ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-looking statements
Statements
made in this Form 10-Q that are not historical or current facts are
"forward-looking statements" made pursuant to the safe harbor
provisions of Section 27A of the Securities Act of 1933 (the "Act")
and Section 21E of the Securities Exchange Act of 1934. These
statements often can be identified by the use of terms such as
"may," "will," "expect," "believe," "anticipate," "estimate,"
"approximate" or "continue," or the negative thereof. We intend
that such forward-looking statements be subject to the safe harbors
for such statements. We wish to caution readers not to place undue
reliance on any such forward-looking statements, which speak only
as of the date made. Any forward-looking statements represent
management's best judgment as to what may occur in the future.
However, forward-looking statements are subject to risks,
uncertainties and important factors beyond our control that could
cause actual results and events to differ materially from
historical results of operations and events and those presently
anticipated or projected. We disclaim any obligation subsequently
to revise any forward-looking statements to reflect events or
circumstances after the date of such statement or to reflect the
occurrence of anticipated or unanticipated events.
Financial
information contained in this report and in our financial
statements is stated in United States dollars and are prepared in
accordance with United States generally accepted accounting
principles.
Description of the Business
We were
incorporated in the State of Nevada on October 24th, 2016. The
Company was incorporated as Beliss Corp. however on June 26, 2019
the Company changed its name to Treasure & Shipwreck, Inc. by
which we will refer to as “TSR,” Our original general
business plan was originally in the search engine optimization
(“SEO”), Internet marketing and web development
business. Subsequent to April 30, 2019 the Company elected to focus
its business plan on entering the treasure recovery business by
attempting to work with, partner with or hire experts in the
industry. Mr. Huffman possesses over 10 years of experience working
with treasure companies, including their budgeting, due diligence,
research issues, and gaining rights to suspected or known wreck
sites using United States Admiralty law in United States Courts. As
such, Huffman knew many of the experts and opportunities in the
treasure industry and had a business plan for such operations to be
implemented by the Company.
In
January 2019, the Company entered into a series of transactions to
gain control of a company named Southern Amusement Co. Inc.
(“Southern Amusement”) a West Virginia based business.
With that acquisition, TSR was to acquire Southern Amusement as a
wholly owned subsidiary company.
Southern
Amusement is an amusement machine provider located in Logan, West
Virginia. The company had some 525 West Virginia Limited Video
Lottery machines licensed under West Virginia law. The agreements
called for delivery of all shares of Southern Amusement owned by
John (J.D.) Brammer to be delivered in the transaction and be held
by TSR. A private agreement was entered by Ajay Rajendron for
delivery of 2,700,000 shares of Beliss stock which he held of his
3,000,000 shares to JD. Brammer as part of the transaction became
the CEO and sole director while Rajanedron resigned. Subsequently,
Brammer resigned and Craig A. Huffman was appointed when the
Southern Amusement transaction did not occur.
Importantly,
under West Virginia law and regulation, control of any lottery
related company, including ownership must be majority owned by a
licensed and certified person by the Lottery Commission who must be
a West Virginia resident. So in the transaction the control and
majority control of Beliss as the owner of Southern, would have to
be a West Virginia resident. Thus, the then Chief Operating Officer
of Southern, John (J.D.) Brammer was appointed as CEO and director
of Beliss, since he was licensed in Southern and was a West
Virginia resident. After numerous legal consultations it was
decided that due to the West Virginia laws, J.D. Brammer would have
to be the majority holder of Beliss. Thus after he was appointed as
CEO and director, and Ajay Rajendran resigned as CEO and director,
additional shares in the amount of 5,500,000 shares we issued to
J.D. Brammer under restrictions, that included such shares would be
surrendered if the transaction was not approved by the West
Virginia Lottery Commission or if the shares of Southern could not
be completely delivered. In such instance all interest in such
shares by J.D. Brammer would be surrendered, and such shares would
go to an escrow agent for control until a future cancellation or
other action occurred. One additional agreement was with Vicki
Ferell, who was part owner of Southern Amusement, so the agreement
with Ferell was for her to deliver her shares of Southern Amusement
to Beliss, in exchange for 571,429 shares of common stock. Such
shares were issued to Vicki Ferrell.
By
April 2019, the shares of Southern Amusement were not delivered to
Beliss after requests were made by counsel. It was then discovered
that there was an undisclosed obligation on such shares which was
not communicated to Beliss during the transaction. In exchange for
a mutual release which Beliss believed such action was merely a
mistake of fact, all such shares were abandoned by any interest by
J.D. Brammer (the issued 5,500,000 shares), including the 2,700,000
private shares he had received from Ajay Rajendron which were also
released to the control of the escrow agent and counsel for the
Company. On April 28, 2019 Brammer resigned and the transaction was
cancelled. At that point Craig A. Huffman (“Huffman”),
counsel for the Company, became acting Chief Executive Officer
(“CEO”) and sole Director of the Company. At the same
time as the settlement agreement, Vicki Ferrell disclaimed any
interest in the shares. The future business in the treasure
industry was approved by all major holders at the time. While not
requiring shareholder approval, it became the direction of the
Company.
While
in the process of unwinding the transaction with the shareholders
of Southern Amusement, the Company began to review various business
opportunities. Subsequent to April 30, 2019, the Company elected to
focus its business plan on entering the treasure recovery business
by attempting to work with, partner with or hire experts in that
industry under the experience of the new acting Chief Executive
Officer and sole Director Craig A. Huffman (“Huffman”).
Huffman possesses over 10 years of experience working with treasure
companies, including their budgeting, due diligence, research
issues, and gaining rights to suspected or known wreck sites using
United States Admiralty law in United States Courts. As such,
Huffman knew many of the experts and opportunities in the treasure
industry and had a business plan for such operations to be
implemented in the Company.
To date
the Company has purchased a research and recovery vessel in August
2019, of the R/V Bellows from the University System of Florida
through the Florida Oceanagraphic Institute. As well the Company
completed the purchase of a large swath of survey data in November
2020 for approximately 60 miles of data from Global Marine
Exploration. Using that data the Company contracted a private crew
and vessel to make recovery and find of a cannon and anchor of the
Cape Canaveral area. The Company then entered into the purchasing
of a private gaming and app library and company, as well as a
treasure themed gaming app based on treasure recovery as an
entertainment based game for phone, android, IOS, X-box, and other
systems.
On about December 13, 2019, the Company carried out, through an
independent contracted crew, successfully recovered artifacts from
its initial dives on the previous scanned areas purchased from GME,
including what is believed to be the boundaries of a suspected
17th
century shipwreck. Among items
identified was a cannon from the period, and an anchor which was
recovered, along with other items. The Company used the recently
announced purchased data to make the finds on initial dives. The
identity of the vessel will be worked on as the area is further
searched and targets explored.
On December 30, 2019, the Company completed the purchase of diving
and recovery equipment. This equipment will be used by the Company
in conjunction with its contractors in the numerous recovery
activities ongoing and planned as well as internal operations with
its growing assets. TSR was able to make the purchase of a bulk
amount of equipment which will be used internally, as well as with
our hired contractors, and divers, dramatically increasing our
ability to equip operations for TSR’s projects through
substantial negotiations and quality purchase for the Company. Much
of the equipment is state of the art and ready for use for the
Company in all its planned operations.
Legal Proceedings
The
Company is not aware of any pending or threatened litigation
against us.
On
November 9, 2019, the Company filed a declaratory action in the
Sixth Judicial Circuit Court for Pinellas County, Florida for the
purpose of obtaining a judicial declaratory judgment as to the
Company’s status under the Securities laws as to whether the
Company has ever been a “Shell” Company under the
Securities Laws. Pursuant to Chapter 86 of the Florida Statutes the
Court will render a decision whether the Company had ever met the
definition of being a shell company under Rule 405 of the
Securities Act, so that all shareholders would be able to utilize
Rule 144, and otherwise be able to enjoy complete ownership and
sale of such shares. Such matter is being amended to supply
exhibits in a new filing.
Results of operations
We have incurred recurring losses to date. Our financial statements
have been prepared assuming that we will continue as a going
concern and, accordingly, do not include adjustments relating to
the recoverability and realization of assets and classification of
liabilities that might be necessary should we be unable to continue
in operation.
Summary of Nine Months Ended January 31, 2020 and 2019 Results of
Operations
For the nine month period ended January 31, 2020 the Company
incurred net losses of $271,152. The Company incurred boat expenses
of $107,664, labor expenses of $41,667, professional fees of $84,367, accounting fees of $15,300, general and administrative expenses of
$16,100, and depreciation
expense of $6,054.
Total operating expenses for the nine month period ended January
31, 2019 were $25,737. The
Company incurred bank service charges of $490, computer and
internet expenses of $352, depreciation expense of $3,566,
professional fees of
$12,596, accounting and audit
fees of $5,023, legal fees of $2,000, and rent expense of
$1,710.
The increase in operating expenses for the nine months ended
January 31, 2020 is attributable to the start of our entry into the
treasure recovery business.
Summary of Three Months Ended
January 31, 2020 and 2019 Results of
Operations
For the three month period ended January 31, 2020 the Company
incurred net losses of $148,864. The Company incurred boat expense of
$56,038, labor expenses of
$10,417, professional fees of
$62,716, accounting fees of
$2,000, depreciation expense of
$3,632, and general and
administrative expenses of $14,061.
Total operating expenses for the three month period ended January
31, 2019 were $11,136. The Company incurred bank service
charges of $185, computer and internet expenses of $241,
depreciation expense of $1,189, professional fees of $8,952, and
rent expense of $570.
The
increase in operating expenses for the three months ended January
31, 2020 is attributable to the start of our entry into the
treasure recovery business.
Liquidity and capital resources
As of January 31, 2020, our
total assets were $118,299.
As of January 31, 2020, our
current liabilities were $81,853 and stockholders’ equity was $36,446. As
of January 31, 2020 we had a
net working capital deficit of $17,890.
A significant financial challenge and risk facing the Company is a
lack of liquidity. Based on its historical rate of expenditures,
the Company expects to expend its available cash in less than one
month from March 18, 2020. The
Company continued to operate with limited working capital during
the period ended January 31, 2020. This limited working capital indicates that the
Company is unable to meet its short-term liabilities with its
current assets. This working capital deficit is extremely risky for
the Company as it may be forced to cease its operations due to its
inability to meet its current obligations.
Due to the fact that the Company does not expect to generate
significant revenues for the foreseeable future the Company must
rely on outside equity and debt funding. The combination of the
ongoing operational, even during times when there is little to no
exploration or recovery activities taking place, and corporate
expenses, as well as the need for outside financing creates a very
risky situation for the Company and its shareholders. This working
capital shortfall and lack of access to cash to fund corporate
activities is extremely risky and may force the Company to cease
its operations which would more than likely result in a complete
loss of all capital invested in or loaned to the Company to
date.
If we are unable to secure additional financing, the
Company’s business may fail and our stock price will likely
be materially adversely affected and our common stock may become
worthless.
Cash flows from operating activities
For the nine months ended
January 31, 2020 net cash flows used in operating activities was
$269,997.
For the nine months ended January 31, 2019 net cash flows used in
operating activities was $13,111.
The
increase in net cash flow used in operating activities is
attributable to the start of our entry into treasure
recover.
Cash flows from investing activities
For the nine months ended January 31, 2020 we have used $60,390 cash in investing
activities.
For the nine months ended January 31, 2019 we have used no cash in investing
activities.
This
increase was attributable to the purchase of a boat and
magnetometer.
Cash flows from financing activities
For the nine months ended January 31, 2020 we have generated $391,350 cash flows from financing
activities.
For the nine months ended January 31, 2019 we have generated $6,200 of cash
flows by financing activities.
This
increase was attributable to cash from the sale of common stock of
$352,750 and an increase in related party loans of
$38,600.
We qualify as a “smaller reporting company” under the
JOBS Act. As a result, we are permitted to, and intend to, rely on
exemptions from certain disclosure requirements.
For example, smaller reporting companies are not required to
provide a compensation discussion and analysis under Item 402(b) of
Regulation S-K or the auditor attestation of internal controls over
financial reporting.
Future Financings
We will continue to rely on equity sales of the Company’s
common shares in order to continue to fund business operations.
Issuances of additional shares will result in dilution to existing
shareholders. There is no assurance that the Company will achieve
any additional sales of equity securities or arrange for debt or
other financing. If the Company is not able to secure outside
financing then it may have to cease its operations.
Recently Issued Accounting Pronouncements
The Company has implemented all new accounting pronouncements that
are in effect. These pronouncements did not have any material
impact on the financial statements unless otherwise disclosed, and
the Company does not believe that there are any other new
accounting pronouncements that have been issued that might have a
material impact on its financial position or results of
operations.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on its
financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or
capital resources.
