FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1998
2-96366-A
(Commission File Number)
TREASURES & EXHIBITS INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
Florida 59-2483405
(State of other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
2300 Glades Road, Suite 450, West Tower, Boca Raton, FL 33431
(Address of Principal Executive Offices)
(561) 750-7535
(Registrant's Telephone Number, including area code)
(Former name, former address and former fiscal years,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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
There were 25,990,756 shares of Common Stock, $.0001 par value, issued and
outstanding at June 1, 1998.
<PAGE>
TREASURES & EXHIBITS INTERNATIONAL, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - June 30, 1998 (Unaudited) and December
31, 1997.
Statement of Operations - Three months and Six months ended
June 30, 1998 and 1997 (Unaudited).
Statement of Shareholders' Equity - December 31, 1994
through June 30, 1998 (Unaudited).
Statement of Cash Flows - Six months ended March 31, 1998 and
1997 (Unaudited).
Notes to Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security-Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
2
<PAGE>
TREASURES & EXHIBITS INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
Item I. Financial Statements
3
<PAGE>
TREASURE & EXHIBITS INTERNATIONAL, INC.
(Formerly Vanderbilt Square Corporation)
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
1998 1997
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,149 $ 179,795
Investment in marketable
trading securities - at market 17,130 16,143
TOTAL CURRENT ASSETS 20,279 195,938
Accounts Receivable - Affiliate 60,000 -
INVESTMENT IN ARTIFACTS 2,432,500 -
TOTAL ASSETS $2,512,779 $ 195,938
</TABLE>
See accompanying notes to financial statements.
F-2(a)
<PAGE>
TREASURE & EXHIBITS INTERNATIONAL, INC.
(Formerly Vanderbilt Square Corporation)
BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, December 31,*
1998 1997
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable $ 682,500 $ -
Accounts payable and accrued
expenses 41,057 2,083
Due to Affiliate - Consulting Fee 15,000 15,000
TOTAL CURRENT LIABILITIES 738,557 17,083
DEFERRED REVENUE 70,000 -
PUT OPTION 1,615,000 -
TOTAL LIABILITIES 2,423,557 17,083
SHAREHOLDERS' EQUITY:
Common stock $.0001 par value;
authorized 50,000,000 shares;
issued and outstanding
25,990,756 shares in 1998 and
16,490,756 shares in 19 2,599 1,649
Additional paid-in capital 1,136,413 1,137,363
Accumulated deficit (1,049,790) (960,157)
TOTAL SHAREHOLDERS' EQUITY 89,222 178,855
TOTAL SHAREHOLDERS' EQUITY
AND LIABILITIES $2,512,779 $ 195,938
</TABLE>
* Reclassified for comparative purposes
See accompanying notes to financial statements.
F-2(b)
<PAGE>
TREASURE & EXHIBITS INTERNATIONAL, INC.
(Formerly Vanderbilt Square Corporation)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Interest and dividend income $ 184 $ 9,747 $ 995 $ 17,660
Realized and unrealized
gain (loss) on investment
in marketable trading
securities 2,169 (9,068) 987 (8,436)
Direct finance lease income - 223 - 464
2,353 902 1,982 9,688
OPERATING EXPENSES:
General and
administrative expenses 50,501 21,472 91,615 33,653
LOSS FROM OPERATIONS (48,148) (20,570) (89,633) (23,965)
OTHER INCOME (EXPENSES):
Equity in earnings (loss)
of unconsolidated subsidiary - (396) - (13,293)
LOSS BEFORE INCOME TAXES (48,148) (20,966) (89,633) (37,258)
INCOME TAX CREDIT PROVISION - - - 2,500
NET LOSS $ (48,148) $ (20,966) $ (89,633) $ (39,758)
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 25,990,756 16,398,356 21,926,867 16,398,356
EARNINGS PER COMMON SHARE $ - $ - $ - $ -
EARNINGS PER COMMON SHARE
ASSUMING DILUTION $ - $ - $ - $ -
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
TREASURE & EXHIBITS INTERNATIONAL, INC.
(Formerly Vanderbilt Square Corporation)
STATEMENT OF SHAREHOLDERS' EQUITY
FROM DECEMBER 31, 1994 THROUGH JUNE 30, 1998
<TABLE>
<CAPTION>
Common Stock
$.0001 Par Value Additional Retained
Authorized 50,000,000 Shares Paid-In Earnings Treasury
Shares Amount Capital (Deficit) Stock Total
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1994 14,429,750 $ 1,499 $ 970,557 $ (10,719) $ (36,239) $ 925,098
Purchase of Treasury Stock (826,900) - - - (71,477) (71,477)
Sale of Treasury Stock 333,000 - - - 24,981 24,981
Net income for the period - - - 1,498 - 1,498
Balance - December 31, 1995 13,935,850 1,499 970,557 (9,221) (82,735) 880,100
10% Stock Dividend 1,499,156 150 166,806 (166,956) - -
Purchase of Treasury Stock (249,100) - - - (33,070) (33,070)
Sale of Treasury Stock 1,212,450 - - - 105,773 105,773
Net income for the period - - - 59,443 - 59,443
Balance - December 31, 1996 16,398,356 1,649 1,137,363 (116,734) (10,032) 1,012,246
Sale of treasury stock 92,400 - - - 10,032 10,032
Dividend distribution - - - (864,263) - (864,263)
Net income for the period - - - 20,840 - 20,840
Balance - December 31, 1997 16,490,756 1,649 1,137,363 (960,157) - 178,855
Net loss for the period - - - (89,633) - (89,633)
Issuance of stock 9,500,000 950 1,614,050 - - 1,615,000
Reclassification of put option - - (1,615,000) - - (1,615,000)
Balance - June 30, 1998 25,990,756 $ 2,599 $ 1,136,413 $(1,049,790) $ - $ 89,222
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
TREASURE & EXHIBITS INTERNATIONAL, INC.
(Formerly Vanderbilt Square Corporation)
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Six Months Ended
June 30,
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (89,633) $ (39,758)
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
(Gain) loss on sale of
marketable securities - (27,569)
Equity in (earnings) or loss
of unconsolidated subsidiary - 13,293
Allowance for market price
of securities (987) 36,005
Changes in operating assets and liabilities:
Increase (Decrease) in accounts
payable and accrued expenses 38,974 (40,109)
Decrease in accrued interest receivable - 143
(Increase) decrease in
accounts receivable - 2,493
(Decrease) Increase in income
taxes payable - (1,450)
Proceeds from sale of marketable
trading securities - 61,918
Purchase of marketable trading
securities - (65,539)
Net cash provided by (used in)
operating activities (51,646) (60,573)
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal collections of loans
to affiliates - 3,085
Advance paid on notes receivable
- other - (2,000)
Principal collections of notes
receivable - other - 15,998
Principal collections of direct
financing leases - 1,693
Advances to affiliates (125,000) -
Investment in unconsolidated
subsidiaries - (11,103)
Net cash provided by
(used in) investing activities (125,000) 7,673
</TABLE>
F-5(a)
<PAGE>
TREASURE & EXHIBITS INTERNATIONAL, INC.
(Formerly Vanderbilt Square Corporation)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Six Months Ended
June 30,
1998 1997
<S> <C> <C>
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ (176,646) $ (52,900)
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 179,795 250,209
CASH AND CASH EQUIVALENTS -
END OF PERIOD $ 3,149 $ 197,309
</TABLE>
See accompanying notes to financial statements.
F-5(b)
<PAGE>
TREASURE & EXHIBITS INTERNATIONAL, INC.
(Formerly Vanderbilt Square Corporation)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents - For purposes of the balance sheet and statement of
cash flows, the Company considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents.
Income Taxes - Deferred income taxes reflect the tax consequences on future
years of differences between the tax basis of assets and liabilities and their
financial reporting amounts. Future tax benefits, such as net operating loss
carryforwards, are recognized to the extent that realization of such benefits
are more likely than not.
Account Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles require management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statement and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
NOTE 2 - FAIR PRESENTATION
The balance sheet as of June 30, 1998, the statement of operations for the six
months ended June 30, 1998 and 1997, the statement of shareholders' equity as
of June 30, 1998, and the statement of cash flows for the six months ended
June 30, 1998 and 1997, have been prepared by the Company without audit. In
the opinion of management, all adjustments necessary to present fairly the
financial position and results of operations at June 30, 1998 and for all
periods presented have been made.
The operations for the six months ended June 30, 1998 are not necessarily
indicative of the results of operations to be expected for the Company's
fiscal year.
The condensed financial statements as of December 31, 1997, 1996 and 1995 have
been derived from audited financial statements.
F-6
<PAGE>
TREASURE & EXHIBITS INTERNATIONAL, INC.
(Formerly Vanderbilt Square Corporation)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 2 - FAIR PRESENTATION (Cont'd)
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed financial statements be read in conjunction with the consolidated
financial statements and notes thereto as of December 31, 1997 and for the
year then ended.
NOTE 3 - BASIS OF PRESENTATION
The June 30, 1997 statement of operations includes the accounts of Vanderbilt
Square Corp. and its wholly-owned subsidiary, Hi-Tech Leasing, Inc.. All
significant intercompany accounts and transaction have been eliminated in such
financial statements.
NOTE 4 - NAME CHANGE
On February 27, 1998, the Company changed its name to Treasure & Exhibits
International, Inc.
NOTE 5 - EARNINGS (LOSS) PER SHARE
Per share information was computed using the weighted average number of common
shares outstanding during the reporting periods. Per share information
computed to be less than one cent is not shown on the accompanying financial
statements.
The Company's adoption of FASB - 128, earnings per share, did not have a
material impact upon reported per share amounts.
The assumed exercise of the outstanding "put option" did not result in a
dilution of earnings per share.
NOTE 6 - INVESTMENT IN MARKETABLE TRADING SECURITIES
Marketable trading securities are stated at market value at the balance sheet
date. The cost of these investments is $40,180 at June 30, 1998 and December
31, 1997, respectively. Unrealized gains and losses resulting from
fluctuations in the market price of the related securities are currently
reflected in the statement of operations under the caption "Realized and
unrealized gain (loss) in marketable trading securities".
F-7
<PAGE>
TREASURE & EXHIBITS INTERNATIONAL, INC.
(Formerly Vanderbilt Square Corporation)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 7 - INVESTMENT IN ARTIFACTS
On March 19, 1998, the Company exercised its option to purchase artifacts
known as the "Dry Tortugas Treasure". The "treasure" is comprised of a
collection of seventeenth century artifacts which were recovered from a sunken
Spanish galleon in an area known as The Dry Tortugas.
Consideration named in the purchase agreement amounted to $2,432,500 comprised
of $617,500 cash, a $200,000 promissory note, and 9,500,000 shares of the
Company's restricted Common Stock valued by the Buyer and Seller at
$1,615,000.
The Company retained the right to repurchase up to 8,000,000 shares of the
restricted Common Stock at prices ranging from $.135 to $.15 per share.
The Company granted the artifacts seller a one year right to put all or any of
the 9,500,000 shares of restricted common stock to the Company at per share
prices ranging from $.085 to $.17 per share. The Company's repurchase price
of $.085 per share is dependent upon the successful registration of the shares
used in the transaction. The put option is reflected as a liability in the
accompanying balance sheet.
The artifact purchase agreement also provides the Sellers with the right to
receive additional Common Stock. If the average market bid price of the
Company's Common Stock is less than $.12 per share during the first five
market days following March 19, 1998, the Company shall issue additional
restricted Common Stock to the Sellers in proportion to their original
holdings to cause the Seller to have the equivalent per share valuation of
$.17 for shares issued in connection with this transaction.
NOTE 8 - NOTES PAYABLE
Notes payable consist of the following:
18% Promissory Note - interest payments
commencing April 19, 1998. Maturing
on March 19, 1999. This note is owed
to an affiliated company. $482,500
F-8
<PAGE>
TREASURE & EXHIBITS INTERNATIONAL, INC.
(Formerly Vanderbilt Square Corporation)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 8 - NOTES PAYABLE (Cont'd)
Secured Promissory Note - Due August 1, 1998.
Collateralized by certain Dry Tortugas
Artifacts valued at $250,000. This note is
Owed to the Seller of the artifacts 200,000
$682,500
NOTE 9 - SUPPLEMENTAL CASH FLOW INFORMATION
(a) Payments made directly to the Seller of the Dry Tortugas artifacts by
affiliates amounted to $617,500.
(b) Advances to affiliates amounting to $125,000 were considered to be repaid
to the Company through a like amount of direct payments to the Dry Tortugas
artifacts Seller as indicated in item (a) above.
(c) Common Stock (and put option) issued in connection with artifact asset
acquisition amounted to $1,615,000.
NOTE 10 - PROPOSED ACQUISITION
On September 10, 1997, the Company entered into a Letter of Intent to acquire
all of the outstanding capital stock of Michael's International Treasure
Jewelry, Inc. ("Michael's"), a privately-held corporation. The entity is
affiliated to the Company by virtue of common principal shareholders.
"Michael's" operates retail jewelry stores in Miami and Key West. The stores
specialize in the sale of jewelry designed with coins of antiquity.
Terms of this Letter of Intent specify a purchase price of $3,500,000
consisting of $350,000 cash and $3,150,000 of the Company's authorized, but
previously unissued, restricted common stock. A total of 8,200,989 shares are
anticipated to be issued in connection with the acquisition. "Michael's" will
become a wholly-owned subsidiary of the Company in a transaction which is
expected to be recorded as a reverse acquisition for accounting and financial
statement reporting purposes.
At June 30, 1998, the Company is continuing its due diligence efforts with
respect to the proposed acquisition.
F-9
<PAGE>
TREASURE & EXHIBITS INTERNATIONAL, INC.
(Formerly Vanderbilt Square Corporation)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 11 - RELATED PARTY TRANSACTIONS
Consulting Agreement - The Company paid $30,000 to an affiliate in accordance
with a (modified) consulting agreement during the six months ended June 30,
1998. A modification reducing consulting fee expense from $120,000 per annum
to $60,000 per annum was effective January 1, 1998.
Interest Expense - Interest expense incurred in connection with borrowing from
affiliates amounts to $24,568 for the six months ended June 30, 1998.
Deferred Revenue - Income recognition relating to a lease of artifacts to an
affiliate has been deferred and will be recognized as collected.
NOTE 12 - INCOME TAXES
A deferred tax benefit relating to the Company's net operating loss
carryforward ($134,387) and allowance for market decline of investments
($23,050) is offset by a valuation allowance since future realization of such
benefit cannot be assured from profitable operations.
The net operating loss expires in the year 2013.
F-10
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The analysis of the Company's financial condition, liquidity, capital
resources and results of operations should be reviewed in conjunction with the
accompanying financial statements, including the notes thereto.
Financial Condition
At June 30, 1998, the Company had current assets of $20,279, compared to
$195,938 at December 31, 1997; total assets of $2,512,779 as compared to
$195,938 at December 31, 1997; current liabilities of $738,557 as compared to
$17,083 at December 31, 1997, and a current net worth of $89,222 as compared
to $178,855 at December 31, 1997. (See "Financial Statements"). The increase
in total assets is due to the Company's acquisition of "treasure artifacts"
from Seahawk Deep Ocean Technology, Inc. on March 19,1998 for $817,500 and
9,500,000 shares of the Company's restricted Common Stock. See Financial
Statements Note 7.
Liquidity
During the six months ended June 30, 1998, the Company had a decrease in cash
and cash equivalents of $(176,646). The decrease was principally attributed
to a net loss of ($89,638) from operations in the period and the Company's
use of its cash in operating activities, and advances to affiliates.
At June 30, 1998, the Company had substantial liabilities and present
commitments that are likely to place significant downward pressure on the
Company's liquidity. During the first quarter of 1998, the Company determined
to pursue exercise of the lease purchase option contained in an artifacts and
display items lease of treasure artifacts from a joint venture between Seahawk
Deep Ocean Technology, Inc. and a Seahawk affiliate in Tampa, Florida. The
Company determined to seek exercise of the lease purchase options to acquire
the leased items itself prior to completion of its due diligence efforts in
connection with its intended acquisition of Michael's International Treasure
Jewelry, Inc. ("Michael's"). On March 19, 1998, the Company closed its
purchase of the artifacts with debt proceeds borrowed from an affiliate and
now comprising a note payable liability in this reporting period in the amount
of $682,500. The obligation to repay those debt proceeds and the Company's
potential exposure to exercise of the "put" option granted to the artifacts
seller, when coupled with the Company's current lack of revenues from
operations, represents a current lack of liquidity and portend a deepening
liquidity problem in the near term.
<PAGE>
Under the terms of the artifacts purchase agreement, lease payments in
the amount of $135,000 which had been previously paid were credited to the
cash portion of the agreed purchase price totaling $617,500. The balance of
the purchase price was paid with 9,500,000 additional shares of the Company's
authorized but previously unissued Common Stock and a secured promissory note
due on August 1, 1998 in the original principal amount of $200,000. All of
the cash funds required to complete the transaction on March 19, 1998, were
borrowed by the Company from its affiliate, First Capital Services, Inc., a
closely held Florida corporation. First Capital Services, Inc. is affiliated
with the Company through common management and control in that the Company's
President and Chief Executive Officer, Larry Schwartz, is also President and
Chief Executive Officer of First Capital Services, Inc.
While the debt to its affiliate, First Capital Services, Inc., is demand
in nature and requires no immediate and on-going debt service, the Company's
prospective ability to repay the debt with revenues from commercial operations
continues to be largely dependent, at August 1, 1998, on its subsequent
ability to complete the intended acquisition of Michael's and to deploy the
artifacts acquired from Seahawk as inventory and exhibits in a commercial
manner which will generate revenues and profits to the Company. There is no
present assurance that the Company will in fact be able to successfully
complete those plans due to the potential occurrence of one or more
insurmountable obstacles to completion of that transaction. In the event that
it is unable to do so, the Company will be required to modify its present plan
to attempt in some other, presently unforseen, way to otherwise commence
commercial operations with a view toward generating revenues or resale
proceeds from the treasure and display items it has acquired with substantial
debt and dilution to its shareholders.
Pursuant to additional terms of the exercised lease purchase option with
Seahawk, the Company had the right to repurchase 8,000,000 of the 9,500,000
shares issued as part of the consideration in the transaction within a ninety
(90) day period ending on or about June 19, 1998. The Company had no ability
to exercise its Common Stock repurchase option with Seahawk and the option
period expired without exercise by the Company.
On July 20, 1998, First Consolidated Financial Corp., a closely held
Florida corporation under common control with the Registrant acquired
5,302,087 shares (the "Shares") of the restricted Common Stock of the Company
from Seahawk Deep Ocean Technology, Inc., a Colorado corporation with
principal offices in Tampa, Florida. Seahawk acquired the shares as an
original issue from the Registrant as part of the consideration paid by the
<PAGE>
Registrant in the acquisition of the certain treasure artifacts from Seahawk
on or about March 19, 1998.
The purchaser in the transaction, First Consolidated Financial Corp., is
under common control with the Registrant in that the Company's Director and
Chief Executive Officer, Mr. Larry Schwartz, is also a director and Chief
Executive Officer of First Consolidated Financial Corp. In addition, First
Consolidated Financial Corp. has a consulting agreement with the Registrant
pursuant to which the Company pays First Consolidated Financial Corp. for
financial and management consulting services.
The transaction in which First Consolidated Financial Corp. acquired the
Shares from Seahawk closed on Friday, July 24, 1998. Pursuant to the terms of
the Stock Purchase Agreement, First Consolidated Financial Corp. paid a total
purchase price of $450,677, or approximately $.085 per Share. Approximately
forty (40%) percent of the purchase price was paid at Closing. The balance is
to be paid in installments beginning in September, 1998 and extending through
December 31, 1998.
The Shares acquired in this transaction between First Consolidated
Financial Corp. as Buyer, and Seahawk Deep Ocean Technology, Inc. as Seller,
may be attributed to Mr. Larry Schwartz who shall be deemed to control the
Shares in all respects. The acquisition of the Shares in this transaction
increased Mr. Schwartz' beneficial ownership interest in the Company to
9,209,274 shares, or 35.4%, based upon a total of 25,990,756 shares of the
Registrant's Common Stock issued and outstanding on July 28, 1998.
The Registrant is informed that Mr. Schwartz negotiated the restricted
stock purchase agreement with Seahawk following the Company's failure to
exercise its option to re-acquire up to 8.5 Million of the shares issued to
acquire the Seahawk artifacts during the option period provided in the
artifacts purchase agreement. The exercise period having expired, without
exercise by the Company, Mr. Schwartz disclosed his intent to cause First
Consolidated Corp. to negotiate directly with Seahawk for the purchase of
5,302,087 shares of that stock as reflected in the transaction reported in
this Item 1.
The Company did not participate in this reported stock purchase
transaction in any way other than by acknowledging, at the request of Mr.
Schwartz, that it had no conflicting interest in reacquiring the Shares
itself.
In general, at August 1, 1998, the Company's liquidity is worse than
limited and will likely diminish in the near term in the absence of current
commercial operations and in the face of on-going general and administrative
<PAGE>
expenses. The Registrant knows of no other trend, additional demand, event or
uncertainties that will result in, or that are reasonably likely to result in,
its liquidity increasing or decreasing in any material way.
Capital Resources
The Company has no outstanding unused credit lines or credit commitments
in place. In order to close its exercise of the Seahawk lease purchase
option, the Company sought and secured credit from an affiliate, First Capital
Services, Inc., a closely-held Florida corporation under common control with
the Company through its President and Chief Executive Officer. It is the
Company's continuing intent at August 3, 1998, to continue to rely upon its
affiliate as needed for additional debt financing and to pursue some form of
equity financing in the near term, in a manner, and under terms and conditions
yet to be determined.
In the event that its current and continuing due diligence efforts with
regard to the acquisition of Michael's International Treasure Jewelry, Inc.
are successfully completed, the Company will require further capital financing
to complete that acquisition and to repay or partially repay the debt to its
affiliate, First Capital Services, Inc. In the interim, the Company will
continue to lease the artifacts and display items to Michael's pending
completion of the intended acquisition. If the Company is ultimately unable
to secure additional debt financing or to raise capital from an equity
financing, it will be adversely affected in that it will likely be unable to
repay its current debt and subsequently, similarly, be unable to complete the
planned acquisition of Michael's. While the Company currently anticipates
completion of the Michael's acquisition transaction, there is and can be no
present assurance that it will be able to do so.
Results of Operations
The Company had revenues for the six months ended June 30, 1998 of
$2,353, as compared to $902 at June 30, 1997. The principal reason for the
increase in revenues was an increase in realized and unrealized gain on
investment securities, in spite of a concurrent decrease in interest and
dividend income.
Operating expenses increased to $50,501 for the quarter ended June 30,
1998 as compared to $21,472 at June 30, 1997. The difference between
operating expenses at June 30, 1998 and June 30, 1997, was $29,029. The
difference between June 30, 1998 and 1997, is directly attributable to an
increase in General and Administrative Expenses. During the quarter ended
June 30, 1998 the Company sustained a net loss of ($48,148) as compared to a
net loss of ($20,966) during the comparable quarter of 1997.
<PAGE>
At June 30, 1998, the Company had no current commercial operations.
Having only recently completed acquisition of the Seahawk treasure artifacts
and exhibits items, through exercise of the lease purchase option, using debt
proceeds secured from its affiliate, First Capital Services, Inc., the Company
at June 1, 1998, begun commercial operations through its collection of lease
payments from Michael's for continued lease of the Seahawk artifacts and
display items. The Company intends to continue this arrangement with
Michael's pending completion of its continuing due diligence efforts toward
developing, entering into and closing a definitive acquisition agreement with
Michael's. While there can be no present assurance that the Company will not
encounter an insurmountable obstacle to successful completion of that
transaction, the Company believes that it will be able to do so during 1998.
Completion of that transaction, at this point, however, continues to be
primarily dependent on the Company's ability to raise additional debt or
equity financing. The many uncertainties surrounding completion and
implementation of this plan however may preclude its successful
implementation. In that event, the Company will be adversely affected.
<PAGE>
PART II
Item 1. LEGAL PROCEEDINGS
Not applicable.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY- HOLDERS
Not applicable.
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
The Registrant filed one (1) Current Report on Form 8-K during this reporting
period dated July 24, 1998 reporting a purchase by an entity under common
control with the Registrant, by and through its director and chief executive
officer, Larry Schwartz of 5,302,087 shares o the Company's restricted Common
Stock from Seahawk Deep Ocean Technology, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
TREASURES & EXHIBITS
INTERNATIONAL, INC.
Date: August 7, 1998
BY:/s/Larry Schwartz
Larry Schwartz, President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Balance
Sheet, Statement of Operations, Statements of Cash Flows and Notes thereto
incorporated in Part I, Item 1. of this Form 10-Q and is qualified by its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,149
<SECURITIES> 17,130
<RECEIVABLES> 60,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,279
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 738,557
<BONDS> 0
0
0
<COMMON> 2,599
<OTHER-SE> 86,623
<TOTAL-LIABILITY-AND-EQUITY> 2,512,779
<SALES> 0
<TOTAL-REVENUES> 1,982
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 91,615
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (89,633)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (89,633)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
