cash of $505,630, of which $382,392 were from issuance of notes and accrued interest deferred, and $123,238 were from issuance of common stock in a private placement.
As disclosed on Item 3, "Legal Proceedings" and Note 9 of our Notes to Financial Statements, as of June 30, 2007, we had outstanding judgment in a total of $381,000 incurred in 2000-2001.
We incurred losses during the past years. We will continue to seek additional funding to finance our operations. The amount and timing of such capital transactions is not yet known and will depend largely on our operating needs. Our ability to secure additional funding is uncertain, as is the financial effect any such funding may have on our capital structure or operating results.
As of June 30, 2007, there were no off-balance sheet arrangements.
The discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires estimates and assumptions that affect the reported amounts and disclosures. We believe the following, among others, to be critical accounting policies. That is, they are both important to the portrayal of our financial condition and results of operations, and they require critical management judgments and estimates about matters that are inherently uncertain. Although we believe our judgments and estimates are appropriate and correct, actual future results may differ from our estimates.
Revenue recognition: We principally derive our revenue from license and distribution fees, we recognize revenue on an accrual basis as earned under contract terms in accordance with the Securities and Exchange Commission (SEC) Staff Accounting Bulletin 104. Fees received prior to such license are reflected as deferred revenue.
Allowance for doubtful accounts: Our allowance for doubtful accounts relates to trade accounts receivable. We perform ongoing evaluations of our customers and we extend or limit credit based upon payment history and the customer's current credit worthiness. The allowance for doubtful accounts is an estimate prepared by management based on analyses of historical bad debts, receivable aging, current economic trends and any specific customer collection issues that have been identified. The allowance for doubtful accounts is reviewed periodically and adjustments are recorded as deemed necessary.
Item 7. FINANCIAL STATEMENTS
Stan J.H. Lee, CPA
794 Broadway, Chula Vista, CA 91910
619-623-7799 Fax 619-564-3408 E-mail) stan2u@gmail.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
TRB Systems International, Inc
We have audited the accompanying consolidated balance sheets of TRB Systems International, Inc. as of June 30, 2007(restated) and the related statements of operations (restated), changes in stockholders' equity ( restated) and cash flows ( restated) for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of TRB Systems International, Inc. as of June 30, 2006, were audited by other auditors whose report dated August 18, 2006, expressed an unqualified opinion on those statements. Their report included an explanatory paragraph regarding going concern.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amount and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2007 and the results of its operations and its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.
As discussed in note 1 to the consolidated financial statements, the consolidated financial statements have been restated.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3-b, the Company in the past has shown significant operating losses that raise substantial doubt about its ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Stan J. H. Lee, CPA ------------------------ Stan J.H. Lee, CPA January 10, 2008 |
Chang G. Park, CPA, Ph. D.
371 E. STREET, CHULA VISTA, CALIFORNIA 91910-2615
TELEPHONE (858)722-5953, FAX (858) 408-2695, FAX (619) 422-1465 E-MAIL changgpark@gmail.com
To the Board of Directors
TRB Systems International, Inc.
(a Development Stage Company)
We have audited the accompanying balance sheet of TRB Systems International, Inc. as of June 30, 2006 and the related statements of operations, changes in shareholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. The financial statements of TRB Systems International, Inc. as of June 30, 2005, were audited by other auditors whose report dated March 27, 2006, expressed an unqualified opinion on those statements. Their report included an explanatory paragraph regarding going concern.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of TRB Systems International, Inc., as of June 30, 2006, and the results of their operations and its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.
The consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company's losses from operations 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.
/s/ Chang G. Park, CPA ---------------------- Chang G. Park, CPA August 18, 2006 Chula Vista, CA 91910 |
TRB SYSTEMS INTERNATIONAL INC.
Statements of Financial Position
(Restated)
ASSETS
As of As of June 30, 2007 June 30, 2007 As of (Restated) (Previously Filed) June 30, 2006 --------------- ------------------ --------------- Current Assets Cash................................................. $ 39,432 $ 39,432 $ 33,323 Accounts receivable, net of allowance for doubtful accounts 2,239,767 2,239,767 2,239,767 Inventories.......................................... 72,621 72,621 234,725 --------------- ---------------- --------------- Total Current Assets.............................. 2,351,820 2,351,820 2,507,815 Indebtedness of related party........................ - 143,395 44,188 Property and Equipment, Net.......................... 166,975 166,975 147,020 Other Assets Prepaid and other assets............................. 120,545 120,545 163,300 Deferred tax asset................................... 222,579 222,579 222,579 --------------- ---------------- --------------- Total Other Assets................................ 343,124 343,124 385,879 --------------- ---------------- --------------- Total Assets......................................... $ 2,861,919 $ 3,005,314 $ 3,084,902 =============== ================ =============== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities Accounts payable and accrued liabilities............. $ 220,119 $ 220,119 $ 396,887 Notes and interest payable........................... 2,258,169 2,258,169 1,875,777 Advances from customers.............................. 171,440 171,440 160,543 Convertible debt..................................... 142,611 142,611 142,611 Other payable........................................ - - 141,958 Legal judgments payable.............................. 381,000 - - Corporation income taxes payable..................... 935 935 935 -------------- --------------- --------------- Total Current Liabilities......................... 3,174,274 2,793,274 2,718,711 Indebtedness to related party........................ 499,783 443,178 443,178 Legal judgments payable.............................. - 381,000 381,000 Total Liabilities................................. 3,674,057 3,617,452 3,542,889 --------------- --------------- ---------------- Stockholders' Equity (Deficit) Common stock, $0.001 par value, 30,000,000 shares authorized; 23,699,922 shares issued and outstanding as of June 30, 2007 and 22,783,002 as of June 30, 2006.................... 23,700 23,700 22,783 Additional paid-in capital.......................... 3,228,810 3,228,810 3,106,489 Retained earning (deficit).......................... (4,064,648) (3,864,648) (3,587,259) --------------- ---------------- ---------------- Total Stockholders' Equity (Deficit)................ (812,138) (612,138) (457,987) --------------- ---------------- ---------------- Total Liabilities and Stockholders Equity (Deficit). $ 2,861,919 $ 3,005,314 $ 3,084,902 =============== ================ ================ See Notes to the Financial Statements. |
TRB SYSTEMS INTERNATIONAL INC.
Statements of Operations
(Restated)
CAPTION> Year Ended Year Ended June 30, 2007 June 30, 2007 ---------------- ------------------- Year-Ended (Restated) (Previously Filed) June 30, 2006 ---------------- ------------------- ------------------ REVENUES Sales.......................................... $ 317,162 $ 317,162 $ 7,093 --------------- ------------------ ------------------ Total revenues................................. 317,162 317,162 7,093 Cost of Revenues............................... 211,160 211,160 3,096 --------------- ------------------ ------------------ Gross Profit................................... 106,002 106,002 3,997 License and distributor fees................... - - 263,239 --------------- ------------------ ------------------ Total Operating Revenue........................ 106,002 106,002 267,236 OPERATING COSTS Operating expenses............................. 550,372 350,372 316,649 Depreciation expenses.......................... 18,770 18,770 6,214 --------------- ------------------ ----------------- Total Operating Costs.......................... 569,142 369,142 322,863 OPERATING INCOME (LOSS)........................ (463,140) (263,140) (55,627) --------------- ------------------ ----------------- OTHER INCOME (EXPENSE) Income from forgiveness of debts............... 294,283 294,283 - Foreign currency translation................... (6,459) (6,459) (811) Interest income................................ - - 2,072 Interest Expense............................... (302,073) (302,073) (104,244) --------------- ------------------ ----------------- Total Other Income (Expenses).................. (14,249) (14,249) (102,983) NET LOSS BEFORE INCOME TAX AND BENEFIT......... (477,389) (277,389) (158,610) Income tax benefit............................. - - 23,792 --------------- ------------------ ------------------ NET INCOME (LOSS).............................. $ (477,389) $ (277,389) $ (134,818) =============== ================== =================== BASIC EARNINGS (LOSS) PER SHARE................ $ (0.02) $ (0.01) $ (0.01) =============== ================= ================== DILUTIVE EARNINGS (LOSS) PER SHARE............. $ (0.02) $ (0.01) $ (0.01) =============== ================= ================== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 22,880,973 22,880,973 22,783,002 =============== ================= ================== See Notes to the Financial Statements. |
TRB SYSTEMS INTERNATIONAL INC.
Statements of Stockholders' Equity (Deficit) (Restated)
Additional Retained Total Common Common Paid-in Earnings Stockholders' Shares Stock Capital (Deficit) Equity ------------------ ----------------- ------------------ -------------- --------------- Balance, June 30, 2005 22,783,002 $ 22,783 $ 3,106,489 $ (3,452,441) $ (323,169) Net loss for the year ended June 30, 2006 - - - (134,818) (134,818) ------------------ ----------------- ----------------- -------------- -------------- Balance, June 30, 2006 22,783,002 $ 22,783 $ 3,106,489 $ (3,587,259) $ (457,987) Common stock issued For service at $0.04 per share on May 22, 2007 130,000 130 5,070 - 5,200 Common stock issued for cash At $0.15 per share On May 22, 2007 786,920 787 117,251 - 118,038 Net loss for the year ended June 30, 2007 - - - (477,389) (477,389) ---------------- ---------------- ------------------ ---------------- -------------- Balance, Jun 30, 2007 23,699,922 $ 23,700 $ 3,228,810 $ (4,064,648) $ (812,138) ================ ================ ================== ================= ============== See Notes to the Financial Statements |
TRB SYSTEMS INTERNATIONAL INC.
Statements of Cash Flows
(Restated)
Year Ended Year Ended June 30, 2007 June 30, 2007 ------------------- ------------------ Year Ended (Restated) (Previously Filed) June 30, 2006 ------------------- ------------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)................................. $ (477,389) $ (277,389) $ (134,818) Adjustments to reconcile net loss to net cash Provided (used in) operating activities: Depreciation and amortization expenses........... 18,770 18,770 6,214 Changes in operating assets and liabilities (Increase) decrease in accounts receivable....... - - (270,398) (Increase) decrease in inventories............... 162,104 162,104 (146,736) (Increase) decrease in other current assets...... - - 50,386 Increase in indebtness of related party.......... 100,793 (99,207) (13,453) Increase in prepaid expenses..................... 42,755 42,755 - (Increase) decrease in deferred tax asset........ - - (23,792) Increase (decrease) in accounts payable and accrued liabilities (176,768) (176,768) 336 Increase (decrease) in customer advance.......... 10,897 10,897 160,543 Increase (decrease) in other payable............. (141,958) (141,958) 141,958 Reclassification of legal judgments payable from non-current liabilities.................... 381,000 - - ------------------- ------------------ ---------------- Net cash used by operating activities........ (79,796) (460,796) (229,760) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of Property and Equipment................. (38,725) (38,725) (44,061) Increase in prepaid and other assets............... - - (163,300) Reclassification of legal judgments payable to current liabilities............................ (381,000) - - ------------------- ------------------ ---------------- Net cash used in investing activities........ (419,725) (38,725) (207,361) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of notes and accrued interest deferred.... 382,392 382,392 - Increase in accrued interest on notes.............. - - 101,585 Issuance of common stock........................... 123,238 123,238 - (Decrease) increase in director's loans........... - - 368,257 ------------------- ------------------ ---------------- Net cash provided by financing activities.... 505,630 505,630 469,842 Net increase (decrease) in cash.................... 6,109 6,109 32,721 CASH, BEGINNING OF YEAR............................ 33,323 33,323 602 ------------------- ----------------- ---------------- CASH, ENDING OF YEAR............................... $ 39,432 $ 39,432 $ 33,323 =================== ================= ================ SUPPLEMENTAL CASH FLOW DISCLOSURES Cash paid during year for Interest................. $ 302,073 $ 302,073 $ 104,244 =================== ================= ================ Cash paid during year for taxes.................... $ - $ - $ - =================== ================= ================ See Notes to the Financial Statements. |
TRB SYSTEMS INTERNATIONAL, INC.
Notes to Financial Statements
June 30, 2007 (Restated)
1. 2007 RESTATEMENT
On January 10, 2008, we amended TRB Systems International Inc.'s Annual Report in Form10-KSB for the year ended June 30, 2007, to amend and restate financial statements for the year 2007 with respect to the correction of errors in previously-issued financial statements.
The first errors were restoring of $200,000 liability under the patent payment to a related party previously not recognized and charging as expense in the statement of operation.
The second errors were reclassification of legal judgments payable from non- current to current liabilities since the judgments have been rendered.
Effects of the restatements by line item follows:
Statement of Financial Position
Statement of Operations
Statement of Stockholders' Equity
Statement of Cash Flows
TRB SYSTEMS INTERNATIONAL INC.
Statements of Financial Position (Restated)
ASSETS
As of As of June 30, 2007 June 30, 2007 --------------------- ---------------------- (Restated) (Previously Filed) CURRENT ASSETS Indebtedness of related party $ - $ 143,395 ------------------- -------------------- TOTAL ASSETS $ 2,861,919 $ 3,005,314 =================== =================== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities Legal judgments payable $ 381,000 $ - ------------------ ------------------- Total Current Liabilities 3,174,274 2,793,274 Indebtness to related party 499,783 443,178 Legal judgments payable - 381,000 ----------------- ------------------- TOTAL LIABILITIES 3,674,057 3,617,452 STOCKHOLDERS' EQUITY (DEFICIT) Retained earnings (deficit) (4,064,648) (3,864,648) ----------------- -------------------- Total Stockholders' Equity (Deficit) (812,138) (612,138) ----------------- -------------------- Total Liabilities and Stockholders'Equity (Deficit) $ 2,861,919 $ 3,005,314 ================= ==================== |
TRB SYSTEMS INTERNATIONAL INC.
Statements of Operations (Restated)
Year Ended Year Ended June 30, 2007 June 30, 2007 --------------------- --------------------- (Restated) (Previously Filed) OPERATING COSTS Operating expenses $ 550,372 $ 350,372 ------------------ --------------------- Total Operating Costs 569,142 369,142 ------------------ --------------------- OPERATING INCOME (LOSS) (463,140) (263,140) NET LOSS BEFORE INCOME TAX AND BENEFIT (477,389) (277,389) ------------------ -------------------- NET INCOME (LOSS) $ (477,389) $ (277,389) ================== ==================== BASIC EARNINGS (LOSS) PER SHARE $ (0.02) $ (0.01) ================== ==================== DILUTIVE EARNINGS (LOSS) PER SHARE $ (0.02) $ (0.02) ================== ==================== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 22,880,973 22,880,973 ================== ==================== |
TRB SYSTEMS INTERNATIONAL INC.
Statements of Stockholders' Equity (Deficit) (Restated)
Year Ended Year Ended June 30, 2007 June 30, 2007 ------------------- ------------------- (Restated) (Previously Filed) STOCKHOLDERS' EQUITY (DEFICIT) Common stock, $0.001 par value, 30,000,000 shares authorized; 23,699,922 shares issued and outstanding as of June 30, 2007 and 22,783,002 as of June 30, 2006 $ 23,700 $ 23,700 Additional paid-in capital 3,228,810 3,228,810 Retained earning (deficit) (4,064,648) (3,864,648) ------------------- ------------------- Total Stockholders' Equity (Deficit) $ (812,138) $ (612,138) =================== =================== |
TRB SYSTEMS INTERNATIONAL INC.
Statements of Cash Flows (Restated)
Year Ended Year Ended June 30, 2007 June 30, 2007 -------------------- ------------------- (Restated (Previously Filed) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (477,389) $ (277,389) Adjustments to reconcile net loss to net cash used in operating activities: Increase in indebtness of related party 100,793 (99,207) Reclassification of legal judgments payable from non-current liabilities 381,000 - ---------------- ------------------ Net cash used in operating activities (79,796) (460,796) CASH FLOWS FROM INVESTING ACTIVITIES: Reclassification of legal judgments payable to current liabilities (381,000) - ---------------- ----------------- Net cash used in investing activities (419,725) (38,725) CASH FLOWS FROM FINANCING ACTIVITIES: ---------------- ----------------- Net increase (decrease) in cash 6,109 6,109 Cash at beginning of year 33,323 33,323 ---------------- ------------------ Cash at end of year $ 39,432 $ 39,432 ================ ================== SUPPLEMENTAL CASH FLOW DISCLOSURES Cash paid during year for Interest $ 302,073 $ 302,073 ================ =================== Cash paid during year for taxes $ - $ - ================ =================== |
2. ORGANIZATION AND 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 (Tianjing) 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.
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. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant account policies of TRB Systems International, Inc., is presented to assist in understanding the Company's financial statements. The financial statements and the notes are the representation of the Company's management, who are responsible for their integrity and objectivity. These accounting policies conform to U.S. generally accepted accounting principles and have been consistently applied in the preparation of the financial statements.
a. Liquidity
As of June 30, 2007, the Company had cash and cash equivalents totaling $39,432 as compared to $ 33,323 at June 30, 2006. As of June 30, 2007, the Company had working capital of $ (822,454) compared to a working capital of $ (210,896) at June 30, 2006. The Company has outstanding judgments in the amount of $ 381,000 that is unable to pay within one-year period.
The Company believes its available cash, cash equivalents, in combination with additional license and distributor payments and loans from related party(ies) will be sufficient to meet its anticipated capital requirements which consist mainly on-going working capital needs. Prior to the commercialization of its products, substantial capital resources will be required to fund continuing operations related to the Company's research, development, manufacturing and business development activities.
The Company believes there may be a number of alternatives available to meet the continuing capital requirements such as public and private financings. Further, the Company placed the first order of its products and believes that will generate new license and distributor agreements. There can be no assurance that any of these findings will be consummated in the time frames needed for continuing operations or on terms favorable to the Company. If adequate funds in the future are not available, the Company will be required to significantly curtail its operating plans and may have to sell or license out significant portions of the Company's technology or potential products, and possibly cease operations.
b. Going Concern
The Company incurred accumulated net losses of $ 4,064,648 from the period of April 11, 1997 (Date of Inception) through June 30, 2007, has recently commenced operations of active sales and it is not profitable yet raising substantial doubt about the Company's ability to continue as a going concern.
The Company may seek additional sources of capital through the issuance of debt or equity financing, but there can be no assurance the Company will be successful in accomplishing its objectives.
The ability of the Company to continue as a going concern is dependent on additional sources of capital and the success of the Company's plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
c. Basis of Presentation
The financial statements of TRB Systems International Inc. are prepared using the accrual basis of accounting whereas revenues are recognized when earned and expenses are recognized when incurred. This basis of accounting conforms to generally accepted accounting principles in the United States of America.
d. Principles of Consolidation
The accompanying consolidated financial statements include the accounts of TRB Systems International Inc., a non-operating holding company and Alenax (Tianjin) Bicycle Corp., the operating company.
e. Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used when accounting for certain items, such as allowances for doubtful accounts, depreciation and amortization, income taxes and contingencies. Actual results could differ from those estimates.
f. Cash and Cash equivalents
For the purpose of the statements of cash flows, the Company considers as cash equivalents: cash on hand, cash in banks, time deposits and all highly liquid short-term investments with maturity of three months or less.
g. Allowance for Doubtful Accounts
The allowance for doubtful accounts is established through a charge to an expense account. The Company reserves based on experience and the risk assessed to each account.
h. Inventories
Inventories consist of bicycles and bicycle parts. Inventories are stated at the lower of cost or market using FIFO (First In, First Out).
i. Property and Equipment
Property and equipment are carried at cost. Depreciation of property and equipment is computed 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 method (MACRS) therefore temporary differences exist. Expenditures for major renewals and betterment that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs as charged to expense as incurred.
j. Impairment of Long-Lived Assets
The Company has adopted FASB Statements No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the total fair value is less than the carrying value of the asset, a loss is recognized for the difference. Fair value is determined based on market quotes, if available, or is based on valuation techniques.
k. Revenue Recognition
The Company recognizes revenues and the related costs when persuasive evidence of an arrangement exists, delivery and acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured in accordance with Securities and Exchange Commission ("SEC") Staff Accounting Bulletin ("SAB") No. 104 "Revenue Recognition in Financial Statements".
The Company accrues for warranty costs, sales returns, bad debts, and other allowances based on its historical experience.
l. Income Tax
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credits carry-forward. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
A valuation allowance is established to reduce the deferred tax asset if it is more likely than not the related tax benefits will not be realized in the future.
m. Comprehensive Income
The Company adopted SFAS No. 130, Reporting Comprehensive Income, which establishes standards for the reporting and display of comprehensive income and its components in the financial statements.
n. Revenue Recognition
License and distributor fees are earned and recognized according to the terms of each agreement.
o. License and Distributor Agreements
The Company's license and distributor agreements provide for compensation to be paid during the first year of the agreements and eventual royalties on the sale of the products. Terms of the agreements typically commence as of the date executed and continue for a period of three years, renewable every three years.
The Company has license agreements in the following countries: Japan, India, Nigeria & Benin, Canada, Ivory Coast, Tanzania, Brazil, Vietnam and Korea.
The Company has distributor agreements in the following states in the United States: California in Orange County and Los Angeles County, Maryland, Delaware and New York in Long Island County and Queens County.
Future Commitments Per Agreements
1st Yr 2nd Yr 3rd Yr Countries States/Counties (Bikes) (Bikes) (Bikes) Total -------------- --------------- ----------- -------------- ---------- ---------- Japan 40,000 80,000 200,000 320,000 India 50,000 90,000 200,000 340,000 Nigeria & Benin 5,000 9,000 10,000 24,000 Tanzania 1,000 2,000 3,000 6,000 Vietnam 4,000 7,000 10,000 21,000 Korea 13,000 31,000 62,000 106,000 Distributors USA CA-Orange County 1,500 3,000 5,000 9,500 CA-LA County 3,000 5,000 7,000 15,000 Maryland & Delaware 1,000 2,000 2,840 5,840 New York Long Island/Queens 1,000 2,000 3,000 6,000 ----------------------------------------------------------------------------------------- |
p. Research and Development
Research and product development costs are expensed as incurred. The Company incurred expense of $29,090 for the year ended June 30, 2007 as compared to $14,453 for the year ended June 30, 2006.
q. Net Operating Loss Carry-forward
Income taxes are provided for the tax effects of transactions reported in the financial statements and consists of taxes currently due plus deferred taxes for operating losses that are available to offset future taxable income.
r. Reclassification
Certain account reclassifications have been made to the financial statements of the prior year in order to conform to classifications used in the current year. These changes had no impact on previously stated financial statements of the Company.
NEW ACCOUNTING PRONOUNCEMENTS
In February 2006, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 155, "Accounting for Certain Hybrid Financial Instruments--an amendment of FASB Statements No. 133 and 140" ("SFAS No. 155"). The provisions of SFAS No. 155 will be effective for all financial instruments acquired, issued, or subject to a re-measurement (new basis) event occurring after the beginning of an entity's first fiscal year that begins after September 15, 2006. The fair value election provided for in paragraph 4(c) of this Statement may also be applied upon adoption of this Statement for hybrid financial instruments that had been bifurcated under paragraph 12 of Statement 133 prior to the adoption of this Statement. Earlier adoption is permitted as of the beginning of an entity's fiscal year, provided the entity has not yet issued financial statements, including financial statements for any interim period, for that fiscal year. SFAS No. 155 amends FASB SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"), and SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS No. 140"). SFAS No. 155 resolves issues addressed in SFAS No. 133 Implementation Issue No. D1, "Application of Statement 133 to Beneficial Interests in securitized Financial Assets". This Statement: a) permits fair value e-measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, b) clarifies which interest only strips and principal-only strips are not subject to the requirements of SFAS No.133, c) establishes a requirement to evaluate interests n securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, d) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and e) amends SFAS No.140 to eliminate the prohibition on a qualifying special purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. The Company is currently evaluating the impact of adopting SFAS No. 155.
In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of Financial Assets--an amendment of FASB Statement No. 140" ("SFAS No. 156"). An entity shall adopt this Statement as of the beginning of its first fiscal year that begins after September 15, 2006. Earlier adoption is permitted as of the beginning of an entity's fiscal year, provided the entity has not yet issued financial statements, including interim financial statements, for any period of that fiscal year. The effective date of this Statement is the date that an entity adopts the requirements of this Statement. SFAS No. 156 amends SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities", with respect to the accounting for separately recognized servicing assets and servicing liabilities. This Statement: a) requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in any of the following situations, b) requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable, c) permits an entity to choose between two subsequent measurement methods for each class of separately recognized servicing assets and servicing liabilities, d) at its initial adoption, permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights, without calling into question the treatment of other available-for-sale securities under SFAS No. 115, provided that the available-for-sale securities are identified in some manner as offsetting the entity's exposure to changes in fair value of servicing assets or servicing liabilities that a servicer elects to subsequently measure at fair value, and e) requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities. The Company is currently evaluating the impact of adopting SFAS No. 156.
In July 2006, the FASB issued FASB Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109". FIN 48 requires that the Company recognize in the consolidated financial statements the impact of a tax position that is more likely than not to be sustained upon examination based on the technical merits of the position. The provisions of FIN No. 48 will be effective for the Company beginning in the March 2007 quarter, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The Company is currently evaluating the impact of adopting FIN No. 48.
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157"). SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier application is encouraged, provided that the reporting entity has not yet issued financial statements for that fiscal year, including any financial statements for an interim period within that fiscal year. The Company is currently evaluating the impact of adopting SFAS No. 157.
In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans" ("SFAS No. 158"). SFAS No.158 provides different effective dates for the recognition and related disclosure provisions and for the required change to a fiscal year-end measurement date. Also, the effective date of the recognition and disclosure provisions differs for an employer that is an issuer of publicly traded equity securities from one that is not. For purposes of this Statement, an employer is deemed to have publicly traded equity securities if any of the following conditions is met: a) the employer has issued equity securities that trade in a public market, which may be either a stock exchange (domestic or foreign) or an over-the-counter market, including securities quoted only locally or regionally, b) the employer has made a filing with a regulatory agency in preparation for the sale of any class of equity securities in a public market, or c) the employer is controlled by an entity covered by (a) or (b). An employer with publicly traded equity securities shall initially apply the requirement to recognize the funded status of a benefit plan and the disclosure requirements as of the end of the fiscal year ending after December 15, 2006. Application as of the end of an earlier fiscal year is encouraged; however, early application shall be for all of an employer's benefit plans. The requirement to measure plan assets and benefit obligations as of the date of the employer's fiscal year-end statement of financial position (paragraphs 5, 6, and 9) shall be effective for fiscal years ending after December 15, 2008, and shall not be applied retrospectively. Earlier application is encouraged; however, early application shall be for all of an employer's benefit plans. An employer with publicly traded equity securities shall initially apply the requirement to recognize the funded status of a benefit plan (paragraph 4) and the disclosure requirements (paragraph 7) as of the end of the fiscal year ending after December 15, 2006. The Company is currently evaluating the impact of adopting SFAS No. 158.
4. ACCOUNTS RECEIVABLE
Accounts Receivable represents the balance due from the License and Distributor agreements.
2007 2006 -------------- ---------------- Accounts Receivable $ 2,614,767 $ 2,614,767 Less: Allowance for Doubtful Accounts (375,000) (375,000) --------------- ---------------- Net Accounts Receivable $ 2,239,767 $ 2,239,767 =============== ================= |
5. PROPERTY AND EQUIPMENT
Fixed assets are summarized by classifications as follows:
2007 2006 ------------------ -------------- Office Equipment $ 43,424 $ 13,093 Tools and Machinery 79,321 79,321 Automobile 50,947 50,947 Moldings 689,061 680,667 Booth for Show 137,470 137,470 Informational tapes and other promotional materials 50,000 50,000 ------------------ ------------- 1,050,223 1,011,498 Less: Accumulated Depreciation (883,248) ( 864,478) ------------------ ------------ $ 166,975 $ 147,020 ================== ============ |
6. RELATED PARTY TRANSACTIONS
ABL Properties, wholly owned by Byung Yim, President, CEO of TRB Systems International, Inc., and under common control with the Company, owns the patents. These patents are exclusively licensed to TRB Systems Inc, the subsidiary (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, 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. ABL Properties and the Company initially agreed to defer payment of the $200,000 until TRB Systems Inc has suitable cash flow to meet its current needs. However, during the year ended June 30, 2007, considered to be first year of active sales, Company became liable for $ 200,000 patent payment and the same amount was offset to indebtness to related parties.
Any cost incurred by TRB Systems Inc. to maintain the patents and that calls for reimbursement by ABL according to the agreement, will be used as a credit toward the $200,000 license fees due to ABL on the first anniversary following the commencement of active bicycle sales. As of June 30, 2007, ABL Properties owes the Company $ 143,395 and $ 200,000 is owed to ABL Properties.
During the year Byung Yim, CEO and director of the Company made loans to the Company as the need for additional capital arose. As of June 30, 2007, the outstanding amount due was $ 443,178.
The net payable to ABK Properties and Byung Yim is $ 499,783 as of June 30, 2007.
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses also include the capitalized portion of legal and consulting expenses incurred in the development of standardized contacts, promotional materials and the filling and registration of patents, and are amortized over a sixty-month period. As of June 30, 2007 the accounts payable and accrued expenses were $ 220,119 and $ 396,887 as of June 30, 2007 and 2006, respectively. During the year ended June 30, 2007, management as written off $294,283 accrued expenses originating from prior to year 2000 under the basis that no creditor has pursued collection to date and internal determination that these payable will ever be paid. Such a transaction resulted in reduction of accounts payable and recognition as income from forgiveness of debts in the statements of operations.
8. ADVANCE FROM A CUSTOMER
The company received advance from a customer in anticipation of future shipment. The terms depend case by case in that it may be refundable or forfeited as stipulated by related provision in the sales contracts.
$171,440 denoted in the June 30, 2007 financial statement as advance from a customer is refundable case if the shipment doesn't occur within the specified time. Advance becomes earned revenue when the goods are shipped and invoiced.
9. NOTES AND INTEREST PAYABLE
Notes payable are unsecured notes to individuals. As of June 30, 2007, the Company had notes payable in the amount of $ 1,631,840 and accrued interest payable of $626,329. Interest expense attributable to notes payable totaled $302,073 at June 30, 2007. Interest rate on the notes ranged from zero to 24%.
As of June 30, 2007:
Notes Payable Rate-Simple Interest Note Holder Balance Maturity Date Interest Amount -------------- -------------- ------------- ------------ --------- In W.Whang $ 100,000 06/30/2009 15% $ 15,000 Byung K.Cho 30,215 06/30/2009 15% 4,532 Janak Shah 120,000 09/05/2010 10% 12,000 Xiao Wei Lu 45,000 12/30/2010 10% 4,500 Ok Yeo Chong 127,887 12/31/2010 10% 12,789 Joon Ki Moon 100,000 06/30/2009 18% 18,000 Young Sik Kwon 695,652 12/31/2010 13% 90,435 Seok Nyu Lee 12,931 10/10/2009 8% 1,003 Kil Ja Bark 99,138 11/2/2009 12% 11,897 Hwa Suk Kim 12,931 11/26/2009 24% 3,103 Byung Yim 41,530 06/30/2010 0% 0 Ok Yeo Chong 246,556 12/31/2010 10% 24,656 --------------------------------------------------------------------------- $ 1,631,840 $ 197,915 |
10. CONVERTIBLE DEBT
The Company entered into three loan agreements, two for $50,000 on February 29, 2003 and one for $42,611 on January 17, 2003 in the total amount of $ 142,611 which carry annual interest rate equivalent to U.S. bank's prime rate.
The notes are convertible into shares of the Company's common stock at a price of $1 per share at the lenders option on December 31, 2004. The notes may be required to be repaid if the value per share at the time of conversion falls below $1, at which time the Company will have to repay the face amount of the notes plus (10%) ten percent. As of June 30, 2007 the lenders have not exercised their option, management is negotiating an extension on the notes.
11. PENDING SUITS AND JUDGMENT
As of June 30, 2007, there are outstanding judgments in the amount of $381,000 against the Company. Management asserts that negotiations have been initiated to have the amounts reduced but the outcome of such negotiations is uncertain. Management believes the company is not in the financial position to pay these amounts within one-year period.
The outstanding judgments consist of:
Creditors/Creditors' Attorneys 2007 2006 ---------------- -------------- David, Kessler & Associates, LLC $ 44,000 $ 44,000 Sawtooth Marketing Group 56,000 56,000 Cole, Schotz, Meiser,Forman & Leonard 89,000 89,000 Bernard & Koff 192,000 192,000 ---------------- --------------- Total $ 381,000 $ 381,000 |
12. CAPITAL STOCK
The company is authorized to issue 30,000,000 at $0.001 par value share. As of June 30, 2007 the amount of voting common shares issued and outstanding are 23,699,922 and additional paid in capital of $ 3,228,810.
On May 22, 2007, Company issued a total of 130,000 to separate individual and entity in exchange for professional service rendered valued at $5,200 or $.04 per share. On the same date, additional 786,920 shares were issued in exchange for cash contribution of $ 118,038 valued at $0.15 per shares.
13. NET LOSS PER SHARE
Net loss per common share for the years ended June 30, 2007 and 2006 is calculated using the weighted-average number of common shares outstanding and common shares equivalents during the periods.
14. INCOME TAX
The net deferred tax asset in the accompanying consolidated balance sheet includes the following components:
2007 --------------- Net Deferred Tax Asset $ 1,384,384 Deferred Tax Asset Valuation Allowance (1,161,805) ---------------- Net Deferred Tax Asset 222,579 ---------------- Deferred Tax Benefit $ 23,792 ---------------- 15. COMMITMENTS AND CONTINGENCIES |
15.1 Lease Commitments
The Company's future annual commitments at June 30 under an operating lease for office space are as follows:
Lease ------------- 2008 16,800 2009 16,800 2010 16,800 2011 16,800 2012 16,800 ------------- Total $ 84,000 |
Rental expense for the year ended June 30, 2007 and 2006 are $15,578 and $34,551, respectively.
15.2 Litigation
As per the Company, as of June 30, 2007, there are no material actions, suits, proceedings or claims pending against or materially affecting the Company, which if adversely determined, would have a material adverse effect on the financial condition of TRB International Systems, Inc. other than the judgments in note 11.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On July 27, 2007, the board of directors of the Company approved the dismissal of Chang G. Park, CPA, Ph.D, our independent accountants and the appointment of Stan J. H. Lee, CPA, certified public accountants, as our principal independent accountant. Chang G. Park, CPA, PH.D has issued its auditor's report on the Company's financial statements for the year ended June 30, 2006, as well as having reviewed our interim financial statements.
Chang G. Park, CPA, Ph.D's report dated August 18, 2006 on our financial statements for the most recent fiscal year ended June 30, 2006 did not contain an adverse opinion or disclaimer of opinion, or qualification or modification as to uncertainty, audit scope, or accounting principles, except that it contained a separate paragraph stating:
"The consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company's losses from operations 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."
In connection with the audit of our financial statements for the most recent year ended June 30, 2006 and in the subsequent interim periods through the date of dismissal, there were no disagreements, resolved or not, with Chang G. Park, CPA, PH.D. on any matters of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Chang G. Park, CPA, PH.D, would have caused Chang G. Park, CPA, PH.D to make reference to the subject matter of the disagreement in connection with their report on the financial statements for such year.
During the year ended June 30, 2006, and in the subsequent interim periods through the date of dismissal, there were no reportable events as described in Item 304(a)(1)(iv)(B) of Regulation S-B.
We provided Chang G. Park, CPA, PH.D with a copy of this Current Report on Form 8-K prior to our filing with the Securities and Exchange Commission, and requested that they furnish us with a letter addressed to the Securities and Exchange Commission stating whether they agree with the statements made in this Current Report on Form 8-K, and if not, stating the aspects with which they do not agree. A copy of the letter provided from Chang G. Park, CPA, PH.D is filed as Exhibit 16.1 to this Current Report on Form 8-K.
During the year ended June 30, 2006, and the subsequent interim periods through the date hereof, we have not, nor has any person on our behalf, consulted with Stan J. H. Lee, CPA, regarding either the application of accounting principles to a specific completed or contemplated transaction, or the type of audit opinion that might be rendered on our financial statements, nor has Stan J. H. Lee, CPA provided to us a written report or oral advice regarding such principles or audit opinion on any matter that was the subject of a disagreement or reportable event set forth in Item 304(a)(1)(iv) of Regulation S-B with our former principle independent accountant.
In October 2005, we dismissed Sotomayor & Associates, LLP as principal accountant and engaged with Armando C. Ibarra, Certified Public Accountants, a Professional corporation, as our principal accountant for our fiscal year ending June 30, 2005 and the interim periods for 2005 and 2006. The decision to change principal accountants was ratified by our Board of Directors.
None of the reports of Sotomayor & Associates, LLP, on our financial statements for either of the past two years or subsequent interim period contained an adverse opinion or disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope or accounting principles.
There were no disagreements between us and Sotomayor & Associates, LLP, for the previous two fiscal years and interim period up to the date of dismissal on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of Sotomayor & Associates, LLP, would have caused it to make reference to the subject matter of the disagreement in connection with its report. Further, Sotomayor & Associates, LLP, has not advised us that: (1) internal controls necessary to develop reliable financial statements did not exist; or (2) information has come to the attention of Sotomayor & Associates, LLP which made it unwilling to rely upon management's representations, or made it unwilling to be associated with the financial statements prepared by management; or (3) the scope of the audit should be expanded significantly, or information has come to the attention of Sotomayor & Associates, LLP that it has concluded will, or if further investigated might, materially impact the fairness or reliability of a previously issued audit report or the underlying financial statements, or the financial statements issued or to be issued covering the fiscal year ended June 30, 2004.
At no time prior to October 2005, did we (or anyone on behalf of us) consult
with Armando C. Ibarra, CPA, a Professional corporation, on matters regarding
(i) the application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
its financial statements, or (ii) any matter that was the subject of a
disagreement with Sotomayor & Associates, LLP, or a reportable event, as defined
in Item 304(a)(2) of Regulation S-B.
On July 1, 2006, we received a notice from our principal independent accountant, Armando C. Ibarra, CPA-APC that it declined to stand for re-election. Their decision was the result of a decision that the accountant made to discontinue their PCAOB registration.
Armando C. Ibarra, CPA-APC has served as our principal independent accountant for the prior fiscal year 2005, inclusive through July 1, 2006. The principal independent accountant's report issued by Armando C. Ibarra, CPA-APC for the year ended June 30, 2005 (the "Report") did not contain any adverse opinion or disclaimer of opinion and it was not modified as to audit scope or accounting principles. The Reports do include a going concern qualification due to the uncertainty associated with the Company's inception-to-date losses from operations.
During the fiscal year ended June 30, 2005 and through July 1, 2006 there were no disagreements with Armando C. Ibarra, CPA-APC, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to Armando C. Ibarra, CPA-APC's satisfaction, would have caused it to make reference to the subject matter of the disagreement(s) in connection with its reports on our consolidated financial statements for such periods.
On July 10, 2006, upon authorization and approval of our board of directors, we engaged the services of Chang G. Park, CPA, Ph.D. ("Park") as its independent registered public accounting firm.
No consultations occurred between the Company and Park during the year ended
June 30, 2005 and through July 10, 2006 regarding either: (i) the application
of accounting principles to a specific completed or contemplated transaction,
the type of audit opinion that might be rendered on the Company's financial
statements, or other information provided that was an important factor
considered by the Company in reaching a decision as to an accounting, auditing,
or financial reporting issue, or (ii) any matter that was the subject of
disagreement or a reportable event requiring disclosure under Item 304(a)(1)
(iv) of Regulation S-B.
Item 8A CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures
As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and principal financial officer of our disclosure controls and procedures (as defined in Rule 132a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief executive officer and principal financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms.
(b) Changes in internal controls:
There was no change in our internal controls or in other factors that could affect these controls during our last fiscal year that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 8A(T). CONTROLS AND PROCEDURES
Not applicable.
Item 8B. OTHER INFORMATION
None.
PART III
Item 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning directors, executive officers and key employees of the Company:
Name Age Positions --------------- ----- ------------------------------------------------------ Byung D. Yim 66 President, Chief Executive Officer, Chief Financial Officer, and Director Marn T. Seol 68 Vice Chairman of the Board of Research and Development August Rheem 72 Vice President & Director Joon Ki Moon 28 Secretary |
The term of office of each of our directors ends at the next annual meeting of our shareholders or when such directors' successor is elected and qualified. Our executive officers are served at the pleasure of the board of directors. There are no agreements with respects to the election of directors.
The following information sets forth the backgrounds and business experience of our directors and executive officers:
Byung D. Yim, has been our Chief Executive Officer, President, Chief Financial Officer, Secretary, and Chairman of the Board of Directors since 1997. From January 2006 to present Mr. Yim also serves as President and CEO of Alenax (Tianjin) Bicycle Corp., our operating subsidiary. Mr. Yim graduated from of Han Yang University of Korea with a B.A. degree in Nuclear Engineering and Electronics.
Marn T. Seol has been our Vice Chairman of Research and Development since July 1993. Mr. Seol is the inventor of both propulsion for lever propelled bicycles and multi-purpose transmission mechanisms for bicycles. Mr. Seol began pursuing his interest in designing bicycles in 1976 by opening Dong Yang Industrial Co., Ltd. in Korea.
August Rheem has been our Vice President since January 1996 and elected to new board of director on May, 2006. Mr. Rheem graduated with a BA degree in economics from Yen Se University in Seoul, Korea. Prior to his joining the Company, he had served as President of Leisure Dynamic Corp. for eight years, and President of H.J. Sports, Inc. for twelve years.
Joon Ki Moon has been served our secretary since December 15, 2006. Prior to his joining the Company from March 2002 to December 2003, he was Team Chief of General Management Department at TRB Global Corp., a bicycle manufacturer in Seoul, Korea. From January 2004 through September 2006, Mr. Moon held various part-time or internship positions at Alenax (Tianjin) Bicycle Corp., the subsidiary of the Company, most recently as Assistant to President of Alenax (Tianjin) Bicycle Corp. Mr. Moon holds a Bachelor degree in Economics from Kang Won University in Kang Won-Do, Korea and a Bachelor degree in Chinese from Nankai University in Tianjing, China.
During the last five years:
(1) No director, officer, significant employee or consultant has been convicted in a criminal proceeding, exclusive of traffic violations.
(2) No bankruptcy petitions have been filed by or against any business or property of any director, officer, significant employee or consultant of the Company nor has any bankruptcy petition been filed against a partnership or business association where these persons were general partners or executive officers.
(3) No director, officer, significant employee or consultant has been permanently or temporarily enjoined, barred, suspended or otherwise limited from involvement in any type of business, securities or banking activities.
(4) No director, officer or significant employee has been convicted of violating a federal or state securities or commodities law.
Section 16(a) of the Securities Exchange Act of 1934 requires our executive Officers, directors and persons who beneficially own more than 10% of our Stock, to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission. Executive officers, directors and greater than 10% beneficial owners are required by applicable regulations to furnish us with copies of all Section 16(a) forms they file.
Based solely upon a review of the copies of such forms furnished to us and
information involving securities transactions of which we are aware, we believe
that during the fiscal year ended June 30, 2007, our executive officers,
directors and greater than 10% beneficial stockholders were complied with
Section 16(a) filing requirements, except that Mr. Joon Ki Moon, our secretary,
failed to file "Initial Statement of Beneficial Ownership of Securities" on
Form 3 when he was selected as secretary of the Company in December 2006.
Item 10. EXECUTIVE COMPENSATION
The following table sets forth all compensation paid in respect of our Chief Executive Officer and those individuals who received compensation in excess of $100,000 per year (collectively, the "Named Executive Officers") for our last two completed fiscal years.
----------------------------------------------------------------------------------------------------------- Non- Nonquali- Equity fied Incentive Deferred All Name and Stock Option Plan Compensation Other Principal Salary Bonus Awards Awards Compensation Earnings Compensation Total Position Year ($) ($) ($) ($) ($) ($) ($) ($) ----------------------------------------------------------------------------------------------------------- Byung Yim 2007 50,000 - - - - - - 50,000 CEO and 2006 50,000 - - - - - - 50,000 President ----------------------------------------------------------------------------------------------------------- |
No named executive officer has received an equity award.
We have not entered into any employment agreements with our executive officers nor have we obtained any key-man life insurance.
There are no arrangements that the management is aware of that may result in changes in control as that term is defined by the provisions of Item 403(c) of Regulation S-B. There are no provisions within our Articles or Bylaws that would delay or prevent a change of control.
The directors did not receive any other compensation for serving as members of the board of directors. The board has not implemented a plan to award options. There are no contractual arrangements with any member of the board of directors. But they are paid a per diem fee for attending board meetings. They also are reimbursed for reasonable out-of-pocket expenses incurred in the performance of their roles.
There are no existing or proposed option/SAR grants.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial ownership of our common stock as of June 30, 2007, each person who is known by us to own beneficially more than 5% of our outstanding common stock. We have only one class of securities outstanding. The beneficial owners of the common stock listed below, based on information furnished by such persons, have sole investment and voting power with respect to such shares, subject to community property laws where applicable.
Title of Name and Address Amount and Nature of Percent of Class of Beneficial Owner Beneficial Ownership Class (1) ------------- ------------------------------ ------------------------ ---------------- Common Stock Byung D.Yim 1,950,000 8.22% 1 Yong An Road Tianjin, 300024, China Common Stock Motion Plus International (2) 5,752,998 24.27% 1472 Cedarwood Dr. Piscataway, NJ 08854 Common Stock Alexander B. Yim (3) 3,802,500 16.04% 6721 Washington Ave. Apt. 191 Ocean Spring, MS 39564 ----------------------------------------------------------------------------------------- |
(1) Based on 23,699,922 shares of common stock outstanding as of October 22, 2007.
(2) 5,752,998 shares owned by Motion Plus International Corp. and Byung Yim is president of the company.
(3) Alexander B. Yim is the son of Byung Yim.
The table below set forth certain information, as of October 22, 2007, all of our directors and executive officers who beneficially owned our voting securities and the amount of our voting securities owned by the directors and executive officers as a group.
Title of Name and Address Amount and Nature of Percent of Class of Beneficial Owner Beneficial Ownership Class (1) ----------------- ----------------------- ------------------------ -------------- Common Stock Byung Yim (2) 1,950,000 8.22 % One Yong An Road Tianjin, 300024, China Common Stock Marn T. Seol (3) 1,003,000 4.23 % One Yong An Road Tianjin, 300024, China Common Stock August Rheem (4) 25,000 0.105 % 19591 Aspendale Sq. Ashburn, Va 20147 Common Stock Joon K. Moon 23,950 0.101 % Rome Garden D-902, Tianjin (300024), China Directors and Officers 3,001,950 12.67 % As a group ----------------------------------------------------------------------------------- |
(1) Based on 23,699,922 shares of common stock outstanding as of October 22, 2007.
(2) Byung Yim is Chairman & CEO.
(3) Marn T. Seol is our Vice Chairman of R&D.
(4) August Rheem is our Vice President & Director
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1994, TRB Systems International Inc. entered into an exclusive licensing agreement with ABL Properties Company ("ABL"), which is controlled by Mr. Byung Yim, our President, CEO and CFO.
Under the License agreement, ABL's patented technology was exclusively licensed to TRB Systems International Inc. for the worldwide manufacture and sale of the NMT. The timing, methodology and general details of the manufacture and sales were left to NMT, as is the design and utilization of the goods employing the technology. The rights, licensed to TRB Systems International Inc. by ABL Properties Company, call for a payment of $200,000 during the first year of active sales, 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. ABL Properties and the Company agreed to defer payment of the $200,000 until TRB Systems International Inc has suitable cash flow to meet its current needs.
Any cost incurred by TRB Systems International Inc. to maintain the patents and that calls for reimbursement by ABL according to the agreement, will be used as a credit toward the $200,000 license fees due to ABL on the first anniversary following the commencement of active bicycle sales. As of June 30, 2007, ABL Properties owes the Company $44,188.
During the year Byung Yim, our CEO and a director, made loans to us as the need for additional capital arose. As of June 30, 2007, the outstanding amount due was $443,178.
Item 13. EXHIBITS
Exhibit No. Description ------------------------------------------------------------- ----------------- 3.1 Article of Incorporation (Incorporated by reference to Registration Statement on Form SB-2/A filed on February 25, 1998, Commission File No. 333-7242). 3.2 Bylaws (Incorporated by reference to Registration Statement on Form SB-2/A filed on February 25, 1998, Commission File No. 333-7242). 10.1 Lease of Taiwan Office (Incorporated by reference to Registration Statement on Form SB-2/A filed on February 25, 1998, Commission File No. 333-7242). 10.2 Exclusive Licensing Agreement between TRB Systems International Inc. and ABL Properties Company (Incorporated by reference to Registration Statement on Form SB-2/A filed on February 25, 1998, Commission File No. 333-7242). 10.3 Patent Registration and Assignment to ABL Properties Company (Incorporated by reference to Registration Statement on Form SB-2/A filed on February 25, 1998, Commission File No. 333-7242). 10.5 License and Marketing Agreement with Mr. Konan Kouadio Simeon for Ivory Coast (Incorporated by reference to Registration Statement on Form SB-2/A filed on February 25, 1998, Commission File No. 333-7242). 10.6 Joint Venture Agreement between with Mr. Janak Shah for India (Incorporated by reference to Registration Statement on Form SB-2/A filed on February 25, 1998, Commission File No. 333-7242). 10.7 License and Marketing Agreement with Mr. Abbas R. Datoo for Tanzania (Incorporated by reference to Registration Statement on Form SB-2/A filed on February 25, 1998, Commission File No. 333-7242). 10.8 Distributorship Agreement with Mr. Kishor M. and Gira K. Dattani for Countries in California (Incorporated by reference to Registration Statement on Form SB-2/A filed on February 25, 1998, Commission File No. 333-7242). 10.9 Licensing and Marketing Agreement with Stella Kujembola for Benin and Nigeria (Incorporated by reference to Registration Statement on Form SB-2/A filed on February 25, 1998, Commission File No. 333-7242). 10.10 Sino-Danish Manufacturing Agreement (Incorporated by reference to Registration Statement on Form SB-2/A filed on February 25, 1998, Commission File No. 333-7242). 10.11 Kun Teng Industries Agreement (Incorporated by reference to Registration Statement on Form SB-2/A filed on February 25, 1998, Commission File No. 333-7242). 21 Subsidiaries of the registrant (Incorporated by reference to Annual Report on Form 10-KSB filed on June 22, 2006, Commission File No. 333-7242). 31.1 Section 302 Certification of CEO and CFO 32.1 Section 906 Certification of CEO and CFO |
Item 14. PRINCIPAL ACCOUNTANT'S FEES AND SERVICES
(1) Audit Fees. The aggregate fees billed us for each of the last two fiscal years for professional services rendered by our principal accountant for the audit of our annual financial statements and review of our quarterly financial statements included in our reports on 10Q-SB and other services typically provided by an accountant in connection with statutory and regulatory filings or engagements for fiscal 2007 and 2006 were $19,750 and $17,000, respectively.
(2) Audit-Related Fees: None.
(3) Tax Fees: None.
(4) All Other Fees: None.
(5) Audit Committee's Pre-Approval Policies and Procedures
Inasmuch as we do not have an audit committee, our board of directors performs the functions of its Audit Committee. Section 10A(i) of the Securities Exchange Act of 1934 prohibits our auditors from performing audit services for us as well as any services not considered to be "audit services" unless such services are pre-approved by the board of directors in lieu of the audit committee) or unless the services meet certain de minimum standards.
The board of directors has adopted resolutions that provide that the board must:
(i) Pre-approve all audit services that the auditor may provide to us as required by Section 10A(i)(1)(A) of the Securities Exchange Act of 1934, as amended by the Sarbanes-Oxley Act of 2002.
(ii) Pre-approve all non-audit services (other than certain de minim services described in Section 10A(i)(1)(B) of the Securities Exchange Act of 1934, as amended by the Sarbanes-Oxley Act of 2002), that the auditors propose to provide to us.
The board of directors considers at each of its meetings whether to approve any audit services or non-audit services. The percentage of hours expended on the principal accountant's engagement to audit our financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full time, permanent employees was 0%.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities 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: January 15, 2008 |
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
By: /s/ Byung Yim ------------------------------------------ Byung Yim, President, CEO, CFO and Director Date: January 15, 2008 By: /s/ Augustin Rheem -------------------------------------------- Augustin Rheem, Vice President and Director Date: January 15, 2008 |
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