UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
(X) Quarterly Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the quarterly period ended October 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 Number: 0-28514
TREASURY INTERNATIONAL, INC.
---------------------------------------------
(Name of Small Business Issuer in Its Charter)
Delaware 98-0160284
------------------------------ ---------------------------------
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
1081 King St., E 2nd Floor
Kitchener, Ontario N2G 2N1
----------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
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(Former Name, Former Address and Former 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
ii
As of October 31, 1999, 93,920,677 shares of the registrant's common
stock were outstanding.
The aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of October 31, 1999 was $5,219,063.
1
PART I Financial Information
ITEM 1. Financial Statements
ACCOUNTANTS' REVIEW REPORT
BROMBERG & ASSOCIATE 1183 Finch Ave.West, Suite 305
--------------------- Toronto, Ontario M3T 2G2
CHARTERED ACCOUNTANTS Phone: (416) 663-7521
Fax: (416) 663-1546
Board of Directors and Shareholders
Treasury International, Inc.
We have reviewed the accompanying interim consolidated balance sheet of Treasury
International, Inc. as at October 31, 1999 and the interim consolidated
statements of operations and cash flows for the nine months then ended, in
accordance with statements on standards for accounting and review services
issued by the American Institute of Certified Public Accountants. All
information included in these interim consolidated financial statements is the
representation of management of Treasury International, Inc.
A review consists principally of inquiries of company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted audit standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to be in conformity with generally accepted accounting principles.
BROMBERG & ASSOCIATE
CHARTERED ACCOUNTANTS
TORONTO, CANADA
January 24, 2000
2
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED BALANCE SHEET
AS AT OCTOBER 31, 1999
(UNAUDITED)
ASSETS
October 31, 1999 January 31, 1999
---------------- ----------------
CURRENT
Bank $ - $ 19,956
Accounts Receivable 509,590 850,000
Due from Wexcap Group 3,000 -
Sundry Assets 3,083 3,098
---------------- ---------------
TOTAL CURRENT ASSETS 515,673 873,054
PROMISSORY NOTE RECEIVABLE (Note 3) 3,990,000 4,000,000
GOODWILL (Notes 2b & 4) 387,618 -
RESEARCH AND DEVELOPMENT COSTS (Notes 2c & 5) 68,860 -
CAPITAL ASSETS (Notes 2d & 6) 12,869 6,935
---------------- ---------------
TOTAL ASSETS $4,975,020 $4,879,989
================ ===============
LIABILITIES
CURRENT LIABILITIES
Bank Indebtedness $ 43,813 $ -
Account Payable and Accrued Liabilities 184,404 83,807
Current portion of long-term debt (Note 7) 1,240,602 1,240,602
---------------- ---------------
$ 1,468,819 $ 1,324,409
NOTES PAYABLE (Note 8) 284,009 -
---------------- ---------------
TOTAL LIABILITIES 1,752,828 1,324,409
---------------- ---------------
SHAREHOLDERS' EQUITY
SHARE CAPITAL
Authorized
100,000,000 common shares
Issued
93,920,677 common shares
9,392 8,832
CONTRIBUTED SURPLUS (Note 10) 4,770,516 4,455,076
DEFICIT (Note 11) (1,557,716) (908,328)
---------------- ---------------
3,222,192 3,555,580
---------------- ---------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $4,975,020 $4,879,989
================ ===============
3
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED STATEMENT OF DEFICIT
NINE MONTHS ENDED OCTOBER 31, 1999
(UNAUDITED)
October 31, 1999 October 31, 1998
------------------ ------------------
Balance, Beginning of Period as restated ($908,328) ($3,066,963)
Adjustment to Selling Price of Mega Blow Moulding Limited ($850,000) -
(Note 11)
Net (Income) Loss for the Period 200,612 (212,523)
------------------ -------------------
Balance, End of Period ($1,557,716) $(3,279,486)
================== ===================
4
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED OCTOBER 31, 1999
(UNAUDITED)
October 31,1999 October 31,1998
------------------- ------------------
REVENUE From Operations $ 205,092 $ 3,395,865
MANAGEMENT FEE INCOME 33,333 -
Interest and Penalty Income 455,521 -
------------------- ------------------
TOTAL INCOME 693,946 3,395,865
COST OF GOODS SOLD 170,045 2,816,383
------------------- ------------------
GROSS PROFIT 523,901 579,482
EXPENSES
General and administrative 314,695 718,107
------------------- ------------------
INCOME (LOSS) FROM OPERATIONS BEFORE UNDER NOTED ITEM 209,206 (138,625)
Interest Expense 8,594 73,898
------------------- ------------------
NET INCOME (LOSS) $200,612 ($212,523)
==================== ===================
Income (Loss) per Share $0.0022 ($0.003)
=================== ==================
Weighted Average Number of Common Shares Outstanding 92,200,296 61,243,332
=================== ==================
5
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED OCTOBER 31, 1999
(UNAUDITED)
October 31,1999 October 31,1998
------------------- ------------------
REVENUE FROM OPERATIONS $ 121,742 $ 1,367,128
MANAGEMENT FEE INCOME 10,000 -
INTEREST AND PENALTY INCOME 204,424 -
------------------- ------------------
TOTAL INCOME 336,166 1,367,128
------------------- ------------------
COST OF GOODS SOLD 95,783 983,334
------------------- ------------------
GROSS PROFIT 240,383 383,794
------------------- ------------------
EXPENSES
General and administrative 120,462 338,075
------------------- ------------------
INCOME FROM OPERATIONS BEFORE UNDER NOTED ITEM 119,921 45,719
Interest Expense 4,175 22,749
------------------- ------------------
NET INCOME $ 115,746 $ 22,970
=================== ==================
Income per Share $ 0.0013 $ 0.0003
=================== ==================
Weighted Average Number of Common Shares Outstanding 92,200,296 61,243,332
=================== ==================
6
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
NINE MONTHS ENDED OCTOBER 31, 1999
(UNAUDITED)
COMMON PAID-IN CONTRIBUTED
SHARES CAPITAL SURPLUS
------------- ----------- --------------
Balance - January 31, 1999 88,320,677 $ 8,832 $ 4,455,076
Issued 1,800,000 shares of common stock for cash 1,800,000 180 99,820
consideration of $100,000
Issued 3,200,000 shares of common stock for all of 3,200,000 320 191,680
the outstanding issued shares of Compelis Corporation
(formerly Pioneer Media Group)
------------- ----------- --------------
Balance-July 31, 1999 93,320,677 $ 9,332 $ 4,746,576
Issued 600,000 shares of common stock in 600,000 60 23,940
consideration for the reduction of the notes payable
by $24,000
------------- ----------- --------------
Balance - October 31,1999 93,920,677 $ 9,392 $ 4,770,516
============= =========== ==============
7
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED OCTOBER 31, 1999
(UNAUDITED)
October 31,1999 October 31,1998
----------------- ----------------
Cash flows from operating activities
Net income (loss) $ 200,612 ($212,523)
Adjustment to Retained Earnings (850,000) -
Adjustment to reconcile net income (loss) to net cash used in - -
operating activities
Increase in deferred Income Taxes - 99
Amortization 24,773 162,906
(Increase) decrease in accounts receivable 340,410 123,533
Increase in amount due from Wexcap Group (3,000) -
Increase in inventories - (166,271)
Decrease in sundry assets 15 39,317
Increase in accounts payable 100,597 80,743
----------------- ----------------
Net cash used for operating activities (186,593) 27,804
----------------- ----------------
Cash flows from financing activities
Promissory note receivable 10,000 -
Notes payable 284,009 -
Long-term debt - (1,480,787)
Proceeds on issue of common shares 316,000 1,495,345
----------------- ----------------
Cash provided by financing activities 610,009 14,558
----------------- ----------------
Cash flows from investing activities
Goodwill (396,809) -
Research and development costs (82,632) -
Purchase of capital assets (7,744) (15,342)
----------------- -----------------
Cash used for investing activities (487,185) (15,342)
----------------- ----------------
Increase in bank indebtedness (63,769) 27,020
Bank balance (indebtedness), beginning of period 19,956 (492,012)
----------------- ----------------
Bank indebtedness, end of period ($43,813) ($464,992)
================= ===============
8
TREASURY INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS AT OCTOBER 31, 1999
The financial information for the nine-month periods ended October 31, 1999 and
1998 presented in this Form 10-QSB has been prepared from accounting records of
Treasury International, Inc. (the "Company") without audit. The information
furnished reflects all adjustments, which are, in the opinion of management,
necessary for a fair statement of the results of interim periods.
The results of operations for the nine months ended October 31, 1999 are not
necessarily indicative of the results to be expected for a full year. The
consolidated balance sheet as of January 31, 1999 has been derived from audited
financial statements. This report should be read in conjunction with the
consolidated financial statements included in the Company's Form 10-KSB for the
Fiscal Year Ended January 31, 1999, as filed with the Securities and Exchange
Commission.
1. Nature of business
Treasury International, Inc. is a holding company which through its wholly
owned subsidiary, Compelis Corporation, is involved in the development of
E-Commerce and Web-enabled databases.
2. Summary of significant accounting policies
a) Basis of consolidation
These consolidated financial statements include the accounts of the
company and the revenues and expenses of its wholly owned subsidiary,
Compelis Corporation, from May 7, 1999, the date of acquisition, to
October 31, 1999.
b) Goodwill
The goodwill arises on the purchase of common shares of Compelis
Corporation. Amortization is provided on a straight-line basis over a
twenty-year period.
c) Research and development costs
The research and development costs relate to the work done in
developing an e-commerce software package and an Internet point of
sale package, together with database development. Amortization is
provided on a straight-line basis over a three-year period.
d) Capital assets
Capital assets are recorded at cost less accumulated amortization.
Amortization is provided as follows:
Office equipment - 20% diminishing balance
Computer equipment - 30 % diminishing balance
Leasehold improvements - term of lease
9
e) Revenue Recognition
Revenue is recognized when customers are invoiced for products shipped
by the company.
f) Income per share
Income per share is calculated based on the weighted average number of
shares outstanding during the period of 92,200,296.
g) General
These financial statements have been prepared in accordance with
United States generally accepted accounting principles (GAAP), as they
relate to these financial statements.
3. Promissory Note Receivable
The promissory note receivable arose on the sale of the company's
subsidiary, Mega Blow Moulding Limited on November 30, 1998.
Further to an Addendum to the Stock Purchase Agreement dated November 5,
1999, the company agreed to extend the due date of the note to January 31,
2000.
4. Goodwill
October 31, 1999 January 31, 1999
------------------------------------------------------------------- ---------------------
Accumulated Net book Net book
Cost Amortization value value
------------------- ------------------- --------------- ---------------------
$396,809 $9,191 $387,618 $ -
=================== =================== =============== =====================
5. Research & Development Costs
October 31, 1999 January 31, 1999
------------------------------------------------------------------ ---------------------
Accumulated Net book Net book
Cost Amortization value value
------------------ ------------------- --------------- ---------------------
$82,632 $13,772 $68,860 $ -
================== =================== =============== =====================
10
6. Capital assets
October 31, 1999 January 31, 1999
--------------------------------------------------- ---------------------
Accumulated Net book Net book
Cost Amortization value value
-------------- ----------------- ------------ ---------------------
Office equipment $21,715 $12,243 $9,472 $6,935
Computer equipment 16,406 13,183 3,223 -
Leasehold improvements 1,407 1,233 174 -
-------------- ----------------- ------------ ---------------------
$39,528 $26,659 $12,869 $6,935
============== ================= ============ =====================
7. Current portion of long-term debt
The current portion of long-term debt is owed to the company's former
subsidiary Mega Blow Moulding Limited.
8. Notes payable
The notes payable consist of the following:
Due Date Principal Amount Interest Rate
-------------- ----------------- --------------
March 31, 2000 $ 34,000 12%
March 31, 2000 $ 8,160 12%
March 31, 2000 $ 52,020 15%
July 15, 2000 $ 40,000 15%
July 31, 2000 $100,000 15%
July 20, 2005 $ 49,829 12%
----------------
Total
9. Income taxes
As at October 31, 1999, the company had a net operating loss carryover of
approximately $2,422,000 expiring in various years through 2014.
10. Contributed surplus
Contributed surplus represents the premium paid on the issuance of common
shares.
11. Adjustment to selling price
The adjustment results from a change to the November 30, 1998 selling price
of the Company's subsidiary, Mega Blow Moulding Limited from $5,100,000 to
$4,250,000.
12
ITEM 2. Management's Discussion and Analysis or Plan of Operation
Overview
The information contained in this Item 2, Management's Discussion and
Analysis or Plan of Operation, contains "forward looking statements" within the
meaning of Section 27A of the Securities Act 1933, as amended (the "Securities
Act"), and Section 21E of the Securities exchange Act of 1934, as amended (the
"Exchange Act"). Actual results may materially differ from those projected in
the forward looking statements as a result of certain risks and uncertainties
set forth in this report. Although management believes that the assumptions made
and expectations reflected in the forward looking statements are reasonable,
there is no assurance that the underlying assumptions will, in fact, prove to be
correct or that actual future results will not be different from the
expectations expressed in this report.
Treasury is an asset management company in the business of acquiring other
organizations and assets which build synergies, enhance business development
opportunities and strengthen management structures for its other business
assets.
On November 30, 1998, Treasury sold its only operating subsidiary, Mega
Blow Mouldings Limited ("MBML"). The Company received a non-refundable deposit
of $250,000, a Promissory Note ("Note") of $4,000,000 and the release of
Treasury as guarantor for MBML's debt at the Royal Bank of Canada. On November
5, 1999 the Company extended the due date of the promissory note from June 1,
1999 to January 31, 2000. In exchange for this extension the Company has
received cash and consideration of $1,394,2266 to retire its long term debt and
the interest due on the Inter-company loan payable to its former subsidiary
MBML. Further the Company has signed a Guaranty and Indemnity Agreement with the
purchaser which releases the Company as a third party guarantor for MBML's debt
with the Royal Bank of Canada.
Treasury, through its wholly owned subsidiary Compelis Corporation,
develops Internet based enterprise commerce solutions that allow companies to
link their trading partners as well as integrate internal applications on a
variety of networks and platforms. These Internet-based hosted applications and
web-enabled industry databases for manufacturers, distributors and retailers
drive down the total cost of technology ownership and support. Additionally
Compelis provides technology based marketing solutions (print and Internet
catalogs and end to end e-commerce enterprise solutions), digital asset
management and creative design for business to business communications.
Compelis hosts a proprietary database of product information from over 300
of the leading manufacturers of industrial products. From this database,
Compelis publishes print, CD-ROM and Internet based catalog solutions for its
industrial customers. Compelis receives and reproduces information for the
database using the latest technology tools and provides output in the formats
required for the target publishing media. Compelis is responsible for the
maintenance of the electronic information and the output applications, all
printing and CD replication is outsourced through third party sources.
Compelis, through its Active Business Solutions suite of software products
builds dynamic web sites which enable Internet users to access information from
a company's catalog, integrate with internal management systems to generate
request for quotation (RFQ), manage requisitions and place orders via purchase
orders or credit card transaction. This Internet-based procurement system
automates the flow of information between buyers and sellers to build cost
12
efficiency into each transaction. Management believes that the strength of
Compelis is its ability to provide customers with a complete end-to-end print,
CD-ROM and Internet commerce solution. Compelis' current target markets include
distributors and manufacturers of industrial, maintenance repair and operation
(MRO), fastener, fluid power, power transmission, electrical, plumbing,
occupational health and safety products.
During the next 12 to 24 months, Treasury intends to continue its expansion
goals. The Company's acquisition strategy includes the following objectives: i)
gain strategic position for its subsidiaries, ii) improve asset productivity and
iii) improve growth potential in both emerging technologies and key targeted
vertical market sectors. To increase its future subsidiaries' market share, the
Company will seek to acquire key competitors or companies having important
products and synergies with existing company operations.
Management believes the future for Treasury is its ability to capitalize on
emerging technologies that link trading partners in end to end enterprise
commerce solutions. The Company is well positioned as an early entrant in the
thin client, Internet-based procurement and management systems market with
products such as ActiveCatalog and ActiveCommerce for e-business and ActiveRMS
for e-retail.
Subsequent Events
Company information can be found at the following web sites
www.compelis.com and www.treyinvestor.com. These sites are to attract new
business and inform interested parties about the Company's intiatives. Further
the Company has launched its demomonstration site for ActiveCommerce at
www.commerceIS.com. to demonstrate the functional capabilities of software. It
is populated with product information from leading industrial product
manufacturers and gives Compelis a strategic advantage in the evolution of
e-commerce and e-business for the Industrial Supply ("IS") and Maintenance
Repair and Operation ("MRO") markets. Compelis maintains its proprietary
database and provides access through subscription to its customers, reducing the
total cost of ownership and support for implementers of these technologies.
The following discussion should be read in conjunction with the
Consolidated Financial Statements of the Company included in this report.
(1) INTERIM PERIODS
----------------
Result of Operations
--------------------
For the three months ended July 31, 1999.
During the three months period ended October 31, 1999 the Company realized
total income of $336,166. The revenue from operations climbed 46% from the
previous quarter as contracts were completed. The sale of Mega Blow Mouldings
Ltd. ("MBML"), formerly the Company's only operating subsidiary, resulted in a
revenue decrease from $1,367,128 at October 31, 1998 to $336,166 at October 31,
1999.
Operating expenses continued to decline during the reporting period and
reflect the streamlining of operations from the sale of MBML. Operating expenses
are principally the result of professional fees, compliance reporting and
restructuring expenses related to the ongoing administration of the public
company and the purchase of Pioneer Media Group (now known as Compelis
Corporation). Also included are the three month operating expenses of Compelis
13
Corporation, currently the Company's only operating subsidiary.
The Company experienced a net profit of $115,746 for the three month period
ended October 31, 1999, compared to net income of $22,970 for the same period in
1998. The year to date net profit of $200,612 is a 205% improvement from October
31, 1998. This year over year improvement in profitability are the result of
more streamlined operations plus are impacted by the interest accrued and
penalty income due on the Promissory Note the Company holds from the sale of
MBML.
The Company is continuing its focus to reduce operating, general and
administrative expenses during this transitional phase.
Liquidity and Capital Resources
Current assets totalled $515,673 at October 31, 1999. A one time adjustment
for activity in a previous period of $850,000 was booked in the second quarter
adjusting the sale price of Mega Blow Mouldings Ltd. ("MBML"). On November 30,
1998 the sale of MBML was inaccurately reported by previous management to
include an $850,000 note receivable in addition to the $250,000 non-refundable
deposit plus the $4,000,000 Promissory Note ("Note") being held from the
purchasers, for an aggregated sale price of $5,100,000. Upon further review,
subsequent to the year end audit dated January 31, 1999, it is the opinion of
current management that this adjustment was required to more accurately state
the amount realizable from the sale of MBML as $4,250,000 not the $5,100,000
previously reported.
On June 30, 1999 the Company received a $10,000 payment from the purchasers
of MBML that was applied against the outstanding balance of the Note. The due
date of the Note has been extended to January 31, 2000 at which time the
principal balance plus interest and penalty becomes due.
Liabilities totalled $1,752,828 at October 31, 1999. In this amount is
$1,240,602, the current portion of long-term debt, which is an amount Treasury
owes to its former subsidiary MBML and is related to the original purchase of
the asset on October 31,1996. On November 5, 1999 Treasury executed an Addendum
to the MBML Stock Purchase Agreement with the purchaser of MBML. In exchange for
the extention to the due date of the Promissory Note, Treasury has received its
release as guarantor to MBML and its banker, the Royal Bank of Canada. In
addition, Treasury has been released by MBML for the balance of the
Inter-company Loan, the current portion of long term debt, which is $1,240,602
plus interest. The total consideration being applied against the balance of the
Note is $1,394,266 which includes the $1,240,602 principal payment plus $153,664
interest expense. The result of this transaction, to be booked in the fourth
quarter, is the elimination of the Company's obligations on the Inter-company
payable due to its former subsidiary MBML (see Note7 of the financial
statements).
The Company believes it will generate sufficient positive cash flow from
operations to meet its operating requirements for the next twelve months. The
primary sources of liquidity for the Company are the funds generated from the
sale of MBML and the revenue from its Compelis subsidiary. However, there can be
no assurance that the Company will be able to realize on its promissory note or
generate sufficient revenues from Compelis to be able to repay its debts. If the
funds available from the collection of the promissory note, together with its
current cash and cash equivalents are not sufficient to meet the Company's cash
14
needs, the Company may, from time to time, seek to raise capital from additional
sources, including the establishment of lending facilities, project-specific
financings and additional public or private debt or equity financings.
15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit
None
(b) Reports on Form 8-K.
None
16
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TREASURY INTERNATIONAL, INC.
Dated: January 25, 2000 By: /s/ DALE DONER
---------------------
Dale Doner, President
Dated: January 25, 2000 By: /s/ MARLIN DONER
-----------------------------
Marlin Doner, Chief Financial
Officer