<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Quarterly Report Under Section 13 or 15 (d) of the
Securities Exchange Act of 1934
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For the quarter ended March 31, 1997
Commission File Number 0-4519
INTER-CONTINENTAL SERVICES CORPORATION
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(Exact name of registrant as specified in its charter)
Missouri 44-0628974
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(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
5700 Broadmoor, Suite 712 Mission, Kansas 66202
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (913) 262-1604
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Indicate by check mark whether the registrant (1) has filed reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such report), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the close of the latest practical date.
Class Outstanding at December 31, 1996
- --------------------------
Common Stock, No par Value 1,891,572
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INTER-CONTINENTAL SERVICES CORPORATION
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1
Balance Sheets - March 31, 1997 and December 31, 1996 1
Condensed Statements of Income (Loss) -
Three Months Ended March 31, 1997 and
Twelve Months Ended December 31, 1997 2
Statement of Cash Flows -
Three Months Ended March 31, 1997 3
Notes to Financial Statements 4
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operation 7
PART II - OTHER INFORMATION
Signatures 8
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INTER-CONTINENTAL SERVICES CORPORATION
BALANCE SHEETS
(Unaudited)
ASSETS
March 31, 1997 December 31, 1996
CURRENT ASSETS:
Cash $ 1,282 $ 3,210
Accounts Receivable, less allowance
for doubtful accounts of $2,300 40,648 44,010
Prepaid Expenses 10,400 0
------------ -----------
Total current assets $ 52,330 $ 47,220
PROPERTY, PLANT AND EQUIPMENT (Note 3) $ 4,486 $ 5,485
OTHER ASSETS (Note 4) $ 22,700 $ 0
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$ 79,516 $ 52,705
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 11,820 $ 37,000
Customer Deposits 0 0
Deposits for Unissued Stock (Note 5) 29,625 25,250
Accrued Expenses (Note 6) 140,400 2,414
Notes Payable (Note 7) 322,950 176,700
------------ -----------
Total current liabilities $ 504,795 $ 241,364
STOCKHOLDERS' EQUITY:
Common Stock, no par, authorized 3,000,000 $ 1,787,817 $ 1,787,817
Shares, issued 1,896,572 shares
Less cost of 340,971 common shares held (161,738) (161,738)
In treasury
Contributed capital in excess of par 63,400 63,400
Accumulated deficit (Note 8) (2,114,757) (1,878,138)
------------ -----------
Total stockholders equity $ (425,278) $ (188,659)
$ 79,516 $ 52,705
See notes to financial statements.
1
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INTER-CONTINENTAL SERVICES CORPORATION
Condensed Statements of Income (Loss)
(Unaudited)
Three Months Twelve Months
Ended Ended
March 31, 1997 December 31, 1996
Operating Revenue $ 62,630 $ 199,480
Cost of Goods Sold 7,950 0
Operating Expenses 291,300 312,765
------------ -----------
Income (Loss) from Operations $ (236,620) $ (113,285)
Other Deductions:
Interest Expense $ 0 $ (1,248)
Miscellaneous Income 0 2,364
Relief of Indebtedness 0 172,850
Extraordinary Gain on Extinguishment
of Accrued Interest
NET INCOME (Loss) $ (236,620) $ 60,681
Income (Loss) Per Share of Common Stock:
Net Income (Loss) (0.12) 0.04
Average Shares Outstanding 1,896,572 1,896,572
See notes to financial statements.
2
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INTER-CONTINENTAL SERVICES CORPORATION
Statements of Cash Flows
Three Months Ended March 31, 1997
(Unaudited)
Cash Flows From Operating Activities:
Net Income (loss) $ (236,620)
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and amortization 999
Changes in operating assets and liabilities:
Decreases in Receivables 3,362
Increases in Prepaid Expenses (10,400)
Decreases in Accounts Payable (25,180)
Increases in Deposits for Unissued Stock 4,375
Increases in Accrued Expenses 137,986
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Total Adjustments $ 111,139
Net Cash Provided by (used in) Operating Activities $ (125,481)
Cash Flows from Investing Activities:
Net Cash Issued in Investing Activities: $ (22,700)
Cash Flows from Financing Activities:
Increase (decrease) of Notes Payable $ 146,250
Net cash provided by financing activities:
Cash and Cash Equivalents at Beginning of Year $ 3,210
Cash and Cash Equivalent at the End of Period $ 1,282
Supplemental disclosures of cash flow information:
Cash Paid Year to Date for Interest 0
Cash Paid Year to Date for Income Taxes 0
See notes to financial statements.
3
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INTER-CONTINENTAL SERVICES CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 1 Summary of Significant Accounting Policies
Business Enterprise - The Company engages primarily in the service of
credit card recovery and cardholder contact.
Property, Plant, and Equipment - Property, Plant, and Equipment are stated
at cost less accumulated depreciation. They are depreciated using
accelerated methods over the estimated useful lives of the assets which
range from five to twenty-five years. Additions, major renewals, and
betterments are capitalized. Maintenance and repair are charged to expense
as occurred.
Cash Flows - For the purposes of the statement of cash flows, the Company
considers all investments with a maturity date of three months or less to
be cash equivalents.
Income Taxes - Investment tax credits are accounted for using the "flow-
through" method.
Income (Loss) Per Common Share - Income (loss) per common share is based on
the weighted average number of shares outstanding.
Concentrations of Credit Risk - Financial instruments that potentially
expose the Company to concentrations of credit risk, consist primarily of
accounts receivable. To limit this risk, the Company has established an
allowance for doubtful accounts based upon factors surrounding the credit
risk of clients, historical trends, and other information.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that effect the amounts reported. Actual results
could differ from the estimates, but management does not believe such
differences will materially effect the Company's financial position or cash
flows.
Note 2 Continued Existence of the Company
For the three months ended June 30, 1997, the Company reported a loss of
$236,620. As a result of this loss, the Company has an accumulated deficit
of $2,114,757 on March 31, 1997
The ability of the Company to meet its obligations and continue in
existence is dependent on its ability to (1) maintain profitable
operations, or (2) obtain additional sources of financing or capital and
(3) the willingness of creditors to continue to accept modified payment
schedules.
4
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Note 3 Property, Plant, and Equipment
Property, plant, and equipment are summarized as follows:
March 31, 1997 December 31, 1997
Furniture and fixtures $ 23,212 $ 23,212
Less: accumulated depreciation 18,726 17,727
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Total $ 4,486 $ 5,485
Note 4 Other Assets
In an effort to diversify and reduce dependence on the credit card
industry, during this financial period, the Company made an additional
investment of $22,700 in a privately held telecommunications company,
American Telecommunications Holdings.
Note 5 Deposits for Unissued Stock
During the fourth quarter of 1996, the Company collected $25,250 from
investors for the issuance of 27,000 shares. During the first quarter
of 1997, the Company collected an additional $4,375 for the issuance of
4000 shares. Non of the shares were issued as of March 31, 1997.
Note 6 Accrued Expenses
Accrued expenses represent payroll obligation incurred but not paid. The
majority of this obligation is to Company officers that are differing
payment until the Company's financial position will support payment. This
obligation was $2,414 as of December 31, 1997 and $140,400 as of
March 31, 1997.
Note 7 Notes Payable
March 31, 1997 December 31, 1997
Due to Shareholders $ 42,000 $ 42,000
Convertible Notes Payable 109,700 109,700
convertible @ $.50/share
Note Payable to Bank 25,000 25,000
interest at prime plus 2%
(loan is currently in question)
Notes Payable to Meyer Group Limited 146,250 0
interest due @ 1%/ month ----------- ----------
Total $ 322,950 $ 176,700
5
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Note 8 Accumulated Deficit
As of December 31, 1995 $ 1,938,819
Net Income - 1996 60,681
As of December 31, 1996 1,878,138
Net Income - three months 1997 (323,758)
As of March 31, 1997 $ 2,114,757
Note 9 Income Taxes
The Company has a net loss carryforward to offset future income tax in the
amount of $795,000. This carryforward are available as follows:
Year of expiration Carryforward
1998 $ 8,000
1999 363,000
2000 6,000
2001 16,000
2003 95,000
2007 59,000
2009 86,000
2010 162,000
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$ 795,000
6
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Item 2
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
The following is management's discussion and analysis of significant factors
which have effected the Company's earnings and financial position during the
first three months of 1997. In the opinion of the Company, the accompanying
unaudited, condensed financial statements contain all adjustments necessary to
present fairly the financial position of the Company as of March 31, 1997 and
the results of operations and cash flows for the three months then ended.
LIQUIDITY AND CAPITAL RESOURCES
The excess of current liabilities over current assets, as of March 31, 1997
is $452,465. While this is definitely material, most of the liability is due to
shareholders, which have a vested interest in the success of the Company.
The current deficit of $2,114,757 is also significant. It does however
compare favorably with the $2,336,758 deficit as of June 30, 1985 and
demonstrates the Company's ability to successfully conduct business with such a
deficit. The Company continues to seek a capital infusion and is actively
searching for beneficial merger or acquisition opportunities.
RESULTS OF OPERATIONS
Operating Revenue - Operating revenues for the first three months of 1997
were $62,630 and were a 30% improvement over the same period in 1996. Marketing
efforts are underway to attract new customers in the credit card industry but
the real opportunity for revenue growth will likely come from diversification
into other businesses.
Operating Expenses - Operating expenses increased substantially over the
same period in 1996. Although expenses in the credit card operations were
reduced so as to provide a profit from that operation, staff additions at the
corporate level, to work on diversification and financing efforts, added
materially to total operating expenses.
CAPITAL STOCK TRANSACTIONS
No additional stock was issued during this quarter.
7
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INTER-CONTINENTAL SERVICES CORPORATION
PART II - OTHER INFORMATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Inter-Continental Services Corporation
Date 14 Aug. 1997
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By: /s/ Robert N. Meyer
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Robert N. Meyer, President
8
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<PAGE>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,282
<SECURITIES> 0
<RECEIVABLES> 40,648
<ALLOWANCES> 2,300
<INVENTORY> 0
<CURRENT-ASSETS> 52,330
<PP&E> 23,212
<DEPRECIATION> 18,726
<TOTAL-ASSETS> 79,516
<CURRENT-LIABILITIES> 504,795
<BONDS> 0
0
0
<COMMON> 1,787,817
<OTHER-SE> (2,213,095)
<TOTAL-LIABILITY-AND-EQUITY> 79,516
<SALES> 62,630
<TOTAL-REVENUES> 62,630
<CGS> 7,950
<TOTAL-COSTS> 7,950
<OTHER-EXPENSES> 291,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 62,630
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (236,620)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
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