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, 1998
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
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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, Suite 508, North York, Ontario M3J 2G2
--------------------------------------------------------------
(Address of Principal Executive Offices)
Issuer's Telephone Number, Including Area Code: 416-663-0668
------------
----------------------------------------------------
(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: 88,320,677 shares of Common
Stock, par value $.0001 per share were outstanding as of February 9, 1999.
Page 1 of 13
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statement
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
October 31 January 31
CURRENT 1998 1998
(Unaudited)
<S> <C> <C> <C>
Accounts receivable $ 485,126 $ 608,659
Inventories (Notes 2 and 4) 512,054 345,783
Sundry assets 32,703 72,020
__________ _________
1,029,883 1,026,462
GOODWILL 1,675,275 1,744,122
CAPITAL ASSETS (Notes 2 and 5) 541,562 620,279
_________ _________
$ 3,246,720 $ 3,390,863
============ ===========
LIABILITIES
CURRENT
Bank indebtedness (Note 7) $ 464,992 $ 492,012
Accounts payable and accrued liabilities 1,077,931 997,188
Current portion of long-term debt 156,234 1,007,676
------------ -----------
1,699,157 2,496,876
DEFERRED INCOME TAXES 53,056 52,957
LONG-TERM DEBT (Note 8) 488,047 1,117,392
2,240,260 3,667,225
------------ -----------
SHAREHOLDERS' EQUITY
SHARE CAPITAL
Authorized
100,000,000 Common shares at $.0001
Issued
86,206,927 Common shares 8,620 2,461
CONTRIBUTED SURPLUS (Note 12) 4,277,326 2,788,140
DEFICIT (3,279,486) (3,066,963)
--------- ---------
1,006,460 ( 276,362)
--------- ---------
$ 3,246,720 $ 3,390,863
============ ===========
</TABLE>
Page 2 of 13
<PAGE>
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED STATEMENT OF DEFICIT
NINE MONTHS ENDED OCTOBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
October 31 October 31
1998 1997
<S> <C> <C>
Balance, beginning of period $( 3,066,963) $ ( 1,556,912)
Net loss for the period ( 212,523) ( 1,415,821)
------------ -------------
Balance, end of period $( 3,279,486) $ ( 2,972,733)
============ =============
</TABLE>
Page 3 of 13
<PAGE>
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED OCTOBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
October 31 October 31
1998 1997
<S> <C> <C>
REVENUE $ 3,395,865 $ 4,750,944
COST OF GOODS SOLD 2,816,383 4,195,459
----------- -----------
GROSS PROFIT 579,482 555,485
EXPENSES
General and administrative (Note 10) 718,107 1,468,741
------- --------
LOSS FROM OPERATIONS BEFORE
UNDERNOTED ITEMS ( 138,625) ( 913,256)
------- -------
Financial 73,898 102,401
------ -------
NET LOSS FROM CONTINUED OPERATIONS ( 212,523) ( 1,015,657)
NET LOSS FROM DISCONTINUED OPERATIONS - ( 282,260)
NET LOSS ON DISPOSAL OF
DISCONTINUED OPERATIONS (NOTE 11) - ( 117,904)
------- -------
NET LOSS $( 212,523) $( 1,415,821)
=========== ===========
LOSS PER SHARE
Continued operations ( 0.003) ( 0.061)
Discontinued operations - ( 0.024)
----- ------
$( 0.003) $( 0.085)
Weighted Average Number of Common =========== ============
Shares Outstanding 61,243,332 16,525,394
=========== ============
</TABLE>
Page 4 of 13
<PAGE>
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED OCTOBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
October 31 October 31
1998 1997
<S> <C> <C>
REVENUE $ 1,367,128 $ 1,357,829
COST OF GOODS SOLD 983,334 1,310,930
------------ ------------
GROSS PROFIT 383,794 46,899
EXPENSES
General and administrative 338,075 271,493
------------ ------------
INCOME (LOSS) FROM OPERATIONS BEFORE
UNDERNOTED ITEMS 45,719 ( 224,594)
Financial 22,749 37,617
------------ -----------
INCOME (LOSS) FROM CONTINUED OPERATIONS 22,970 ( 262,211)
NET GAIN ON DISPOSAL OF
DISCONTINUED OPERATIONS - 1,977,738
------------ ------------
NET INCOME $ 22,970 $ 1,715,527
============ ============
INCOME PER SHARE $ 0.0003 $ 0.104
============ ============
Weighted Average Number of Common
Shares Outstanding 61,243,332 16,525,394
============= ============
</TABLE>
Page 5 of 13
<PAGE>
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
NINE MONTHS ENDED OCTOBER 31, 1998
(UNAUDITED)
COMMON PAID-IN CONTRIBUTED
SHARES CAPITAL SURPLUS
Balance-January 31, 1998 24,610,495 $ 2,461 $ 2,788,140
Issued 4,500,000 shares of 4,500,000 450 61,750
common stock for cash
consideration of $62,200
Issued 5,332,500 shares of 5,332,500 533 49,792
common stock for consulting and
public relations services
Issued 2,353,932 common shares 2,353,932 235 39,765
toward reduction of debentures --------- ------ -----------
payable
Balance-April 30, 1998 36,796,927 3,679 2,939,447
---------- ------ -----------
Issued 33,670,000 common
shares toward reduction of
debentures payable 33,670,000 3,367 1,318,513
Issued 3,740,000 common
shares for consulting
and public relations
services 3,740,000 374 19,366
Balance-July 31, 1998 74,206,927 $ 7,420 $ 4,277,326
---------- -------- -----------
Issued 12,000,000 common
shares in lieu of
compensation 12,000,000 1,200 -
---------- -------- -----------
Balance-October 31, 1998 86,206,927 $ 8,620 $ 4,277,326
========== ======== ===========
Page 6 of 13
<PAGE>
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED OCTOBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
October 31 October 31
1998 1997
<S> <C> <C>
Cash flows from operating activities
Net loss
$( 212,523) $(3,393,559)
Adjustments to reconcile net loss to net
cash used in operating activities
Increase (decrease)in deferred income taxes 99 ( 1,161)
Amortization 162,906 110,043
Decrease in accounts receivable 123,533 95,285
Decrease in income taxes receivable - 6,182
Increase in inventories ( 166,271) ( 70,211)
Decrease in sundry assets 39,317 112,160
Increase in accounts payable 80,743 72,743
----------- -----------
Net cash provided by (used in)
operating activities 27,804 (3,068,518)
----------- -----------
Cash flows from financing activities
Long-term debt ( 1,480,787) ( 203,142)
Proceeds on issue of common shares 1,495,345 1,134,246
----------- -----------
Cash provided by financing activities 14,558 931,104
----------- -----------
Cash flows from investing activities
Purchase of capital assets ( 15,342) ( 33,370)
Discontinued operations - 1,977,738
Cash provided by (used in)
investing activities ( 15,342) 1,944,368
----------- ----------
Decrease (increase) in bank indebtedness 27,020 ( 193,046)
Bank indebtedness, beginning of period ( 492,012) ( 394,407)
----------- -----------
Bank indebtedness, end of period $( 464,992) $( 587,453)
============ ============
</TABLE>
Page 7 of 13
<PAGE>
TREASURY INTERNATIONAL, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS AT OCTOBER 31, 1998
(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.
The results of operations for the nine months ended October 31, 1998
are not necessarily indicative of the results to be expected for a
full year. The consolidated balance sheet as of January 31, 1998 has
been derived from audited financial statements. This report should be
read in conjunction with the consolidated financial statements
included in the Company's Form 10-KSB for the Fiscal Year Ended
January 31, 1998, as filed with the Securities and Exchange
Commission.
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) Goodwill
The goodwill arises on the purchase of common shares
of Mega Blow Moulding Limited. Amortization is provided on
a straight line basis over a twenty year period.
(e) Revenue recognition
Revenue is recognized when customers are invoiced for
products shipped by the company.
Page 8 of 13
<PAGE>
TREASURY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS AT OCTOBER 31, 1998
(UNAUDITED)
(f) Income per share
Income per share is calculated based on the weighted average
number of shares outstanding during the period of 61,243,332.
(g) General
These financial statements have been prepared in accordance
with United States generally accepted accounting principles
(GAAP), as they relate 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. The purchase price of
$2,863,182 consisted of $1,361,302 cash and debentures of $1,501,880.
4. Inventories
October 31 January 31
Inventories consist of: 1998 1998
---------- ---------
Raw materials $ 158,563 $ 144,183
Packaging 27,365 20,135
Finished goods 326,126 181,465
----------- ----------
$ 512,054 $ 345,783
=========== ==========
5. Goodwill
<TABLE>
<CAPTION>
October 31 January 31
1998 1998
-------- ---------- ---------- ----------
Accumulated Net Net
Cost Amortization book value book value
-------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
$1,835,918 $160,643 $1,675,275 $1,744,122
</TABLE>
6. Capital assets
<TABLE>
<CAPTION>
October 31 January 31
1998 1998
-------- ---------- ---------- ----------
Accumulated Net Net
Cost Amortization book value book value
-------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Leasehold improvements $ 4,221 $ 1,957 $ 2,264 $ 2,556
Machinery and equipment 2,479,918 1,984,860 495,058 575,488
Office equipment 111,891 67,651 44,240 42,235
---------- ---------- --------- ---------
$2,596,030 $2,054,468 $ 541,562 $ 620,279
========== ========== ========= =========
</TABLE>
Page 9 of 13
<PAGE>
TREASURY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS AT OCTOBER 31, 1998
(UNAUDITED)
7. Bank indebtedness
The bank indebtedness includes two operating demand loans in the
amount of $465,574 which are secured by a registered general assignment
of book debts and general security agreements of book debts and general
security agreements of Mega Blow Moulding Limited.
8. Long term debt
The long-term debt consists of two term loans. The term loans are
secured by a registered general security agreement having first lien
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%. The term loans are payable as follows:
1999 $ 156,234
2000 166,415
2001 176,971
2002 and following 144,661
_________
644,281
Less current portion 156,234
_________
$ 488,047
=========
9. Income taxes
As of October 31, 1998 the company had a net operating loss carryover
of approximately $ 2,358,000 expiring in various years through 2014.
10. General and administrative expenses
General and administrative expenses for the nine months ended
October 31, 1998 include fees paid by the company for consulting
and public relations services in the amount of $ 111,745.
Discontinued operations
On July 31, 1997, the company disposed of its subsidiary, Silver 925, Inc.
Page 10 of 13
<PAGE>
TREASURY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS AT OCTOBER 31, 1998
(UNAUDITED)
Contributed surplus
Contributed surplus represents the premium paid on the issuance of common
shares.
Subsequent events
Subsequent to July 31, 1998, the company entered into an agreement to sell
all of the common shares of its wholly-owned subsidiary, Mega Blow Moulding
Limited, for cash consideration of $5,100,000.
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, 1998
During the nine months ended October 31, 1998 the Company's sales decreased
by 28.5% to $3,395,865 from $4,750,944 in the nine months ended October 31,
1997. The Company experienced a net loss of $212,523 in the nine months ended
October 31, 1998 compared to a net loss of $1,415,821 in the nine months ended
October 31, 1997 due to a reduction in the level of consulting and public
relations services contracted by the Company and also a cessation in expenses
related to Silver 925, Inc., a former subsidiary. The cost of products sold by
the Company was 82.9% of sales during the nine months ended October 31, 1998,
down from 88% of sales in the nine months ended October 31, 1997. The decrease
in the cost of products sold is attributable to better purchasing practices.
General and administrative expenses decreased in the nine months ended October
31, 1998 to $718,107 or 21% of sales, compared to $1,468,741 or 31% of sales in
the nine months ended October 31, 1997 due to lower consulting and public
relations services contracted by the Company.
Results of Operations
For the three months ended October 31, 1998.
During the three months ended October 31, 1998 the Company's net sales
increased by .01% to $1,367,128 from $1,357,829 in the three months ended
October 31, 1997. The Company experienced a net income of $22,970 in the three
months ended October 31, 1998 compared to a net income of $1,715,527 in the
Page 11 of 13
<PAGE>
three months ended October 31, 1997 as a result of a net gain on the disposition
of Silver 925, Inc., a former subsidiary. The cost of products sold by the
Company was 72% of sales during the three months ended October 31, 1998, down
from 97% of sales in the three months ended October 31,1997. The decrease is
attributable to better purchasing practices. General and administrative expenses
increased in the three months ended October 31,1998 to $338,075 or 25% of sales,
compared to $271,493 or 20% of sales, in the three months ended October 31,
1997. The increase is attributable to higher actual administration expenses
relative to budget.
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 7 and 8 to the Company's
interim Consolidated Financial Statements set forth in part I hereto.
Current assets totalled $1,029,883 at October 31, 1998 compared to
$1,026,462 at January 31, 1998. At October 31, 1998, the Company had no cash or
short-term deposits, and current net bank indebtedness of $464,992. Accounts
receivable totalled $485,126 at October 31, 1998 compared to $608,659 at January
31, 1998 and is primarily related to the timing of receivables collection.
As of October 31, 1998, current liabilities totalled $1,699,157 compared to
$2,496,876 at January 31, 1998. The decrease is attributable to the elimination
of the Company's debenture obligations which were previously issued on October
30, 1996. At October 31, 1998, the Company also had term loans that were
specifically incurred to finance the Company's acquisition of Mega Blow.
The Company's bank indebtedness of $464,992 is secured by a first
priority lien on the assets of Mega Blow.
The Company believes it will generate sufficient positive cash flow from
operations to meet its operating requirements for the next twelve months.
However, 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 12 of 13
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(b) Reports on Form 8-K. None
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.
/s/ James Hal
Dated: February 18, 1999 By___________________________
James Hal, President
/s/ Howard Halpern
Dated: February 18, 1999 By___________________________
Howard Halpern, Principal
Financial Officer
Page 13 of 13
