-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B6r9DZef8QUFBpW/Q4g7c02mgDTq0WakdCAu2BIOb1hU2kX59tStmBaVsKANtmxn pnMHE5Cje45ESnZCMjLvhg== 0000943440-98-000033.txt : 19980521 0000943440-98-000033.hdr.sgml : 19980521 ACCESSION NUMBER: 0000943440-98-000033 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980520 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TREASURE & EXHIBITS INTERNATIONAL INC CENTRAL INDEX KEY: 0000764773 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 592483405 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 002-96366-A FILM NUMBER: 98628646 BUSINESS ADDRESS: STREET 1: 2300 GLADES RD STREET 2: STE 450, WEST TOWER CITY: BOCA RATON STATE: FL ZIP: 33431 BUSINESS PHONE: 5617507200 MAIL ADDRESS: STREET 1: 2300 GLADES ROAD STREET 2: SUITE 450-WEST CITY: BOCA RATON STATE: FL ZIP: 33431 FORMER COMPANY: FORMER CONFORMED NAME: VANDERBILT SQUARE CORP DATE OF NAME CHANGE: 19920703 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1997 2-96366-A (Commission File Number) TREASURE AND EXHIBITS INTERNATIONAL, INC. (Exact name of Registrant as specified in its charter) Florida 59-2483405 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 2300 Glades Road, Suite 450-West Boca Raton, Florida 33431 (Address of Principal Executive Offices) (561) 750-7200 (Registrant's Telephone Number) Vanderbilt Square Corp. 3040 E. Commercial Boulevard, Ft. Lauderdale, Florida 33308 (Former Name, Former Address and former Fiscal Year, if changed since last report) Securities registered pursuant to Section 12(b) of the Act None None (Title of Each Class) (Name of Each Exchange on which Registered) Securities registered pursuant to Section 12(g) of the Act None None (Title of Each Class) (Name of Each Exchange on which Registered) Indicate by check mark whether the Registrant (1) has filed all reports required 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 The aggregate market value of the voting stock held by non- affiliates of the Registrant as of March 25, 1998, was approximately $975,500.00. The number of shares of Common Stock issued as of March 25, 1997, was 25,990,756. INDEX Item Page Part I 1. Business 2 2. Properties 5 3. Legal Proceedings 5 4. Submission of Matters to a Vote of Security Holders 5 Part II 5. Market for Registrant's Common Equity and Related Stockholder Matters 6 6. Selected Financial Data 7 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 8. Financial Statements and Supplementary Data 11 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 11 Part III 10. Directors and Executive Officers of the Registrant 12 11. Executive Compensation 14 12. Security Ownership of Certain Beneficial Owners and Management 14 13. Certain Relationships and Related Transactions 16 Part IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 17 PART I ITEM 1. Business Vanderbilt Square Corp. (the "Registrant" or "Company") was organized under the laws of the State of Florida on January 16, 1985. Until mid-1997 the Company was engaged in leasing equipment to customers through its wholly-owned subsidiary, Hi-Tech Leasing, Inc. ("Hi-Tech"); deriving revenue from investments in marketable securities; and rendering consulting advice and administrative and office management services to its affiliate, Corrections Services, Inc. ("CSI"). CSI is a publicly-held company engaged in marketing an electronic monitoring system to corrections agencies and facilities. Through Hi-Tech, the Company entered into equipment leasing with customers pursuant to which the Company retained title and ultimate ownership of the leased equipment. The customer, or lessee, was entitled to possession and use of the equipment for the purposes for which the equipment is intended so long as the customer continued the scheduled lease payments and so long as all other performance obligations incumbent upon the customer under the lease agreement were performed and satisfied. At year end, 1996, the Company owned a 27.7% interest in CSI and was otherwise affiliated with CSI through common management and control. On July 28, 1997, the Company sold its entire investment in Hi-Tech Leasing, Inc. to CSI in exchange for 2,000,000 restricted shares of CSI's authorized but previously unissued restricted Common Stock. The Company valued the common shares received in the purchase and sale transaction at $731,000 and reported a loss on the sale of its subsidiary, Hi-Tech, amounting to $5,988. See "Financial Statements". On August 28, 1997, the Company distributed substantially all of its holdings in CSI to the Company's shareholders pro-rata with their respective ownership interests in the Company. Each Vanderbilt Square shareholder received .17 shares of CSI Common Stock for each share of the Company's Common Stock held. No fractional shares were issued and no cash was distributed in lieu of fractional shares. Instead, a full share of CSI Common Stock was distributed for each remaining fractional share held by a Company stockholder at the time of the distribution. The Company treated the distribution of its CSI Common Stock as a dividend to its shareholders. The sale of Hi-Tech by the Company to its affiliate, CSI, was one aspect of a change of control of the Company which occurred during August, 1997. See "Change of Control" below. With disposition of its Hi-Tech subsidiary, the Company stepped out of its equipment leasing business, and at December 31, 1997, it had no commercial operations in that area. Change of Control On August 27, 1997, the Company's former President and Director, Norman H. Becker and its former Secretary/Treasurer and Director, Diane Aquino, resigned as officers and directors of the Company following the appointment of Messrs. Larry Schwartz and Edward Meyer as all of the members of the Registrant's Board of Directors. The Board thereafter appointed Mr. Schwartz as the Company's President and Mr. Meyer as its Secretary/Treasurer. Mr. Schwartz also entered into option agreements with the Company's former officers and directors pursuant to which Mr. Schwartz was granted the right to purchase an aggregate of 3,500,000 shares of the Registrant's Common Stock from the former officers and directors at the rate of $0.10 per their share. The options granted Mr. Schwartz in that transaction by its terms would have expired on January 15, 1998. Mr. Schwartz exercised those options timely and in the process became a control shareholder of the Company. In four unrelated transactions, four other stockholders of the Registrant sold an aggregate of 2,000,000 shares of the Registrant's Common Stock at $0.15 per share to three unrelated purchasers. The purchasers of those latter shares were not and are not affiliated with either Messrs. Schwartz or Meyer, nor are they affiliated with one another. With disposition of its prior holdings in CSI, and with the resignation of former officers and directors, Mr. Becker and Ms. Aquino, the Company's affiliation with CSI and its prior activity of rendering consulting advice and administrative and office management services to CSI, was also terminated. Affiliation of the Registrant and CSI was based in addition to the services rendered by the Company to CSI, on their prior common management and control. At December 31, 1997, the only remaining nexus between the Company and CSI were the common shareholders generated primarily by the Company's distribution of its CSI Common Stock to its own shareholders on August 26, 1997. With termination of the Company's affiliation with CSI, the Company stepped out of its previous consulting activity rendering advice and administrative and office management services to that company. For all practical purposes, at the beginning of September, 1997, the Company became inactive with no current commercial operations. Recent Developments On September 9, 1997, the Company entered into a preliminary Letter of Intent to acquire all of the issued and outstanding capital stock of Michael's International Treasure Jewelry, Inc., a closely-held Florida corporation with several operating locations in the cities of Miami and Key West, Florida. Michael's International Treasure Jewelry, Inc. ("Michael's") is engaged in the manufacture of rare treasure jewelry at its facility in the Seybold Building in Miami, Florida. It manufactures treasure jewelry for its own sales and distributions operations and has represented to the Company that its sales are, accordingly, made at margins above customary margins in the personal jewelry industry. The September 9, 1997 Letter of Intent continues to be preliminary and specifies by its terms that the combination/acquisition contemplated is contingent upon the parties' subsequent ability to negotiate and execute a definitive acquisition agreement. Upon its entry into the letter of intent, the Company undertook and continues at April 1, 1998, due diligence efforts to ensure that the proposed acquisition presents an audit-able combination and that the operations and financial condition of Michael's is both well known to and well understood by the Company. Those efforts continue at the date of this report and the Company continues to intend to proceed with the acquisition. It has recently given written assurance to a third party in another transaction that it intends to complete some form of acquisition/combination with Michael's prior to December 31, 1998. Despite that current intent, however, there can be no assurance that the Company's efforts will not encounter one or more insurmountable obstacles to the contemplated transaction. In that event, the parties may be required to abandon the proposed transaction and the Company will have, in the premises, sustained significant legal and accounting costs, the expenditure of which will have an adverse, rather than a beneficial, effect on the Company's financial condition. On October 1, 1997, the Company, as co-lessee, entered into a one (1) year lease/purchase agreement with Seahawk Deep Ocean Technology, Inc. ("Seahawk"), a publicly-held corporation with principal offices in Tampa, Florida. The other co-lessee in the lease purchase agreement with Seahawk is Michael's International Treasure Jewelry, Inc. The lease purchase agreement obligated Seahawk to lease certain artifacts and display items referred to in the lease purchase agreement as the "Treasure" to the co-lessees for a term of one (1) year in exchange for quarterly payments in the amount of $67,500 each. The lease purchase agreement provided for a buy-out after one (1) year for a purchase price of $2,500,000, payable $750,000 in cash with the balance in the Company's restricted Common Stock. It was the intent of the co- lessees to display the artifacts at Michael's flagship store at 400 Duval Street in Key West, Florida and to use the display to generate retail traffic for Michael's Treasure Jewelry business. Under the lease arrangement, Michael's was obligated to make the quarterly lease payments and the Company's interest in the lease was focused on the lessee's right to purchase the artifacts and display items at the end of the lease at what the Company viewed as a very favorable purchase price. The Company itself was not bound to make any of the quarterly lease payments but in the event that Michael's failed to make them, or any of them, the Company reserved the right to elect to do so in order to protect its interest in the buy-out right at the end of the lease. Michael's expected to garner additional retail revenues through its display of the artifacts and display items with which to make the quarterly lease payments. Subsequent Developments At March 1, 1998, a total of $135,000 in lease payments had been paid to Seahawk and, pursuant to additional on-going discussions and negotiations between Seahawk and the co-lessees during the first quarter of 1998, the Company determined to exercise the purchase option prior to lease-end itself with the amiable consent and waiver of Michael's. See Item 7., Management's Discussion and Analysis of Financial Condition and Results of Operations - "Liquidity". ITEM 2. Properties The Company does not own or lease any real property. The Company maintained its executive offices in Ft. Lauderdale, Florida pursuant to an oral month-to-month tenancy with an affiliate at a cost of $1,350 per month until September, 1997. Since October, 1997, the Company has maintained its executive offices in Boca Raton, Florida, cost free, with its affiliate, First Capital Services, Inc. ITEM 3. Legal Proceedings No legal proceedings are currently pending or, to the knowledge of management, threatened against the Company. ITEM 4. Submission Of Matters To A Vote Of Security Holders No matters were submitted to a vote of security holders, through a solicitation of proxies during the fourth quarter of the fiscal year covered by this report. During the first quarter of 1998, a majority of the shareholder interest in the Company consented without meeting to change of the Company's name from Vanderbilt Square Corp. to Treasure and Exhibits International, Inc. PART II ITEM 5. Market For Registrant's Common Equity And Related Stockholder Matters The Company's Common Stock is traded in the over-the-counter market on the National Association of Securities Dealers, Inc. OTC Bulletin Board under the symbol "VNSR". The Company intends to change the trading symbol to "TEII" as soon as practicable after the filing of this Annual Report on Form 10-K. Set forth below is the range of high and low bid and asked information for the Company's Common Stock for the two most recent fiscal years. This information represents prices between dealers and does not reflect retail mark-up or mark-down or commissions, and does not necessarily represent actual market transactions. During the period between January 1, 1996 and March 31, 1997, the range of the reported high and low bid and asked quotations for the Company's Common Stock was as follows:
PERIOD BID PRICE ASKED PRICE HIGH LOW HIGH LOW First Quarter - 1996 $ .375 $ .25 $ .50 $ .375 Second Quarter - 1996 $ .375 $ .25 $ .50 $ .375 Third Quarter - 1996 $ .40 $ .18 $ .40 $ .25 Fourth Quarter - 1996 $ .375 $ .18 $ .40 $ .25 First Quarter - 1997 $ .325 $ .16 $ .38 $ .22 Second Quarter - 1997 $ .30 $ .16 $ .35 $ .20 Third Quarter - 1997 $ .375 $ .25 $ .40 $ .25 Fourth Quarter - 1997 $ .25 $ .18 $ .35 $ .20 First Quarter - 1998 $ .20 $ .25 $ .25 $ .16 April 1, 1998 - May 13, 1998 $ .065 $ .05 $ .095 $ .09
As of May 1, 1998, there were approximately 210 record holders of the Registrant's outstanding Common Stock. Moreover, shares of the Company's Common Stock are held for additional stockholders at brokerage firms and/or clearing houses. The Company, therefore, was unable to determine the precise number of beneficial owners of its Common Stock as of May 1, 1998. The Company has never paid any cash dividends on its Common Stock and does not anticipate paying cash dividends in the foreseeable future. See Item 7., Management's Discussion and Analysis and Results of Operations - "Liquidity". The Registrant intends to retain earnings, if any, for future growth and expansion opportunities. Payment of cash dividends in the future will be dependent upon the Company's earnings, financial condition, capital requirements and other factors determined to be relevant by the Board of Directors. See Item 7., Management's Discussion and Analysis and Results of Operations - "Liquidity". ITEM 6. Selected Financial Data
Years Ended December 31, 1997 1996 1995 1994 1993 Revenues $ 144,283 $ 227,902 $ 99,710 $ 108,928 $ 172,354 Operating Expenses $ 130,047 $ 169,509 $ 91,595 $ 110,129 $ 153,895 Net Income (loss) $ 20,840 $ 59,443 $ 1,498 $ 6,642 $ 254,483 Weighted number of shares outstanding 16,437,088 14,847,281 14,224,096 14,515,066 12,799,737 Net income (loss) per share of Common Stock outstanding $ .001 $ -0- $ -0- $ -0- $ .02 Total Assets $ 195,938 $1,063,919 $ 920,910 $1,004,085 $1,011,870 Total Liabilities $ 17,083 $ 51,673 $ 40,810 $ 78,987 $ 76,818 Cash Dividends $ -0- $ -0- $ -0- $ -0- $ -0-
See Financial Statements and Notes to Financial Statements ITEM 7. Management Discussion And Analysis Of Financial Condition And Results Of Operations This analysis of the Company's financial condition, liquidity, capital resources and results of operations should be viewed in conjunction with the accompanying financial statements, including the notes thereto. Financial Condition At December 31, 1997, the Company had current assets of $195,938 as compared to $763,977 at December 31, 1996, total assets of $195,938 at December 31, 1997 as compared to $1,063,919 at December 31, 1996, current liabilities of $17,083 at December 31, 1997, as compared to $48,447 at December 31, 1996, total liabilities of $17,083 at December 31, 1997, as compared to $51,673 at December 31, 1996, and a net worth of $178,855 at December 31, 1997, as compared to $1,012,246 at December 31, 1996. See "Financial Statements". The decrease in assets was principally due to the decrease in cash and cash equivalents and marketable trading securities and disposition of the Company's consolidated subsidiary, Hi-Tech Leasing, Inc. The decrease in liabilities was principally due to an increase in retained earnings deficiency. Liquidity During the year ended December 31, 1997, the Company had a decrease in cash and cash equivalents of $70,414, from $250,209 to $179,795. The Company's decrease in cash was principally due to the sale disposition of its investment in its consolidated subsidiary, Hi-Tech, in August, 1997. At year-end the Company had limited liabilities and no present commitments that were reasonably likely to result in its liquidity increasing or decreasing in any material way. During the first quarter of 1998, however, 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. See Item 1., Business, Subsequent Developments. The Company and its intended acquisition, Michael's International Treasure Jewelry, Inc., were co-lessees in the Seahawk lease. The Company determined during the first quarter of 1998 to seek to exercise the lease purchase option to acquire the leased items itself prior to the 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 Michael's consent to the transaction and without Michael's participation in exercise of the lease purchase option. Under the terms of the 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 ($482,500), 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. The debt incurred by the Company in the process of acquiring the Seahawk treasure artifacts, exceeds the Company's total assets at year-end 1997 by a factor approaching four (4). 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 is largely dependent, at March 31, 1998, on its subsequent ability to complete the intended acquisition of Michael's and to deploy the artifacts acquired from Seahawk as inventory and exhibits in a commercial manner which will generate revenues and profits to the Company. There is no present assurance that the Company will in fact be able to successfully complete those plans due to the potential occurrence of one or more presently unforseen, insurmountable obstacles to completion of that transaction. In the event that it is unable to do so, the Company will be required to modify its present 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 has 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 has no current ability to exercise its Common Stock repurchase option with Seahawk and will likely be faced with the need for additional, substantial borrowing from one or more affiliates in order to exercise the repurchase option should it choose to do so within the exercise period. In general, at March 31, 1998, the Company's liquidity is limited and will likely diminish in the near term in the absence of current commercial operations and on-going general and administrative expenses. See Item 1., "Business". The Registrant knows of no other trend, additional 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 At year end 1997, the Company has no outstanding unused credit lines or credit commitments in place. There were no significant liabilities and the Company was meeting its on-going expenses with its diminishing cash and cash equivalents. Lease payments for lease of the Seahawk treasure artifacts and display items were the obligation of the Company's co-lessee, Michael's International Treasure Jewelry, Inc. 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, Larry Schwartz. See "Liability". It is the Company's intent at March 31, 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 due diligence efforts with regard to the acquisition of Michael's International Treasure Jewelry, Inc. are successfully 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. incurred in the Company's acquisition of the Seahawk artifacts. In the interim, the Company will continue to lease the artifacts and display items to Michael's pending completion of the intended acquisition. If the Company is ultimately unable to secure 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, be unable to complete the planned acquisition of Michael's. While the Company currently anticipates completion of the Michael's acquisition transaction, there is and can be no present assurance that it will be able to do so. Results of Operations The Company's revenues for the year ended December 31, 1997, were $144,283 as compared to $127,902 for the year ended December 31, 1996, and $99,710 for the year ended December 31, 1995. The principal reason for the decrease in revenues was a decrease in income from sales of marketable equity securities. Operating expenses decreased to $130,047 for the year ended December 31, 1997 as compared to $169,509 at December 31, 1996 and $91,595 at December 31, 1995. The difference between operating expenses at December 31, 1997 and December 31, 1996, was $39,462. The difference in operating expenses at December 31, 1996 and December 31, 1995 was $77,914. The principal reason for the difference between December 31, 1997 and 1996, and a decrease in Selling General and Administrative Expenses. Income before provision for income taxes for the year ended December 31, 1997, was $8,248 as compared to income of $86,846 for the year ended December 31, 1996 and a loss of ($480) for the year ended December 31, 1995. The decrease in income of $78,598 for the year ended December 31, 1997 as compared to December 31, 1996, was principally due to a decrease in earnings from the sale of marketable equity securities. At March 31, 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 March 31, 1998), intends to immediately begin commercial operations through its collection of lease payments, albeit reduced to $14,000 per month since the lease payments no longer contain a component reflecting a purchase option, from Michael's for continued lease of the Seahawk artifacts and display items otherwise under the same terms and conditions of the Seahawk lease. The Company intends to continue this arrangement with Michael's pending completion of its current due diligence efforts toward developing, entering into and closing a definitive acquisition agreement with Michael's. While there can be no present assurance that the Company will not encounter an insurmountable obstacle to successful completion of that transaction, the Company believes that it will be able to do so during the first half of 1998. Completion of that transaction, at this point, however, is primarily dependent on the Company's ability to raise additional debt or equity financing. Once closed, if closed, the Company expects its acquisition of Michael's to enable it to, and to continue to, buy unique shipwreck artifacts and to carry out its ultimate plan to become a leading retailer of quality treasure jewelry and artifacts. The many uncertainties surrounding completion and implementation of this plan however may preclude its successful implementation. In that event, the Company will be adversely affected. ITEM 8. Financial Statements And Supplementary Data Financial information pursuant to this Item appears elsewhere in this Report. See Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K. ITEM 9. Disagreements On Accounting And Financial Disclosure No change of the Company's independent, certified auditor accountants took place with respect to the preparation of the Company's financial statements for the two (2) most recent fiscal years contained in this report. There are and have been no disagreements on accounting or financial disclosure. PART III ITEM 10. Directors And Executive Officers Of The Registrant The directors and executive officers of the Company, as of the date of this Report are as follows: Name Age Offices Held Larry Schwartz 50 President, Secretary, Treasurer and Director Edward Meyer 40 Former Secretary, Treasurer and Director Norman H. Becker 60 Former President and Director Glenn Shaffren 42 Former Vice President and Director Diane Aquino 49 Former Secretary/ Treasurer and Director Larry Schwartz, was appointed President and Chief Executive Officer of the Registrant on August 27, 1997 following the resignation of its prior management. With the resignation of Mr. Meyer (see below) on April 30, 1998, Mr. Schwartz also assumed the duties of Secretary and Treasurer of the Company. Mr. Schwartz is also President and Chief Executive Officer of First Capital Services, Inc. and First Consolidated Financial Corporation, as well as various affiliated entities and is presently engaged in the business of asset based lending, financial consulting services for corporate clients, and financial placement services. Mr. Schwartz has been engaged in those activities for the last five years and has assumed management of the Registrant as his initial engagement with a publicly-held enterprise. Mr. Schwartz holds the BS Degree from Boston State College and an MA Degree from Boston College. In addition, Mr. Schwartz was a doctoral candidate at Boston College attending post-masters course work in 1973. Boston State College and Boston College are both located in the City of Boston, Massachusetts. In addition his formal education, Mr. Schwartz has attended numerous seminars on a broad variety of topics related to asset based lending operations. Edward Meyer, was appointed Secretary, Treasurer and a Director of the Company on August 27, 1997 coincident with the change of control reflected in Item 1., Business, Change of Control, herein. Mr. Meyer is also the controller of the Company's affiliate, First Capital Services, Inc., an enterprise affiliated with the Registrant due to common control. Mr. Meyer has been the controller of First Capital Services, Inc. since 1994. Prior to 1994, he was controller and officer manager of Zimmerman Tree Service. Mr. Meyer holds the BBA Degree in accounting from the Bernard Baruch College of the City University of New York and is a licensed certified public accountant in both the State of Florida and the State of Colorado. On April 30, 1998, however, Mr. Meyer resigned as the Company's Secretary, Treasurer and a member of its Board of Directors due to excess demand on his time generated by his other duties. The Company was informed by Mr. Meyer at the time of resignation that he had no disagreement with the Company's management, financial or otherwise. Norman H. Becker, resigned as an officer and director of the Company on August 26, 1997 in connection with the transaction changing control of the Company to Messrs. Schwartz and Meyer. Prior to his appointment as the Company's President and Chief Executive Officer during February 1987, Mr. Becker was Secretary/Treasurer and a Director of the Company since its inception, January 16, 1985. Since January, 1993, Mr. Becker was also President of CSI, former affiliate of the Company. (See "Business" and "Financial Statements" and accompanying notes). Since January 1985, Mr. Becker has been self-employed in the practice of public accounting. Mr. Becker is a graduate of City College of New York (Bernard Baruch School of Business) and is a member of a number of professional accounting associations including the American Institute of Certified Public Accountants, the Florida Institute of Certified Public Accountants, and the Dade County Chapter of the Florida Institute of Certified Public Accountants. Glenn Shaffren became Vice President and a Director of the Company in November, 1996. Since 1994, Mr. Shaffren has been an officer and director of Digitel Network Services, Inc., a private Georgia corporation, and its Chief Executive Officer and Chief Financial Officer since March, 1995. He has been involved in cable television since 1979 and has owned, operated and sold two outside plant construction and installation companies specializing in fiber optic cable and coaxial cable, aerial and underground construction, splicing and activation. In 1992, Mr. Shaffren was Vice President of Operations for American Fiber Optics. Mr. Shaffren resigned as an officer and director of the Company on January 29, 1997. Diane Aquino resigned as an officer and director of the Company on August 26, 1997 in connection with the transaction changing control of the Company to Messers. Schwartz and Meyer. Ms. Aquino was been Secretary/Treasurer and a Director of the Company since February 15, 1989. Since January 1993, Ms. Aquino was Secretary and Treasurer of CSI, an affiliate of the Company. ITEM 11. Executive Compensation
SUMMARY COMPENSATION TABLE Annual Compensation Long Term Compensation Awards Payments Restricted Securities Name of Individual Other Annual Stock Underlying/ LTIP All Other and Principal Position Year Salary Bonus Compensation Award(s) Options/SARs Payouts Compensation Larry Schwartz 1997 $ -0- -0- $15,000 -0- -0- -0- -0- President Edward Meyer 1997 $ -0- -0- $ -0- -0- -0- -0- -0- Secretary/Treasurer Norman H. Becker 1996 $ 4,000 -0- $ 1,163 -0- -0- -0- -0- Former President 1997 $ 4,000 -0- $ 3,338 -0- -0- -0- -0- Glenn Shaffren 1996 -0- -0- -0- -0- -0- -0- -0- Former Vice President 1997 -0- -0- -0- -0- -0- -0- -0- Diane Aquino 1996 $7,500 -0- -0- -0- -0- -0- -0- Former Secretary/ Treasurer 1997 $7,500 -0- -0- -0- -0- -0- -0-
During the 1997 fiscal year, there were no stock options, stock appreciation rights, restricted stock awards, LTIP awards, or similar compensation issued. None of the Company's former or present officers and directors had formal employment agreements with the Company. ITEM 12. Security Ownership Of Certain Beneficial Owners And Management The following table sets forth, as of the date of this Report, certain information concerning beneficial ownership of the Company's Common Stock, by (i) each person known to the Company to own five percent (5%) or more of the Company's outstanding Common Stock, (ii) all directors of the Company, naming them and (iii) all directors and officers of the Company as a group, without naming them.
Amount and Nature of Percent Name and Address Beneficial Ownership (1) of Class(1) Larry Schwartz (2) 3,907,637 Shares 15% Seahawk I, Ltd(4) 5,903,066 Shares 23% 5102 S. Westshore Blvd. Tampa, FL 33611 Seahawk Deep Ocean Technology, Inc. (4) 2,529,286 Shares 10% 5102 S. Westshore Blvd. Tampa, FL 33611 Edward Meyer (2) -0- -0- All Officers and Directors as a Group (1 persons) 3,907,637 Shares 15%
(1) As used in the Annual Report, the term beneficial ownership with respect to a security is defined by Rule 13d-3 under the Securities Exchange Act of 1934 as consisting of sole or shared voting power (including the power to vote or direct the vote) and/or sole or shared investment power (including the power to dispose or direct the disposition of) with respect to the security through any contract, arrangement, understanding, relationship or otherwise, including a right to acquire such power(s) during the next 60 days. Unless otherwise noted, beneficial ownership consists of sole ownership, voting and investment rights. (2) The address for such person is c/o Treasures & Exhibits International Inc., 2300 Glades Road, Suite 450, West Tower, Boca Raton, Florida 33431. (3) Calculations are based upon 25,990,756 issued and outstanding shares of the Company's Common Stock. The total reflects subsequent issuance, on March 19, 1998, of 9,500,000 shares of the Company's restricted Common Stock to persons designated by the Seller as part of the purchase price paid by the Company in its acquisition of the Seahawk artifacts and display items. See Item. 1, "Business". (4) Seahawk I, Ltd. and Seahawk Deep Ocean Technology, Inc. are affiliated by common control with each other. All of the shares owned of record by those entities accordingly may be deemed to be held by a single beneficial owner. ITEM 13. Certain Relationships And Related Transactions During the fiscal year ended December 31, 1997, there were no material transactions between the Company and any of its officers and/or Directors which involved $60,000 or more. However, the Company entered into a management consulting arrangement with First Consolidated Financial Corporation, an affiliate under common control with the Company in that company's President and Chief Executive Officer, Larry Schwartz, is also President and Chief Executive Officer of First Consolidated Financial Corporation. Pursuant to the consulting arrangement, First Consolidated renders management consulting services to the Company in exchange for a monthly fee in the amount of $5,000. On an annualized basis, the consulting arrangement represents a $60,000 expense to the Company. Monthly payments, each in the amount of $5,000 have continued since December 31, 1997 through the date of this report. In addition, the Company has borrowed from its affiliate, First Capital Services, Inc. in order to acquire the Seahawk artifacts and display items through exercise of the lease purchase option. See Item 7., Management's Discussion and Analysis of Financial Condition and Results of Operations - "Liquidity". In addition, on December 31, 1997, the Company loaned its affiliate, First Capital Services, Inc. $153,649.32 on a short term basis at an annual interest rate of 12%. On January 15, 1998, First Capital Services repaid $125,000 of the Company's loan. The loan transactions were entered into by and between the Company and First Capital Services, Inc. in an effort to generate a modicom of interest income for the Company pending its own development and implementation of revenue producing commercial operations. PART IV ITEM 14. Exhibits, Financial Statements, Schedules And Reports On Form 8-K (a) 1. Financial Statements: (i) Report of Independent Certified Public Accountant; (ii) Consolidated Balance Sheet - December 31, 1997 and December 31, 1996; (iii) Consolidated Statement of Operations - Three years ended December 31, 1997; (iv) Consolidated Statement of Shareholders' Equity - Three years ended December 31, 1997; (v) Consolidated Statement of Cash Flows - Three years ended December 31, 1997; (vi) Notes to Consolidated Financial Statements (a)(3)Exhibits (b)(10) Letter of Intent dated September 10, 1997 for proposed acquisition of Michael's International Treasure Jewelry, Inc. (b)(10) Agreement for Purchase of Artifacts and Displays for purchase by the Registrant of certain artifacts and display items from Seahawk Deep Ocean Technology, Inc. (b) Reports of Form 8-K The Registrant filed no reports on Form 8-K during the fourth quarter of 1997. On March 27, 1998, the Company filed a report on Form 8-K of its purchase on March 19, 1998 of the artifacts previously leased to the Company as co-lessee for cash, newly issued restricted Common Stock and a secured promissory note. The March 19, 1998 Form 8-K was amended on May 14, 1998 to correct an error in the cash portion of the reported purchase price which had been overstated by $200,000 inadvertently in the original Form 8-K current report. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. TREASURE AND EXHIBITS INTERNATIONAL, INC. Date: May 14, 1998 By: /s/Larry Schwartz Larry Schwartz, President Pursuant to the requirements of the Securities Exchange Act of 1934, this report have been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Signatures Title Date (i) Principal Executive Officer /s/Larry Schwartz Chief Executive May 14, 1998 Larry Schwartz Officer (ii) Principal Financial and Accounting Officer /s/Larry Schwartz Treasurer May 14, 1998 Larry Schwartz (iii) A Majority of the Board of Directors /s/Larry Schwartz Director May 14, 1998 Larry Schwartz EX-27.1 2 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE. VANDERBILT SQUARE CORP. AND SUBSIDIARIES REPORT ON EXAMINATION OF CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997 AND 1996 CONTENTS PAGE INDEPENDENT AUDITOR'S REPORT. . . . . . . . . . . . . . . . . 1 CONSOLIDATED BALANCE SHEET. . . . . . . . . . . . . . . . . . 2 CONSOLIDATED STATEMENT OF OPERATIONS. . . . . . . . . . . . . 3 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY. . . . . . . . 4 CONSOLIDATED STATEMENT OF CASH FLOWS. . . . . . . . . . . . . 5 NOTES TO FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . 6 - 13 Board of Directors and Shareholders Vanderbilt Square Corp. and Subsidiaries Boca Raton, Florida INDEPENDENT AUDITOR'S REPORT I have audited the accompanying consolidated balance sheet of Vanderbilt Square Corp. and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of operations and shareholders' equity and cash flows for each of the three years ended December 31, 1997. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Vanderbilt Square Corp. and subsidiaries as of December 31, 1997 and 1996, and the consolidated results of its operations and its cash flows for the three years ended December 31, 1997, in conformity with generally accepted accounting principles. Thomas W. Klash Certified Public Accountant Hollywood, Florida February 9, 1998 except for Note N, as to which the date is March 19, 1998. VANDERBILT SQUARE CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET DECEMBER 31, 1997 AND 1996
ASSETS 1997 1996 Current Assets: Cash and cash equivalents $ 179,795 $ 250,209 Notes receivable - current: Affiliate - 38,478 Other - 20,544 Accounts receivable: Other - 4,334 Investment in marketable trading securities - at market 16,143 443,067 Accrued interest receivable - 143 Net investment in direct financing leases - current - 3,453 Prepaid income taxes - 3,749 TOTAL CURRENT ASSETS 195,938 763,977 INVESTMENT IN UNCONSOLIDATED SUBSIDIARY - 250,008 NOTES RECEIVABLE - NONCURRENT Affiliate - 34,347 Other - 6,733 NET INVESTMENT IN DIRECT FINANCING LEASES - noncurrent - 8,854 $ 195,938 $1,063,919 See accompanying notes to consolidated financial statements. -2(a)- VANDERBILT SQUARE CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET DECEMBER 31, 1997 AND 1996 LIABILITIES AND SHAREHOLDERS' EQUITY 1997 1996 CURRENT LIABILITIES: Accounts payable and accrued expenses $ 17,083 $ 40,109 Deferred income taxes - current - 8,338 TOTAL CURRENT LIABILITIES 17,083 48,447 DEFERRED INCOME TAXES - NON CURRENT - 3,226 17,083 51,673 SHAREHOLDERS' EQUITY Common stock $.0001 par value, authorized 50,000,000 shares, issued 16,490,756 shares in 1997 and 1996; outstanding 16,490,756 in 1997 and 16,398,356 in 1996 1,649 1,649 Additional paid-in capital 1,137,363 1,137,363 Retained earnings (deficiency) (960,157) (116,734) 178,855 1,022,278 Less treasury stock - 92,400 shares in 1996 - at cost - 10,032 178,855 1,012,246 $ 195,938 $1,063,919 See accompanying notes to consolidated financial statements. -2(b)- VANDERBILT SQUARE CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS THREE YEARS ENDED DECEMBER 31, 1997 1997 1996 1995 REVENUES: Interest and dividend income $ 32,101 $ 39,424 $ 33,448 Income realized from sale of marketable equity securities 111,578 187,493 47,317 Consulting fees - - 18,000 Direct finance lease income 604 985 945 144,283 227,902 99,710 OPERATING EXPENSES: Selling, general and administrative expenses 124,419 225,097 85,046 Provision for loss on market decline of marketable trading securities 5,628 (55,588) 6,549 130,047 169,509 91,595 INCOME (LOSS) FROM OPERATIONS 14,236 58,393 8,115 OTHER INCOME (EXPENSE) Equity in earnings (loss) of unconsolidated subsidiary - 26,453 (8,595) Loss on sale of subsidiary (5,988) - - INCOME (LOSS) BEFORE INCOME TAXES 8,248 86,846 (480) PROVISION (CREDIT) FOR INCOME TAXES - DEFERRED (12,592) 25,403 (1,978) NET INCOME (LOSS) $ 20,840 $ 59,443 $ 1,498 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 16,437,088 14,847,281 14,224,096 NET INCOME (LOSS) PER COMMON SHARES $ - $ - $ - See accompanying notes to consolidated financial statements. -3- VANDERBILT SQUARE CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY THREE YEARS ENDED DECEMBER 31, 1997 Common Stock $.0001 Par Value Additional Retained Authorized 50,000,000 Shares Paid-In Earnings Treasury Shares Amount Capital (Deficit) Stock Total 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 See accompanying notes to consolidated financial statements. -4- VANDERBILT SQUARE CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS THREE YEARS ENDED DECEMBER 31, 1997 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1997 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 20,840 $ 59,443 $ 1,498 Adjustments to reconcile net income to net cash provided by (used in) operating activities: (Gain) on sale of marketable securities (111,578) (187,493) (47,317) Loss on sale of wholly-owned subsidiary 5,988 - - Equity in (earnings) loss of unconsolidated subsidiary - (26,453) 8,595 Allowance for market decline of securities 5,628 (55,588) 6,549 Write off of uncollectible notes - 74,000 10,000 Changes in operating assets and liabilities: Increase (decrease)in accounts payable and accrued expenses (23,026) 5,291 (42,797) (Increase) decrease in accrued interest receivable 143 894 (334) Decrease (increase) in deferred income taxes (11,564) 25,403 (1,978) (Increase) decrease in account receivable - other 4,334 22,331 (6,456) (Decrease) increase in income taxes payable/pre-paid 3,749 (9,741) 326 Proceeds from sale of marketable securities 245,107 728,716 236,496 Purchase of marketable securities (76,642) (531,320) (596,177) NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 62,979 105,483 (431,595) Continued on next page -5(a)- VANDERBILT SQUARE CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS THREE YEARS ENDED DECEMBER 31, 1997 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1997 1996 1995 CASH FLOWS FROM INVESTING ACTIVITIES: Loan advance to affiliates (160,000) (74,043) (3,000) Principal collections of loans to affiliates 193,907 15,695 30,741 Advances paid on notes receivable - other (6,500) (9,250) (68,500) Principal collections of notes receivable - other 13,161 32,229 186,144 Principal collections on direct financing leases 2,272 3,379 5,769 Purchase of equipment for lease - (7,100) - Proceeds from sale of investments in unconsolidated subsidiaries 44,511 4,753 469,255 Investment in unconsolidated subsidiaries (220,744) (18,119) (19,628) NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (133,393) (52,456) 600,781 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (70,414) 53,027 169,186 CASH AND CASH EQUIVALENTS - Beginning of year 250,209 197,182 27,996 CASH AND CASH EQUIVALENTS - End of Year $ 179,795 $ 250,209 $ 197,182 See accompanying notes to consolidated financial statements. -5(b)- VANDERBILT SQUARE CORP. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation - The consolidated financial statements include the accounts of the Company, and its wholly-owned subsidiaries, Hi-Tech Leasing, inc., and Professional Programmers, Inc. through the date of their disposition. All significant intercompany accounts and transactions have been eliminated. The financial statements of Hi-Tech Leasing, Inc., are included in consolidation for its year ended November 30, 1995 and 1996 in order to expedite preparation of financial statements and to coincide with the taxable year of the Company. Revenue Recognition - Prior to the disposition of Hi-Tech Leasing, Inc., the Company leased equipment under agreements accounted for as direct financing leases. Under this accounting method, the gross investment in the leases is recorded as the total of the minimum lease payments plus the unguaranteed residual salvage value of the property. The excess of the gross investment over the cost of the property represents unearned income, and this is deducted from the gross investment to arrive at the net investment in the direct financing leases. The unearned interest income is amortized to income over the term of the leases using the "interest method" so as to produce a constant periodic rate of return on the net investment in the leases. Investments in Marketable Trading Securities - The Company's investment in marketable trading securities consists of trading securities as defined in FASB Statement No. 115. Trading securities are carried at market value in the accompanying balance sheet. Unrealized gains and losses resulting from fluctuations in the market price of the related securities are currently reflected in the statement of operations. Net Income (Loss) Per Common Share - Net income (loss) per common share was computed by dividing the net income (loss) for each period by the weighted average number of common shares outstanding during each period. The Company's adoption of FAS-12B, earnings per share, did not have a significant impact upon reported per share amounts. -6- VANDERBILT SQUARE CORP. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 NOTE A - 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 bases 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. Account 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 B - NOTES RECEIVABLE - AFFILIATES 1996 10% Note Receivable - Due from a company whose shareholder is an officer and director of the Company - unsecured and due on demand $ 25,000 8% Note Receivable - Due from an individual who is an officer and director of the Company - collateralized by transportation equipment - payable in monthly installments of $488, including interest, thru November 15, 2000 20,000 10% Note Receivable - Due from a company whose shareholder is an officer and director of the Company - collateralized by transportation equipment - payable in monthly installments of $937, including through September 15, 1999 27,647 Other 178 72,825 Deduct noncurrent portion 34,347 $ 38,478 Interest income relating to notes from related parties amounts to $4072 in 1997 and $1,334 in 1996. -7- VANDERBILT SQUARE CORP. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 NOTE C - NOTES RECEIVABLE - OTHER Notes receivable - Other - consist of the following: 1996 8% - 12% Notes Receivable - Collateralized by transportation and other equipment. Payments are due in various monthly installments through November 15, 1998 $ 23,797 10% Notes Receivable - Collateralized by equipment having fair market value exceeding the principal balance of the respective note. The notes are due in various monthly installments of through October 1, 1997 3,480 27,277 Deduct noncurrent portion 6,733 $ 20,544 Interest earned on the above notes amounts to $1,538 in 1997 and $9,644 in 1996. NOTE D - INVESTMENT IN MARKETABLE TRADING SECURITIES At December 31, 1997, the Company's investment in marketable trading securities consisted entirely of trading securities as follows: Cost Market Value Investment in corporate trading securities $ 40,180 $ 16,143 Unrealized gains (losses) on changes in market values of marketable trading securities amounted to $(5,628) in 1997 and $55,588 in 1996. -8- VANDERBILT SQUARE CORP. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 NOTE E - NET INVESTMENT IN DIRECT FINANCING LEASES The Company's operations included leasing various types of equipment which were classified as direct financing leases. These leases are summarized as follows at December 31, 1996: 1996 Total minimum lease payment to be received $ 14,017 Add: unguaranteed residuals - Gross investment in leases 14,017 Deduct: unearned interest income 1,710 Net investment in direct financing leases 12,307 Deduct: current portion 3,453 Noncurrent portion $ 8,854 The Company had no investment in direct financing leases at December 31, 1997. NOTE F - INVESTMENT IN UNCONSOLIDATED SUBSIDIARY At December 31, 1996, the Company owned a 27.7% interest in Corrections Services, Inc. ("CSI"). The investment was accounted for using the equity method for recognizing income or loss from its investment. On July 28, 1997, Vanderbilt Square Corp. received 2,000,000 additional shares of CSI authorized, but previously unissued restricted Common Stock in exchange for the sale of its entire investment in Hi-Tech Leasing, Inc. Fair value of the common shares received amounted to $731,000. The Company reported a loss on the disposition of Hi-Tech Leasing, Inc. amounting to $5,988 as reflected in the accompanying consolidated statement of operations for the year ended December 31, 1997. -9- VANDERBILT SQUARE CORP. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 NOTE F - INVESTMENT IN UNCONSOLIDATED SUBSIDIARY (Cont'd) On August 28, 1997, Vanderbilt Square Corp. distributed substantially all of its investment in CSI to the Company's shareholders. Vanderbilt Square Corp.'s shareholders received .17 shares of CSI Common Stock for each share held. No fractional shares were issued and no cash was distributed in lieu of fractional shares. One full share of CSI Common Stock was distributed for each fractional share remaining. The distribution of CSI common Stock was reflected as a dividend in the accompanying statement of shareholders' equity. CSI was affiliated to the Company during 1997 and 1996 through officers and directors and principal shareholders in common. NOTE G -RELATED PARTY TRANSACTIONS The Company entered into the following transactions with various entities and individuals affiliated by virtue of common management or stock ownership for the three years ended December 31, 1997: 1997 1996 1995 Consulting and professional fees $ 69,065 $ 43,525 $ 6,139 Office administration 12,848 15,300 14,875 Rent expense 12,600 16,200 15,750 Consulting fee income - - (18,000) Loss on sale of subsidiary 5,988 - - Interest income - invested with affiliates (3,849) - - $ 96,652 $ 75,025 $ 18,764 NOTE H - SALE OF WHOLLY-OWNED SUBSIDIARIES Hi-Tech Leasing, Inc. - Pursuant to the terms of a Capital Stock Purchase Agreement with Corrections Services, Inc. ("CSI"), an affiliate, the Company sold its entire investment interest in Hi-Tech Leasing, Inc. on July 28, 1997. The Company received 2,000,000 shares of previously unissued restricted Common Stock of CSI having a fair market value of $731,000. The Company incurred a $5,988 loss on the disposition of Hi-Tech Leasing, Inc. The Company's earnings and cash flows reflect the operations of Hi-Tech Leasing, Inc. through July 28, 1997. -10- VANDERBILT SQUARE CORP. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 NOTE H - SALE OF WHOLLY-OWNED SUBSIDIARIES (Cont'd) Professional Programmers, Inc. - On September 30, 1997, the Company settled an obligation owing to Corrections Services, Inc., an affiliate, with the assignment of 100% of its investment interest in Professional Programmers, Inc., an inactive, wholly-owned subsidiary. Fair value of the investment transferred amounted to $16,152. NOTE I - INCOME TAXES The components of the provision for income taxes are as follows for the three years ended December 31, 1997: 1997 1996 1995 Federal $(12,592) $ 24,078 $(1,978) State - 1,325 - $(12,592) $ 25,403 $(1,978) The credit provision for income taxes resulted form the reversal of prior year deferred income taxes payable. The current income tax expected to be paid by the Company is zero. The primary difference between taxes expected to be paid based upon pre-tax financial statement income and current income tax expense relates to undistributed earnings of a sold subsidiary (Hi-Tech Leasing, Inc.). A deferred tax benefit relating to the Company's net operating loss carryforward ($44,754) and allowance for market decline of investments ($24,037) 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 2112. NOTE J - SUPPLEMENTAL CASH FLOW INFORMATION Disposition of Subsidiaries - The Company received Common Stock with a fair value of $731,000 in exchange for its investment in Hi-Tech Leasing, Inc. A summary of non-cash assets owned by Hi-Tech Leasing, Inc. on the date of sale follows: Marketable securities $ 446,675 Notes receivable 59,534 Investment in financing lease 10,035 Non-cash assets owned 516,244 Cash and cash equivalents 220,744 Net assets of subsidiary sold $ 736,988 -11- VANDERBILT SQUARE CORP. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 NOTE J - SUPPLEMENTAL CASH FLOW INFORMATION (Cont'd) The Company settled a $16,152 obligation to an affiliate through the conveyance of 100% of its interest in Professional Programmers, Inc. Shareholder's Equity - On August 26, 1997, the Company distributed investment stock to common shareholders as a dividend. Fair value of the stock amounted to $864,263. NOTE K - DIVIDEND DISTRIBUTIONS On August 6, 1996, the Board of Directors of the Company declared a 10% stock dividend of the outstanding Common Stock of the Company. The stock dividend was paid on September 24, 1996 to all stockholders of record at the close of business on August 23, 1996. As more fully described in Note H to the financial statements, the Company distributed 2,803,446 shares of CSI restricted common stock to shareholders of record on August 26, 1997. Fair market value of the securities amounted to $864,263. NOTE L - COMMITMENTS AND CONTINGENCIES Artifacts Display Lease - On October 1, 1997, the Company entered into a one year Lease/Purchase Agreement with Seahawk Deep Ocean Technology, Inc. ("Lessor") and Michael's International Treasure Jewelry, Inc. ("Co-Lessee") for the "Dry Tortugas Treasure" (the "Treasure"). The Lease/Purchase Agreement obligates Seahawk to lease the Treasure to the Co-Lessees for a term of one year. The lease provides for quarterly payments of $67,500. See Note N. Consulting Agreement - On October 1, 1997, the Company entered into a consulting agreement with First Consolidated Financial Corp. (an affiliate) which provides for annual payments of $120,000 per annum. NOTE M - PROPOSED ACQUISITION On September 10, 1997, the Company entered into a Letter of Intent to acquire all of the outstanding capital stock -12- VANDERBILT SQUARE CORP. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 NOTE M - PROPOSED ACQUISITION (Cont'd) 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. Terms of this Letter of Intent specify a purchase price of $3,500,000 consisting of $350,000 cash and $3,150,000 of the Company's authorized, but previously unissued, restricted common stock. A total of 8,200,989 shares are anticipated to be issued in connection with the acquisition. "Michael's" will become a wholly-owned subsidiary of the Company in a transaction which is expected to be recorded as a reverse acquisition for accounting and financial statement reporting purposes. The agreement must be approved by the Board of Directors of Vanderbilt Square Corp. and "Michael's" and by the shareholders of the Company. NOTE N - SUBSEQUENT EVENTS Name Change - On February 27, 1998, the Company changed its name to Treasure & Exhibits International, Inc. Artifacts and Displays Purchase Agreement - On March 19, 1998, the Company exercised its option to purchase artifacts previously described as the "Dry Tortugas Treasure". See Note L. Consideration named in the agreement amounted to $2,432,500 comprised of $617,500 cash payments, 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 option expires on June 10, 1998. 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. -13- VANDERBILT SQUARE CORP. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 NOTE N - SUBSEQUENT EVENTS (Cont'd) As a result of the cash required to acquire the artifacts, Vanderbilt Square Corp. borrowed $482,500 from affiliated entity. The borrowings mature on March 19, 1999. -14-
EX-27.2 3
5 This schedule contains summary financial information extracted from Balance Sheet, Statement of Operations, Staements of Cash Flows and Notes thereto incorporated in Part II, Item 8 of this Form 10-K and is qualified in its entirety by reference to such financial statements. 12-MOS DEC-31-1997 DEC-31-1997 179,795 16,143 0 0 0 195,938 0 0 195,938 17,083 0 0 0 1,649 177,207 193,938 0 144,283 0 0 130,047 5,988 0 8,248 (12,592) 0 0 0 0 20,840 0 0
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