January 28, 2000
TREASURY INTERNATIONAL INC (TREY)
Quarterly Report (SEC form 10QSB)
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
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
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
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.
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