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 September 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 November 6, 1998.
<PAGE>
TREASURES & EXHIBITS INTERNATIONAL, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - September 30, 1998 (Unaudited) and December
31, 1997.
Statement of Operations - Three months and Nine months ended
September 30, 1998 and 1997 (Unaudited).
Statement of Shareholders' Equity - December 31, 1994 through
September 30, 1998 (Unaudited).
Statement of Cash Flows - Nine months ended September 30, 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
<PAGE> 2
TREASURES & EXHIBITS INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
Item I. Financial Statements
<PAGE> 3
Board of Directors and Shareholders
Treasure & Exhibits International, Inc.
Boca Raton, Florida
INDEPENDENT ACCOUNTANT'S REPORT
I have reviewed the accompanying balance sheet of Treasure & Exhibits
International, Inc. as of September 30, 1998, and the statement of operations,
shareholders' equity and cash flows for the nine months then ended. These
financial statements are the responsibility of the Company's management.
I conducted my review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, I do not express such an opinion.
Based on my review, I am not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
Thomas W. Klash
Certified Public Accountant
Hollywood, Florida
November 5, 1998
<PAGE> 4
TREASURE & EXHIBITS INTERNATIONAL, INC.
(Formerly Vanderbilt Square Corporation)
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
September 30, December 31,
1998 1997
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 51,827 $ 179,795
Investment in marketable
trading securities - at market 22,073 16,143
TOTAL CURRENT ASSETS 73,900 195,938
Accounts Receivable - Affiliate 102,000 -
INVESTMENT IN ARTIFACTS 2,432,500 -
TOTAL ASSETS $2,608,400 $ 195,938
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
TREASURE & EXHIBITS INTERNATIONAL, INC.
(Formerly Vanderbilt Square Corporation)
BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, December 31,
1998 1997*
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable $ 782,500 $ -
Accounts payable and accrued
expenses 57,137 2,083
Due to Affiliate - Consulting Fee 15,000 15,000
TOTAL CURRENT LIABILITIES 854,637 17,083
DEFERRED REVENUE 112,000 -
PUT OPTION 1,615,000 -
TOTAL LIABILITIES 2,581,637 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 1997 2,599 1,649
Additional paid-in capital 1,136,413 1,137,363
Accumulated deficit (1,112,249) (960,157)
TOTAL SHAREHOLDERS' EQUITY 26,763 178,855
TOTAL SHAREHOLDERS' EQUITY
AND LIABILITIES $2,608,400 $ 195,938
</TABLE>
* Reclassified for comparative purposes
See accompanying notes to financial statements.
<PAGE> 6
TREASURE & EXHIBITS INTERNATIONAL, INC.
(Formerly Vanderbilt Square Corporation)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Interest and dividend income $ 750 $ 9,747 $ 1,745 $ 17,660
Realized and unrealized
gain (loss) on investment
in marketable trading
securities 4,942 (9,068) 5,929 (8,436)
Direct finance lease income - 223 - 464
5,692 902 7,674 9,688
OPERATING EXPENSES:
General and
administrative expenses 68,151 21,472 159,766 33,653
LOSS FROM OPERATIONS (62,459) (20,570) (152,092) (23,965)
OTHER INCOME (EXPENSES):
Equity in earnings (loss)
of unconsolidated subsidiary - (396) - (13,293)
LOSS BEFORE INCOME TAXES (62,459) (20,966) (152,092) (37,258)
INCOME TAX CREDIT PROVISION - - - 2,500
NET LOSS $ (62,459) $ (20,966) $ (152,092) $ (39,758)
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 25,990,756 16,398,356 23,281,496 16,398,356
EARNINGS PER COMMON SHARE $ - $ - $ (.01) $ -
EARNINGS PER COMMON SHARE
ASSUMING DILUTION $ - $ - $ (.01) $ -
</TABLE>
See accompanying notes to financial statements.
<PAGE> 7
TREASURE & EXHIBITS INTERNATIONAL, INC.
(Formerly Vanderbilt Square Corporation)
STATEMENT OF SHAREHOLDERS' EQUITY
FROM DECEMBER 31, 1994 THROUGH SEPTEMBER 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>
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 - - - (152,092) - (152,092)
Issuance of stock 9,500,000 950 1,614,050 - - 1,615,000
Reclassification of put option - - (1,615,000) - - (1,615,000)
Balance - September 30, 1998 25,990,756 $ 2,599 $ 1,136,413 $(1,112,249) $ - $ 26,763
</TABLE>
See accompanying notes to financial statements.
<PAGE> 8
TREASURE & EXHIBITS INTERNATIONAL, INC.
(Formerly Vanderbilt Square Corporation)
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Nine Months Ended
September 30,
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (152,092) $ (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 (5,930) 36,005
Changes in operating assets and liabilities:
Increase (Decrease) in accounts
payable and accrued expenses 55,054 (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 (102,968) (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>
<PAGE> 9
TREASURE & EXHIBITS INTERNATIONAL, INC.
(Formerly Vanderbilt Square Corporation)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Nine Months Ended
September 30,
1998 1997
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from affiliates $ 100,000 $ -
Net cash provided by
financing activities - -
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (127,968) (52,900)
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 179,795 250,209
CASH AND CASH EQUIVALENTS -
END OF PERIOD $ 51,827 $ 197,309
</TABLE>
See accompanying notes to financial statements.
<PAGE> 9
TREASURE & EXHIBITS INTERNATIONAL, INC.
(Formerly Vanderbilt Square Corporation)
NOTES TO FINANCIAL STATEMENTS
September 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.
Accounting 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 September 30, 1998, the statement of operations for
the nine months ended September 30, 1998 and 1997, the statement of
shareholders' equity as of September 30, 1998, and the statement of cash flows
for the nine months ended September 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 September 30, 1998 and for all periods presented have been made.
The operations for the nine months ended September 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.
<PAGE> 10
TREASURE & EXHIBITS INTERNATIONAL, INC.
(Formerly Vanderbilt Square Corporation)
NOTES TO FINANCIAL STATEMENTS
September 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 September 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" was not considered in the
calculation of fully diluted earnings per share because the effect is
anti-dilutive.
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 September 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".
<PAGE> 11
TREASURE & EXHIBITS INTERNATIONAL, INC.
(Formerly Vanderbilt Square Corporation)
NOTES TO FINANCIAL STATEMENTS
September 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
repurchase right expired on June 10, 1998 with no shares bought by the
Company.
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, 1999 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.
<PAGE> 12
TREASURE & EXHIBITS INTERNATIONAL, INC.
(Formerly Vanderbilt Square Corporation)
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
NOTE 8 - NOTES PAYABLE
Notes payable consist of the following:
18% Promissory Note - Interest payments
scheduled to commence April 19, 1998.
Maturing on March 19, 1999. This note
is owed to an affiliated company. $482,500
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 (a) 50,000
12% Promissory Note - Payable to an
affiliate. Maturing on August 18, 1999. 150,000
12% Promissory Note - Payable to an
affiliate. Proceeds used for working
capital. Maturing on July 7, 1999. 100,000
$782,500
(a) The Company is presently negotiating the settlement of this note.
Management expects this obligation to be satisfied in the fourth
calendar quarter.
Interest expense amounts to $51,195 for the nine months ended September 30,
1998. Accrued interest payable amounted to $49,112 as of September 30, 1998.
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.
(d) Interest paid on notes payable amounted to $2,083 for the nine months
ended September 30, 1998.
<PAGE> 13
TREASURE & EXHIBITS INTERNATIONAL, INC.
(Formerly Vanderbilt Square Corporation)
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
NOTE 9 - SUPPLEMENTAL CASH FLOW INFORMATION (Cont'd)
(e) An affiliate paid $150,000 on behalf of the Company in partial settlement
of the note owing to the seller of the Dry Tortugas Artifacts.
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.
Management has concluded that the planned acquisition of "Michaels" is no
longer feasible as originally conceived. All costs incurred in connection
with the proposed acquisition have been included in the accompanying statement
of operations.
NOTE 11 - RELATED PARTY TRANSACTIONS
Consulting Agreement - The Company paid $45,000 to an affiliate in accordance
with a (modified) consulting agreement during the nine months ended September
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 $51,195 for the nine months ended September 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 of approximately $246,000 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.
<PAGE> 14
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 September 30, 1998, the Company had current assets of $73,900, compared to
$195,938 at December 31, 1997; total assets of $2,608,400 as compared to
$195,938 at December 31, 1997; current liabilities of $54,637 as compared to
$17,083 at December 31, 1997, and a current net worth of $26,763 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 nine months ended September 30, 1998, the Company had a decrease in
cash and cash equivalents of $(127,968). The decrease was principally
attributed to a net loss of ($152,092) from operations in the period and the
Company's use of its cash in operating activities and advances to affiliates.
At September 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
<PAGE> 15
deepening liquidity problem in the near term.
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
has been significantly hampered by the recent need to abandon the Michael's
acquisition plan now determined to be unworkable due to a lack of auditability
of all of the Michael's operations. The Company will now be required to
modify its 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
Registrant in the acquisition of the certain treasure artifacts from Seahawk
on or about March 19, 1998.
<PAGE> 16
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
scheduled 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 November 6, 1998.
The Registrant was 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 November 1, 1998, the Company's liquidity is worse than
limited and will likely diminish in the near term in the continuing absence of
current commercial operations and in the face of on-going general and
administrative expenses. The Registrant knows of no other trend, additional
<PAGE> 17
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 November 1, 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 effort to determine and
implement an alternative transaction with Michael's Treasure Jewelry, Inc.,
are successful a plan is determined and 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. If the Company is ultimately unable to secure needed
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, it will be unable to complete an as
yet undetermined transaction with Michael's. While the Company currently
anticipates implementation of another 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 nine months ended June 30, 1998 of
$7,674, as compared to $9,688 at September 30, 1997. The principal reason for
the decrease in revenues was a decrease in interest and dividend income.
Operating expenses increased to $68,151 for the quarter ended September
30, 1998 as compared to $21,472 at September 30, 1997. The difference between
operating expenses at September 30, 1998 and September 30, 1997, was $46,679.
The difference between September 30, 1998 and 1997, is directly attributable
to an increase in General and Administrative Expenses. During the quarter
ended Sepember 30, 1998 the Company sustained a net loss of ($62,459) as
compared to a net loss of ($20,966) during the comparable quarter of 1997.
<PAGE> 18
At September 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 following its recent abandonment of the prior acquisition plan
pending its current efforts toward developing, entering into and closing some,
as yet undetermined other form of transaction with Michael's. While there can
be no present assurance that the Company will not again encounter one or more
insurmountable obstacle to successful completion of such a transaction, the
Company believes that it will be able to do so. 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 a financing effort
however may preclude its successful implementation. In that event, the
Company will be adversely affected.
<PAGE> 19
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 no Current Reports on Form 8-K during this reporting
period.
On October 30, 1998, however, the Registrant filed a Current Report on Form
8-K reporting its abandonment of the prior plan to acquire all of the capital
stock of Michael's Treasure Jewelry, Inc. as unworkable. See Item 2. -
"Liquidity".
<PAGE> 20
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: November 11, 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 in its
etirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 51,827
<SECURITIES> 22,073
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 73,900
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,432,500
<CURRENT-LIABILITIES> 854,637
<BONDS> 0
0
0
<COMMON> 2,599
<OTHER-SE> 24,164
<TOTAL-LIABILITY-AND-EQUITY> 2,608,400
<SALES> 0
<TOTAL-REVENUES> 7,674
<CGS> 0
<TOTAL-COSTS> 159,766
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (152,092)
<INCOME-TAX> 0
<INCOME-CONTINUING> (152,092)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (152,092)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
