SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(X) Quarterly Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 For the quarterly period ended October 31, 1997
OR
( ) Transition Report pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission File Number: 0-28514
TREASURY INTERNATIONAL, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 98-0160284
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
1183 Finch Avenue West, North York, Ontario M3J 2G2
(Address of Principal Executive Offices)
Issuer's Telephone Number, Including Area Code: (416) 663-5508
7040 Tranmere Drive, Mississauga, Ontario L5S 1L9
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 21,619,031 shares of Common
Stock, par value $.0001 per share were outstanding as of January 30, 1998.
<PAGE>
INDEX
PAGE
PART I. FINANCIAL INFORMATION....................... 3
ITEM 1. FINANCIAL STATEMENTS..................... 3
Interim Consolidated Balance Sheet as of
October 31, 1997 and January 31, 1997........ 3
Interim Consolidated Statement of Deficit as
of October 31, 1997 and October 31, 1996..... 4
Interim Consolidated Statement of Operations
as for the three months ended October 31,
1997 and 1996 and for the nine months ended
October 31, 1997 and 1996.................... 5
Interim Consolidated Statement of Changes in
Stockholders' Equity as at October 31, 1997.. 7
Interim Consolidated Statement of Cash Flows
as of October 31, 1997 and October 31, 1996.. 8
Notes to Interim Consolidated Financial
Statements................................... 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION........................ 14
PART II. OTHER INFORMATION.......................... 14
ITEM 2. CHANGES IN SECURITIES.................... 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......... 14
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED BALANCE SHEET
ASSETS
October 31 January 31
CURRENT 1997 1997
(Unaudited)
-------- ---------
Accounts receivable $ 717,072 $ 812,357
Inventories (Notes 2 and 4) 456,126 385,915
Sundry assets 32,381 144,541
- 6,182
--------- ---------
1,205,579 1,348,995
GOODWILL 1,835,918 1,835,918
CAPITAL ASSETS (Notes 2 and 5) 646,626 723,299
$ 3,688,123 $3,908,212
=========== ==========
LIABILITIES
CURRENT
Bank indebtedness (Note 6) $ 587,453 $ 394,407
Accounts payable and accrued
liabilities 1,091,671 1,018,928
Current portion of long-term debt 1,063,911 1,147,812
--------- ---------
2,743,035 2,561,147
DEFERRED INCOME TAXES 53,000 54,161
LONG-TERM DEBT (Note 7) 1,185,220 1,304,461
3,981,255 3,919,769
--------- ---------
<PAGE>
SHAREHOLDERS' EQUITY
SHARE CAPITAL
Authorized
50,000,000 Common shares at $.0001
Issued
18,780,180 Common shares 1,878 1,494
CONTRIBUTED SURPLUS 2,677,723 1,543,861
DEFICIT (2,972,733) (1,556,912)
----------- ----------
( 293,132) ( 11,557)
----------- ----------
$ 3,688,123 $ 3,908,212
============ ============
<PAGE>
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED STATEMENT OF DEFICIT
NINE MONTHS ENDED OCTOBER 31, 1997
(UNAUDITED)
October 31 October 31
1997 1996
---------- ----------
Balance, beginning of period $ ( 1,556,912) $( 524,828)
Net loss for the period ( 1,415,821) ( 617,349)
------------- -----------
Balance, end of period $ ( 2,972,733) $( 1,142,177)
============== =============
<PAGE>
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED OCTOBER 31, 1997
(UNAUDITED)
October 31 October 31
1997 1996
---------- ----------
REVENUE $ 1,357,829 $ 128,364
COST OF GOODS SOLD 1,310,930 287,229
------------- ----------
GROSS PROFIT (LOSS) 46,899 (158,865)
EXPENSES
General and administrative
(Note 9) 235,863 446,493
LOSS FROM OPERATIONS BEFORE
UNDERNOTED ITEMS ( 188,964) ( 605,358)
----------- -----------
Financial 37,617 -
Amortization 35,630 549
Other income - (33,990)
---------- -----------
73,247 (33,441)
LOSS FROM CONTINUED OPERATIONS ( 262,211) ( 571,917)
NET GAIN ON DISPOSAL OF
DISCONTINUED OPERATIONS
(NOTE 10) 1,977,738 -
---------- ----------
NET INCOME (LOSS) $ 1,715,527 $ ( 571,917)
============= =============
INCOME PER SHARE $ 0.104 $ ( 0.04)
=========== =============
Weighted Average Number of
Common Shares Outstanding 16,525,394 13,973,690
============ ==========
<PAGE>
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED OCTOBER 31, 1997
(UNAUDITED)
October 31 October 31
1997 1996
---------- ----------
REVENUE $ 4,750,944 $ 689,690
COST OF GOODS SOLD 4,195,459 612,725
--------- ---------
GROSS PROFIT
555,485 76,965
EXPENSES
General and administrative (Note 9) 1,358,698 726,658
--------- ---------
LOSS FROM OPERATIONS BEFORE
UNDERNOTED ITEMS ( 803,213) ( 649,693)
---------- ---------
Financial 102,401 -
Amortization 110,043 1,646
Other income - ( 33,990)
---------- ---------
212,444 ( 32,344)
---------- ---------
NET LOSS FROM CONTINUED
OPERATIONS (1,015,657) ( 617,349)
NET LOSS FROM DISCONTINUED
OPERATIONS ( 282,260) -
NET LOSS ON DISPOSAL OF DISCONTINUED
OPERATIONS ( 117,904) -
---------- ---------
NET LOSS $(1,415,821) $ ( 617,349)
============ ============
LOSS PER SHARE
Continued operations ( 0.061)
Discontinued operations ( 0.024)
-----------
$ ( 0.085) $ ( 0.04)
========= ==========
Weighted Average Number of Common
Shares Outstanding 16,525,394 13,973,690
========== ==========
<PAGE>
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
NINE MONTHS ENDED OCTOBER 31, 1997
(UNAUDITED)
COMMON PAID-IN CONTRIBUTED
SHARES CAPITAL SURPLUS
------ ------- -----------
Balance-January 31, 1997 14,942,566 $1,494 $ 1,543,861
Issued 555,000 common shares
for consulting and public
relations services 555,000 56 554,944
Issued 150,000 common shares
toward the purchase price
of Silver 925, Inc. 150,000 15 149,985
-------- --------- ----------
Balance-April 30, 1997 15,647,566 1,565 2,248,790
Issued 500,000 common shares
for consulting and pubic
relations services 500,000 50 111,196
Issued 225,000 common
shares toward the purchase
price of Silver 925, Inc. 225,000 22 224,978
Issued 507,614 common
shares toward reduction
of debentures payable 507,614 51 49,949
------- ----- --------
Balance-July 31, 1997 16,880,180 1,688 2,634,913
Issued 1,150,000 common
shares for consulting and
public relations services 1,150,000 115 13,585
Issued 750,000 common
shares toward reduction
of debentures payable 750,000 75 29,225
18,780,180 1,878 $ 2,677,723
========== ===== ===========
<PAGE>
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED OCTOBER 31, 1997
(UNAUDITED)
October 31 October 31
1997 1996
---------- ----------
Cash flows from operating activities
Net loss $( 3,393,559) $( 617,349)
Adjustments to reconcile net
loss to net cash used in
operating activities
Increase (decrease)in deferred
income taxes ( 1,161) 57,744
Amortization 110,043 1,646
Decrease (increase)in accounts
receivable 95,285 ( 882,739)
Decrease in income taxes receivable 6,182 -
Increase in inventories ( 70,211) ( 466,288)
Decrease (increase) in sundry
assets 112,160 ( 29,516)
Increase (decrease) in accounts payable 72,743 1,017,415
-------- ---------
Net cash used in operating activities ( 3,068,518) ( 919,087)
---------- ---------
Cash flows from financing activities
Long-term debt ( 203,142) 750,000
Proceeds on issue of common shares 1,134,246 235,500
---------- ---------
Cash provided by financing activities 931,104 985,500
---------- ---------
Cash flows from investing activities
Purchase of capital assets ( 33,370) ( 779,898)
Discontinued operations 1,977,738 -
Long term debt - 751,880
Goodwill - ( 1,835,918)
----------- ------------
Cash provided by investing activities 1,944,368 (1,863,936)
----------- ------------
Decrease in cash and short-term deposits
(bank indebtedness) ( 193,046) ( 1,797,523)
Cash and short-term deposits
(bank indebtedness),
beginning of period ( 394,407) ( 292,611)
--------- ----------
Bank indebtedness, end of period $( 587,453) $(1,504,912)
=========== ===========
<PAGE>
TREASURY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS AT OCTOBER 31, 1997
(UNAUDITED)
1. Nature of business
Treasury International, Inc. is a holding company which, through its
wholly-owned subsidiaries, Megatran Investments Ltd. and Mega Blow Moulding
Limited, distributes a variety of consumer and industrial products. The company
was incorporated on August 18, 1995 in the State of Delaware.
2. Summary of significant accounting policies
(a) Basis of consolidation
These consolidated financial statements include the accounts of the company
and its wholly-owned subsidiaries, Megatran Investments Ltd. and Mega Blow
Moulding Limited.
(b) Inventories
Raw materials are valued at the lower of cost (first-in, first-out method)
and net realizable value. Finished goods are valued at the lower of cost and net
realizable value with cost being determined by the retail method.
(c) Capital assets
Capital assets are recorded at cost less accumulated amortization.
Amortization is provided as follows:
Leasehold improvements - straight line over term of lease
Machinery and equipment - 20% diminishing balance
Office equipment - 20% diminishing balance
(d) Revenue recognition
Revenue is generally recognized as customers are invoiced for products
shipped by the company.
(e) Loss per share
Loss per share is calculated based on the weighted average number of
shares outstanding during the period of 16,525,394.
<PAGE>
(f) General
These financial statements have been prepared in accordance with .S.
generally accepted accounting principles (GAAP), as they elate to these
financial statements.
3. Business combination
On October 30, 1996, the company acquired 100% of the issued and
outstanding common shares of Megatran Investments Ltd., parent company of Mega
Blow Moulding Limited.
4. Inventories
October 31 January 31
Inventories consist of: 1997 1997
--------- --------
Raw materials $175,899 $ 151,241
Packaging 19,331 24,345
Finished goods 260,896 210,329
-------- -------
$456,126 $385,915
======== ========
5. Capital assets
October 31 January 31
1997 1997
------------------------------------------
Accumulated Net Net
Cost Amortization book value book value
---- ------------ ---------- ----------
Leasehold improvements $ 4,191 $ 1,631 $ 2,560 $ 2,893
Machinery and equipment 2,473,153 1,873,545 599,608 668,585
Office equipment 103,314 58,856 44,458 51,821
$2,580,658 $1,934,032 $646,626 $ 723,299
========== ========== ======== =========
6. Bank indebtedness
The bank indebtedness consists of two operating demand loans in the amount
of $542,887 which are secured by a registered general assignment of book debts
and general security agreements of Mega Blow Moulding Limited.
<PAGE>
7. Long term debt
The long-term debt consists of two term loans and three debentures
payable. The term loans are secured by a registered general security agreement
having first charge over all assets excluding real property of Mega Blow
Moulding Limited. The term loans bear interest at rates varying from 6.47% to
bank prime plus 1.75%. One of the three debentures in the amount of $500,000 is
subject to 8% interest. The remaining two are interest-free debentures.
The term loans and debentures are payable as follows:
Term loans Debentures Total
---------- ---------- -----
1998 $ 143,284 $ 920,627 $ 1,063,911
1999 154,284 250,627 404,911
2000 168,084 250,626 418,710
2001 184,084 - 184,084
2002 177,515 - 177,515
------- --------- ----------
827,251 1,421,880 2,249,131
Less current 143,284 920,627 1,063,911
portion --------- --------- ----------
$ 683,967 $ 501,253 $ 1,185,220
========= ========= ===========
8. Income taxes
As of October 31, 1997 the company had a net operating loss carryover of
approximately $2,143,000 expiring in various years through 2013.
9. General and administrative expenses
General and administrative expenses for the nine months ended October 31,
1997 include fees paid by the company for consulting and public relations in the
amount of $ 742,433.
10. Discontinued Operations
On July 31, 1997, the Company disposed of its subsidiary, Silver 925, Inc.
The results of Silver 925, Inc. have been reported as discontinued operations in
these financial statements. The company had previously reported an estimated net
loss of $2,095,642 on the disposal of Silver 925, Inc. for it's quarter ended
July 31, 1997. The net assets of this discontinued operation here previously
stated at their net carrying value less the anticipated loss on disposal.
<PAGE>
ITEM 2. Management's Discussion and Analysis or Plan of Operation.
The information contained in this Item 2, Management's Discussion and
Analysis or Plan of Operation, contains "forward looking statements" within the
meaning of Section 27A of the Securities Act 1933, as amended (the "Securities
Act"), and Section 21E of the Securities exchange Act of 1934, as amended (the
"Exchange Act"). Actual results may materially differ from those projected in
the forward looking statements as a result of certain risks and uncertainties
set forth in this report. Although management believes that the assumptions made
and expectations reflected in the forward looking statements are reasonable,
there is no assurance that the underlying assumptions will, in fact, prove to be
correct or that actual future results will not be different from the
expectations expressed in this report.
The Company is an international manufacturing, distribution and marketing
organization with subsidiaries producing over 500 consumer and industrial
products primarily for North American markets.
(1) INTERIM PERIODS:
Results of Operations
For the nine months ended October 31, 1997.
During the nine months ended October 31, 1997 the Company's sales
increased by 589% to $4,750,944 from $689,690 in the nine months ended October
31, 1996 due to the acquisition of Mega Blow Moulding ("Mega Blow"). The Company
experienced a net loss of $1,415,821 in the nine months ended October 31, 1997
compared to a net loss of $617,349 in the nine months ended October 31, 1996 due
to greater expenses associated with the activities of Mega Blow and Silver 925,
Inc. ("Silver"). The cost of products sold by the Company was 88% of sales
during the nine months ended October 31, 1997, down from 89% of sales in the
nine months ended October 31, 1996. The decrease in the cost of products sold is
attributable to better purchasing practices. General and administrative expenses
increased in the nine months ended October 31, 1997 to $1,358,698 or 28% of
sales, compared to $726,658 or 105% of sales in the nine months ended October
31, 1996 due to greater carrying costs associated with the operations of Mega
Blow and Silver.
Results of Operations
For the three months ended October 31, 1997.
<PAGE>
During the three months ended October 31, 1997 the Company's net sales
increased by 958% to $1,357,829 from $128,364 in the three months ended October
31, 1996 due to the acquisition of Mega Blow. The Company experienced a net
income of $1,715,527 in the three months ended October 31, 1997 compared to a
net loss of $571,917 in the three months ended October 31, 1996 as a result of a
net gain on the disposition of discontinued operations. The cost of products
sold by the Company was 96% of sales during the three months ended October 31,
1997, down from 224% of sales in the three months ended October 31,1996. The
decrease is attributable to better purchasing practices. General and
administrative expenses decreased in the three months ended October 31,1997 to
$235,863 or 17% of sales, compared to $446,493 or 348% of sales, in the three
months ended October 31, 1996. The decrease is attributable to careful budgeting
and forecasting activities.
Liquidity and Capital Resources.
The primary sources of liquidity for the Company are funds generated by
the operations and borrowing under the Company's loan agreement. Additional
information on the loan agreement is described in notes 6 and 7 to the Company's
interim Consolidated Financial Statements set forth in part I hereto.
Current assets totaled $1,205,579 at October 31, 1997 compared to
$1,348,995 at January 31, 1997. The decrease is attributable to the recently
discontinued operations of Silver 925 whose assets were reclassified as assets
relating to discontinued operations. At October 31, 1997, the Company had nil
cash and short-term deposits, and current net bank indebtedness of $587,453.
Accounts receivable totaled $717,072 at October 31, 1997 compared to $812,357 at
January 31, 1997 and is primarily related to the recently discontinued
operations of Silver 925, Inc.
As of October 31, 1997, current liabilities totaled $2,743,035 compared to
$2,561,147 at January 31, 1997. The decrease is attributable to the recently
discontinued Silver 925 operations. At October 31, 1997, the Company also had
term loans and debentures specifically incurred to finance the Company's
acquisition of Mega Blow.
The Company's bank indebtedness of $587,453 is secured by a first priority
lien on the assets of Mega Blow. The Company also has outstanding $1,451,880
principal amount of debentures due as follows: $920,627 in 1998; $250,627 in
1999; and $250,626 in 2000. All debentures are convertible into common shares of
the Company at the option of the holders. In the event holders convert these
debentures as to which no assurance can be given, the Company's obligation to
repay the $1,451,880 of indebtedness would be eliminated.
<PAGE>
The Company believes it will generate sufficient positive cash flow from
operations to meet its operating requirements for the next twelve months.
However, there can be no assurance that the Company will be able to repay those
debentures which mature in 1997 if they are not converted. If the funds
available under the Company's financing agreements, together with its current
cash and cash equivalents, are not sufficient to meet the Company's cash needs,
the Company may, from time to time, seek to raise capital from additional
sources including the extension of its current lending facilities,
project-specific financing and additional public or private debt or equity
financing.
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities.
During the period from August 1, 1997 through October 31, 1997, the
Company issued 750,000 shares of its Common Stock upon the conversion of the
Company's 8% Convertible Subordinated Debentures, which shares were not
registered under the Act. The shares were issued in transactions exempt from
registration under S promulgated under the Act.
In addition, on October 7, 1997, the Company issued 1,150,000 shares of
Common Stock to 2 persons for consulting and public relations services, which
shares were not registered under the Act. The shares were issued pursuant to
Section 4(2) under the Securities Act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
27 Financial Data Schedule
(b) Reports on Form 8-K. On October 30, 1997, the Company filed a report
on Form 8-K reporting on Item 2 that it had entered into an Agreement
pursuant to which the Company sold all of the outstanding shares of
Silver to former owners of Silvers' stock.
<PAGE>
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.
TREASURY INTERNATIONAL, INC.
Dated: February 24, 1998 By: /s/ James Hal
James Hal
President
Dated: February 24, 1998 By: /s/ Howard Halpern
Howard Halpern
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED JULY 31, 1997 FINANCIAL STATEMENTS OF TREASURY INTERNATIONAL, INC. AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> OCT-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 717,072
<ALLOWANCES> 0
<INVENTORY> 456,126
<CURRENT-ASSETS> 1,205,579
<PP&E> 646,626
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,688,123
<CURRENT-LIABILITIES> 2,743,035
<BONDS> 0
0
0
<COMMON> 1,878
<OTHER-SE> 2,677,723
<TOTAL-LIABILITY-AND-EQUITY> 3,688,123
<SALES> 1,357,829
<TOTAL-REVENUES> 1,357,829
<CGS> 1,310,930
<TOTAL-COSTS> 1,310,930
<OTHER-EXPENSES> 235,863
<LOSS-PROVISION> (188,964)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,715,527
<INCOME-TAX> 0
<INCOME-CONTINUING> (262,211)
<DISCONTINUED> 1,977,738
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,715,527
<EPS-PRIMARY> 0.104
<EPS-DILUTED> 0.104
</TABLE>
