SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997
2-96366-A
(Commission File Number)
TREASURE AND EXHIBITS INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
Florida 59-2483405
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2300 Glades Road, Suite 450-West
Boca Raton, Florida 33431
(Address of Principal Executive Offices)
(561) 750-7200
(Registrant's Telephone Number)
Vanderbilt Square Corp.
3040 E. Commercial Boulevard, Ft. Lauderdale, Florida 33308
(Former Name, Former Address and former Fiscal Year,
if changed since last report)
Securities registered pursuant to Section 12(b) of the Act
None None
(Title of Each Class) (Name of Each Exchange
on which Registered)
Securities registered pursuant to Section 12(g) of the Act
None None
(Title of Each Class) (Name of Each Exchange
on which Registered)
Indicate by check mark whether the Registrant (1) has filed all
reports required 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
The aggregate market value of the voting stock held by non-
affiliates of the Registrant as of March 25, 1998, was
approximately $975,500.00.
The number of shares of Common Stock issued as of March 25, 1997,
was 25,990,756.
<PAGE>
INDEX
Item Page
Part I 1. Business 2
2. Properties 5
3. Legal Proceedings 5
4. Submission of Matters to a Vote of
Security Holders 5
Part II 5. Market for Registrant's Common Equity
and Related Stockholder Matters 6
6. Selected Financial Data 7
7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7
8. Financial Statements and Supplementary
Data 11
9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure 11
Part III 10. Directors and Executive Officers of the
Registrant 12
11. Executive Compensation 14
12. Security Ownership of Certain Beneficial
Owners and Management 14
13. Certain Relationships and Related
Transactions 16
Part IV 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 17
<PAGE>
PART I
ITEM 1. Business
Vanderbilt Square Corp. (the "Registrant" or "Company") was
organized under the laws of the State of Florida on January 16,
1985. Until mid-1997 the Company was engaged in leasing equipment
to customers through its wholly-owned subsidiary, Hi-Tech Leasing,
Inc. ("Hi-Tech"); deriving revenue from investments in marketable
securities; and rendering consulting advice and administrative and
office management services to its affiliate, Corrections Services,
Inc. ("CSI"). CSI is a publicly-held company engaged in marketing
an electronic monitoring system to corrections agencies and
facilities.
Through Hi-Tech, the Company entered into equipment leasing
with customers pursuant to which the Company retained title and
ultimate ownership of the leased equipment. The customer, or
lessee, was entitled to possession and use of the equipment for the
purposes for which the equipment is intended so long as the
customer continued the scheduled lease payments and so long as all
other performance obligations incumbent upon the customer under the
lease agreement were performed and satisfied.
At year end, 1996, the Company owned a 27.7% interest in CSI
and was otherwise affiliated with CSI through common management and
control. On July 28, 1997, the Company sold its entire investment
in Hi-Tech Leasing, Inc. to CSI in exchange for 2,000,000
restricted shares of CSI's authorized but previously unissued
restricted Common Stock. The Company valued the common shares
received in the purchase and sale transaction at $731,000 and
reported a loss on the sale of its subsidiary, Hi-Tech, amounting
to $5,988. See "Financial Statements".
On August 28, 1997, the Company distributed substantially all
of its holdings in CSI to the Company's shareholders pro-rata with
their respective ownership interests in the Company. Each
Vanderbilt Square shareholder received .17 shares of CSI Common
Stock for each share of the Company's Common Stock held. No
fractional shares were issued and no cash was distributed in lieu
of fractional shares. Instead, a full share of CSI Common Stock
was distributed for each remaining fractional share held by a
Company stockholder at the time of the distribution. The Company
treated the distribution of its CSI Common Stock as a dividend to
its shareholders.
The sale of Hi-Tech by the Company to its affiliate, CSI, was
one aspect of a change of control of the Company which occurred
during August, 1997. See "Change of Control" below.
<PAGE>
With disposition of its Hi-Tech subsidiary, the Company
stepped out of its equipment leasing business, and at December 31,
1997, it had no commercial operations in that area.
Change of Control
On August 27, 1997, the Company's former President and
Director, Norman H. Becker and its former Secretary/Treasurer and
Director, Diane Aquino, resigned as officers and directors of the
Company following the appointment of Messrs. Larry Schwartz and
Edward Meyer as all of the members of the Registrant's Board of
Directors. The Board thereafter appointed Mr. Schwartz as the
Company's President and Mr. Meyer as its Secretary/Treasurer.
Mr. Schwartz also entered into option agreements with the
Company's former officers and directors pursuant to which Mr.
Schwartz was granted the right to purchase an aggregate of
3,500,000 shares of the Registrant's Common Stock from the former
officers and directors at the rate of $0.10 per their share. The
options granted Mr. Schwartz in that transaction by its terms would
have expired on January 15, 1998. Mr. Schwartz exercised those
options timely and in the process became a control shareholder of
the Company. In four unrelated transactions, four other
stockholders of the Registrant sold an aggregate of 2,000,000
shares of the Registrant's Common Stock at $0.15 per share to three
unrelated purchasers. The purchasers of those latter shares were
not and are not affiliated with either Messrs. Schwartz or Meyer,
nor are they affiliated with one another.
With disposition of its prior holdings in CSI, and with the
resignation of former officers and directors, Mr. Becker and Ms.
Aquino, the Company's affiliation with CSI and its prior activity
of rendering consulting advice and administrative and office
management services to CSI, was also terminated. Affiliation of
the Registrant and CSI was based in addition to the services
rendered by the Company to CSI, on their prior common management
and control. At December 31, 1997, the only remaining nexus
between the Company and CSI were the common shareholders generated
primarily by the Company's distribution of its CSI Common Stock to
its own shareholders on August 26, 1997. With termination of the
Company's affiliation with CSI, the Company stepped out of its
previous consulting activity rendering advice and administrative
and office management services to that company. For all practical
purposes, at the beginning of September, 1997, the Company became
inactive with no current commercial operations.
Recent Developments
On September 9, 1997, the Company entered into a preliminary
Letter of Intent to acquire all of the issued and outstanding
capital stock of Michael's International Treasure Jewelry, Inc., a
<PAGE>
closely-held Florida corporation with several operating locations
in the cities of Miami and Key West, Florida. Michael's
International Treasure Jewelry, Inc. ("Michael's") is engaged in
the manufacture of rare treasure jewelry at its facility in the
Seybold Building in Miami, Florida. It manufactures treasure
jewelry for its own sales and distributions operations and has
represented to the Company that its sales are, accordingly, made at
margins above customary margins in the personal jewelry industry.
The September 9, 1997 Letter of Intent continues to be preliminary
and specifies by its terms that the combination/acquisition
contemplated is contingent upon the parties' subsequent ability to
negotiate and execute a definitive acquisition agreement. Upon its
entry into the letter of intent, the Company undertook and
continues at April 1, 1998, due diligence efforts to ensure that
the proposed acquisition presents an audit-able combination and
that the operations and financial condition of Michael's is both
well known to and well understood by the Company. Those efforts
continue at the date of this report and the Company continues to
intend to proceed with the acquisition. It has recently given
written assurance to a third party in another transaction that it
intends to complete some form of acquisition/combination with
Michael's prior to December 31, 1998.
Despite that current intent, however, there can be no
assurance that the Company's efforts will not encounter one or more
insurmountable obstacles to the contemplated transaction. In that
event, the parties may be required to abandon the proposed
transaction and the Company will have, in the premises, sustained
significant legal and accounting costs, the expenditure of which
will have an adverse, rather than a beneficial, effect on the
Company's financial condition.
On October 1, 1997, the Company, as co-lessee, entered into a
one (1) year lease/purchase agreement with Seahawk Deep Ocean
Technology, Inc. ("Seahawk"), a publicly-held corporation with
principal offices in Tampa, Florida. The other co-lessee in the
lease purchase agreement with Seahawk is Michael's International
Treasure Jewelry, Inc. The lease purchase agreement obligated
Seahawk to lease certain artifacts and display items referred to in
the lease purchase agreement as the "Treasure" to the co-lessees
for a term of one (1) year in exchange for quarterly payments in
the amount of $67,500 each. The lease purchase agreement provided
for a buy-out after one (1) year for a purchase price of
$2,500,000, payable $750,000 in cash with the balance in the
Company's restricted Common Stock. It was the intent of the co-
lessees to display the artifacts at Michael's flagship store at 400
Duval Street in Key West, Florida and to use the display to
generate retail traffic for Michael's Treasure Jewelry business.
Under the lease arrangement, Michael's was obligated to make the
quarterly lease payments and the Company's interest in the lease
was focused on the lessee's right to purchase the artifacts and
display items at the end of the lease at what the Company viewed as
<PAGE>
a very favorable purchase price. The Company itself was not bound
to make any of the quarterly lease payments but in the event that
Michael's failed to make them, or any of them, the Company reserved
the right to elect to do so in order to protect its interest in the
buy-out right at the end of the lease. Michael's expected to
garner additional retail revenues through its display of the
artifacts and display items with which to make the quarterly lease
payments.
Subsequent Developments
At March 1, 1998, a total of $135,000 in lease payments had
been paid to Seahawk and, pursuant to additional on-going
discussions and negotiations between Seahawk and the co-lessees
during the first quarter of 1998, the Company determined to
exercise the purchase option prior to lease-end itself with the
amiable consent and waiver of Michael's. See Item 7., Management's
Discussion and Analysis of Financial Condition and Results of
Operations - "Liquidity".
ITEM 2. Properties
The Company does not own or lease any real property. The
Company maintained its executive offices in Ft. Lauderdale, Florida
pursuant to an oral month-to-month tenancy with an affiliate at a
cost of $1,350 per month until September, 1997. Since October,
1997, the Company has maintained its executive offices in Boca
Raton, Florida, cost free, with its affiliate, First Capital
Services, Inc.
ITEM 3. Legal Proceedings
No legal proceedings are currently pending or, to the
knowledge of management, threatened against the Company.
ITEM 4. Submission Of Matters To A Vote Of Security Holders
No matters were submitted to a vote of security holders,
through a solicitation of proxies during the fourth quarter of the
fiscal year covered by this report. During the first quarter of
1998, a majority of the shareholder interest in the Company
consented without meeting to change of the Company's name from
Vanderbilt Square Corp. to Treasure and Exhibits International,
Inc.
<PAGE>
PART II
ITEM 5. Market For Registrant's Common Equity And Related
Stockholder Matters
The Company's Common Stock is traded in the over-the-counter
market on the National Association of Securities Dealers, Inc. OTC
Bulletin Board under the symbol "VNSR". The Company intends to
change the trading symbol to "TEII" as soon as practicable after
the filing of this Annual Report on Form 10-K. Set forth below is
the range of high and low bid and asked information for the
Company's Common Stock for the two most recent fiscal years. This
information represents prices between dealers and does not reflect
retail mark-up or mark-down or commissions, and does not
necessarily represent actual market transactions.
During the period between January 1, 1996 and March 31, 1997,
the range of the reported high and low bid and asked quotations for
the Company's Common Stock was as follows:
<TABLE>
<CAPTION>
PERIOD BID PRICE ASKED PRICE
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
First Quarter - 1996 $ .375 $ .25 $ .50 $ .375
Second Quarter - 1996 $ .375 $ .25 $ .50 $ .375
Third Quarter - 1996 $ .40 $ .18 $ .40 $ .25
Fourth Quarter - 1996 $ .375 $ .18 $ .40 $ .25
First Quarter - 1997 $ .325 $ .16 $ .38 $ .22
Second Quarter - 1997 $ .30 $ .16 $ .35 $ .20
Third Quarter - 1997 $ .375 $ .25 $ .40 $ .25
Fourth Quarter - 1997 $ .25 $ .18 $ .35 $ .20
First Quarter - 1998 $ .20 $ .25 $ .25 $ .16
April 1, 1998 - May 13, 1998 $ .065 $ .05 $ .095 $ .09
</TABLE>
As of May 1, 1998, there were approximately 210 record holders
of the Registrant's outstanding Common Stock. Moreover, shares of
the Company's Common Stock are held for additional stockholders at
brokerage firms and/or clearing houses. The Company, therefore,
was unable to determine the precise number of beneficial owners of
its Common Stock as of May 1, 1998.
The Company has never paid any cash dividends on its Common
Stock and does not anticipate paying cash dividends in the
foreseeable future. See Item 7., Management's Discussion and
Analysis and Results of Operations - "Liquidity". The Registrant
intends to retain earnings, if any, for future growth and expansion
opportunities. Payment of cash dividends in the future will be
dependent upon the Company's earnings, financial condition, capital
requirements and other factors determined to be relevant by the
Board of Directors. See Item 7., Management's Discussion and
Analysis and Results of Operations - "Liquidity".
<PAGE>
ITEM 6. Selected Financial Data
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Revenues $ 144,283 $ 227,902 $ 99,710 $ 108,928 $ 172,354
Operating Expenses $ 130,047 $ 169,509 $ 91,595 $ 110,129 $ 153,895
Net Income (loss) $ 20,840 $ 59,443 $ 1,498 $ 6,642 $ 254,483
Weighted number of
shares outstanding 16,437,088 14,847,281 14,224,096 14,515,066 12,799,737
Net income (loss)
per share of Common
Stock outstanding $ .001 $ -0- $ -0- $ -0- $ .02
Total Assets $ 195,938 $1,063,919 $ 920,910 $1,004,085 $1,011,870
Total Liabilities $ 17,083 $ 51,673 $ 40,810 $ 78,987 $ 76,818
Cash Dividends $ -0- $ -0- $ -0- $ -0- $ -0-
</TABLE>
See Financial Statements and Notes to Financial Statements
ITEM 7. Management Discussion And Analysis Of Financial Condition
And Results Of Operations
This analysis of the Company's financial condition, liquidity,
capital resources and results of operations should be viewed in
conjunction with the accompanying financial statements, including
the notes thereto.
Financial Condition
At December 31, 1997, the Company had current assets of
$195,938 as compared to $763,977 at December 31, 1996, total assets
of $195,938 at December 31, 1997 as compared to $1,063,919 at
December 31, 1996, current liabilities of $17,083 at December 31,
1997, as compared to $48,447 at December 31, 1996, total
liabilities of $17,083 at December 31, 1997, as compared to $51,673
at December 31, 1996, and a net worth of $178,855 at December 31,
1997, as compared to $1,012,246 at December 31, 1996. See
"Financial Statements". The decrease in assets was principally due
to the decrease in cash and cash equivalents and marketable trading
securities and disposition of the Company's consolidated
subsidiary, Hi-Tech Leasing, Inc. The decrease in liabilities was
principally due to an increase in retained earnings deficiency.
Liquidity
During the year ended December 31, 1997, the Company had a
decrease in cash and cash equivalents of $70,414, from $250,209 to
$179,795. The Company's decrease in cash was principally due to
the sale disposition of its investment in its consolidated
subsidiary, Hi-Tech, in August, 1997. At year-end the Company had
<PAGE>
limited liabilities and no present commitments that were reasonably
likely to result in its liquidity increasing or decreasing in any
material way. During the first quarter of 1998, however, 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. See
Item 1., Business, Subsequent Developments. The Company and its
intended acquisition, Michael's International Treasure Jewelry,
Inc., were co-lessees in the Seahawk lease. The Company determined
during the first quarter of 1998 to seek to exercise the lease
purchase option to acquire the leased items itself prior to the
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 Michael's consent to the transaction
and without Michael's participation in exercise of the lease
purchase option.
Under the terms of the 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
($482,500), 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.
The debt incurred by the Company in the process of acquiring
the Seahawk treasure artifacts, exceeds the Company's total assets
at year-end 1997 by a factor approaching four (4). 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 is largely dependent, at March 31, 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
presently unforseen, 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
<PAGE>
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 has 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 has no current
ability to exercise its Common Stock repurchase option with Seahawk
and will likely be faced with the need for additional, substantial
borrowing from one or more affiliates in order to exercise the
repurchase option should it choose to do so within the exercise
period.
In general, at March 31, 1998, the Company's liquidity is
limited and will likely diminish in the near term in the absence of
current commercial operations and on-going general and
administrative expenses. See Item 1., "Business". 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
At year end 1997, the Company has no outstanding unused credit
lines or credit commitments in place. There were no significant
liabilities and the Company was meeting its on-going expenses with
its diminishing cash and cash equivalents. Lease payments for
lease of the Seahawk treasure artifacts and display items were the
obligation of the Company's co-lessee, Michael's International
Treasure Jewelry, Inc. 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, Larry Schwartz.
See "Liability". It is the Company's intent at March 31, 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 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. incurred in the Company's acquisition of the Seahawk
artifacts. 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
<PAGE>
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's revenues for the year ended December 31, 1997,
were $144,283 as compared to $127,902 for the year ended December
31, 1996, and $99,710 for the year ended December 31, 1995. The
principal reason for the decrease in revenues was a decrease in
income from sales of marketable equity securities.
Operating expenses decreased to $130,047 for the year ended
December 31, 1997 as compared to $169,509 at December 31, 1996 and
$91,595 at December 31, 1995. The difference between operating
expenses at December 31, 1997 and December 31, 1996, was $39,462.
The difference in operating expenses at December 31, 1996 and
December 31, 1995 was $77,914. The principal reason for the
difference between December 31, 1997 and 1996, and a decrease in
Selling General and Administrative Expenses. Income before
provision for income taxes for the year ended December 31, 1997,
was $8,248 as compared to income of $86,846 for the year ended
December 31, 1996 and a loss of ($480) for the year ended December
31, 1995. The decrease in income of $78,598 for the year ended
December 31, 1997 as compared to December 31, 1996, was principally
due to a decrease in earnings from the sale of marketable equity
securities.
At March 31, 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 March 31,
1998), intends to immediately begin commercial operations through
its collection of lease payments, albeit reduced to $14,000 per
month since the lease payments no longer contain a component
reflecting a purchase option, from Michael's for continued lease of
the Seahawk artifacts and display items otherwise under the same
terms and conditions of the Seahawk lease. The Company intends to
continue this arrangement with Michael's pending completion of its
current 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 the first half of 1998. Completion of that transaction,
at this point, however, is primarily dependent on the Company's
ability to raise additional debt or equity financing.
<PAGE>
Once closed, if closed, the Company expects its acquisition of
Michael's to enable it to, and to continue to, buy unique shipwreck
artifacts and to carry out its ultimate plan to become a leading
retailer of quality treasure jewelry and artifacts. 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.
ITEM 8. Financial Statements And Supplementary Data
Financial information pursuant to this Item appears elsewhere
in this Report. See Item 14. Exhibits, Financial Statements,
Schedules and Reports on Form 8-K.
ITEM 9. Disagreements On Accounting And Financial Disclosure
No change of the Company's independent, certified auditor
accountants took place with respect to the preparation of the
Company's financial statements for the two (2) most recent fiscal
years contained in this report. There are and have been no
disagreements on accounting or financial disclosure.
<PAGE>
PART III
ITEM 10. Directors And Executive Officers Of The Registrant
The directors and executive officers of the Company, as of
the date of this Report are as follows:
Name Age Offices Held
Larry Schwartz 50 President, Secretary,
Treasurer and Director
Edward Meyer 40 Former Secretary,
Treasurer and Director
Norman H. Becker 60 Former President and
Director
Glenn Shaffren 42 Former Vice President and
Director
Diane Aquino 49 Former Secretary/
Treasurer and Director
Larry Schwartz, was appointed President and Chief Executive
Officer of the Registrant on August 27, 1997 following the
resignation of its prior management. With the resignation of Mr.
Meyer (see below) on April 30, 1998, Mr. Schwartz also assumed the
duties of Secretary and Treasurer of the Company. Mr. Schwartz is
also President and Chief Executive Officer of First Capital
Services, Inc. and First Consolidated Financial Corporation, as
well as various affiliated entities and is presently engaged in the
business of asset based lending, financial consulting services for
corporate clients, and financial placement services. Mr. Schwartz
has been engaged in those activities for the last five years and
has assumed management of the Registrant as his initial engagement
with a publicly-held enterprise. Mr. Schwartz holds the BS Degree
from Boston State College and an MA Degree from Boston College. In
addition, Mr. Schwartz was a doctoral candidate at Boston College
attending post-masters course work in 1973. Boston State College
and Boston College are both located in the City of Boston,
Massachusetts. In addition his formal education, Mr. Schwartz has
attended numerous seminars on a broad variety of topics related to
asset based lending operations.
Edward Meyer, was appointed Secretary, Treasurer and a
Director of the Company on August 27, 1997 coincident with the
change of control reflected in Item 1., Business, Change of
Control, herein. Mr. Meyer is also the controller of the Company's
affiliate, First Capital Services, Inc., an enterprise affiliated
with the Registrant due to common control. Mr. Meyer has been the
controller of First Capital Services, Inc. since 1994. Prior to
<PAGE>
1994, he was controller and officer manager of Zimmerman Tree
Service. Mr. Meyer holds the BBA Degree in accounting from the
Bernard Baruch College of the City University of New York and is a
licensed certified public accountant in both the State of Florida
and the State of Colorado. On April 30, 1998, however, Mr. Meyer
resigned as the Company's Secretary, Treasurer and a member of its
Board of Directors due to excess demand on his time generated by
his other duties. The Company was informed by Mr. Meyer at the
time of resignation that he had no disagreement with the Company's
management, financial or otherwise.
Norman H. Becker, resigned as an officer and director of the
Company on August 26, 1997 in connection with the transaction
changing control of the Company to Messrs. Schwartz and Meyer.
Prior to his appointment as the Company's President and Chief
Executive Officer during February 1987, Mr. Becker was
Secretary/Treasurer and a Director of the Company since its
inception, January 16, 1985. Since January, 1993, Mr. Becker was
also President of CSI, former affiliate of the Company. (See
"Business" and "Financial Statements" and accompanying notes).
Since January 1985, Mr. Becker has been self-employed in the
practice of public accounting. Mr. Becker is a graduate of City
College of New York (Bernard Baruch School of Business) and is a
member of a number of professional accounting associations
including the American Institute of Certified Public Accountants,
the Florida Institute of Certified Public Accountants, and the Dade
County Chapter of the Florida Institute of Certified Public
Accountants.
Glenn Shaffren became Vice President and a Director of the
Company in November, 1996. Since 1994, Mr. Shaffren has been an
officer and director of Digitel Network Services, Inc., a private
Georgia corporation, and its Chief Executive Officer and Chief
Financial Officer since March, 1995. He has been involved in cable
television since 1979 and has owned, operated and sold two outside
plant construction and installation companies specializing in fiber
optic cable and coaxial cable, aerial and underground construction,
splicing and activation. In 1992, Mr. Shaffren was Vice President
of Operations for American Fiber Optics. Mr. Shaffren resigned as
an officer and director of the Company on January 29, 1997.
Diane Aquino resigned as an officer and director of the
Company on August 26, 1997 in connection with the transaction
changing control of the Company to Messers. Schwartz and Meyer.
Ms. Aquino was been Secretary/Treasurer and a Director of the
Company since February 15, 1989. Since January 1993, Ms. Aquino
was Secretary and Treasurer of CSI, an affiliate of the Company.
<PAGE>
ITEM 11. Executive Compensation
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payments
Restricted Securities
Name of Individual Other Annual Stock Underlying/ LTIP All Other
and Principal Position Year Salary Bonus Compensation Award(s) Options/SARs Payouts Compensation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Larry Schwartz 1997 $ -0- -0- $15,000 -0- -0- -0- -0-
President
Edward Meyer 1997 $ -0- -0- $ -0- -0- -0- -0- -0-
Secretary/Treasurer
Norman H. Becker 1996 $ 4,000 -0- $ 1,163 -0- -0- -0- -0-
Former President 1997 $ 4,000 -0- $ 3,338 -0- -0- -0- -0-
Glenn Shaffren 1996 -0- -0- -0- -0- -0- -0- -0-
Former Vice President 1997 -0- -0- -0- -0- -0- -0- -0-
Diane Aquino 1996 $7,500 -0- -0- -0- -0- -0- -0-
Former Secretary/
Treasurer 1997 $7,500 -0- -0- -0- -0- -0- -0-
</TABLE>
During the 1997 fiscal year, there were no stock options,
stock appreciation rights, restricted stock awards, LTIP awards, or
similar compensation issued. None of the Company's former or
present officers and directors had formal employment agreements
with the Company.
ITEM 12. Security Ownership Of Certain Beneficial Owners And
Management
The following table sets forth, as of the date of this Report,
certain information concerning beneficial ownership of the
Company's Common Stock, by (i) each person known to the Company to
own five percent (5%) or more of the Company's outstanding Common
Stock, (ii) all directors of the Company, naming them and (iii) all
directors and officers of the Company as a group, without naming
them.
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name and Address Beneficial Ownership (1) of Class(1)
<S> <C> <C>
Larry Schwartz (2) 3,907,637 Shares 15%
Seahawk I, Ltd(4) 5,903,066 Shares 23%
5102 S. Westshore Blvd.
Tampa, FL 33611
Seahawk Deep Ocean
Technology, Inc. (4) 2,529,286 Shares 10%
5102 S. Westshore Blvd.
Tampa, FL 33611
Edward Meyer (2) -0- -0-
All Officers and Directors
as a Group (1 persons) 3,907,637 Shares 15%
</TABLE>
(1) As used in the Annual Report, the term beneficial ownership
with respect to a security is defined by Rule 13d-3 under the
Securities Exchange Act of 1934 as consisting of sole or
shared voting power (including the power to vote or direct the
vote) and/or sole or shared investment power (including the
power to dispose or direct the disposition of) with respect to
the security through any contract, arrangement, understanding,
relationship or otherwise, including a right to acquire such
power(s) during the next 60 days. Unless otherwise noted,
beneficial ownership consists of sole ownership, voting and
investment rights.
(2) The address for such person is c/o Treasures & Exhibits
International Inc., 2300 Glades Road, Suite 450, West Tower,
Boca Raton, Florida 33431.
(3) Calculations are based upon 25,990,756 issued and outstanding
shares of the Company's Common Stock. The total reflects
subsequent issuance, on March 19, 1998, of 9,500,000 shares of
the Company's restricted Common Stock to persons designated by
the Seller as part of the purchase price paid by the Company
in its acquisition of the Seahawk artifacts and display items.
See Item. 1, "Business".
(4) Seahawk I, Ltd. and Seahawk Deep Ocean Technology, Inc. are
affiliated by common control with each other. All of the
shares owned of record by those entities accordingly may be
deemed to be held by a single beneficial owner.
<PAGE>
ITEM 13. Certain Relationships And Related Transactions
During the fiscal year ended December 31, 1997, there were no
material transactions between the Company and any of its officers
and/or Directors which involved $60,000 or more. However, the
Company entered into a management consulting arrangement with First
Consolidated Financial Corporation, an affiliate under common
control with the Company in that company's President and Chief
Executive Officer, Larry Schwartz, is also President and Chief
Executive Officer of First Consolidated Financial Corporation.
Pursuant to the consulting arrangement, First Consolidated renders
management consulting services to the Company in exchange for a
monthly fee in the amount of $5,000. On an annualized basis, the
consulting arrangement represents a $60,000 expense to the Company.
Monthly payments, each in the amount of $5,000 have continued since
December 31, 1997 through the date of this report.
In addition, the Company has borrowed from its affiliate,
First Capital Services, Inc. in order to acquire the Seahawk
artifacts and display items through exercise of the lease purchase
option. See Item 7., Management's Discussion and Analysis of
Financial Condition and Results of Operations - "Liquidity". In
addition, on December 31, 1997, the Company loaned its affiliate,
First Capital Services, Inc. $153,649.32 on a short term basis at
an annual interest rate of 12%. On January 15, 1998, First Capital
Services repaid $125,000 of the Company's loan. The loan
transactions were entered into by and between the Company and First
Capital Services, Inc. in an effort to generate a modicom of
interest income for the Company pending its own development and
implementation of revenue producing commercial operations.
<PAGE>
PART IV
ITEM 14. Exhibits, Financial Statements, Schedules And Reports On
Form 8-K
(a) 1. Financial Statements:
(i) Report of Independent Certified Public Accountant;
(ii) Consolidated Balance Sheet - December 31, 1997 and
December 31, 1996;
(iii) Consolidated Statement of Operations - Three years
ended December 31, 1997;
(iv) Consolidated Statement of Shareholders' Equity -
Three years ended December 31, 1997;
(v) Consolidated Statement of Cash Flows - Three years
ended December 31, 1997;
(vi) Notes to Consolidated Financial Statements
(a)(3)Exhibits
(b)(10) Letter of Intent dated September 10, 1997
for proposed acquisition of Michael's
International Treasure Jewelry, Inc.
(b)(10) Agreement for Purchase of Artifacts and
Displays for purchase by the Registrant
of certain artifacts and display items
from Seahawk Deep Ocean Technology, Inc.
(b) Reports of Form 8-K
The Registrant filed no reports on Form 8-K during
the fourth quarter of 1997. On March 27, 1998, the
Company filed a report on Form 8-K of its purchase
on March 19, 1998 of the artifacts previously
leased to the Company as co-lessee for cash, newly
issued restricted Common Stock and a secured
promissory note. The March 19, 1998 Form 8-K was
amended on May 14, 1998 to correct an error in the
cash portion of the reported purchase price which
had been overstated by $200,000 inadvertently in
the original Form 8-K current report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, hereunto
duly authorized.
TREASURE AND EXHIBITS
INTERNATIONAL, INC.
Date: May 14, 1998 By: /s/Larry Schwartz
Larry Schwartz, President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report have been signed below by the following persons
on behalf of the Registrant in the capacities and on the dates
indicated.
Signatures Title Date
(i) Principal Executive Officer
/s/Larry Schwartz Chief Executive May 14, 1998
Larry Schwartz Officer
(ii) Principal Financial and
Accounting Officer
/s/Larry Schwartz Treasurer May 14, 1998
Larry Schwartz
(iii) A Majority of the Board
of Directors
/s/Larry Schwartz Director May 14, 1998
Larry Schwartz
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
VANDERBILT SQUARE CORP. AND SUBSIDIARIES
REPORT ON EXAMINATION OF CONSOLIDATED
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<PAGE>
CONTENTS
PAGE
INDEPENDENT AUDITOR'S REPORT. . . . . . . . . . . . . . . . . 1
CONSOLIDATED BALANCE SHEET. . . . . . . . . . . . . . . . . . 2
CONSOLIDATED STATEMENT OF OPERATIONS. . . . . . . . . . . . . 3
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY. . . . . . . . 4
CONSOLIDATED STATEMENT OF CASH FLOWS. . . . . . . . . . . . . 5
NOTES TO FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . 6 - 13
<PAGE>
Board of Directors and Shareholders
Vanderbilt Square Corp. and Subsidiaries
Boca Raton, Florida
INDEPENDENT AUDITOR'S REPORT
I have audited the accompanying consolidated balance sheet of Vanderbilt
Square Corp. and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations and shareholders' equity and
cash flows for each of the three years ended December 31, 1997. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audits.
I conducted my audits in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audits provide a reasonable basis
for my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Vanderbilt
Square Corp. and subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of its operations and its cash flows for the three years
ended December 31, 1997, in conformity with generally accepted accounting
principles.
Thomas W. Klash
Certified Public Accountant
Hollywood, Florida
February 9, 1998 except for Note N,
as to which the date is March 19, 1998.
<PAGE>
VANDERBILT SQUARE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997 AND 1996
<CAPTION>
ASSETS
1997 1996
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 179,795 $ 250,209
Notes receivable - current:
Affiliate - 38,478
Other - 20,544
Accounts receivable:
Other - 4,334
Investment in marketable trading
securities - at market 16,143 443,067
Accrued interest receivable - 143
Net investment in direct financing
leases - current - 3,453
Prepaid income taxes - 3,749
TOTAL CURRENT ASSETS 195,938 763,977
INVESTMENT IN UNCONSOLIDATED SUBSIDIARY - 250,008
NOTES RECEIVABLE - NONCURRENT
Affiliate - 34,347
Other - 6,733
NET INVESTMENT IN DIRECT FINANCING
LEASES - noncurrent - 8,854
$ 195,938 $1,063,919
See accompanying notes to consolidated financial statements.
-2(a)-
<PAGE>
VANDERBILT SQUARE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997 AND 1996
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
1997 1996
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 17,083 $ 40,109
Deferred income taxes - current - 8,338
TOTAL CURRENT LIABILITIES 17,083 48,447
DEFERRED INCOME TAXES - NON CURRENT - 3,226
17,083 51,673
SHAREHOLDERS' EQUITY
Common stock $.0001 par value,
authorized 50,000,000 shares,
issued 16,490,756 shares in 1997
and 1996; outstanding 16,490,756
in 1997 and 16,398,356 in 1996 1,649 1,649
Additional paid-in capital 1,137,363 1,137,363
Retained earnings (deficiency) (960,157) (116,734)
178,855 1,022,278
Less treasury stock - 92,400 shares
in 1996 - at cost - 10,032
178,855 1,012,246
$ 195,938 $1,063,919
See accompanying notes to consolidated financial statements.
-2(b)-
<PAGE>
VANDERBILT SQUARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
THREE YEARS ENDED DECEMBER 31, 1997
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
REVENUES:
Interest and dividend income $ 32,101 $ 39,424 $ 33,448
Income realized from
sale of marketable
equity securities 111,578 187,493 47,317
Consulting fees - - 18,000
Direct finance lease income 604 985 945
144,283 227,902 99,710
OPERATING EXPENSES:
Selling, general and
administrative expenses 124,419 225,097 85,046
Provision for loss on market
decline of marketable
trading securities 5,628 (55,588) 6,549
130,047 169,509 91,595
INCOME (LOSS) FROM OPERATIONS 14,236 58,393 8,115
OTHER INCOME (EXPENSE)
Equity in earnings (loss) of
unconsolidated subsidiary - 26,453 (8,595)
Loss on sale of subsidiary (5,988) - -
INCOME (LOSS) BEFORE INCOME TAXES 8,248 86,846 (480)
PROVISION (CREDIT) FOR INCOME
TAXES - DEFERRED (12,592) 25,403 (1,978)
NET INCOME (LOSS) $ 20,840 $ 59,443 $ 1,498
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 16,437,088 14,847,281 14,224,096
NET INCOME (LOSS) PER COMMON
SHARES $ - $ - $ -
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
VANDERBILT SQUARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 1997
<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
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
VANDERBILT SQUARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 1997
<CAPTION>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 20,840 $ 59,443 $ 1,498
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities:
(Gain) on sale of
marketable securities (111,578) (187,493) (47,317)
Loss on sale of wholly-owned
subsidiary 5,988 - -
Equity in (earnings) loss
of unconsolidated subsidiary - (26,453) 8,595
Allowance for market decline
of securities 5,628 (55,588) 6,549
Write off of uncollectible
notes - 74,000 10,000
Changes in operating assets
and liabilities:
Increase (decrease)in accounts
payable and accrued expenses (23,026) 5,291 (42,797)
(Increase) decrease in
accrued interest receivable 143 894 (334)
Decrease (increase) in
deferred income taxes (11,564) 25,403 (1,978)
(Increase) decrease in account
receivable - other 4,334 22,331 (6,456)
(Decrease) increase in income
taxes payable/pre-paid 3,749 (9,741) 326
Proceeds from sale of
marketable securities 245,107 728,716 236,496
Purchase of marketable
securities (76,642) (531,320) (596,177)
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 62,979 105,483 (431,595)
Continued on next page
-5(a)-
<PAGE>
VANDERBILT SQUARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 1997
<CAPTION>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM
INVESTING ACTIVITIES:
Loan advance to affiliates (160,000) (74,043) (3,000)
Principal collections of loans
to affiliates 193,907 15,695 30,741
Advances paid on notes
receivable - other (6,500) (9,250) (68,500)
Principal collections of notes
receivable - other 13,161 32,229 186,144
Principal collections on direct
financing leases 2,272 3,379 5,769
Purchase of equipment for lease - (7,100) -
Proceeds from sale of
investments in
unconsolidated subsidiaries 44,511 4,753 469,255
Investment in unconsolidated
subsidiaries (220,744) (18,119) (19,628)
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (133,393) (52,456) 600,781
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (70,414) 53,027 169,186
CASH AND CASH EQUIVALENTS -
Beginning of year 250,209 197,182 27,996
CASH AND CASH EQUIVALENTS -
End of Year $ 179,795 $ 250,209 $ 197,182
See accompanying notes to consolidated financial statements.
-5(b)-
<PAGE>
VANDERBILT SQUARE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements include
the accounts of the Company, and its wholly-owned subsidiaries, Hi-Tech
Leasing, inc., and Professional Programmers, Inc. through the date of their
disposition. All significant intercompany accounts and transactions have been
eliminated. The financial statements of Hi-Tech Leasing, Inc., are included
in consolidation for its year ended November 30, 1995 and 1996 in order to
expedite preparation of financial statements and to coincide with the taxable
year of the Company.
Revenue Recognition - Prior to the disposition of Hi-Tech Leasing, Inc., the
Company leased equipment under agreements accounted for as direct financing
leases. Under this accounting method, the gross investment in the leases is
recorded as the total of the minimum lease payments plus the unguaranteed
residual salvage value of the property. The excess of the gross investment
over the cost of the property represents unearned income, and this is deducted
from the gross investment to arrive at the net investment in the direct
financing leases. The unearned interest income is amortized to income over
the term of the leases using the "interest method" so as to produce a constant
periodic rate of return on the net investment in the leases.
Investments in Marketable Trading Securities - The Company's investment in
marketable trading securities consists of trading securities as defined in
FASB Statement No. 115. Trading securities are carried at market value in the
accompanying balance sheet. Unrealized gains and losses resulting from
fluctuations in the market price of the related securities are currently
reflected in the statement of operations.
Net Income (Loss) Per Common Share - Net income (loss) per common share was
computed by dividing the net income (loss) for each period by the weighted
average number of common shares outstanding during each period.
The Company's adoption of FAS-12B, earnings per share, did not have a
significant impact upon reported per share amounts.
-6-
<PAGE>
VANDERBILT SQUARE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE A - 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 bases 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 B - NOTES RECEIVABLE - AFFILIATES
1996
10% Note Receivable - Due from a company
whose shareholder is an officer and director
of the Company - unsecured and due on demand $ 25,000
8% Note Receivable - Due from an individual
who is an officer and director of the Company
- collateralized by transportation equipment
- payable in monthly installments of $488,
including interest, thru November 15, 2000 20,000
10% Note Receivable - Due from a company
whose shareholder is an officer and
director of the Company - collateralized
by transportation equipment - payable
in monthly installments of $937, including
through September 15, 1999 27,647
Other 178
72,825
Deduct noncurrent portion 34,347
$ 38,478
Interest income relating to notes from related parties amounts to $4072 in
1997 and $1,334 in 1996.
-7-
<PAGE>
VANDERBILT SQUARE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE C - NOTES RECEIVABLE - OTHER
Notes receivable - Other - consist of the following:
1996
8% - 12% Notes Receivable -
Collateralized by transportation
and other equipment. Payments
are due in various monthly
installments through
November 15, 1998 $ 23,797
10% Notes Receivable -
Collateralized by equipment
having fair market value
exceeding the principal balance
of the respective note. The
notes are due in various monthly
installments of through
October 1, 1997 3,480
27,277
Deduct noncurrent portion 6,733
$ 20,544
Interest earned on the above notes amounts to $1,538 in 1997 and $9,644 in
1996.
NOTE D - INVESTMENT IN MARKETABLE TRADING SECURITIES
At December 31, 1997, the Company's investment in marketable trading
securities consisted entirely of trading securities as follows:
Cost Market Value
Investment in corporate
trading securities $ 40,180 $ 16,143
Unrealized gains (losses) on changes in market values of marketable trading
securities amounted to $(5,628) in 1997 and $55,588 in 1996.
-8-
<PAGE>
VANDERBILT SQUARE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE E - NET INVESTMENT IN DIRECT FINANCING LEASES
The Company's operations included leasing various types of equipment which
were classified as direct financing leases. These leases are summarized as
follows at December 31, 1996:
1996
Total minimum lease payment
to be received $ 14,017
Add: unguaranteed residuals -
Gross investment in leases 14,017
Deduct: unearned interest
income 1,710
Net investment in direct
financing leases 12,307
Deduct: current portion 3,453
Noncurrent portion $ 8,854
The Company had no investment in direct financing leases at December 31, 1997.
NOTE F - INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
At December 31, 1996, the Company owned a 27.7% interest in Corrections
Services, Inc. ("CSI"). The investment was accounted for using the equity
method for recognizing income or loss from its investment.
On July 28, 1997, Vanderbilt Square Corp. received 2,000,000 additional shares
of CSI authorized, but previously unissued restricted Common Stock in exchange
for the sale of its entire investment in Hi-Tech Leasing, Inc. Fair value of
the common shares received amounted to $731,000. The Company reported a loss
on the disposition of Hi-Tech Leasing, Inc. amounting to $5,988 as reflected
in the accompanying consolidated statement of operations for the year ended
December 31, 1997.
-9-
<PAGE>
VANDERBILT SQUARE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE F - INVESTMENT IN UNCONSOLIDATED SUBSIDIARY (Cont'd)
On August 28, 1997, Vanderbilt Square Corp. distributed substantially all of
its investment in CSI to the Company's shareholders. Vanderbilt Square
Corp.'s shareholders received .17 shares of CSI Common Stock for each share
held. No fractional shares were issued and no cash was distributed in lieu of
fractional shares. One full share of CSI Common Stock was distributed for
each fractional share remaining. The distribution of CSI common Stock was
reflected as a dividend in the accompanying statement of shareholders' equity.
CSI was affiliated to the Company during 1997 and 1996 through officers and
directors and principal shareholders in common.
NOTE G -RELATED PARTY TRANSACTIONS
The Company entered into the following transactions with various entities and
individuals affiliated by virtue of common management or stock ownership for
the three years ended December 31, 1997:
1997 1996 1995
Consulting and
professional fees $ 69,065 $ 43,525 $ 6,139
Office administration 12,848 15,300 14,875
Rent expense 12,600 16,200 15,750
Consulting fee income - - (18,000)
Loss on sale of
subsidiary 5,988 - -
Interest income -
invested with
affiliates (3,849) - -
$ 96,652 $ 75,025 $ 18,764
NOTE H - SALE OF WHOLLY-OWNED SUBSIDIARIES
Hi-Tech Leasing, Inc. - Pursuant to the terms of a Capital Stock Purchase
Agreement with Corrections Services, Inc. ("CSI"), an affiliate, the Company
sold its entire investment interest in Hi-Tech Leasing, Inc. on July 28,
1997. The Company received 2,000,000 shares of previously unissued restricted
Common Stock of CSI having a fair market value of $731,000. The Company
incurred a $5,988 loss on the disposition of Hi-Tech Leasing, Inc.
The Company's earnings and cash flows reflect the operations of Hi-Tech
Leasing, Inc. through July 28, 1997.
-10-
<PAGE>
VANDERBILT SQUARE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE H - SALE OF WHOLLY-OWNED SUBSIDIARIES (Cont'd)
Professional Programmers, Inc. - On September 30, 1997, the Company settled an
obligation owing to Corrections Services, Inc., an affiliate, with the
assignment of 100% of its investment interest in Professional Programmers,
Inc., an inactive, wholly-owned subsidiary. Fair value of the investment
transferred amounted to $16,152.
NOTE I - INCOME TAXES
The components of the provision for income taxes are as follows for the three
years ended December 31, 1997:
1997 1996 1995
Federal $(12,592) $ 24,078 $(1,978)
State - 1,325 -
$(12,592) $ 25,403 $(1,978)
The credit provision for income taxes resulted form the reversal of prior year
deferred income taxes payable.
The current income tax expected to be paid by the Company is zero. The
primary difference between taxes expected to be paid based upon pre-tax
financial statement income and current income tax expense relates to
undistributed earnings of a sold subsidiary (Hi-Tech Leasing, Inc.).
A deferred tax benefit relating to the Company's net operating loss
carryforward ($44,754) and allowance for market decline of investments
($24,037) 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 2112.
NOTE J - SUPPLEMENTAL CASH FLOW INFORMATION
Disposition of Subsidiaries - The Company received Common Stock with a fair
value of $731,000 in exchange for its investment in Hi-Tech Leasing, Inc. A
summary of non-cash assets owned by Hi-Tech Leasing, Inc. on the date of sale
follows:
Marketable securities $ 446,675
Notes receivable 59,534
Investment in financing lease 10,035
Non-cash assets owned 516,244
Cash and cash equivalents 220,744
Net assets of subsidiary sold $ 736,988
-11-
<PAGE>
VANDERBILT SQUARE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE J - SUPPLEMENTAL CASH FLOW INFORMATION (Cont'd)
The Company settled a $16,152 obligation to an affiliate through the
conveyance of 100% of its interest in Professional Programmers, Inc.
Shareholder's Equity - On August 26, 1997, the Company distributed investment
stock to common shareholders as a dividend. Fair value of the stock amounted
to $864,263.
NOTE K - DIVIDEND DISTRIBUTIONS
On August 6, 1996, the Board of Directors of the Company declared a 10% stock
dividend of the outstanding Common Stock of the Company. The stock dividend
was paid on September 24, 1996 to all stockholders of record at the close of
business on August 23, 1996.
As more fully described in Note H to the financial statements, the Company
distributed 2,803,446 shares of CSI restricted common stock to shareholders of
record on August 26, 1997. Fair market value of the securities amounted to
$864,263.
NOTE L - COMMITMENTS AND CONTINGENCIES
Artifacts Display Lease - On October 1, 1997, the Company entered into a one
year Lease/Purchase Agreement with Seahawk Deep Ocean Technology, Inc.
("Lessor") and Michael's International Treasure Jewelry, Inc. ("Co-Lessee")
for the "Dry Tortugas Treasure" (the "Treasure"). The Lease/Purchase
Agreement obligates Seahawk to lease the Treasure to the Co-Lessees for a term
of one year. The lease provides for quarterly payments of $67,500. See Note
N.
Consulting Agreement - On October 1, 1997, the Company entered into a
consulting agreement with First Consolidated Financial Corp. (an affiliate)
which provides for annual payments of $120,000 per annum.
NOTE M - PROPOSED ACQUISITION
On September 10, 1997, the Company entered into a Letter of Intent to acquire
all of the outstanding capital stock
-12-
<PAGE>
VANDERBILT SQUARE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE M - PROPOSED ACQUISITION (Cont'd)
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.
The agreement must be approved by the Board of Directors of Vanderbilt Square
Corp. and "Michael's" and by the shareholders of the Company.
NOTE N - SUBSEQUENT EVENTS
Name Change - On February 27, 1998, the Company changed its name to Treasure &
Exhibits International, Inc.
Artifacts and Displays Purchase Agreement - On March 19, 1998, the Company
exercised its option to purchase artifacts previously described as the "Dry
Tortugas Treasure". See Note L. Consideration named in the agreement
amounted to $2,432,500 comprised of $617,500 cash payments, 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 repurchase option expires on June
10, 1998.
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.
-13-
<PAGE>
VANDERBILT SQUARE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE N - SUBSEQUENT EVENTS (Cont'd)
As a result of the cash required to acquire the artifacts, Vanderbilt Square
Corp. borrowed $482,500 from affiliated entity. The borrowings mature on
March 19, 1999.
-14-
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Balance
Sheet, Statement of Operations, Staements of Cash Flows and Notes thereto
incorporated in Part II, Item 8 of this Form 10-K and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 179,795
<SECURITIES> 16,143
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 195,938
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 195,938
<CURRENT-LIABILITIES> 17,083
<BONDS> 0
0
0
<COMMON> 1,649
<OTHER-SE> 177,207
<TOTAL-LIABILITY-AND-EQUITY> 193,938
<SALES> 0
<TOTAL-REVENUES> 144,283
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 130,047
<LOSS-PROVISION> 5,988
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,248
<INCOME-TAX> (12,592)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,840
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
