material
impact on the financial statements of the Company.
NOTE 3-RISKS AND UNCERTAINTIES
The following risk factors relating to the Company and its business
should be carefully considered:
The Companys subsidiary operates in the
Republic of Moldova.
The
Companys wholly owned subsidiary, Intercomsoft Limited, operates in the
Republic of Moldova, a former member of the Soviet Union with a historically
uncertain economic and political climate. This may have a material adverse
impact on the Company and Intercomsoft.
The Company has no current source of revenue.
The
Company had no source of revenue for the year ended December 31, 207. Its sole
revenue source prior to that and for the year ended December 31, 2006 was from
Intercomsoft whose only customer was the Republic of Moldovas Ministry of
Economics to which it supplied its goods and services pursuant to the Supply
Agreement between the Government of Moldova and Intercomsoft.
On
or about February 11, 2006, the Company received a notice from the Government
of the Republic of Moldova advising the Company that it did not intend to renew
the Supply Agreement which, unless renewed, expired by its terms on April 29,
2006. The Company believes that such non-renewal notice may not have been sent
timely under the applicable provisions of the Supply Agreement. However,
inasmuch as the Companys only revenues are derived from Intercomsofts
activities under the Supply Agreement, as of April 29, 2006, the Company has
had no current source of revenue as a consequence of the non-renewal of such
Agreement. Although the Company has contested Moldovas notice of non-renewal
of the Supply Agreement, there can be no assurance as to the outcome of such
dispute. If the Government of the Republic of Moldova does not recognize the
renewal of the Supply Agreement, such event will have a material adverse effect
on Intercomsoft and the Company.
The Company has commenced a legal action against
the Government of Moldova.
On
June 27, 2006, the Company and Intercomsoft commenced an action in the United
States District Court for the Southern District of New York against the Ministry
of Economics of the Republic of Moldova and the Government of the Republic of
Moldova seeking damages of approximately $41 million for breach of contract and
an injunction prohibiting Moldova from producing further essential government
documents in accordance with the terms of the Supply Agreement. Additionally,
the Company has contested Moldovas notice of non-renewal of the Supply
Agreement. Among the Companys claims against Moldova is a claim for
non-payment for all of the essential government documents produced under the
Supply Agreement during the four month period commencing January 2006 and
ending in April 2006. Based, in part, upon records issued by Moldova, the
Company believes the uncollected amount due for this period for services rendered,
together with contractually agreed upon interest for late payments, is in
excess of $2.5 million, which amount is not included in the accompanying
financial statement. The Company is still pursuing such amount and believes it
to be a legally valid receivable. In August 2006, the action was withdrawn,
without prejudice.
On September 18, 2006,
Intercomsoft commenced an action with the International Chamber of Commerce,
International Court of Arbitration, in Geneva, Switzerland (the ICC). The
Demand for Arbitration filed in connection therewith repeats and incorporates
the claims that were set forth in the Complaint in the withdrawn prior action
noted above.
The
Moldovan Defendants have denied that the ICC has jurisdiction to hear the
arbitration and hearings have been held, but not completed, on this issue. In
addition, the Moldovan Defendants have
- 24 -
commenced
an action before the International Commercial Court of Arbitration attached to
the Chamber of Commerce and Industry of the Republic of Moldova, claiming that
it is the proper body to administer any arbitration between the parties. The
claims asserted in the current action, are the same claims asserted by the
Moldovan Defendants in the ICC arbitration. Such arbitration is currently
stayed in favor of the jurisdiction proceedings before the ICC arbitral panel.
The
Republic of Moldova and the other respondents have interposed counterclaims
against the Company and Intercomsoft in amounts totaling $30 million. The
counterclaims contain allegations of fraud and misrepresentation claimed to
have occurred during the performance of the Supply Agreement.
Management
of the Company and Intercomosft are vigorously pursuing the claims against the
Moldovan Defendants and have denied any wrongdoing and are, likewise,
vigorously contesting the counterclaims.
The Company has terminated its agreement with
Supercom Limited.
Pursuant to a Sales
Agreement between Intercomsoft and Supercom Limited (Supercom) dated August
25, 1995, as amended, Supercom supplied the equipment, software, technology and
consumables utilized by Intercomsoft for the production of computerized
documents under the Supply Agreement. Pursuant to this agreement, Intercomsoft
was provided with the guidance and support required for the installation and
operation of the equipment, as well as the materials required for its
maintenance.
On
March 24, 2005, Intercomsoft and Supercom entered into a Termination Agreement,
terminating the Sales Agreement. Notwithstanding, pursuant to the terms of the
Termination Agreement, Supercom, in consideration of certain payments to be
made to it, agreed to continue to supply Moldova with such equipment,
consumables, software and technology during the remaining term of the Supply
Agreement, pursuant to the requirements of the Supply Agreement. Supercom
agreed not to take any action, directly or indirectly, to interfere with
Intercomsofts contractual rights with Moldova or to, in any way, cause Moldova
to terminate or not renew the Supply Agreement and agreed to pay to
Intercomsoft certain amounts specified in the Termination Agreement as
liquidated damages in the event of any breach or default by Supercom
thereunder. Except and as to the extent provided under the Termination
Agreement, Intercomsoft has no other rights to Supercoms proprietary
technology as referred to above.
The Company is not pursuing development of
its aluminum-air fuel cell technology
.
Through a joint venture with Aluminum-Power, Inc., the Companys
majority shareholder, the Company pursued research and development of its
aluminum-air fuel cell technology it acquired in the first quarter of 2001.
Such research and development was suspended in the second quarter of 2003. The
Company does not intend to pursue the development of such technology in the
future.
The Company has no current business
activities that generate revenue.
Although the
Company is currently exploring opportunities, it is not currently engaged in
any business activities that generate revenue.
- 25 -
NOTE
4-PROPERTY AND EQUIPMENT
A summary of
property and equipment and the estimated useful lives used in the computation
of depreciation is as follows:
|
|
|
|
|
|
|
|
|
|
Amount
|
|
Life
|
|
|
|
|
|
|
|
Document
processing equipment
|
|
$
|
170,000
|
|
|
5 years
|
|
|
|
|
|
|
|
|
|
Less accumulated
depreciation
|
|
|
143,000
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
27,000
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE
5-SHAREHOLDERS EQUITY
The Company
has authorized 130,000,000 shares of $0.01 par value common stock, of which
100,472,328 shares were issued and outstanding as of December 31, 2007.
The Company has
authorized 10,000 shares of $1.00 par value shares of Preferred Stock, none of
which were issued and outstanding as of December 31, 2007.
NOTE 6-RELATED
PARTY TRANSACTIONS AND BALANCES
Transactions
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Compensation
and related expenses to Chairman (1)
|
|
$
|
318,000
|
|
$
|
276,000
|
|
|
|
|
|
|
|
|
|
Cash
advance from Royal HTM Group (2)
|
|
|
106,000
|
|
|
178,000
|
|
|
|
|
|
|
|
|
|
Cash
advances in the form of direct payment of expenses by Royal HTM Group (2)
|
|
|
591,000
|
|
|
551,000
|
|
|
|
|
|
|
|
|
|
Business
development services (2)
|
|
|
120,000
|
|
|
120,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,135,000
|
|
$
|
1,125,000
|
|
|
|
|
|
|
|
|
|
|
|
1)
|
Mr.
Boris Birshtein serves as the Companys Chairman of the Board of Directors
(the Chairman) on a month-to-month basis.
|
|
|
(2)
|
The
Company has engaged Royal HTM Group, Inc., a Canadian company beneficially
owned and controlled by the Chairman, to render certain business development
services to the Company. Royal HTM Group has also advanced money to the
Company to fund its expenses.
|
- 26 -
Balances
Payables
to related parties consist of the following:
|
|
|
|
|
Amount due to the Chairman
and a company owned and controlled by such individual.
|
|
$
|
1,587,000
|
|
|
|
|
|
|
Accrued compensation due
to the Chairman.
|
|
|
571,000
|
|
|
|
|
|
|
|
|
$
|
2,158,000
|
|
|
|
|
|
|
These amounts are
non-interest bearing and due on demand.
NOTE 7-STOCK
COMPENSATION PLANS
Pursuant to
the Companys 2001 Omnibus Plan, as amended, eligible persons, as defined
therein, may be granted (a) stock options which may be designated as
nonqualified stock options or incentive stock options, (b) stock appreciation
rights, (c) restricted stock awards, (d) performance awards, or (e) other forms
of stock-based incentive awards.
The maximum
number of shares with respect to which the awards may be granted under the 2001
Omnibus Plan, as amended, is 10,000,000 shares of common stock; provided,
however, that such number of shares of common stock may also be subject to
adjustment, from time to time, at the discretion of the Board of Directors of
the Company. The Company has also issued options outside of the Omnibus Plan.
A summary of
option activity is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Inside
Plan
|
|
Outside
Plan
|
|
Total
|
|
|
|
|
|
|
|
|
|
Balance
January 1, 2006
|
|
|
5,470,000
|
|
|
5,250,000
|
|
|
10,720,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(1,600,000
|
)
|
|
|
|
|
(1,600,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 2006
|
|
|
3,870,000
|
|
|
5,250,000
|
|
|
9,120,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
|
|
|
(2,250,000
|
)
|
|
(2,250,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 2007
|
|
|
3,870,000
|
|
|
3,000,000
|
|
|
6,870,000
|
|
|
|
|
|
|
|
|
|
|
|
|
- 27 -
The following
table summarizes information regarding stock options outstanding at December
31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
Price
Range
|
|
Number of
Options
Outstanding
|
|
Weighted Average
Remaining
Contractual Life
|
|
Weighted
Average
Exercise
Price
|
|
Number of
Shares
Exercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.01
|
|
|
6,870,000
|
|
|
2.1
|
|
|
0.01
|
|
|
6,870,000
|
|
NOTE 8-INCOME
TAX
The Companys
income tax benefit differs from the expected income tax benefit by applying the
U.S. Federal statutory rate of 34% to net income (loss) as follows:
|
|
|
|
|
|
|
|
|
|
December 31, 2007
|
|
December 31, 2006
|
|
|
|
|
|
|
|
|
Income tax
(benefit) at statutory rate of 34%
|
|
$
|
(431,000
|
)
|
$
|
(450,000
|
)
|
|
Net
operating loss carryforward (used) not utilized
|
|
|
431,000
|
|
|
450,000
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Deferred tax
assets and liabilities consist of:
|
|
|
|
|
|
|
|
|
|
December 31, 2007
|
|
December 31, 2006
|
|
|
|
|
|
|
|
|
Deferred tax
assets (liabilities):
|
|
|
|
|
|
|
|
Amortization of
intangibles
|
|
$
|
(3,935,000
|
)
|
$
|
(3,400,000
|
)
|
Net operating
loss carryforward
|
|
|
2,796,000
|
|
|
2,365,000
|
|
Capital loss
carryforward
|
|
|
2,706,000
|
|
|
2,706,000
|
|
|
|
|
|
|
|
|
|
|
|
|
1,567,000
|
|
|
1,671.000
|
|
Valuation
allowance (see Note 2)
|
|
|
(1,567,000
|
)
|
|
(1,671,000
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
- 28 -
NOTE 9-SEGMENT
INFORMATION
The Companys
operations are classified into two reportable segments. The segments consist of
Intercomsoft, which produces computerized identification documents, and general
and administrative expenses incurred for corporate purposes.
YEAR ENDED
DECEMBER 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercomsoft
|
|
Corporate and
Administrative
|
|
Total
|
|
|
Net sales
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Operating
expenses
|
|
|
(34,000
|
)
|
|
1,233,000
|
|
|
1,267,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
(34,000
|
)
|
$
|
(1,233,000
|
)
|
$
|
(1,267,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
YEAR ENDED
DECEMBER 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercomsoft
|
|
Corporate and
Administrative
|
|
Total
|
|
|
Net sales
|
|
$
|
640,000
|
|
$
|
|
|
$
|
640,000
|
|
Operating
expenses
|
|
|
604,000
|
|
|
1,364,000
|
|
|
1,968,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
36,000
|
|
$
|
(1,364,000
|
)
|
$
|
(1,328,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
- 29 -
|
|
ITEM 8.
|
CHANGES IN
AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
None.
|
|
ITEM 8 A.
|
CONTROLS AND PROCEDURES
|
Evaluation of
Disclosure Controls and Procedures
As of the
end of the period covered by this Annual Report, the Company carried out, under
the supervision and with the participation of the Companys management,
including its Chief Executive Officer and Chief Financial Officer, an
evaluation of the effectiveness of the design and operation of the Companys
disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934) in ensuring that information
required to be disclosed by the Company in its reports is recorded, processed,
summarized and reported within the required time periods. In carrying out that
evaluation, management identified a material weakness (as defined in Public
Company Accounting Oversight Board Standard No. 2) in our internal control over
financial reporting regarding a lack of adequate segregation of duties.
Accordingly, based on their evaluation of our disclosure controls and
procedures as of December 31, 2007, the Companys Chief Executive Officer and
its Chief Financial Officer have concluded that, as of that date, the Companys
controls and procedures were not effective for the purposes described above.
There was
no change in the Companys internal control over financial reporting (as
defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of
1934) during the period ended December 31, 2007 that has materially affected or
is reasonably likely to materially affect the Companys internal control over
financial reporting.
Managements Report
on Internal Control over Financial Reporting
Management
of the Company is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rule 13a-15(f) under
the Securities Exchange Act of 1934. We have assessed the effectiveness of
those internal controls as of December 31, 2007, using the Committee of
Sponsoring Organizations of the Treadway Commission (COSO)
Internal Control Intergrated Framework
as a basis for our assessment.
Because of
inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies and procedures may deteriorate. All internal control systems, no
matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective
- 30 -
can provide only reasonable assurance with respect to financial
statement preparation and presentation.
A material
weakness in internal controls is a deficiency in internal control, or
combination of control deficiencies, that adversely affects the Companys ability
to initiate, authorize, record, process, or report external financial data
reliably in accordance with accounting principles generally accepted in the
United States of America such that there is more than a remote likelihood that
a material misstatement of the Companys annual or interim financial statements
that is more than inconsequential will not be prevented or detected. In the
course of making our assessment of the effectiveness of internal controls over
financial reporting, we identified a material weakness in our internal control
over financial reporting. This material weakness consisted of inadequate
staffing and supervision within the bookkeeping and accounting operations of
our company. The relatively small number of individuals who have bookkeeping
and accounting functions prevents us from segregating duties within our
internal control system. The inadequate segregation of duties is a weakness
because it could lead to the untimely identification and resolution of
accounting and disclosure matters or could lead to a failure to perform timely
and effective reviews.
As we are
not aware of any instance in which the Company failed to identify or resolve a
disclosure matter or failed to perform a timely and effective review, we
determined that the addition of personnel to our bookkeeping and accounting
operations is not an efficient use of our very limited resources at this time
and not in the interest of our shareholders.
This Annual
Report does not include an attestation report of the Companys registered
public accounting firm regarding internal control over financial reporting.
Managements report was not subject to attestation by the Companys registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the Company to provide only managements report
in this Annual Report.
PART III
|
|
ITEM 9.
|
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
|
Directors and Executive Officers
Our
officers are elected by, and serve at the pleasure of, our Board of Directors.
The names and ages of our directors and executive officers as of December 31,
2007, are set forth below. Our By-laws provide for not less than three and not
more than fifteen directors.
- 31 -
|
|
|
|
|
|
|
NAME
|
|
AGE
|
|
POSITION WITH
COMPANY
|
|
|
|
|
|
|
|
|
Boris Birshtein
|
|
60
|
|
Chairman of the Board of Directors
|
|
|
|
|
|
|
|
Yuri Benenson
|
|
53
|
|
Director; Chief Executive Officer
|
|
|
|
|
|
|
|
Walter J. Perchal
|
|
56
|
|
Director
|
|
|
|
|
|
|
|
Jack Braverman
|
|
39
|
|
Director; Chief Financial Officer
|
Background of Executive Officers and Directors
Boris
Birshtein
has served as our Chairman of the Board of Directors since January 1998. From
1994 to May 2006, Mr. Birshtein served as the Chairman of the Board of
Directors of Banca Commercialia pe Actiuni Export Import, a former subsidiary
of ours, and since 1997 he has been the Chairman of the Board and principal
shareholder of Royal HTM Group, Inc. Since 1999, Mr. Birshtein has served as
the Chairman of Eontech Group Inc., of which he is the principal shareholder
and of Aluminum-Power Inc., our majority shareholder. Since 1996 Mr. Birshtein
has served as the Chairman of World Assets (Media) Inc. Mr. Birshtein holds
PhDs in Philosophy and Economics.
Yuri
Benenson
has served as a member of our Board of
Directors and our Chief Executive Officer since May 2003. From 1997 to May 2006
Mr. Benenson served as a member of the Board of Directors of Banca Commerciala
pe Actiuni Export Import Bank and since 1997 as Vice President of EXIM Asint,
S.A., both of which are our former subsidiaries, and from January 2004 has
served as a member of the management team of Intercomsoft Limited, our
subsidiary. Mr. Benenson holds a masters degree in Finance and Economics from
Vilnius State University.
Walter
J. Perchal
has served as member of our Board of
Directors since February 2001. Since 1997, Mr. Perchal has served as the
President and Chief Executive Officer of IC Inc., a consulting firm, which
provides consulting services in North America, Europe and Asia. For the past 25
years, Mr. Perchal has served as an adjunct Professor at York University in
Toronto, Canada.
Jack
Braverman
has served as a member of our Board of
Directors and our Chief Financial Officer since January 2004. Mr. Braverman has
worked with Mr. Birshtein, his uncle and our Chairman of the Board, in a number
of capacities since 1997, including his service as President of Eontech Group,
Inc. from July 1999 to date, President of Royal HTM Group, Inc. from December
1997 to April 2001 and as Vice President and Chief Financial Officer of Royal
HTM Group, Inc. from April 2001 to date, as well as serving as Vice President
of Aluminum-Power Inc, our majority shareholder, since January 2001. Mr.
Braverman holds a BA in Economics from the University of Western Ontario.
- 32 -
Section 16(a) Beneficial Ownership Reporting
Compliance
We
are not aware of any person who was a director, officer, or beneficial owner of
more than ten percent (10%) of our common stock and who failed to file reports
required by Section 16(a) of the Securities Exchange Act of 1934 in a timely
manner.
|
|
ITEM 10.
|
EXECUTIVE COMPENSATION
|
For the fiscal
years ended December 31, 2007 and 2006, the following individuals received the
following compensation for services rendered to us. See Employment Agreements
for a description of compensation arrangements entered into by us with certain
of our executive officers and directors.
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual
Compensation
|
|
Long Term
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AWARDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name & Principal Position
|
|
Year
|
|
Salary ($)
|
|
Other Annual
Compensation
($)
|
|
|
Securities
Underlying
Options/ SARs
|
|
All Other
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boris Birshtein
|
|
2007
|
|
$
|
276,570
|
(1)
|
$
|
72,162
|
(2)
|
|
|
|
|
|
Chairman of
the Board
|
|
2006
|
|
$
|
276,570
|
(3)
|
$
|
63,600
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yuri Benenson
|
|
2007
|
|
$
|
104,216
|
(5)
|
|
|
|
|
|
|
|
|
Chief
Executive Officer
|
|
2006
|
|
$
|
53,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jack Braverman
|
|
2007
|
|
$
|
94,416
|
(6)
|
$
|
17,559
|
(7)
|
|
|
|
|
|
Chief
Financial Officer
|
|
2006
|
|
$
|
105,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
All of such amount was
accrued but not paid to Mr. Birshtein.
|
|
|
(2)
|
Such amount represents a
monthly expense allowance $1,800 totaling $21,600 annually, all of which was
accrued but not paid, and $50,562 for auto lease and insurance premiums paid
on behalf of Mr. Birshtein
|
|
|
(3)
|
Of such amount, $23,047
was paid to Mr. Birshtein and the balance was accrued and remains due to him.
|
|
|
(4)
|
Includes a monthly expense
allowance of $1,800 totaling $21,600 annually. Of such amount, $1,800 was
paid to Mr. Birshtein and the balance was accrued and remains due to him.
Such amount also includes $42,000 for auto lease and insurance premiums paid
on behalf of Mr. Birshtein.
|
|
|
(5)
|
Of such amount, $99,216
was paid to Mr. Benenson in year 2007 and $5,000 was paid in January 2008, in
arrears.
|
|
|
(6)
|
Of such amount $25,116 was
paid to Mr. Braverman and $69,300 was accrued and remains unpaid.
|
- 33 -
|
|
(7)
|
Such amount represents
auto lease and insurance premiums paid on behalf of Mr. Braverman.
|
Options/SAR Grants in Last Fiscal Year to
Officers and Directors
In
2007 there were no options granted pursuant to the 2001 Omnibus Plan, as
amended and no outstanding options were exercised during 2007.
Compensation of Directors
All
of our outside Directors are entitled to receive an attendance fee of $2,000
for each meeting of the Board of Directors attended up to a maximum of $8,000
for any 12-month period. During the fiscal years ended December 31, 2007 and
2006, there were no such payments made to any outside Director.
Mr.
Birshtein has served as our Chairman of the Board since January 1998 and since
March 2004, has served in such capacity pursuant to a letter agreement between
he and us which provides for, among other things, a monthly consulting fee of
$23,047 and a monthly expense allowance of $1,800. Additionally, we paid
certain auto lease and insurance expenses on Mr. Birshteins behalf, as
detailed in the table above.
Mr.
Benenson has served a member of the Board of Directors and our Chief Executive
Office since May 2003. In connection with his service as our CEO in 2007, Mr.
Benenson was paid $104,000, but was not entitled to nor compensated for his
service as a member of our Board of Directors.
Mr.
Braverman has served as a member of the Board of Directors and our Chief
Financial Officer since January 2004. In connection with his service as our CFO
in 2007, Mr. Braverman was entitled to receive $94,416, but was not entitled to
nor compensated for his service as a member of our Board of Directors. Of such
amount, Mr. Braverman was paid $25,166 and the balance was accrued and remains
due to him. Additionally, we paid certain auto lease and insurance expenses on
Mr. Bravermans behalf, as detailed in the table above.
Employment Agreements
The
employment agreement with Boris Birshtein, our Chairman of the Board of
Directors, expired on December 31, 2003 and was not renewed. Thereafter, pursuant
to a letter agreement dated March 10, 2004 between he and us, Mr. Birshtein
agreed to continue to serve as our Chairman of the Board of Directors on a
month-to-month basis on substantially the same terms as were provided for in
his prior employment agreement including, among other things, a monthly
consulting fee of $23,047 and a monthly expense allowance of $1,800.
2001 Omnibus Plan, As Amended
In
January 2001, our Board of Directors adopted the 2001 Omnibus Plan, which
became effective in February 2001 after stockholder approval. In June 2001, our
Board
- 34 -
of Directors
approved a resolution to increase the maximum aggregate number of shares that
may be issued under the 2001 Omnibus Plan. Thereafter, the stockholders
approved the increase of the authorized number of shares issuable pursuant to
the 2001 Omnibus Plan from 4,000,000 shares to 10,000,000 shares. This
amendment became effective in August 2001.
Summary
of 2001 Omnibus Plan, as amended
Qualified
directors, officers, employees, consultants and advisors of ours and our
subsidiaries are eligible to receive (a) stock options (Options), which may
be designated as nonqualified stock options (NQSOs) or incentive stock
options (ISOs), (b) stock appreciation rights (SARs), (c) restricted stock
awards (Restricted Stock), (d) performance awards (Performance Awards) or
(e) other forms of stock-based incentive awards (collectively, the Awards). A
director, officer, employee, consultant or advisor who has been granted an
Option is referred to herein as an Optionee and a director, officer,
employee, consultant or advisor who has been granted any other type of Award is
referred to herein as a Participant.
The Omnibus Committee
administers the 2001 Omnibus Plan, as amended, and has full discretion and
exclusive power to (a) select the directors, officers, employees, consultants
and advisors who will participate in the 2001 Omnibus Plan, as amended, and
grant Awards to such directors, officers, employees, consultants and advisors,
(b) determine the time at which such Awards shall be granted and the terms and
conditions with respect to such Awards to the extent not inconsistent with the
provisions of the 2001 Omnibus Plan, as amended, and (c) resolve all questions
relating to the administration of the 2001 Omnibus Plan, as amended. Members of
the Omnibus Committee receive no compensation for their services in connection
with the administration of the 2001 Omnibus Plan, as amended.
The
Omnibus Committee may grant NQSOs or ISOs that are evidenced by stock option
agreements. A NQSO is a right to purchase a specific number of shares of common
stock during such time as the Omnibus Committee may determine, not to exceed
ten years, at a price determined by the Omnibus Committee that, unless deemed
otherwise by the Omnibus Committee, is not less than the fair market value of
the common stock on the date the NQSO is granted. An ISO is an Option that
meets the requirements of Section 422 of the Internal Revenue Code of 1986, as
amended (the Code). No ISOs may be granted under the 2001 Omnibus Plan, as
amended, to an employee who owns more than 10% of our outstanding voting stock
(Ten Percent Stockholder) unless the option price is at least 110% of the
fair market value of the common stock on the date of grant and the ISO is not
exercisable more than five years after it is granted. In the case of an
employee who is not a Ten Percent Stockholder, no ISO may be exercisable more
than ten years after the date the ISO is granted and the exercise price of the
ISO shall not be less than the fair market value of the common stock on the
date the ISO is granted. Further, no employee may be granted ISOs that first
become exercisable during a calendar year for the purchase of common stock with
an aggregate fair market value (determined on the date of grant of each ISO) in
excess of $100,000. An ISO (or any installment thereof) counts against the
annual limitation
- 35 -
only in the
year it first becomes exercisable.
The
exercise price of the common stock subject to a NQSO or ISO may be paid in cash
or, at the discretion of the Omnibus Committee, by a promissory note or by the
tender of common stock owned by the Option holder or through a combination
thereof. The Omnibus Committee may provide for the exercise of Options in
installments and upon such terms, conditions and restrictions as it may
determine.
An
SAR is a right granted to a Participant to receive, upon surrender of the
right, but without payment, an amount payable in cash. The amount payable with
respect to each SAR shall be based on the excess, if any, of the fair market
value of a share of common stock on the exercise date over the exercise price
of the SAR, which will not be less than the fair market value of the common
stock on the date the SAR is granted. In the case of an SAR granted in tandem
with an ISO to an employee who is a Ten Percent Stockholder, the exercise price
shall not be less than 110% of the fair market value of a share of common stock
on the date the SAR is granted.
Restricted
Stock is common stock that is issued to a Participant at a price determined by
the Omnibus Committee, which price per share may not be less than the par value
of the common stock, and is subject to restrictions on transfer and/or such
other restrictions on incidents of ownership as the Omnibus Committee may
determine.
A
Performance Award granted under the 2001 Omnibus Plan, as amended (a) may be
denominated or payable to the Participant in cash, common stock (including,
without limitation, Restricted Stock), other securities or other Awards and (b)
shall confer on the Participant the right to receive payments, in whole or in
part, upon the achievement of such performance goals during such performance
periods as the Omnibus Committee shall establish. Subject to the terms of the
2001 Omnibus Plan, as amended, and any applicable Award agreement, the
performance goals to be achieved during any performance period, the length of
any performance period, the amount of any Performance Award granted and the
amount of any payment or transfer to be made pursuant to any Performance Award
shall be determined by the Omnibus Committee.
The
Omnibus Committee may grant Awards under the 2001 Omnibus Plan, as amended,
that provide the Participants with the right to purchase common stock or that
are valued by reference to the fair market value of the common stock
(including, but not limited to, phantom securities or dividend equivalents).
Such Awards shall be in a form determined by the Omnibus Committee (and may
include terms contingent upon a change of control of the Company); provided
that such Awards shall not be inconsistent with the terms and purposes of the
2001 Omnibus Plan, as amended.
The
Omnibus Committee determines the price of each such Award and may accept any
lawful consideration.
The
Omnibus Committee may at any time, amend, suspend or terminate the 2001 Omnibus
Plan, as amended; provided, however, that (a) no change in any Awards
previously granted may be made without the consent of the holder thereof and
(b) no amendment (other than an amendment authorized to reflect any merger,
consolidation,
- 36 -
reorganization
or the like to which we are a party or any reclassification, stock split,
combination of shares or the like) may be made increasing the aggregate number
of shares of the common stock with respect to which Awards may be granted or
changing the class of persons eligible to receive Awards, without the approval
of the holders of a majority of our outstanding voting shares.
In
the event a Change in Control (as defined in the 2001 Omnibus Plan, as amended)
occurs, then, notwithstanding any provision of the 2001 Omnibus Plan, as amended,
or of any provisions of any Award agreements entered into between any Optionee
or Participant and us to the contrary, all Awards that have not expired and
which are then held by any Optionee or Participant (or the person or persons to
whom any deceased Optionees or Participants rights have been transferred)
shall, as of the date of such Change of Control, become fully and immediately
vested and exercisable and may be exercised for the remaining term of such
Awards.
If
we became a party to any merger, consolidation, reorganization or the like, the
Omnibus Committee has the power to substitute new Awards or have the Awards be
assumed by another corporation. In the event of a reclassification, stock
split, combination of shares or the like, the Omnibus Committee shall
conclusively determine the appropriate adjustments.
No
Award granted under the 2001 Omnibus Plan, as amended, may be sold, pledged,
assigned or transferred other than by will or the laws of descent and
distribution, and except in the case of the death or disability of an Optionee
or a Participant, Awards shall be exercisable during the lifetime of the
Optionee or Participant only by that individual.
No
Awards may be granted under the 2001 Omnibus Plan, as amended, on or after
January 2, 2011, but Awards granted prior to such date may be exercised in
accordance with their terms.
As
of December 31, 2007, of the 10,000,000 shares of our common stock reserved for
issuance under the 2001 Omnibus Plan, as amended, options to acquire 3,870,000
shares of our common stock were outstanding.
|
|
ITEM 11.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
|
|
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
The
following table sets forth information concerning the beneficial ownership of
shares of our common stock with respect to stockholders who were known by us to
be the beneficial owners of more than 5% of our common stock as of December 31,
2007, and our officers and directors, individually and as a group. Unless
otherwise indicated, the beneficial owner has sole voting and investment power
with respect to such shares of common stock.
Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. In accordance with the Securities and Exchange
Commission
- 37 -
rules, shares
of our common stock which may be acquired upon exercise of stock options or
warrants which are currently exercisable or which become exercisable within 60
days of the date of the table are deemed beneficially owned by the holders of
such securities. Subject to community property laws, where applicable, the
persons or entities named in the table below have sole voting and investment
power with respect to all shares of our common stock indicated as beneficially
owned by them.
|
|
|
|
|
|
|
|
|
As of December
31, 2007 (1)
|
|
NAME OF BENEFICIAL OWNER
|
|
AMOUNT AND
NATURE OF
BENEFICIAL OWNER
|
|
PERCENT OF
CLASS
|
|
|
|
|
|
|
|
|
|
|
Boris
Birshtein
1285 Avenue of the Americas, 35
th
Floor
New York, New York, 10019
|
|
84,922,000
|
(2)(3)
|
|
79.2
|
%
|
|
|
|
|
|
|
|
Aluminum-Power
Inc.
87 Scollard Street
Toronto, Ontario M5R 1G4
|
|
75,275,000
|
(2)
|
|
70.2
|
%
|
|
|
|
|
|
|
|
Yuri
Benenson
1285 Avenue of the Americas, 35
th
Floor
New York, NY10019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jack
Braverman
1285 Avenue of the Americas, 35
th
Floor
New York, NY 10019
|
|
500,000
|
(4)
|
|
.466
|
%
|
|
|
|
|
|
|
|
Walter J.
Perchal
1285 Avenue of the Americas, 35
th
Floor
New York, New York, 10019
|
|
75,275
|
(5)
|
|
.070
|
%
|
|
|
|
|
|
|
|
P.L.T.
International, Inc
87 Scollard Street
Toronto, Ontario M5R 1G4
|
|
8,225,000
|
|
|
7.66
|
%
|
|
|
|
|
|
|
|
All
Executive Officers and
Directors as a Group (4 persons) (6)
|
|
83,922,000
|
|
|
79.736
|
%
|
|
|
|
|
|
(1)
|
Based on a total of
107,342,328 shares of common stock, which includes: (i) 100,472,328 shares of
common stock issued and outstanding as of December 31, 2007; (ii) options to
purchase 3,870,000 shares of our common stock granted pursuant to the 2001
Omnibus Plan, as amended; and, (iii) options to purchase 3,000,000 shares of
our common stock granted outside of the 2001 Omnibus Plan, as amended.
|
|
|
|
|
(2)
|
Mr. Birshtein is an
indirect owner of Aluminum-Power Inc., our majority shareholder, which owns
75,275,000 shares of our common stock. Aluminum-Power Inc.s majority
shareholder is Eontech Group Inc. of which Birshtein Holdings, Ltd. is the
majority owner. Mr. Birshtein directly controls Birshtein Holdings, Ltd.
|
|
|
|
|
(3)
|
Represents 5,737,000
shares of our common stock owned directly by Mr. Birshtein; 3,910,000 shares
of our common stock owned by Magnum Associates, Inc., of which Mr. Birshtein
is the sole shareholder; and, 75,275,000 shares of our common stock owned by
|
- 38 -
|
|
|
|
|
Aluminum-Power Inc.
|
|
|
|
|
(4)
|
Represents an option
granted on November 2, 2004, under our 2001 Omnibus Plan, as amended, to
purchase up to 500,000 shares of our common stock. Such option has a term of
five years and an exercise price of $0.01 per share.
|
|
|
|
|
(5)
|
Represents ownership of
approximately 1% of Aluminum-Power Inc., the owner of 75,275,000 shares of
our common stock.
|
|
|
|
|
(6)
|
Includes Messrs.
Birshtein, Benenson, Braverman and Perchal.
|
|
|
ITEM 12.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
|
During
2007, we accrued $276,000 in compensation and $21,600 in expenses due to Mr.
Boris Birshtein related to his performance as the Chairman of the Board. In
year 2006 we paid Mr. Birshtein $23,000 and accrued $253,000 in compensation
due to him and paid $44,000 and accrued $20,000 in expenses related to his
performance as the Chairman of the Board.
During
2005 we engaged Royal HTM Group, Inc., a Canadian company beneficially owned
and controlled by our Chairman of the Board, to render certain business
development services to us. During 2007 we accrued $120,000 for such services.
In 2006 we paid $99,000 to Royal HTM Group for such services and $312,000 was
accrued and unpaid, of which $21,000 was consulting fees and $291,000 was
reimbursement of business expenses.
During
2007 Royal HTM Group lent us $106,000 to cover our operating expense for the
year and advanced $591,000 on our behalf for certain services and expenses we
incurred, which included, among other things, approximately $99,000 in
compensation paid to our CEO and $25,000 paid to our CFO on our behalf, and
$193,000 to fund on-going legal fees related to our legal action in Moldova. In
2006 Royal HTM Group lent us $178,000 to cover our operating expenses for the
year and advanced $260,000 on our behalf for certain services and expenses we
incurred. Such amounts are non-interest bearing and are due on demand.
|
|
ITEM 13.
|
EXHIBITS AND REPORTS ON FORM 8-K
|
The exhibits
listed below are filed as part of this Annual Report.
|
|
|
|
Exhibit
|
|
Document
|
|
|
|
|
|
|
|
|
3(i)
|
|
Articles of
Incorporation (incorporated by reference to the Registration Statement on
Form 10-SB filed with the Securities and Exchange Commission under File No.
000-28144).
|
|
|
|
3(ii)
|
|
By-laws
(incorporated by reference to the Registration Statement on Form 10-SB filed
with the Securities and Exchange Commission under File No. 28144).
|
- 39 -
|
|
|
4
|
|
January 24,
2001 Definitive Information Statement filed with the Securities and Exchange
Commission (incorporated herein by reference).
|
|
|
|
4(i)
|
|
July 19,
2001 Information Statement filed with the Securities and Exchange Commission
(incorporated herein by reference).
|
|
|
|
10(i)
|
|
January 11,
2001 Technology Acquisition Agreement between Trimol Group, Inc. and
Aluminum-Power Inc. (incorporated herein by reference to the Definitive
Information Statement filed with the Securities and Exchange Commission).
|
|
|
|
10(ii)
|
|
January 11,
2001 License Agreement between Trimol Group, Inc. and Aluminum-Power Inc.
(incorporated herein by reference to the Definitive Information Statement
filed with the Securities and Exchange Commission).
|
|
|
|
10(v)
|
|
July 1, 2001
Research & Development Agreement between Aluminum-Power Inc. and Trimol
Group, Inc. (incorporated herein by reference to Form 10-KSB filed with the
Securities and Exchange Commission for the year ended December 31, 2001).
|
|
|
|
10 (vi)
|
|
March 24,
2005 Termination Agreement between Intercomsoft Limited and Supercom Limited
(incorporated herein by reference to Form 8-K filed with the Securities and
Exchange Commission on March 28, 2005).
|
|
|
|
21
|
|
Subsidiary of the Registrant.
|
|
|
|
23
|
|
Consent of Paritz & Company, P.A.
|
|
|
|
31.1
|
|
Chief Executive Officer Certification
|
|
|
|
31.2
|
|
Chief Financial Officer
Certification.
|
|
|
|
32.1
|
|
Chief Executive Officer Certification pursuant to
18 U.S.C. Section
1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.2
|
|
Chief Financial Officer Certification pursuant to
18 U.S.C. Section
1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
- 40 -
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, this 14
th
day of April,
2008.
|
|
|
TRIMOL GROUP, INC.
|
|
|
|
By:
|
/s/ Yuri
Benenson
|
|
|
|
|
Name:
|
Yuri
Benenson
|
|
Title:
|
Chief
Executive Officer and Director
|
|
|
|
By:
|
/s/ Jack
Braverman
|
|
|
|
|
Name:
|
Jack
Braverman
|
|
Title:
|
Chief
Financial Officer and Director
|
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/ Boris
Birshtein
|
Date: April 14, 2008
|
|
|
|
Name:
|
Boris
Birshtein
|
|
Title:
|
Chairman of
the Board and Director
|
|
|
|
By:
|
/s/ Yuri
Benenson
|
Date: April 14, 2008
|
|
|
|
Name:
|
Yuri
Benenson
|
|
Title:
|
Chief
Executive Officer and Director
|
|
|
|
By:
|
/s/ Jack
Braverman
|
Date: April 14, 2008
|
|
|
|
Name:
|
Jack
Braverman
|
|
Title:
|
Chief
Financial Officer and Director
|
|
|
|
By:
|
/s/ Walter
Perchal
|
Date: April 14, 2008
|
|
|
|
Name:
|
Walter
Perchal
|
|
Title:
|
Director
|
|
- 41 -