SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________to________.
Commission File No. 2-96366-A
TREASURE AND EXHIBITS INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
Florida 59-2483405
- --------------------------------- ---------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
2300 Glades Road, Suite 450, West Tower, Boca Raton, Florida 33431
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(Address of principal executive offices)
(531) 750-7535
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(Registrant's telephone number, including area code)
----------------------------------------------------
(Former name, former address and formal fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes No X
As of April 10, 2000, 28,990,756 shares of Common Stock of the issuer were
outstanding.
<PAGE>
TREASURE AND EXHIBITS INTERNATIONAL
INDEX
Page
Number
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1999 and
December 31, 1998............................................ 1
Consolidated Statements of Operations - For the
three months and six months ended June 30, 1999 and 1998..... 2
Consolidated Statements of Cash Flows - For the six
months ended June 30, 1999 and 1998.......................... 3
Notes to Consolidated Financial Statements................... 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 5
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................. 7
SIGNATURES.............................................................. 8
1
<PAGE>
Item 1 - Financial Statements
TREASURE AND EXHIBITS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
June 30, December 31,
ASSETS 1999 1998
--------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 79,725 $ 1,544
Investments in marketable securities 19,553 19,553
Note receivable 0 750,000
----------- ------------
Total current assets 99,278 771,097
Property and Equipment 2,691,577 2,700,000
Other assets 7,622 500
----------- ------------
Total assets $ 2,798,477 $ 3,471,597
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 520,436 $ 100,834
Notes and loans payable - related parties 2,515,904 2,171,054
Put option 1,615,000 1,615,000
----------- ------------
Total current liabilities 4,651,340 3,886,888
Stockholders' Deficiency:
Common stock $.0001 par value, 50,000,000
authorized, 28,990,756 shares outstanding
as of June 30, 1999 and December 31, 1998 2,899 2,899
Additional paid-in capital 1,541,113 1,541,113
Accumulated Deficit (3,396,875) (1,959,303)
----------- ------------
Total stockholders' equity (1,852,863) (415,291)
----------- ------------
Total liabilities and stockholders' equity $ 2,798,477 $ 3,471,597
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements
1
<PAGE>
TREASURE AND EXHIBITS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1999 1998 1999 1998
------ ----- ------ ------
<S> <C> <C> <C> <C>
Revenue:
Interest and dividend income $ 221 $ 184 $ 465 $ 995
Realized and unrealized gain
on investments
in marketable securities 0 2,169 0 987
---------- ---------- --------- ---------
221 2,353 465 1,982
General and administrative
expenses 198,392 50,501 398,037 91,615
---------- ---------- --------- ---------
Income (loss) from continuing
operations before income tax
(expense) benefit (198,171) (48,148) (397,572) (89,633)
Income tax (expense) benefit (81,000) 0 (385,000) 0
---------- ---------- --------- ---------
Net Income (loss) from
continuing operations (279,171) (48,148) (782,572) (89,633)
Discontinued operations:
Loss from operations of
discontinued operations
(net of tax benefit of
$181,000 and $385,000) $(137,000) $ 0 $(655,000) 0
---------- ---------- --------- ---------
Net income (loss) $(416,171) $ (48,148) (1,437,572) (89,633)
========== ========== ========= =========
Basic net income (loss) from
continuing operations per
share $ (.01) $ 0 $ (.03) $ 0
========== ========== ========= =========
Basic income (loss) per share $ (.01) $ 0 $ (.05) $ 0
========== ========== ========= =========
Weighted average shares
outstanding 28,990,756 25,990,756 28,990,756 21,926,867
=========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements
2
<PAGE>
TREASURE AND EXHIBITS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
Six Months Ended June 30,
---------------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (1,437,572) $ (89,633)
Adjustments to reconcile net income (loss) to net cash
and cash equivalents provided by (used in)
operating activities:
Expenses paid by affiliate on behalf of Company 271,267 0
Depreciation 25,523 0
Realized and unrealized gain on sale of marketable
securities 0 (987)
Changes in operating assets and liabilities:
(Increase) decrease in other assets (7,122) 0
Increase (decrease) in accounts payable and
accrued liabilities 419,602 38,974
---------- ----------
Net cash provided by (used in) operating activities (728,302) (51,646)
---------- ----------
Cash flows from investing activities:
Loan advances to affiliates $ 0 $(125,000)
Principal payments received from others 750,000 0
---------- ----------
Net cash provided by (used in) investing activities 750,000 (125,000)
---------- ----------
Cash flows from financing activities:
Proceeds from notes payable - affiliates 56,483 0
---------- ----------
Net cash provided by financing activities 56,483 0
---------- ----------
Net (decrease) increase in cash and cash equivalents 78,181 (176,646)
Cash and cash equivalents, as of beginning of period 1,544 179,795
---------- ----------
Cash and cash equivalents, as of end of period $ 79,725 $ 3,149
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements
3
<PAGE>
TREASURE AND EXHIBITS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
1. INTERIM PRESENTATION
The interim consolidated financial statements are prepared pursuant to the
requirements for reporting on Form 10-Q. These statements include the
accounts of Treasure and Exhibits International, Inc. (the "Company") and
all of its wholly owned and majority owned subsidiary companies. The
December 31, 1998 balance sheet data was derived from audited financial
statements but does not include all disclosures required by generally
accepted accounting principles. The interim financial statements and notes
thereto should be read in conjunction with the financial statements and
notes included in the Company's Form 10-K for the year ended December 31,
1998. In the opinion of management, the interim financial statements
reflect all adjustments of a normal recurring nature necessary for a fair
statement of the results for the interim periods presented. The current
period results of operations are not necessarily indicative of results
which ultimately will be reported for the full year ending December 31,
1999.
2. SIGNIFICANT RISKS AND UNCERTAINTIES
During 1999, the Company discontinued all of its business operations and
surrendered all of its remaining assets to First Capital Services, Inc., an
entity related by common control and ownership, in settlement of
outstanding loans payable, in lieu of foreclosure. Additionally the Company
is a defendant in several lawsuits, the outcome of which cannot be
determined. These factors raise substantial doubt as to the ability of the
Company to continue as a going concern.
4
<PAGE>
Item 2. Management's Discussion and Analysis Of Financial Condition And Results
Of Operations
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of Securities Exchange
Act of 1934. Statements contained herein which are not historical facts are
forward-looking statements that involve risks and uncertainties. All phases of
the Company's operations are subject to a number of uncertainties, risks and
other influences. Therefore, the actual results of the future events described
in such forward-looking statements in this Form 10-Q could differ materially
from those stated in such forward-looking statements. Among the factors which
could cause the actual results to differ materially are the risks and
uncertainties described both in this Form 10-Q and the risks, uncertainties and
other factors set forth from time to time in the Company's other public reports,
filings and public statements. Many of these factors are beyond the control of
the Company, any of which, or a combination of which, could materially affect
the results of the Company's operations and whether the forward-looking
statements made by the company ultimately prove to be accurate.
Results Of Operations
Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998
Revenues. Net revenues decreased $2,132, or 90.6%, to $221 for the three
months ended June 30, 1999 from $2,353 for the three months ended June 30, 1998.
The decrease is attributable to having no realized and unrealized gains on
investments in marketable securities for the three month period ended June 30,
1999 compared to a $2,169 gain on realized and unrealized investments in
marketable securities during the same period in 1998 which was partially offset
by having $37 of additional interest and dividend income for the three months
ended June 30, 1999.
General and Administrative Expenses. General and administrative expenses
totaled $198,392 for the three months ended June 30, 1999 an increase of
$147,891 or 292.8%, from $50,501 during the same period in the prior fiscal
year. The increase is primarily attributable to expenses incurred in building
the required infrastructure to open the gaming operations.
Losses from continuing operations. Losses from continuing operations
totaled $279,171 for the three months ended June 30, 1999, an increase of
$231,023 or 479.8% from $48,148 during the same period in 1998. This increase is
primarily attributable to increased general and administrative expenses.
Losses from discontinued operations. Losses from discontinued operations
resulted from the shutting down of the casino operations and totaled $137,000
(net of a tax benefit of $181,000), for the three months ended June 30, 1999,
compared to none in the same period of the prior year. The losses are primarily
attributable to revenues of $102,000 which were offset by direct costs of
$7,000; wages of $75,000; accounting for a default judgment of $130,000 pursuant
to claims relating to berthing space of our casino ship; rent of $30,000;
marketing of $40,000; depreciation of $13,000; $11,000 of payroll tax expense
and $113,000 of various other expenses.
5
<PAGE>
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
Revenues. For the six months ended June 30, 1999, net revenues decreased
$1,517, or 76.5%, to $465 as compared to total revenues of $1,982 during the six
months ended June 30, 1998. The decrease is primarily attributable to a lack of
earnings from realized and unrealized gain on investments in marketable
securities and a decrease of $530 or 53.3% to $465 in interest and dividend
income during the six month period ended June 30, 1999 compared to $995 in
interest and dividend income during the same period in 1998.
General and Administrative Expenses. General and administrative expenses
totaled $398,037 during the six months ended June 30, 1999 an increase of
$306,422 or 334.5%, from $91,615 during the same period in the prior fiscal
year. This increase is primarily attributable to our start up costs associated
with the maiden voyage of our casino cruise ship the acquisition of an adult
gaming complex in Sunny Isles, Florida, as well as the leasing costs to berth
the ship.
Losses from continuing operations. Losses from continuing operations
totaled $782,572 for the six months ended June 30, 1999, an increase of $692,939
or 343.6% from $89,633 during the same period in 1998. This increase is
primarily attributable to increased general and administrative expenses relating
to the start up and leasing costs of a casino cruise ship, and the acquisition
of an adult gaming facility.
Losses from discontinued operations. Losses from discontinued operations
resulted from the shutting down of the casino ship operations and totaled
$655,000 (net of a tax benefit of $385,000), for the six months ended June 30,
1999, as compared to none in the same period of the prior year. The losses are
attributable to revenues of $278,000 which were offset by direct costs of
$62,000; maintenance charges for the cruise ship of $77,000; lease and berth
space costs of $354,000 and accounting for a default judgment of $130,000
pursuant to claims relating to berthing space of our casino ship; wages and
subcontracting fees of 378,000; payroll tax of $33,000; marketing costs of
$85,000; depreciation of $13,000 and $186,000 of the other costs.
Financial Condition, Liquidity and Capital Resources
The Company had a cash balance of $79,725 and a deficit working capital of
$ 4,552,062 at June 30, 1999 compared to a cash balance of $1,544 and a deficit
in working capital of $3,115,791 at June 30, 1998. The increase in cash is
primarily attributable to the payment of the $750,000 note receivable. The
decrease in working capital was primarily attributable to a decrease of $750,000
in notes receivable and an increase of $419,602 in accounts payable and accrued
liabilities.
For the six months ended June 30, 1999 cash used in operating activities
amounted to $728,302 as compared to cash used by operating activities of $51,656
for the corresponding period of the prior year. This change resulted primarily
from an increase in the net operating loss and in other assets which were
partially offset by an increase of $271,267 in expenses paid by an affiliate; an
increase of $25,523 in depreciation; and increase of $380,628 in accounts
payable and accrued liabilities.
6
<PAGE>
Net cash provided by investing activities increased to $750,000 during the
six months ended June 30, 1999 from $125,000 used in investing activities during
the six months ended June 30, 1998. This increase is attributable to payment of
a $750,000 note related to the sale of artifacts and the absence of loans to
affiliates.
Net cash provided by financing activities increased to $56,483 during the
six months ended June 30, 1999 from none during the six months ended June 30,
1998. This increase was attributable to proceeds from notes payable from an
affiliate.
By December 1999 we had ceased all operations and had defaulted on our
master loan agreement with our affiliate First Capital Services, Inc. ("First
Capital") whereby we had acquired funds to purchase certain treasured artifacts
and lease a casino cruise ship, as well as a $750,000 note to First Capital
which we assumed in connection with the acquisition of an adult gaming facility.
At close of business of December 31, 1999, First Capital accepted the artifacts
and gambling machines and related assets as settlement of amounts due under both
the master loan agreement and the $750,000 note.
In January 2000, we entered into a letter of intent to acquire 100% of
Union IPO Corporation ("Union IPO"), a Nevada corporation in exchange for
15,000,000 shares of the Company's common stock. Union IPO is an investment firm
targeting labor resources and union based venture capital, and promoting union
friendly technology companies. In connection with the Union IPO acquisition, a
majority of our shareholders have approved a name change to Union IPO, Inc. and
an increase in the number of authorized shares from 50,000,000 to 100,000,000.
While there can be no assurance that we will not encounter an insurmountable
obstacle to successful completion of the Union IPO acquisition such as being
able to resolve the outstanding litigation on terms satisfactory to the Company,
we believe that we will be able to do so during 2000. It is unlikely that we
will be able to generate any revenues unless and until we consummate the Union
IPO transaction, or another operating company. In the event that we cannot
acquire Union IPO, we will be primarily dependent upon the efforts of our
President to seek out, and negotiate other business opportunities. Even if we do
successfully acquire Union IPO, or any other operating company, there can be no
assurance that we will ever operate at a profit.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
During the three months ending June 30, 1999, we filed one report on
Form 8-K announcing the resignation of our former Chief Executive
Officer, Lee Summers, and appointing the undersigned as President.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
TREASURE AND EXHIBITS INTERNATIONAL, INC.
By:
-----------------------------------
Larry Schwartz
President, Chief Executive Officer
and Chief Financial Officer
Dated: May ____, 2000
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 79,725
<SECURITIES> 19,553
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 99,278
<PP&E> 2,691,577
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,798,477
<CURRENT-LIABILITIES> 4,651,340
<BONDS> 0
0
0
<COMMON> 2,899
<OTHER-SE> (1,855,762)
<TOTAL-LIABILITY-AND-EQUITY> 2,798,477
<SALES> 0
<TOTAL-REVENUES> 465
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 398,307
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (397,572)
<INCOME-TAX> (385,000)
<INCOME-CONTINUING> (782,572)
<DISCONTINUED> (655,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,437,572)
<EPS-BASIC> (.05)
<EPS-DILUTED> (.05)
</TABLE>
