<PAGE>
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 ending December 31, 1997
Commission File No. O-4519
INTER-CONTINENTAL SERVICES CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Missouri 44-0628974
- -------------------------------- -------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4101 Westerly Place, Suite 108
Newport Beach, CA 92660
--------------------------------------
(Address of Principal Office and Zip Code)
Registrant's telephone number, including area code
(949) 629-4120
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Shares of Common Stock, No Par Value
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 No X
--- ---
The aggregate market value of the voting stock of the Registrant held by
persons other than officers, directors and greater than 5% shareholders as of
the close of business on December 31, 1997 was $450,212 based on a "bid"
price of $0.625. The number of shares of Common Stock outstanding at
December 31, 1997 was 1,896,572.
<PAGE>
Part I
Item 1. BUSINESS
Inter-Continental Services Corporation (the "Company" or "ICSC") was
incorporated as a Missouri corporation in 1958 under the name All State
Credit & Research, Inc. The Company changed its name to Inter-Continental
Computing, Inc. in September 1968 and in June 1969 changed to its current
name, Inter-Continental Services Corporation.
During 1997 the Company operated a credit card recovery and cardholder
contact service in Phoenix, Arizona. During 1997, the Company closed their
Kansas City, Missouri operations.
Initially, the Company provided services for better control of oil company
credit cards. In the late 1960s, with the introduction of bank cards and
expanded appeal of travel cards, the Company's card recovery services were
modified and adapted to the more demanding purpose of the multi-purpose cards.
While technology has greatly decreased the need for card recovery, the
Company has developed related services that focus on effecting
issuer/customer contact and developing pertinent facts and information
relative to more effective and less costly collection. The Company's
reputation, current services and adaptation to the contemporary challenges in
the credit card industry should assist in the transition from credit card
servicing to other business ventures that the Company might want to enter
into in the future.
In 1997 substantially all of the revenues are concentrated with one customer
in the credit card industry. During 1997 the Company derived 91% of operating
revenue from one customer. During 1996, the Company obtained 93% of operating
revenues from two customers. In 1995, two customers provided 87% of operating
revenues. Although the Company is directly affected by the well being of its
major customers, management is uncertain as to the significant loss of
customers at December 31, 1997.
As of December 31, 1997, the Company had two fulltime and five part-time
employees.
Item 2. Properties
As of December 31, 1997 the Company occupied a 1,150 square foot building in
Phoenix, Arizona. The lease on those premises will expire on August 31,2000.
The Company also occupies approximately 2,000 square feet of premises in
Newport Beach, California on a month-to-month lease for $1,720 per month
plus taxes.
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders
None
2
<PAGE>
Part II
Item 5. Market for Registrant's Common Equity and related Shareholder Matters
The principal trading in the Company's stock has been in the NASDAQ
over-the-counter market. Listed below are the average bid and ask quotations;
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
End of Quarter Bid Asked Bid Asked Bid Asked
-------------- --- ----- --- ----- --- -----
<S> <C> <C> <C> <C> <C> <C>
1st 1/4 5/8 1/4 5/8 1/4 1/2
2nd 1/4 5/8 1/4 3/4 1/4 1/2
3rd 1/4 5/8 1/4 3/4 3/8 1 1/8
4th 1/4 5/8 1/2 1 3/8 1/8 7/8
</TABLE>
The approximate number of shareholders of record for the Company's stock as
of December 31, 1997 was 511. There were no dividends paid in 1997, 1996, or
1995.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating Revenues $ 241,294 $ 199,480 $ 379,715 $ 426,345 $ 555,788
Income (Loss) from
Continuing Operations $(486,787) $ 60,681 $(163,745) $ (87,599) $ 146,479
Income (loss) from
Continuing Operations
per share:
Primary $ (0.26) $ 0.04 $ (0.11) $ (0.07) $ 0.11
Fully Diluted $ (0.18) $ 0.04 $ (0.11) $ (0.07) $ 0.08
At year end:
Total Assets $ 143,478 $ 52,705 $ 70,575 $ 127,177 $ 110,861
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Conditions
and Result of Operations
RESULTS OF OPERATIONS
1997 Compared to 1996
Operating revenue in 1997 increased $41,814 or 21% to $241,294 from
$199,480 in 1996. This increase was the result of management's efforts
to increase revenues and thereby increase profitability.
Operating expenses increased $392,764 or 126% to $705,529 in 1997 from
$312,765 in 1996. Much of this increase in expenses can be attributable
to increased general and administrative payroll cost. Three officers of
the Company were granted employment contracts effective October 1, 1996
(see note 9). Payroll costs in 1997 amounted to $325,000. Of this
amount, $70,200 should have been accrued as of December 31, 1996. Cost
associated with selling the Company's products also increased because
of the increased unit sales in 1997 as compared to 1996.
3
<PAGE>
Largely as a result of the increased operating expenses in 1997, the
Company's 1997 loss increased $384,788 or 377% to $486,787 as compared to a
loss in 1996, before an extraordinary gain, of $101,999. 1996 Compared to 1995
Operating revenue in 1996 decreased 47% to $199,480 from $379,715 in 1995.
Most of this decline was a result of management's decision to phase out
services that were no longer profitable. Operating expenses in 1996 were
$312,765. This was a reduction of $160,928 or 34%, from $473,693 in 1995.
Costs were lower in 1996 primarily because of declining revenue and a
reduction in the Company's work force.
As a result, the loss from operations was $101,999. This was 38% less than
the $163,745 in 1995. The Company had an extraordinary gain of $162,680
resulting from the waiving of accrued interest on shareholder notes payable.
LIQUIDITY AND CAPITAL RESOURCES
The Company ended 1997, 1996 and 1995 with anticipation for better operating
results in the future. However, since current liabilities exceeded current
assets, additional liquidity will be necessary to continue as a viable entity.
Management continues to actively seek a corporate merger or an additional
source of capital to allow the Company to expand and adequately market its
services. The Company is actively discussing merger possibilities with other
companies but has not yet been able to complete negotiations.
INFLATION
The impact of inflation is not material to the operations of the Company.
Item 7A: Quantitative and Qualitative Disclosures about Market Risk
The Company does not use derivative financial instruments. Management of the
Company believes its exposure to market risks, including exchange rate risk,
interest rate risk and commodity price risk, is not material at the present
time.
Item 8. Financial Statements and Supplementary data
<TABLE>
<CAPTION>
Index to Financial Statements Page
<S> <C>
Independent Auditors Report 5
Balance Sheet - December 31, 1997 and 1996 6
Statements of Operations - Years Ended December 31, 1997, 1996 and 7
1995
Statements of Shareholders' Deficit - Years Ended December 31, 8
1997, 1996 and 1995
Statements of Cash Flows - Years Ended December 31, 1997, 1996 and 9
1995
Notes to Financial Statements 10-13
</TABLE>
4
<PAGE>
Independent Auditor's Report
Board of Directors
Inter-Continental Services Corp.
We have audited the balance sheet of Inter-Continental Services Corporation as
of December 31, 1997 and 1996, and the related statements of operations,
shareholders' deficit, and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we 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 presentations.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency, which raises substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
In our opinion, the afore mentioned financial statements present fairly, in all
material respects, the financial position of Inter-Continental Services
Corporation at December 31, 1997 and 1996 and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
Our audits of the financial statements also included the schedules listed in
answer to Item 14(a)2. In our opinion, such schedules present fairly the
information required to be set forth therein.
Edward B. Stonehocker
Certified Public Accountant
201 South Main Street
Suite 900
Salt Lake City, UT 84115
January 8, 2000
5
<PAGE>
INTER-CONTINENTAL SERVICES CORPORATION
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
------------
Assets 1997 1996
---- ----
<S> <C> <C>
Current Assets
Cash $ 20,312 $ 3,210
Accounts receivable, net of $2,300 allowance 44,972 44,010
----------- -----------
Total Current Assets 65,284 47,220
Fixed Assets: (Note 1)
Furniture and equipment 23,212 23,212
Accumulated depreciation (21,723) (17,727)
----------- -----------
Net Fixed Assets 1,489 5,485
Other Assets
Investment in ATH (note 3) 58,655 --
Note receivable from officers (note 4) 15,350 --
Other 2,700 --
----------- -----------
Total Assets $ 143,478 $ 52,705
=========== ===========
Liabilities and Shareholder's Deficit
Current Liabilities:
Accounts payable $ 3,129 $ 37,000
Deposit for un-issued stock (note 5) 30,125 25,250
Note payable to bank (note 6) 25,000 25,000
Convertible notes payable (note 7) 109,700 109,700
Due to former shareholder (note 8) 42,000 42,000
Accrued payroll (note 9) 325,000 --
Note payable - other (note 10) 261,418 --
Interest payable (note 11) 22,552 --
Accrued liabilities -- 2,414
----------- -----------
Total Current Liabilities 818,924 241,364
----------- -----------
Shareholders' Deficit:
Common Stock, no par, authorized 3,000,000 shares, 1,787,817 1,787,817
Issued 2,237,543 in 1997 and 1996
Contributed capital 63,400 63,400
Accumulated deficit (2,364,925) (1,878,138)
----------- -----------
(513,708) (26,921)
Less: Treasury stock at cost, 340,971 shares (161,738) (161,738)
----------- -----------
Total shareholders deficit (675,446) (188,659)
----------- -----------
Total Liabilities and Stockholders' Deficit $ 143,478 $ 52,705
=========== ===========
</TABLE>
See notes to financial statements
6
<PAGE>
INTER-CONTINENTAL SERVICES CORPORATION
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Operating revenues $ 241,294 $ 199,480 $ 379,715
Operating expenses 705,529 312,765 473,693
--------- --------- ---------
Income (loss) from operations (464,235) (113,285) (93,978)
Other income (expense):
Interest expense (22,552) (1,248) (71,299)
Miscellaneous income 0 2,364 1,532
--------- --------- ---------
(22,552) 1,116 (69,767)
--------- --------- ---------
Income (loss) before tax and extraordinary item (486,787) (112,169) (163,745)
Income tax benefit (note 18) 0 (10,170) --
--------- --------- ---------
Income (loss) before extraordinary item (486,787) (101,999) (163,745)
Extraordinary item - gain on extinguishment of accrued interest on
shareholder and convertible notes, net of tax effect (note 18) 162,680 --
--------- --------- ---------
Net Income (Loss) $(486,787) $ 60,681 $(163,745)
========= ========= =========
Per share of common stock (note 16):
Loss before extraordinary item $ (0.26) $ (0.06) $ (0.11)
Extraordinary item --- 0.10 --
--------- --------- ---------
Net income (loss) $ (0.26) $ 0.04 $ (0.11)
========= ========= =========
Fully Diluted:
Loss before extraordinary Item $ (0.18) $ (0.05) $ (0.11)
Extraordinary item -- 0.09 --
--------- --------- ---------
Net Income (Loss) $ (0.18) $ 0.04 $ (0.11)
========= ========= =========
</TABLE>
See notes to financial statements
7
<PAGE>
INTER-CONTINENTAL SERVICES CORPORATION
STATEMENT OF SHAREHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Total
Common Paid in Accumulated Treasury Shareholders
Stock Capital Deficit Stock Deficit
----- ------- ------- ----- -------
<S> <C> <C> <C> <C> <C>
January 1 ,1995 $1,389,417 $63,400 ($1,775,074) ($186,738) ($508,995)
Reissued treasury stock -- -- -- 25,000 25,000
Net loss -- -- (163,745) -- (163,745)
---------- ------- ----------- --------- -----------
December 31, 1995 1,389,417 63,400 (1,938,819) (161,738) (647,740)
Issuance of common stock (note 15) 398,400 -- -- -- 398,400
Net Income -- -- 60,681 -- 60,681
---------- ------- ----------- --------- -----------
December 31, 1996 1,787,817 63,400 (1,878,138) (161,738) (188,659)
Net Loss -- -- (486,787) -- (486,787)
---------- ------- ----------- --------- -----------
December 31, 1997 $1,787,817 $63,400 ($2,364,925) ($161,738) ($675,446)
========== ======= =========== ========= ===========
</TABLE>
See notes to financial statements
8
<PAGE>
INTER-CONTINENTAL SERVICES CORPORATION
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Operating Activities
Net Income (loss) $(486,787) $ 60,681 $(163,745)
Adjustments to reconcile net income (loss) to net
Cash provided by (used in) operating activities
Depreciation 3,996 3,900 4,003
Reissued treasury stock -- -- 25,000
Changes in assets and liabilities
Accounts receivable (962) (18,965) 56,807
Other assets (18,050) -- 4,500
Accrued interest 22,552 (186,141) 63,060
Accrued payroll 325,000 -- --
Due to shareholders -- (35,000) 77,000
Accrued liabilities (2,414) (2,160) (5,630)
Deposit for unissued stock 4,875 25,250 --
Accounts payable (33,871) 37,000 --
--------- --------- ---------
Net cash provided by (used in) operating
activities: (185,661) (115,435) 60,995
Cash provided by (used in) investing activities:
Additions to fixed assets -- -- (7,849)
Investment in ATH (58,655) -- --
--------- --------- ---------
Net cash provided by (used in) (58,655) -- (7,849)
operating activities:
Cash provided by (used in) financing activities:
Issuance of common stock -- 119,000 --
Payment on notes payable -- (36,500) (52,287)
Borrowing on notes payable 261,418 -- --
--------- --------- ---------
261,418 82,500 (52,287)
--------- --------- ---------
Increase (decrease) in cash 17,102 (32,935) 859
Cash at beginning of year 3,210 36,145 35,286
--------- --------- ---------
Cash at end of year $ 20,312 $ 3,210 $ 36,145
========= ========= =========
Supplemental cash flow information:
Interest paid -- $ 1,200 $ 10,700
Income taxes -- -- --
</TABLE>
See notes to financial statements
9
<PAGE>
INTER-CONTINENTAL SERVICES CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations:
The Company operates a credit card recovery and cardholder contact service
business. Substantially all of the revenues and accounts receivable are
concentrated with a few customers in the credit card industry. During 1997
substantially all of the revenues are concentrated with one customer in the
credit card industry. This customer accounted for 91% of the Company's revenues
in 1997. During 1996 the Company obtained approximately $185,000 in revenue from
two customers. During 1995 the Company obtained approximately $330,000 in
revenue from two customers. At December 31, 1997 and 1996 substantially all of
the accounts receivable were from one customer. Although the Company is directly
affected by the well-being of its major customers, management is uncertain as to
the possibility of a significant loss of customers at December 31, 1997. (See
Note 2)
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles which requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
notes. Actual results could differ from those estimates, but management does not
believe such differences will materially affect the Company's financial
position, results of operations or cash flows.
FIXED ASSETS:
Fixed assets are depreciated on accelerated methods over the estimated useful
lives (5-7 years) of the asset.
NOTE 2 - CONTINUED EXISTENCE OF THE COMPANY
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of the
Company as a going concern. However, the Company has sustained operating losses
in recent years. In addition, the Company has used substantial amounts of
working capital in its operations. Further, at December 31, 1997, current
liabilities exceed current assets by $753,640 and total liabilities exceed total
assets by $675,446.
In view of these matters, realization of a major portion of the assets in the
accompanying balance sheet is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to meet its
financing requirements, and the success of its future operations. Management
believes that actions presently being taken to revise the Company's operating
and financial requirements provide the opportunity for the Company to continue
as a going concern.
NOTE 3 - INVESTMENT IN ATH
In an effort to diversify and reduce dependence on the credit card industry, the
Company invested $58,655 in 1997 in a privately held telecommunications company,
American Telecommunications Holdings. Although this has taken longer than
planned, management expects this investment will ultimately prove beneficial for
the shareholders of the Company.
10
<PAGE>
NOTE 4 - NOTES RECEIVABLE FROM OFFICERS
During 1997 the Company made advances of $10,350 to William N. Meyer, CEO and
Chairman of the Board and also advanced $5,000 to Barry J. Weidenhammer, Vice
President, Treasurer, Secretary and member of the Board of Directors. The
Company has signed notes from Mr. Meyer and Mr. Weidenhammer covering these
advances.
NOTE 5 - DEPOSIT FOR UNISSUED STOCK
As of December 31, 1996, the Company had deposits from investors for unissued
stock in the amount of $25,250. These deposits were for the issuance of a total
of 27,000 shares at prices ranging from $.62 to $1.00 per share. During 1997 the
Company received additional deposits from other investors totaling $4,875 for
the issuance of an additional 4,000 shares at prices ranging from $1.00 to $1.25
per share. As of December 31, 1997, the total amount of the deposit for unissued
stock was $30,125 for 31,000 shares.
NOTE 6 - NOTE PAYABLE TO BANK
Note payable to bank in the amount of $25,000 consists of a loan from a bank
which was taken over by the Federal Deposit Insurance Corporation. The owner of
the note is currently unknown. No interest payments have been made on this note
since 1993 and no interest is currently being accrued.
NOTE 7 - CONVERTIBLE NOTES PAYABLE
Convertible notes payable are demand notes in the total amount of $109,700 as of
December 31, 1996 and December 31, 1997. One of these notes, in the amount of
$20,700 is payable to Robert N. Meyer, President, CEO and Chairman. The other
note, in the amount of $89,000, is payable to an unrelated individual. Both
notes are convertible into shares of the company at $.50 per share.
NOTE 8 - DUE TO FORMER SHAREHOLDERS
During 1995 the company obtained advances of $42,000 from former shareholders.
There are no repayment terms associated with this advance and no interest was
accrued.
NOTE 9 - ACCRUED PAYROLL
Effective October 1, 1996, the company entered into employment agreements with
Mr. Robert N. Meyer, President and CEO, and Mr. Barry J. Weidenhammer, Vice
President/Treasurer. Under terms of his agreement, Mr. Meyer is to receive
$7,500 per month plus a 30% fringe benefit package. The contract with Mr. Meyer
also provides that if the Company is unable to generate cash flow sufficient to
pay his salary, then the Company is obligated to pay 1% interest per month on
the deferred payment.
Mr. Weidenhammer's agreement provides for $6,500 per month plus a 30% fringe
benefit package. The contract with Mr. Weidenhammer also provides that if the
Company is unable to generate cash flow sufficient to pay his salary, then the
Company is obligated to pay 1% interest per month on the deferred payment.
(See additional discussion under Item 11. Executive Compensation)
11
<PAGE>
NOTE 10 - NOTES PAYABLE - OTHER
During 1997 the Company borrowed a net total of $261,418. Of this amount
$247,918 was from an unrelated company. An additional $13,500 was borrowed from
entities controlled by members of the Board of Directors. Although there has
been no formal approval by the shareholders, the company anticipates that these
notes will ultimately be convertible into common stock at the rate of $.50 per
share. The company has accrued interest on these notes.
NOTE 11 - INTEREST PAYABLE
The accrued interest payable as of December 31, 1997 includes interest due to
employees and a former employee, based on their employment agreements with the
Company. In addition, the Company has accrued interest on notes payable - other
(see note 10).
NOTE 12 - INCOME TAXES
The Company has net operating loss carryforwards, expiring between 1999 and
2012, of approximately $1,200,000. These loss carryforwards can potentially
offset future income tax liability.
NOTE 13 - RELATED PARTY TRANSACTIONS
During 1997, Meyer Group Limited, a privately held company, performed certain
technical assistance totaling $29,500 for Company. This technical assistance
provided the Company with the expertise necessary in order to diversify. Robert
N. Meyer, President and CEO of the Company, is also President of Meyer Group
Limited. In addition, Mr. Meyer owns approximately 18% of the outstanding stock
of Meyer Group Limited.
NOTE 14 - RENTAL AGREEMENTS
The company leased office space under a lease which expired during 1997. Another
smaller space was occupied under a lease which expires on August 31, 2000. Rent
payments for the years ended December 31, 1997, 1996 and 1995 were approximately
$74,928, $50,000 and $54,000.
NOTE 15 - ISSUANCE OF COMMON STOCK
The Company issued no additional shares of common stock during 1997. During
fiscal year 1996 a shareholder of the Company contributed $119,000 in cash,
$35,000 in canceled noted payable to a shareholder and $206,640 in canceled
convertible notes (convertible at $.50 per share or 413,280 shares) in exchnage
for 416,666 shares of newly issued common stock. There is no documentation of
Board of Directors minutes or shareholder minutes approving the transactions, or
any other inducements made to the shareholder.
The Company issued 30,000 treasury shares for services rendered in 1995 at a
valuation of $.50 per share. The Company issued 50,000 treasury shares to an
employee for services in 1995 valued at $.20 per share.
NOTE 16 - EARNINGS PER SHARE
Earnings per share amounts are computed based on the weighted average number of
shares actually outstanding. During 1997 there were 1,896,572 shares
outstanding, 1,658,032 in 1996; 1,419,491 in 1995. The number of shares used in
fully diluted computations was 2,669,808 in 1997 and 1,877,432 in 1996.
12
<PAGE>
NOTE 17 - CONTINGENCIES
The Company has not filed appropriate documents with the Securities and Exchange
Commission disclosing a Director resignation. The Company did not hold a
shareholders meeting during 1997.
NOTE 18 - EXTRAORDINARY ITEM
In fiscal 1996 interest owed to shareholders on convertible notes and
shareholders notes $(178,350) was waived in lieu of 10,000 shares of newly
issued stock (valued at $10,000). Also interest accrued on the note payable to
bank ($4,500) was written off. The total $172,850, less tax effect of $10,170,
was recorded as an extraordinary item.
13
<PAGE>
Part III
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
A new accountant was engaged to audit the financial statements of
Inter-Continental Services Corporation in 1997. The former accountant did not
resign and was not dismissed but declined to stand for re-election because of
the need for the primary accountant to be closer to the corporate
headquarters in California. The former accountant did not issue an adverse
opinion or a disclaimer of opinion in the previous two years but its report
was qualified as to uncertainty because of Company's ability to continue as a
going concern. The decision to change accountants will be voted on in the
next meeting of the Board of Directors. The new accountant has relied on the
work of the former accountant in all respects for 1996 and 1995 financial
statement information as far as it was practicable.
The Company's Board of Directors does not have a standing audit committee.
Item 10. Directors and Executive Officers of the Registrant
(A) The Directors presently serving will hold office until the next annual
meeting and until their successors are elected and have qualified. Directors
serve terms of one year. The current Board of Directors are serving on an
interim basis until their approval at the next shareholders meeting.
(B) Executive officers of the Company are not elected to a specific term of
office.
Directors and Executive Officers
Robert N. Meyer President, Chief Executive Officer
Age: 36 and Chairman of the Board of Directors
Director since: 1996
Barry J. Weidenhammer Vice President, Secretary, Treasurer and Director
Age: 60
Carol M. Maltby Vice-President (Resigned effective July 31, 1997)
Age: 59
Alan S. Rosenfield Director
Age 41
Juan A. Ruiz Director
Age 39
Frank Willis Director
Age 39
(C) Business Experience:
Mr. Meyer became President, Chief Executive Officer and Chairman of the
Company on September 18, 1996. Mr. Meyer also serves as President,
Chief Executive Officer and Chairman of Meyer Group Limited in Newport
Beach, California. Mr. Meyer is also a director of Global Access
Telephone & Technology, Inc., which is headquartered in Vista,
California. Mr. Meyer resides in Costa Mesa, California. Mr. Meyer is
serving on an interim basis subject to election by the shareholders at
their next annual meeting.
14
<PAGE>
Mr. Weidenhammer has thirty years experience in general management.
Most recently, he served as general manager of Eaton Aerospace in Costa
Mesa, California. Mr. Weidenhammer became Vice-President and Treasurer
on September 18, 1996. He was given the additional title of Secretary
effective July 31, 1997 after resignation of Ms. Maltby. Mr.
Weidenhammer was elected on an interim basis to the Board of Directors
on December 24, 1997, subject to the election by the shareholders at
their next annual meeting. Mr. Weidenhammer resides in Newport Beach,
California.
Ms. Maltby has over twenty-five years experience in general management,
sales and marketing. Ms. Maltby has served as a director and an
executive officer for international and national companies. Most,
recently, Ms. Maltby has served as vice-president and secretary of
Meyer Group Limited and Access Medical Systems, Inc. She resides in
Carlsbad, California. Ms. Maltby resigned as an officer and director of
the Company effective July 31, 1997.
Judge Rosenfield has been a Municipal Court Judge in Los Angeles County
since 1990 He was re-elected to a second six year term in November
1998. Prior to his appointment, Judge Rosenfield was a Deputy District
Attorney for Los Angeles County. Judge Rosenfield is also a former
Deputy Sheriff for Los Angeles County. On December 24, 1997, Judge
Rosenfield was elected an interim member of the Board of Directors,
subject to his election by the shareholders.
Juan Ruiz has over nineteen years of general management experience,
including experience in international business. Mr. Ruiz has a broad
range of expertise, which includes the development and integration of
hardware and software for communications systems. He has also been
involved in the planning and search for new business in the area of
communications. He has also been responsible for the development and
training of newly hired personnel. On December 24, 1997, Mr. Ruiz was
elected an interim member of the Board of Directors, subject to his
election by the shareholders.
Mr. Willis served the United States Army as a communications
specialist. He continued in the communications field after his military
service. Mr. Willis is an officer and a principal owner of, a privately
held communications company that builds and services computer based
switches for the telecommunications industry. Mr. Willis was elected to
the board on December 24, 1997, on an interim basis subject to the
approval of the shareholders at the next annual meeting. Mr. Willis
resigned from the board effective February 12, 1999.
Item 11. Executive Compensation
No cash compensation was paid to any officer or director. No employee was
paid in excess of $100,000.
Effective October 1, 1996, Mr. Meyer entered into an employment agreement
with the Company whereby he would serve as President and CEO of the Company.
Under terms of the agreement, Mr. Meyer is to receive $7,500 per month plus a
30% fringe benefit package. The contract with Mr. Meyer provides that if the
Company is unable to generate cash flow sufficient to pay his salary, then
the Company will pay 1% interest per month on the deferred payment.
Effective October 1, 1996, Mr. Weidenhammer entered into an employment
agreement with the Company whereby he would serve as
Vice-President/Treasurer. The agreement stipulates that Mr. Weidenhammer is
to receive $6,500 per month plus a 30% fringe benefit package. The contract
with Mr. Weidenhammer provides that if the Company is unable to generate cash
flow sufficient to pay his salary, then the Company will pay 1% interest per
month on the deferred payment.
Ms. Maltby also had an employment agreement with the Company from October 1,
1996 until her resignation in July 1997. The agreement with Ms. Maltby
provided for $4,000 per month plus fringe benefits of 30%. Ms. Maltby is also
entitled to interest of 1% per month on any deferred payroll amount.
15
<PAGE>
As of December 31, 1997 the Company had accrued, but not paid payroll
to the following:
<TABLE>
<CAPTION>
December 31, 1997
-----------------
<S> <C>
Robert N. Meyer, President, CEO and Chairman $146,250
Barry J. Weidenhammer, Vice-President, Treasurer, $126,750
Secretary & Director
Carol M. Maltby, former Vice-President $52,000
-------
Total Accrued Payroll $325,000
</TABLE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table shows the amount of common stock owned as of December 31,
1997, by each person known by the Company to own directly or beneficially
more than 5% of the outstanding shares of the Company's stock.
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of Beneficial Owner Of Beneficial Ownership Percent of Class
- ------------------------------------ ----------------------- ----------------
<S> <C> <C>
Dr. David Ganch
27 W. 041 Walz Drive
Wheaton, IL 60187 545,666 28.77%
James F. Bell
5700 Broadmoor, Suite 712
Mission, Kansas 66202 (1) 174,674 9.21%
</TABLE>
(1) Includes 70,674 shares held by Mr. Bell's wife.
Item 13. Certain Relationships and Related Transactions
As of December 31, 1997, the Company was indebted to Robert N. Meyer,
President, CEO and Chairman the amount of $20,700.
The indebtedness is a convertible note with no stated rate of interest.
Unpaid interest has not been accrued. The note is convertible at the option
of the note-holder into Common Stock of the Company at $.50 cents per share.
In 1997 the Company contracted with the Meyer Group Limited for certain
technical advice. The Company paid $29,500 in fees to the Meyer Group Limited
during 1997 for those services. Robert N. Meyer is CEO of both the Company
and the Meyer Group Limited. Mr. Meyer also owns approximately 18% of the
outstanding stock of Meyer Group Limited.
16
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K
(1) The following financial statements are included in Part II Item 8:
<TABLE>
<CAPTION>
Index to Financial Statements Page
<S> <C>
Independent Auditors Report 5
Balance Sheet - December 31, 1997 and 1996 6
Statements of Operations - Years Ended December 31, 1997, 1996
and 1995 7
Statements of Shareholders' Deficit - Years Ended December 31,
1997, 1996 and 1995 8
Statements of Cash Flows - Years Ended December 31,
1997, 1996 and 1995 9
Notes to Financial Statements 10-13
</TABLE>
(2) The following financial statement schedules should be read in
conjunction with the financial statements referred to above.
<TABLE>
<CAPTION>
Index to Financial Statement Schedules Page
<S> <C>
Years Ended December 31, 1997, 1996, and 1995
Schedule II - Amounts Receivable from Related Parties and Underwriters, 18
Promoters and Employees other than Related Parties
Schedule V - Property, Plant and Equipment 19
Schedule VI - Accumulated Depreciation of Property, Plant and Equipment 19
Schedule VIII - Valuation and Qualifying Accounts 20
Schedule IX - Short-term Borrowings 21
Signatures 22
</TABLE>
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
No reports on Form 8-K have been filed by the registrant during the last quarter
of the period covered by this report.
17
<PAGE>
Inter-Continental Services Corporation
Schedule II
Amounts Receivable from Related Parties and
Underwriters, Promoters, and Employees Other
than Related Parties
<TABLE>
<CAPTION>
Balance at Balance at
Beginning Written End of Period
Of Period Additions Collected Off Current Not Current
--------- --------- --------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Year Ended
December 31, 1997 -- -- -- -- $15,350 --
========= ========= ========= ========= ========= =========
Year Ended
December 31, 1996 -- -- -- -- -- --
========= ========= ========= ========= ========= =========
Year Ended
December 31, 1995 $4,500 -- $4,500 -- -- --
========= ========= ========= ========= ========= =========
</TABLE>
18
<PAGE>
Inter-Continental Services Corporation
Schedule V
Property, Plant and Equipment
<TABLE>
<CAPTION>
Balance at
Beginning of Balance at
the Period Additions Retirements End of Period
---------- --------- ----------- -------------
<S> <C> <C> <C> <C>
Furniture and Equipment
Year Ended
December 31, 1997 $23,212 -- -- $23,212
======= ======= ======= =======
Furniture and Equipment
Year Ended
December 31, 1996 $23,212 -- -- $23,212
======= ======= ======= =======
Furniture and Equipment
Year Ended
December 31, 1995 $15,363 $ 7,849 -- $23,212
======= ======= ======= =======
</TABLE>
Estimated lives are 5 to 7 years
Depreciation is computed on an accelerated basis
Schedule VI
Accumulated Depreciation of Property, Plant and Equipment
<TABLE>
<CAPTION>
Balance at
Beginning of Balance at
the Period Additions Retirements End of Period
---------- --------- ----------- -------------
<S> <C> <C> <C> <C>
Furniture and Equipment
Year Ended
December 31, 1997 $17,727 $ 3,996 -- $21,723
======= ======= ======= =======
Furniture and Equipment
Year Ended
December 31, 1996 $13,867 $ 3,900 -- $17,727
======= ======= ======= =======
Furniture and Equipment
Year Ended
December 31, 1995 $ 9,824 $ 4,003 -- $13,827
======= ======= ======= =======
</TABLE>
19
<PAGE>
Inter-Continental Services Corporation
Schedule VIII
Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Balance at Charged
Beginning Cost & Other Other Balance at
Description Of Period Expense Accounts Charges End of Period
---------- -------- -------- ------- -------------
<S> <C> <C> <C> <C> <C>
Year Ended
December 31, 1997
Allowance for Doubtful $2,300 -- -- -- $2,300
Accounts.
====== ==== ==== ==== ======
Year Ended
December 31, 1996
Allowance for Doubtful $2,500 $200 -- -- $2,300
Accounts.
====== ==== ==== ==== ======
Year Ended
December 31, 1995
Allowance for Doubtful $2,500 -- -- -- $2,500
Accounts.
====== ==== ==== ==== ======
</TABLE>
20
<PAGE>
Inter-Continental Services Corporation
Schedule IX
Short-Term Borrowings
<TABLE>
<CAPTION>
Weighted Maximum Average Weighted
Balance Average Outstanding Outstanding Average
At End Interest During During Interest Rate
Category Of Period Rate Period Period During Period
-------- --------- ---- ------ ------ -------------
<S> <C> <C> <C> <C> <C>
Note Payable
To Bank
1997 $25,000 12.00% $25,000 $25,000 12.00%
======= ===== ======= ======= =====
1996 $25,000 12.00% $25,000 $25,000 12.00%
======= ===== ======= ======= =====
1995 $25,000 12.00% $25,000 $25,000 12.00%
======= ===== ======= ======= =====
</TABLE>
An interest rate of 12% was assumed. The bank was assumed by the
Federal Deposit Insurance Corporation in 1993. The bank has not made
any payments since the third quarter of 1993 because they have not been
contacted to make payment arrangements. Prior to 1993 interest was at
prime plus 2%. No interest was charged in 1997.
Note Payable - Other
<TABLE>
<S> <C> <C> <C> <C>
1997 $261,418 12.00% $261,418 $178,990 12.00%
======== ===== ======== ======== =====
1996 -- 12.00% $ 71,500 $ 49,625 12.00%
======== ===== ======== ======== =====
1995 $ 71,500 12.00% $101,500 $ 86,500 12.00%
======== ===== ======== ======== =====
</TABLE>
An interest rate of 12% was assumed. Notes are demand notes.
The average balance during the year represents the average quarterly
balances.
Convertible Notes Payable
<TABLE>
<S> <C> <C> <C> <C> <C>
1997 $109,700 12.00% $109,700 $109,700 12.00%
======== ===== ======== ======== =====
1996 $109,700 12.00% $248,099 $179,400 12.00%
======== ===== ======== ======== =====
1995 $354,099 12.00% $376,386 $365,243 12.00%
======== ===== ======== ======== =====
</TABLE>
An interest rate of 12% was assumed.
Notes are demand notes convertible into common stock at a rate of $.50
per share.
21
<PAGE>
INTER-CONTINENTAL SERVICES CORPORATION
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) 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
/s/ Robert N. Meyer
DATE: January 3, 2000
BY: Robert N. Meyer, President,
/s/ Barry J. Weidenhammer
DATE: January 3, 2000
BY: Barry J. Weidenhammer, Vice-President
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 20,312
<SECURITIES> 0
<RECEIVABLES> 47,272
<ALLOWANCES> 2,300
<INVENTORY> 0
<CURRENT-ASSETS> 65,284
<PP&E> 23,212
<DEPRECIATION> 23,212
<TOTAL-ASSETS> 143,478
<CURRENT-LIABILITIES> 818,924
<BONDS> 0
0
0
<COMMON> 1,787,817
<OTHER-SE> (2,463,263)
<TOTAL-LIABILITY-AND-EQUITY> 143,478
<SALES> 241,294
<TOTAL-REVENUES> 241,294
<CGS> 0
<TOTAL-COSTS> 705,529
<OTHER-EXPENSES> 22,552
<LOSS-PROVISION> 2,300
<INTEREST-EXPENSE> 22,552
<INCOME-PRETAX> (486,787)
<INCOME-TAX> 0
<INCOME-CONTINUING> (486,787)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (486,787)
<EPS-BASIC> (0.26)
<EPS-DILUTED> (0.18)
</TABLE>
