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 September 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)
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(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 - September 30, 1999
and December 31, 1998.................................. 1
Consolidated Statements of Operations - For the
three months and nine months ended September 30,
1999 and 1998.......................................... 2
Consolidated Statements of Cash Flows - For the nine
months ended September 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
<PAGE>
Item 1 - Financial Statements
TREASURE AND EXHIBITS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
September 30, December 31,
ASSETS 1999 1998
-------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 58,338 $ 1,544
Investments in marketable securities 19,553 19,553
Note receivable 0 750,000
----------- -----------
Total current assets 77,891 771,097
Property and Equipment 2,679,117 2,700,000
Other assets 7,622 500
----------- -----------
Total assets $ 2,764,630 $3,471,597
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 677,831 $ 100,834
Notes and loans payable - related parties 2,560,404 2,171,054
Put option 1,615,000 1,615,000
----------- -----------
Total current liabilities 4,853,235 3,886,888
Stockholders' Deficiency:
Common stock $.0001 par value, 50,000,000
authorized, 28,990,756 shares outstanding
as of September 30, 1999 and December 31, 1998 2,899 2,899
Additional paid-in capital 1,541,113 1,541,113
Accumulated Deficit (3,632,617) (1,959,303)
----------- -----------
Total stockholders' equity (2,088,605) (415,291)
----------- -----------
Total liabilities and stockholders' equity $ 2,764,630 $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 Nine Months Ended
September 30, September 30,
---------------------- ------------------------
1999 1998 1999 1998
---- ----- ------ ------
<S> <C> <C> <C> <C>
Revenue:
Interest and dividend income $ 80 $ 750 $ 545 $ 1,745
Realized and unrealized gain
on investments
in marketable securities 0 4,942 0 5,929
--------- ---------- ---------- ----------
80 5,692 545 7,674
General and administrative
expenses 106,822 68,151 504,859 159,766
--------- ---------- ---------- ----------
Income (loss) from continuing
operations before income tax
(expense) benefit (106,742) (62,459) (504,314) (152,092)
Income tax (expense) benefit (39,000) 0 (424,000) 0
--------- ---------- ---------- ----------
Net Income (loss) from
continuing operations (145,742) (62,459) (928,314) (152,092)
Discontinued operations:
Loss from operations of
discontinued operations
(net of tax benefit of
$39,000 and $424,000) $ (90,000) $ 0 $ (745,000) $ 0
--------- ---------- ---------- ----------
Net income (loss) $ (235,742) $ (62,459) (1,673,314) (152,092)
========= ========== ========== ==========
Basic net income (loss) from
continuing operations per
share $ 0 $ 0 $ (.03) $ (.01)
========= ========== ========== ==========
Basic income (loss) per share $ ( .01) $ 0 $ ( .06) $ (.01)
========= ========== ========== ==========
Weighted average shares
outstanding 28,990,756 25,990,756 28,990,756 23,281,496
=========== ============ ============ ===========
</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>
Nine Months Ended September 30,
-------------------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (1,673,314) $(152,092)
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 270,738 0
Depreciation 38,512 0
Realized and unrealized gain on sale of marketable
securities 0 (5,930)
Changes in operating assets and liabilities:
(Increase) decrease in other assets (7,122) 0
Increase (decrease) in accounts payable and
accrued liabilities 576,997 55,054
----------- -----------
Net cash provided by (used in) operating activities (794,189) (108,898)
----------- -----------
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 100,983 100,000
----------- -----------
Net cash provided by financing activities 100,983 100,000
----------- -----------
Net (decrease) increase in cash and cash equivalents 56,794 (133,898)
Cash and cash equivalents, as of beginning of period 1,544 179,795
----------- -----------
Cash and cash equivalents, as of end of period $ 58,338 $ 45,897
=========== ===========
</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
September 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
Quarter Ended September 30, 1999 Compared to Quarter Ended September 30, 1998
Revenues. Net revenues decreased by $5,612, or 98.6%, to $80 for the
quarter ended September 30, 1999 from $5,692 for the quarter ended September 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
$670 to $80 in interest and dividend income during the three month period ended
September 30, 1999 compared to $4,942 in earnings on realized and unrealized
gain on investments in marketable securities and $750 in interest and dividend
income during the same period in 1998.
General and Administrative Expenses. General and administrative expenses
totaled $106,822 during the quarter ended September 30, 1999, an increase of
$38, 621 or 56.7%, from $68,151 during the same period in the prior fiscal year.
The increases in expenses during the quarter are primarily attributable costs
incurred in connection with expenses incurred in establishing an infrastructure
for the gaming operations.
Losses from continuing operations. Losses from continuing operations
totaled $145,742 for the quarter ended September 30, 1999, an increase of
$83,283 or 133.3% from $62,459 during the same period in 1998. This increase is
primarily attributable to the increase in general and administrative expenses.
Losses from discontinued operations. Losses from discontinued operations
resulted from shutting down the cruise operations and totaled $90,000 (net of a
tax benefit of $39,000), for the three months ended September 30, 1999, as
compared to none in the same period of the prior year. The losses are
attributable to revenues of $9,000 which were offset by direct costs of $2,000;
settlement of a lawsuit involving claims for outstanding management fees
relating to the operation of the adult gaming facility in the amount of $80,000;
depreciation of $13,000; rent of $25,000 and wages of $13,000 and other costs of
$5,000.
5
<PAGE>
Nine Months Ended September 30, 1999 Compared to Nine Months Ended September 30,
1998
Revenues. For the nine months ended September 30, 1999, net revenues
decreased by $7,129, or 92.9%, to $545 as compared to total revenues of $7,674
during the nine months ended September 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 $1,200 to $545 in
interest and dividend income during the nine month period ended September 30,
1999 compared to $5,929 in earnings on realized and unrealized gain on
investments in marketable securities and $1,745 in interest and dividend income
during the same period in 1998.
General and Administrative Expenses. General and administrative expenses
totaled $504,859 during the nine months ended September 30, 1999, an increase of
$345,083 or 216%, from $159,776 during the same period in the prior fiscal year.
The increase in expenses during the nine months ended September 30, 1999 is
primarily attributable to the lease of our casino cruise ship and relating berth
space and costs associated with the establishment of an adult gaming complex in
Sunny Isles, Florida.
Losses from continuing operations. Losses from continuing operations
totaled $928,314 for the nine months ended September 30, 1999, an increase of
776,222 or 510.4% from $152,092 during the same period in 1998. This increase is
primarily attributable to increased general and administrative expenses relating
to start up and leasing costs of a casino cruise ship, and the establishment of
the adult gaming facility.
Losses from discontinued operations. Losses from discontinued operations
resulted from shutting down the cruise operations and totaled $745,000 (net of a
tax benefit of $424,000), for the nine months ended September 30, 1999, as
compared to none in the same period of the prior year. The losses are
attributable to revenues of $287,000 which were offset by direct costs of
$64,000; maintenance charges for the cruise ship of $77,000; lease and berth
space costs of $379,000 and accounting for a default judgment of $130,000
pursuant to claims relating to berthing space of our casino ship; settlement of
a lawsuit involving claims for outstanding management fees relating to the
operation of the adult gaming facility in the amount of $80,000; wages and
subcontracting fees of $391,000; payroll tax of $34,000; marketing costs of
$85,000; depreciation of $26,000 and other costs of $190,000.
Financial Condition, Liquidity and Capital Resources
The Company had a cash balance of $58,338 and a deficit working capital of
$ 4,775,344 at September 30, 1999 compared to a cash balance of $1,544 and a
deficit in working capital of $3,115,791 at September 30, 1998. The increase in
cash is attributable to the payment of a $750,000 note receivable from an
affiliate. The decrease in working capital was is partially attributable to the
decrease of $750,000 in notes receivable; an increase of $576,997 in accounts
payable and accrued liabilities; and an increase of $389,350 in notes and loans
payable to related parties.
For the nine months ended September 30, 1999 cash used in operating
activities totaled $794,189 as compared to cash used in operating activities of
$108,898 for the corresponding period of the prior year. This change resulted
from an increase in the net operations loss and other assets which was partially
offset by increases of $270,738 in expenses paid by an affiliate and increase of
$521,943 to $576,997 in accounts payable and accrued liabilities and
depreciation of $38,512. Net cash provided by investing activities increased to
$750,000 during the nine months ended September 30, 1999 from $125,000 used in
investing activities during the nine months ended September 30, 1998. This
increase was attributable to the payment of a $750,000 note related to the sale
of artifacts and the absence of loans to affiliates.
6
<PAGE>
Net cash provided by financing activities increased by $983 to $100,983
during the nine months ended September 30, 1999 from $100,000 during the nine
months ended September 30, 1998. This increase was attributable to increased
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 the 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 a transaction with 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
None
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
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 58,338
<SECURITIES> 19,553
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 77,891
<PP&E> 2,679,117
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,764,630
<CURRENT-LIABILITIES> 4,853
<BONDS> 0
0
0
<COMMON> 2,899
<OTHER-SE> (2,091,504)
<TOTAL-LIABILITY-AND-EQUITY> 2,764,630
<SALES> 0
<TOTAL-REVENUES> 545
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 504,859
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (504,314)
<INCOME-TAX> (424,000)
<INCOME-CONTINUING> (928,314)
<DISCONTINUED> (745,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,673,314)
<EPS-BASIC> (.06)
<EPS-DILUTED> (.06)
</TABLE>
