SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended June 30, 2002.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to .
Commission file number: 33-24108D
TRSG CORPORATION
(Exact name of small business issuer as specified in its charter)
DELAWARE 87-045382
---------- -----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3095 E. Patrick Lane, Suite 1, Las Vegas, Nevada 89120
--------------------------------------------------------
(Address of principal executive office) (Zip Code)
(702) 399-4328
-----------------------------
(Issuer's telephone number)
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 XX No
---- ----
The number of outstanding shares of the issuer's common stock, $0.001 par
value (the only class of voting stock), as of August 13, 2002 was 93,408,731.
TABLE OF CONTENTS
PART I- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS..................................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.............4
PART II- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS......................................................6
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.............................6
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................9
SIGNATURES....................................................................10
INDEX TO EXHIBITS.............................................................11
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2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to TRSG Corporation., a Delaware
corporation, and its subsidiaries and predecessors unless otherwise indicated.
Consolidated, unaudited, condensed interim financial statements including a
balance sheet for the Company as of the quarter ended June 30, 2002, and
statements of operations, and statements of cash flows for the interim period up
to the date of such balance sheet and the comparable period of the preceding
year are attached hereto as Pages F-1 through F- 9 and are incorporated herein
by this reference.
[THIS SPACE LEFT BLANK INTENTIONALLY]
3
TRSG CORPORATION
--------
FINANCIAL STATEMENTS
---------
JUNE 30, 2002
F-1
TRSG CORPORATION
- CONTENTS -
PAGE NUMBER
Financial Statements:
Balance Sheet F-3
Statement of Operations F-4
Statement of Changes in Stockholders' Equity (Deficit) F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-8
F-2
TRSG CORPORATION
BALANCE SHEET
ASSETS
June 30, December 31,
2002 2001
------------- -------------
(Unaudited) (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 22,952 $ 12,096
Accounts receivable:
Trade 40,453 128,280
Related party 665,445 891,957
Other 127,140 1,500
Inventories 77,871 499,594
------------- -------------
Total current assets 933,861 1,533,427
Property and equipment - 440,963 547,603
Less accumulated depreciation and amortization (347,924) (332,687)
------------- -------------
93,039 214,916
OTHER ASSETS:
Goodwill, net of accumulated amortization,
of $156,107 - 1,245,925
Other - 54,172
------------- -------------
- 1,300,097
$ 1,026,900 $ 3,048,440
============== =============
The accompanying notes are an integral part of the financial statements.
F-3
TRSG CORPORATION
BALANCE SHEET
(CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
June 30 , December 31,
2002 2001
------------ ------------
(Unaudited) (Unaudited)
CURRENT LIABILITIES:
Current portion of long-term debt $ - $ 4,213
Notes payable 346,936 90,000
Accounts payable:
Trade 625,906 940,966
Related - 69,751
Commissions 210,922 201,271
Accrued expenses 62,732 93,263
------------ -------------
Total current liabilities 1,245,956 996,796
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock - $.001 par value, 5,000,000
shares auth. No shares issued and outstanding - -
Common stock, - $.001 par value, 200,000,000
shares auth. Issued and outstanding -
48,383,731 and 24,822,731 shares at
June 30, 2002 and December 31, 2001,
respectively 48,384 18,258
Additional paid-in capital 3,655,239 2,182,220
Accumulated deficit (3,922,679) (719,218)
------------ --------------
(219,056) (1,481,260)
------------ --------------
$ 1,026,900 $ 2,478,056
============ ==============
The accompanying notes are an integral part of the financial statements.
F-4
TRSG CORPORATION
STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2002 2001 2002 2001
------------ ------------- ------------ -------------
SALES $ 279,380 $ 393,488 $ 559,234 $ 1,097,285
COST OF SALES 8,761 80,540 117,102 221,504
------------ ------------- ------------ -------------
GROSS PROFIT 270,619 312,948 442,222 875,781
SELLING, GENERAL AND 539,767 616,455 1,282,926 1,316,033
------------ -------==---- ------------ -------------
ADMINISTRATIVE EXPENSES
LOSS FROM OPERATIONS (269,178) (303,507) (810,704) (440,252)
OTHER INCOME (EXPENSE):
Loss on sale - A&A Medical
Supply Co. - - (43,105) -
Interest expense - net (3,264) (18,064) (6,733) (22,377)
Gain on settlement - - - 586,970
Other - 2,814 - 7,045
Abandonment of leasehold
improvements - - (26,329) -
Impairment of goodwill (1,203,953) - (1,203,953) -
------------ ------------- ------------ -------------
(1,207,217) (15,250) (1,280,120) 553,638
NET INCOME(LOSS) $(1,476,395) $ (318,757) $(2,090,824) $ 113,386
============ ------------- ------------ -------------
BASIC EARNINGS ( LOSS)
PER SHARE $ (.034) $ (0.02) $ (.048) $ 0.01
============ ============= ============ =============
WEIGHTED AVERAGE
SHARES OUTSTANDING 43,241,786 18,234,623 43,365,286 16,765,112
============ ============= ============ =============
The accompanying notes are an integral part of the financial statements.
F-5
TRSG CORPORATION
STATEMENT OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
--------------------------------
JUNE 30, JUNE 30,
2002 2001
--------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (2,090,824) 113,386
Adjustments to reconcile net income (loss)
to net cash from (to) operating activities:
Loss on disposal of A&A Medical Supply 43,105 -
Loss on abandonment of leasehold improvements 26,329 -
Net current assets disposed of with A&A Medical Supply (22,561) -
Depreciation and amortization 43,105 66,649
Stock issued for services 241,140 56,301
Impairment of goodwill 1,203,953 -
Changes in operating assets and liabilities which increase
(decrease) cash flow:
Accounts receivable (125,925) (36,197)
Inventories 421,723 (60,318)
Prepaid expenses - 97,732
Accounts payable (370,781) 153,154
Accrued expenses (30,561) 50,927
Deferred revenue - (244,629)
--------------- ---------------
Net cash from (to) operating activities (636,618) 197,005
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of A&A Medical Supply Co. 114,000 -
Capital expenditures (3,606) (3,000)
Purchase of TRSG CORPORATION - (350,000)
Advances to related party 226,512 (577,443)
Cash received in acquisition - 2,196
Deposit 54,172 -
Other - 5,350
--------------- ---------------
Net cash to investing activities 391,078 (922,897)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock - 716,702
Proceeds from issuance of debt 256,396 115,000
--------------- ---------------
Net cash from financing activities 256,396 831,702
NET INCREASE (DECREASE) IN CASH EQUIVALENTS 10,856 105,810
CASH AND CASH EQUIVALENTS:
BALANCE - beginning of period 12,096 -
--------------- ---------------
BALANCE - end of period $ 22,952 $ 105,810
=============== ===============
The accompanying notes are an integral part of the financial statements.
F-6
TRSG CORPORATION
STATEMENT OF CASH FLOWS - CONTINUED
(UNAUDITED)
SUPPLEMENTAL DISCLOSURE
SIX MONTHS ENDED
---------------------------------
JUNE 30, JUNE 30,
2002 2001
------------- ------------
CASH PAID FOR INTEREST $ - $ 21,252
============= ============
CASH PAID FOR TAXES $ - $ -
============= ============
NONCASH INVESTING AND FINANCING ACTIVITIES
STOCK ISSUED FOR ACQUISITION $ - $ 1,224,131
============= ============
STOCK ISSUED FOR SERVICES $ 241,140 $ -
============= ============
F-7
TRSG CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The balance sheet as of June 30, 2002 and the related statements
of operations, and cash flows for the six months ended June 30,
2002 and 2001 are unaudited. In the opinion of management, the
information reflects all adjustments (consisting solely of normal
recurring adjustments) that are necessary to a fair presentation
of the financial statements. The results of operations for the
six months ended June 30, 2002 are not necessarily indicative of
the results to be expected for the whole year.
NOTE 2- BUSINESS COMBINATION:
On January 11, 2001, the Company obtained substantially all of
the assets and operations of Gateway Distributors, Ltd.
("Gateway") in exchange for 13,448,660 shares of common stock.
Gateway is a publicly held company and is a distributor of
vitamin and nutritional supplements, health foods, cleaning and
skin care products mainly in the United States, Canada, and
Japan. On January 4, 2002, the Company issued an additional
8,000,000 shares to Gateway. In addition, subsequent to the end
of the period, the Company issued 45,000,000 restricted shares to
Gateway to reimburse them for payments made in the Company's
behalf. As a result of these transactions, TRSG Corporation is
now became a 71.1% owned subsidiary of Gateway and is
consolidated in its financial statements. The transaction was
accounted for under the purchase method of accounting, therefore,
assets and liabilities were recorded on their fair values at the
date of acquisition.
NOTE 3 - NOTES PAYABLE:
At June 30, 2002, the Company had $258,238 of notes payable to
certain individuals. Both notes bear interest at a fixed rate of
15%, are unsecured and due within one year.
NOTE 4 - SETTLEMENT PAYABLE:
On December 29, 2000, the Company obtained a settlement on the
judgment against it of $618,970 for $50,000. The obligation was
satisfied and resulted in a gain on settlement of $568,970 in the
current period ended June 30, 2001.
NOTE 5 - NOTE PAYABLE - RELATED PARTIES:
At June 30, 2002, the Company had a $88,158 note payable to
stockholders. There is no schedule for repayments of these notes
at June 30, 2002.
F-8
TRSG CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 2001
NOTE 6 - SALE OF A & A MEDICAL SUPPLY CO:
On February 1, 2002, the Company sold its medical supply division
in Utah. A summary of the transaction is as follows:
Assets sold $ 619,817
Liabilities assumed by buyer 316,712
---------------
303,105
Sales price - cash to be received over term of agreement (260,000)
---------------
Loss on sale of division $43,105
At March 31, 2002, other receivables include an amount of $126,000
related to this sale.
NOTE 7 - ADDITIONAL FOOTNOTES INCLUDED BY REFERENCE:
Except as indicated in Notes above, there have been no other
material changes in the information disclosed in the notes to the
financial statements included in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 2001. Therefore,
these footnotes are included by reference. In addition, the
footnotes for inventory, property and equipment and amortization
of Gateway Distributors, LTD. December 31, 2001 10-KSB should
also be referred to due to the acquisition per Note 2.
NOTE 8 - IMPAIRMENT OF GOODWILL:
Goodwill is assigned to specific reporting units and is reviewed
for possible impairment at least annually or more frequently upon
the occurrence of an event or when circumstances indicate that a
reporting unit's carrying amount is greater than its fair value.
During 2002, the Company determined that the carrying amount
exceeded the fair value, which estimated based on the present
value of expected future cash inflows. Accordingly, a goodwill
impairment loss of $1,205,953 was recognized.
Changes in the carrying amount of goodwill during 2002 are
summarized below:
Balance, January 1, 2002 $ 1,245,925
Amortization expense - goodwill (41,972)
Impairment loss (1,203,953)
-------------------
Balance, June 30, 2002 $ -
===================
F-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULT OF OPERATION
General
As used herein the term "Company" refers to TRSG Corporation., a
Delaware corporation, its subsidiaries and predecessors, unless the
context indicates otherwise. The Company was originally incorporated
in the State of Delaware on January 11, 1988.
On January 11, 2001, the Company issued 13,448,660 shares of its
common stock to Gateway Distributors, Inc. ("Gateway") in exchange for
substantially all of the assets and operations of Gateway. On January
4, 2002, the Company issued an additional 8,000,000 shares to Gateway.
Finally, subsequent to the end of the quarter, the Company issued
45,000,000 shares to Gateway to reimburse them for payments made in
the Company's behalf. As a result of these transactions, the Company
is now a 71.1 % owned subsidiary of Gateway.
The Company's products are marketed through network marketing within
the United States and wholesale personal import sales outside of the
United States. Network marketing enables the Company's independent
distributors in the United States to earn profits by selling the
Company's products to retail consumers. Distributors may also develop
their own distributor organizations by sponsoring others to do
business in any market where the Company operates, entitling the
sponsors to receive overrides or commissions (cash incentives,
including royalties and bonuses) on product sales within their
down-line organizations.
The Company believes that through special blends, whole foods such as
grains and vegetables can be combined to help produce optimum health.
Recent studies reveal that prevention through health maintenance is a
key to enjoying a healthy lifestyle. However, health challenges today
are at an all-time high. The need for proper nutrition has never been
greater. The Company markets whole food products based on the
proposition that pure, natural, unprocessed, unpreserved, unsprayed,
simple, organic foods provide whole food nutrition. The Company
believes that whole food nutrition is the key, the answer, and the
solution to creating a long healthy life. The health care products
that the Company sells are intended to provide nutritional
supplementation to the product's users. The products are not intended
to diagnose, treat, cure or prevent any disease.
Results Of Operations
The Company's results of operations for the periods described below
are not necessarily indicative of results of operations for future
periods, which depend upon numerous factors including the Company's
ability in the future to enter new markets and introduce additional
and new products into its markets.
Sales for the three months ended June 30, 2002 were $279,380, as
compared to sales of $393,488 in the three months ended June 30, 2001.
The decrease resulted from a lack of inventory to support customer
demand.
Sales for the six months ended June 30, 2002 were $ 559,324, as
compared to sales of $1,097,285 in the six months ended June 30, 2001.
The decrease resulted from a lack of inventory to support customer
demand.
4
Net loss was $1,476,395 for the three months ended June 30, 2002, as
compared to net loss of $318,757 for the three months ended June 30,
2001. The increase in net loss primarily resulted from impairment of
goodwill in the amount of $1,203,953.
Net loss was $2,090,824 for the six months ended June 30, 2002, as
compared to net profit of $113,386 for the six months ended June 30,
2001. The decrease in net profit for the six month period ended June
30, 2002 as compared to the same period in 2001 primarily resulted from
the impairment of goodwill of $1,203,953 coupled with an operating loss
of $810,704.
General, and administrative expenses were $539,797 for the three
months ended on June 30, 2002 and $616,455 for the comparable period
in 2001, an decrease of $76,658. The decrease in general and
administrative expenses resulted from the reduced administrative costs
associated with a slowdown in the operations of the Company.
General, and administrative expenses were $1,282,926 for the six
months ended on June 30, 2002 and $1,316,033 for the comparable period
in 2001, a decrease of $33,107. The primary reason for decrease is the
slowdown mentioned above.
Operating loss was $269,178 during the three months ended on June 30,
2002, compared to an operating loss of $303,507 for the comparable
three months in 2001. The Company's operating loss decreased for the
comparable three months ended June 30, 2001, because of a decrease in
general and administrative costs.
Operating loss was $810,704 during the six months ended on June 30,
2002, compared to an operating loss of $440,252 for the comparable six
months in 2001. The Company's operating loss increased for the
comparable six months ended June 30, 2002 because of a decrease in
sales by 50%.
Liquidity and Capital Resources
The Company had a net working capital deficit of $312,095 as of June
30, 2002, as compared to a net working capital surplus of $133,963 as
of December 31, 2001. The decrease in net working capital is due to an
increase in notes payable coupled with a dramatic reduction in
inventories and trade receivables.
Net stockholders' deficit in the Company was $219,056 as of June 30,
2002, compared to net stockholder's equity of $1,630,628 as of
December 31, 2001. The decrease in stockholder's equity is due to the
large losses in the current period from impairment of goodwill and
losses from a drop in sales.
Cash flows used in operating activities were $636,618 for the six
months ended June 30, 2002 as compared to cash flows provided by
operations of $197,005 for the comparable period in 2001. The major
reasons for this drop is due to the large loss of $2,090,824 compared
to a gain of $113,386 for the comparable period in 2001.
Cash flows provided by investing activities were $391,078 for the six
months ended June 30, 2002 compared to cash flow used in investing
activities of $922,897 for the six months ended June 30, 2001.
Cash flows provided by financing activities were $256,396 for the six
months ending June 30, 2002, as compared to $831,702 provided by
financing activities for the comparable period in 2001.
5
Due to the Company's expected cash flow fluctuations, the Company may
experience occasional cash flow shortages. To satisfy its cash
requirements, including debt servicing, the Company must periodically
raise funds from external sources. This may involve the Company
conducting exempt offerings of its equity securities and obtaining
advances from related parties.
Impact of Inflation
The Company believes that inflation has had a negligible effect on
operations over the past two years. The Company believes that it can
offset inflationary increases in the cost of materials and labor
through increased sales and improved operating efficiency.
Capital Expenditures
The Company made no material capital expenditures during the period
covered by this report.
Income Tax Expense (Benefit)
The Company's income tax benefits may be limited to the losses
sustained since January 12, 2001 due to the change of control and
management.
Going Concern
The Company's ability to continue as a going concern is an issue
raised as a result of an accumulated deficit of $3,922,679 as of June
30, 2002 as well as the current period loss of $1,476,395 and a
working capital deficit of $312,095. The Company's ability to continue
as a going concern is subject to the ability of the Company to operate
at a profit and /or obtaining the necessary funding from outside
sources. Management is committed to taking the necessary steps to
ensure the Company remains a going concern. Management's plan to
address the Company's ability to continue as a going concern includes:
(1) obtaining additional funding from the sale of the Company's
securities; (2) increasing sales; (3) obtaining loans and grants from
various financial institutions where possible. Although management
believes that it will be able to obtain the necessary funding to allow
the Company to remain a going concern through the methods discussed
above, there can be no assurances that such methods will prove
successful PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Subsequent to June 30, 2002, the Company issued an additional
45,000,000 restricted shares of common stock to Gateway Distributors
(the Company's parent) to reimburse them for payments made on their
behalf to Neptune Communications, Inc. for consulting services. The
Company issued the shares pursuant to section 4(2) of the Securities
Act of 1933 in an isolated private transaction by the Company which
did not involve a public offering. The Company made this transfer
based on the following factors: (1) The issuance was an isolated
private transaction by the Company which did not involve a public
6
offering, being made to a single entity for services; (2) there was
only one offeree who was issued stock for services rendered; (3) the
offeree has not resold the stock but has continued to hold it since
the date of issue; (4) there were no subsequent or contemporaneous
public offerings of the stock; (5) the stock was not broken down into
smaller denominations; and (6) the negotiations for the sale of the
stock took place directly between the offeree and the Company.
During the quarter ended June 30, 2002, the Company issued 1,690,000
shares of common stock under S-8, valued at par, to various
individuals for services rendered to the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)Exhibits Exhibits required to be attached by Item 601 of Regulation
S-B are listed in the Index to Exhibits on page 9 of this Form 10-QSB,
and are incorporated herein by this reference.
(b)Reports on Form 8-K. No reports were filed on Form 8-K during the
quarter.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
7
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, this 22nd day of August 2002.
TRSG Corporation
By: /s/ Rick Bailey
------------------------------------------
Rick Bailey
Its: President, Chief Executive Officer and Director
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of TRSG Corporation (the"
Company") on Form 10-QSB for the period ending June 30, 2002 as
filed with the Securities and Exchange Commission on the date
hereof (the"Report"), I, Rick Bailey, sole Executive Officer of
the Company, certify, pursuant to 18 U.S.C. S 1350, as adopted
pursuant to S 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report complies with the requirements of section 13
(a) or 15 (d) of the Securities Exchange Act of 1934; and
(2) The financial information contained in the Report fairly
presents, in all material respects, the financial condition
and result of operations of the Company.
/s/ Rick Bailey
---------------------------------
Rick Bailey
CEO/CFO
August 22, 2002
8
INDEX TO EXHIBITS
Exhibit Page Description
3(i) * Articles of Incorporation of the Company
(incorporated herein by reference to the
Company's Form S-18 as filed with the
Securities and Exchange Commission on
December 6, 1988 ).
3(i)(a) * Certificate of Amendment of Articles of Incorporation
Changing the Company's Name From Jutland Enterprises,
Inc. to Professional Wrestling Alliance Corporation
and increasing the number of authorized shares of
stock dated November 15, 1999.(Incorporated herein by
reference to the Company's Form 8-K filed with the
Securities and Exchange Commission on December 3,
1999).
3(ii) * Bylaws of the Company, as amended
(incorporated herein by reference to the
Company's Form S-18 as filed with the
Securities and Exchange Commission on
December 6, 1988).
Material Contracts
10(i) * Asset Purchase Agreement dated February 1, 2002
between TRSG Corporation and A and A Medical Company,
filed with the Form 10-QSB for March 31, 2002 as
exhibit 10(vi).
10(ii) * Bill of Sale and Assignment of Assets dated February
6, 2002, filed with the Form 10-QSB for March 31,
2002 as exhibit 10(vii)
10(iii) * Assignment of Contracts dated February 6, 2002, filed
with the Form 10-QSB for March 30, 2002 as exhibit
10(viii)
* Incorporated by reference from previous filings of the Company, as
noted.
9