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 March 31, 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 - December 31, 1998
and March 31, 1999.......................................... 1
Consolidated Statements of Operations - For the three
months ended March 31, 1999 and March 31, 1998.............. 2
Consolidated Statements of Cash Flows - For the three
months ended March 31, 1999 and March 31, 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.............................................................. 7
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
TREASURE AND EXHIBITS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
March 31, December 31,
ASSETS 1999 1998
----------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 42,259 $ 1,544
Investments in marketable securities 19,553 19,553
Note receivable 126,017 750,000
----------- ------------
Total current assets 187,829 771,097
Property and Equipment 2,704,534 2,700,000
Other assets 7,622 500
----------- ------------
Total assets $ 2,899,985 $ 3,471,597
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 268,926 $ 100,834
Notes and loans payable - related parties 2,452,751 2,171,054
Put option 1,615,000 1,615,000
----------- ------------
Total current liabilities 4,336,677 3,886,888
Stockholders' Deficiency:
Common stock $.0001 par value, 50,000,000
authorized, 28,990,756 shares
outstanding as of March 31, 1999
and December 31, 1998 2,899 2,899
Additional paid-in capital 1,541,113 1,541,113
Accumulated deficit (2,980,704) (1,959,303)
----------- ------------
Total stockholders' equity (1,436,692) (415,291)
----------- ------------
Total liabilities and stockholders' equity $ 2,899,985 $ 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
Three Months Ended
March 31,
1999 1998
------ ------
Revenue:
Interest and dividend income $ 244 $ 811
Realized and unrealized gain on investments
in marketable securities 0 (1,182)
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244 (371)
General and administrative expenses 199,645 41,114
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Income (loss) from continuing operations
before income tax (expense) benefit (199,401) (41,485)
Income tax (expense) benefit (304,000) 0
--------- ----------
Net Income (loss) from continuing operations (503,401) (41,485)
Discontinued operations:
Loss from operations of discontinued operations $ (518,000) $ 0
--------- ----------
Net income (loss) $(1,021,401) $ (41,485)
========== ==========
Basic net income (loss) from continuing
operations per share $ (.02) $ 0
========== ==========
Basic income (loss) per share $ (.04) $ 0
========== ==========
Weighted average shares outstanding 28,990,756 17,862,978
=========== ===========
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>
Three Months Ended March 31,
----------------------------
1999 1998
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (1,021,401) $ (41,485)
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 264,607 0
Depreciation 12,556 0
Realized and unrealized gain on sale of marketable
securities 0 1,182
Changes in operating assets and liabilities:
(Increase) decrease in other assets (7,122) 0
Increase (decrease) in accounts payable and
accrued liabilities 168,092 21,020
---------- ----------
Net cash provided by (used in) operating activities (583,268) (19,283)
Cash flows from investing activities:
Loan advances to affiliates $ 0 $(125,000)
Principal payments received from others 623,983 0
Net cash provided by (used in) investing activities 623,983 (125,000)
Cash flows from financing activities:
Proceeds from notes payable - affiliates 0 0
Net cash provided by financing activities 0 0
Net (decrease) increase in cash and cash equivalents 40,715 (144,283)
Cash and cash equivalents, as of beginning of period 1,544 179,795
Cash and cash equivalents, as of end of period $ 42,259 $ 35,512
</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
(Unaudited)
March 31, 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 March 31, 1999 Compared to Three Months Ended March 31, 1998
Revenues. Net revenues increased $615, to $244 for the three months ended
March 31, 1999 from $(371) for the three months ended March 31, 1998. This
increase is attributable to a loss of $1,182 on realized and unrealized gain on
investments in marketable securities for the three months ended March 31, 1998
(compared to no loss during the same period in 1999), which was partially offset
by higher interest and dividend income.
General and Administrative Expenses. General and administrative expenses
totaled $199,645 during the three months ended March 31, 1999, an increase of
$158,531 or 385.6% from $41,114 during the same period in the prior fiscal year.
The increase in general and administrative expenses was primarily attributable
to expenses incurred in developing the infrastructure to pursue the gaming
operations.
Losses from continuing operations. Losses from continuing operations
totaled $503,401 for the three months ended March 31, 1999, an increase of
$461,916 or 1,113.5% from $41,485 during the same period in 1998. This increase
is primarily attributable to expenses related to the lease of the casino curise
ship and costs associated with start up of the gaming facility.
Losses from discontinued operations. Losses from discontinued operations
resulted from shutting down the cruise operations and totaled $822,000, for the
three months ended March 31, 1999, compared to none in the same period of the
prior year. The losses are primarily attributable to revenues of $176,000 which
were offset by direct costs of $55,000; maintenance charges for the cruise ship
of $77,000; lease and berth space costs of $324,000, wages and subcontracting
fees of $303,000, payroll tax of $22,000, marketing costs of $45,000 and other
cost of 172,000.
5
<PAGE>
Financial Condition, Liquidity and Capital Resources
The Company had a cash balance of $42,259 and a working capital deficit of
$4,148,848 at March 31, 1999 compared to a cash balance of $1,544 and a working
capital deficit of $3,115,791 at December 31, 1998. The decrease in working
capital was primarily attributable to an increase of $168,092 in accounts
payable; an increase of $281,697 in notes and loans payable; and a decrease of
$623,983 in notes receivables.
For the three months ended March 31, 1999, net cash used in operating
activities totaled $583,268 as compared to $19,283 for the corresponding period
of the prior year. This change resulted from an increased net loss and an
increase in other assets which were partially offset by an increase of $264,607
in expenses paid by an affiliate; an increase in depreciation expense of
$12,556; and an increase of $147,072 in accounts payable and accrued
liabilities.
Net cash provided by investing activities totaled $623,983 during the three
months ended March 31, 1999 compared with $125,000 used in investing activities
during the three months ended March 31, 1998. This increase was attributable to
an increase of $623,983 in payments received from others and a decrease in
advances to affiliates of $125,000.
We had no cash flows resulting from financing activities for either the
three months ended March 31, 1999 or March 31, 1998.
As of December 1999 we had ceased all operations and had defaulted on our
master loan agreement with our affiliate First Capital Services, Inc. ("First
Capital") who had provided the 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. As of
the 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.
6
<PAGE>
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 quarter ended March 31, 1999 we filed a report of
announcing our change of auditors from Thomas W. Klash, CPA to Rachlin
Cohen Holtz, CPA in Ft. Lauderdale, Florida.
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:/s/ Larry Schwartz
--------------------------------------
Larry Schwartz
President, Chief Executive Officer and
Chief Financial Officer
Dated: May 12, 2000
7
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 42,259
<SECURITIES> 19,553
<RECEIVABLES> 126,017
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 187,829
<PP&E> 2,704,534
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,899,985
<CURRENT-LIABILITIES> 4,336,677
<BONDS> 0
0
0
<COMMON> 2,899
<OTHER-SE> (1,439,591)
<TOTAL-LIABILITY-AND-EQUITY> 2,899,985
<SALES> 0
<TOTAL-REVENUES> 244
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 199,645
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (199,401)
<INCOME-TAX> (304,000)
<INCOME-CONTINUING> (503,401)
<DISCONTINUED> (518,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,021,401)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
</TABLE>
