<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASIIINGTON, 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 years ending December 31, 1998
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, 1998 was $450,212 based on a "bid"
price of $0.625. The number of shares of Common Stock outstanding at December
31, 1998 was 1,896,572.
1
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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 1998 the Company operated a credit card recovery and cardholder
contact service in Phoenix, Arizona. As previously announced, the Company
closed their Kansas City, Missouri operations in 1997.
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 enter into in the
future.
In 1998 substantially all of the revenues are concentrated with one customer
in the credit card industry. In 1998 the Company derived 90% of its operating
revenue from one customer. During 1997 the Company derived 91% of operating
revenue from one customer. During 1996, the Company obtained 93% of operating
revenues from two customers. 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, 1998.
As of December 31, 1998, the Company had two fulltime and four part-time
employees.
Item 2. Properties
As of December 31, 1998, the Company occupied a 1,150 square foot building in
Phoenix, Arizona. The lease on those premises expires 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
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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>
1998 1997 1996
---- ---- ----
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 5/8
2nd 1/4 5/8 1/4 5/8 1/4 3/4
3rd 1/4 5/8 1/4 5/8 1/4 3/4
4th 1/4 5/8 1/4 5/8 1/2 1 3/8
</TABLE>
The approximate number of shareholders of record for the Company's stock as
of 12/31/98 was 511.
There were no dividends paid in 1996, 1997, 1998 or 1999.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating Revenues $154,979 $241,294 $199,480 $379,715 $426,345
Income from Continuing Operations $(378,003) $(486,787) $60,681 $(163,745) $(87,599)
Income from Continuing Operations per share:
Primary $(0.20) $(0.26) $0.04 $(0.11) $(0.07)
Fully Diluted $(0.11) $(0.18) $0.04 $(0.11) $(0.07)
At year end:
Total Assets $158,244 $143,478 $52,705 $70,575 $127,177
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Conditions and
Result of Operations
RESULTS OF OPERATIONS
1998 Compared to 1997
In 1998 operating revenue decreased $86,315 or 64%, from $241,294 to
$154,979. In 1998 the Company continued to attempt to reduce unfavorable
operations and continued to attempt to diversify into more profitable
business ventures.
Operating expenses decreased in 1998 by 30% primarily because general and
administrative payroll expense decreased from $325,000 in 1997 to $218,400 in
1998. One of the Company's officers resigned in 1997 and was not replaced in
1998, which was the primary reason for the decrease in the 1998 general and
administrative payroll. Other expenses also showed a significant decreased in
1998 vs. 1997, primarily because of the decrease in volume of business that
was seen in 1998.
3
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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.
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.
LIQUIDITY AND FINANCIAL RESOURCES
The Company ended 1998, 1997 and 1996 with anticipation for better operating
results in the future. However, since current liabilities exceeded current
assets, additional liquidity is needed.
Management continues to actively seek a corporate merger or a source of
infusion 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, 1998 and 1997 6
Statements of Operations - Years Ended December 31, 1998, 1997 and
1996 7
Statements of Shareholders' Deficit - Years Ended December 31,
1998, 1997 and 1996 8
Statements of Cash Flows - Years Ended December 31, 1998, 1997, 1996 9
Notes to Financial Statements 10-13
</TABLE>
4
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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, 1998 and 1997, and the related statements of operations,
shareholders' deficit, and cash flows for each of the three years in the
period ended December 31, 1998. 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, 1998 and 1997 and the results of its operations
and its cash flows for each of the three years in the period of December 31,
1998, 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
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INTER-CONTINENTAL SERVICES CORPORATION
BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
1998 1997
---- ----
<S> <C> <C>
Assets
Current Assets
Cash $16,777 $20,312
Accounts receivable, net of $2,300 allowance 34,262 44,972
---------- ----------
Total Current Assets 51,039 65,284
Fixed Assets: (Note 1)
Furniture and equipment 23,212 23,212
Accumulated depreciation (23,212) (21,723)
---------- ----------
Net Fixed Assets 0 1,489
Other Assets
Investment in ATH (note 3) 70,855 58,655
Note receivable from officers (note 4) 33,650 15,350
Other 2,700 2,700
---------- ----------
Total Assets $158,244 $143,478
========== ==========
Liabilities and Shareholder's Deficit
Current Liabilities:
Accounts payable $60,459 $3,129
Deposit for un-issued stock (note5) 30,125 30,125
Note payable to bank (note 6) 25,000 25,000
Convertible notes payable (note 7) 459,700 109,700
Due to former shareholder (note 8) 42,000 42,000
Accrued payroll (note 9) 193,400 325,000
Note payable - other (note 10) 338,061 261,418
Accrued liabilities -- --
---------- ----------
Total Current Liabilities 1,211,693 818,924
---------- ----------
Shareholders' Deficit:
Common Stock, no par, authorized 3,000,000 shares, 1,787,817 1,787,817
Issued 2,237,543 in 1998 and 1997.
Contributed capital 63,400 63,400
Accumulated deficit (2,742,928) (2,364,925)
---------- ----------
(891,711) (513,708)
Less: Treasury stock at cost, 340,971 shares (161,738) (161,738)
---------- ----------
Total shareholders deficit (1,053,449) (675,446)
---------- ----------
Total Liabilities and Stockholders' Deficit $158,244 $143,478
========== ==========
</TABLE>
See notes to financial statements
6
<PAGE>
INTER-CONTINENTAL SERVICES CORPORATION
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Operating revenues $154,979 $241,294 $199,480
Operating expenses 492,586 705,529 312,765
---------- ---------- ----------
Income (loss) from operations (337,607) (464,235) (113,285)
Other income (expense):
Interest expense (40,396) (22,552) (1,248)
Miscellaneous income 0 0 2,364
---------- ---------- ----------
(40,396) (22,552) 1,116
---------- ---------- ----------
Income (loss) before tax and extraordinary item (378,003) (486,787) (112,169)
Income tax benefit 0 0 (10,170)
---------- ---------- ----------
Income (loss) before extraordinary item (378,003) (486,787) (101,999)
Extraordinary item - gain on
extinguishment of accrued interest
on shareholder and convertible
notes, net of tax effect (note 18) -- -- 162,680
Net Income (Loss) $(378,003) $(486,787) $60,681
========== ========== ==========
Per share of common stock (note 16):
Primary:
Loss before extraordinary item $(0.20) $(0.26) $(0.06)
Extraordinary item -- -- 0.10
---------- ---------- ----------
Net income (loss) $(0.20) $(0.26) $0.04
========== ========== ==========
Fully Diluted:
Loss before extraordinary Item $(0.11) $(0.18) $(0.05)
Extraordinary item -- -- 0.09
Net Income (Loss) $(0.11) $(0.18) $0.04
========== ========== ==========
</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 ,1996 1,389,417 63,400 (1,938,819) (161,738) (647,740)
Issuance of common stock (Note 15) 398,400 -- -- 398,400
Net loss -- -- 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)
Net loss -- -- (378,003) -- (378,003)
---------- ---------- ----------- ----------- -----------
December 31, 1998 $1,787,817 $63,400 ($2,742,928) ($ 161,738) ($1,053,449)
========== ========== =========== =========== ===========
</TABLE>
See notes to financial statements
8
<PAGE>
INTER-CONTINENTAL SERVICES CORPORATION
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ----------
<S> <C> <C> <C>
Operating Activities
Net Income (loss) $(378,003) $60,681 $(163,745)
Adjustments to reconcile net income (loss) to net
Cash provided by (used in) operating activities.
Depreciation 1,489 3,996 3,900
Reissued treasury stock -- -- --
Changes in assets and liabilities
Accounts receivable 10,710 (962) (18,965)
Other assets (18,300) (18,050) --
Accrued interest 40,396 22,552 (186,141)
Accrued payroll (131,600) 325,000 --
Due to shareholders -- -- (35,000)
Accrued liabilities -- (2,414) (2,160)
Deposit for unissued stock -- 4,875 25,250
Accounts payable 57,330 (33,871) 37,000
---------- ---------- ---------
Net cash provided by (used in) operating
activities: (417,978) (185,661) (115,435)
Cash provided by (used in) investing activities:
Additions to fixed assets -- -- --
Investment in ATH (12,200) (58,655) --
---------- ---------- ---------
Net cash provided by (used in) (12,200) (58,655) --
operating activities:
Cash provided by (used in) financing activities:
Issuance of common stock -- -- 119,000
Payment on notes payable -- -- (36,500)
Convertible notes payable 350,000 -- --
Borrowing on notes payable 76,643 261,418 --
---------- ---------- ---------
426,643 261,418 82,500
---------- ---------- ---------
Increase (decrease) in cash (3,535) 17,102 (32,935)
Cash at beginning of year 20,312 3,210 36,145
---------- ---------- ---------
Cash at end of year 16,777 20,312 3,210
========== ========== =========
Supplemental cash flow information:
Interest paid -- -- $1,200
Income taxes -- -- --
</TABLE>
See notes to financial statements
9
<PAGE>
Inter-Continental Services Corporation
Notes to Financial Statements
December 31, 1998
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 1998
substantially all of the revenues are concentrated with one customer in the
credit card industry. This customer accounted for 90% of the Company's
revenues in 1998. 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. 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, 1998. (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, 1998, current
liabilities exceed current assets by $1,160,654 and total liabilities exceed
total assets by $1,053,449.
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 an additional $12,200 in 1998 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. The total
investment amounted to $70,855 as of December 31, 1998.
10
<PAGE>
NOTE 4 - NOTES RECEIVABLE FROM OFFICERS
During 1998 the Company made additional advances totaling $18,300 to officers
of the Company. 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, Secretary, Treasurer and Director. The
Company has signed notes from Mr. Meyer and Mr. Weidenhammer covering these
advances.
NOTE 5 - DEPOSIT FOR UNISSUED STOCK
As of December 31, 1998 and December 31, 1997 the total amount of the deposit
for unissued shares was $30,125 for 31,000 unissued shares. During 1997 the
Company received additional deposits from other investors totaling $4,875 for
the issuance of another 4,000 shares at prices ranging from $1.00 to $1.25
per share. 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.
NOTE 6 - NOTE PAYABLE TO BANK
A 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 amount of $109,700 as of
December 31, 1997 and December 31, 1996. 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.
In December 1998, the Board of Directors approved the issuance of common
shares of the Company to Robert N. Meyer and Barry J. Weidenhammer in
exchange for a reduction in their accrued payroll. The exchange rate was set
at $.50 per share. Mr. Meyer was issued a convertible note in the amount of
$200,000 and Mr. Weidenhammer was issued a convertible note in the amount of
$150,000 and their accrued payroll was reduced accordingly. As of December
31, 1998, there was a total of $459,700 convertible notes payable outstanding
representing 919,400 additional shares of the company's common stock. No
interest has been accrued for these notes.
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 will pay 1% interest per month
on the deferred payment.
11
<PAGE>
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 will pay 1% interest per month on the deferred payment. (See
discussion under Item 13. Certain Relationships and Related Transactions)
Also included in accued payroll is $52,000 due to Carol Maltby, a former Vice
President, for salary and benefits from October 1, 1996 to July 31, 1999.
NOTE 10 - NOTES PAYABLE - OTHER
During 1997 the Company borrowed a 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. During 1998 the
Company borrowed an additional $76,643. Of this amount, $52,543 was borrowed
from the same unrelated company; $12,500 was borrowed from an entity
controlled by a Director and $11,600 was borrowed from Barry J. Weidenhammer,
Vice-President/Treasurer and Director. As of December 31, 1998, the notes
totaled $338,061. 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, 1998 and 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 2000 and
2013, of approximately $1,600,000. 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 to the 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 in 1997 and other
office space which was rented on a monthly basis. Rent payments for the year
ended December 31,1998, 1997 and 1996 were $36,576, $74,928 and $50,000
respectively.
12
<PAGE>
NOTE 15 - ISSUANCE OF COMMON STOCK
The Company issued no additional shares of common stock during 1998 or 1997.
During fiscal 1996 a shareholder of the Company contributed $119,000 in cash,
$35,000 in canceled noted payble to a shareholder and $206,640 in canceled
convertible notes (convertible at $.50 per share or 413,280 shares) in
exchange 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.
NOTE 16 - EARNINGS PER SHARE
Earnings per share amounts are computed based on the weighted average number
of shares actually outstanding. During 1998 there were 1,896,572 shares
outstanding, 1,896,572 in 1997; 1,658,032 in 1996. The number of shares used
in fully diluted computations was 3,523,094 in 1998; 2,669,808 in 1997 and
1,877,432 in 1996.
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 or 1998.
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.
None.
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.
(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
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. 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.
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.
14
<PAGE>
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.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table shows the amount of common stock owned as of December 31,
1998 as well as beneficial ownership of the Common Stock by the Company's
Directors and by all Directors and Officers as a group.
<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.
15
<PAGE>
Item 13. Certain Relationships and Related Transactions
As of December 31, 1998, the Company was indebted to the following:
DECEMBER 31, 1998
-----------------
Robert N. Meyer, President, CEO and Chairman $20,700
The indebtedness is convertible notes with no stated interest. Unpaid
interest has not been accrued. The notes are convertible at the option of the
note holder into Common Stock of the Company at 50 cents per share. (See also
note 7.)
As of December 31, 1998, the Company was indebted to Barry J. Weidenhammer in
the amount of $11,600 (see note 10).
As of December 31, 1998, the Company had accrued, but not paid, payroll to
the following:
DECEMBER 31, 1998
-----------------
Robert N. Meyer, President, CEO and Chairman $63,250
Barry J. Weidenhammer, Vice-President, Treasurer, $78,150
Secretary & Director
Carol M. Maltby, former Vice-President $52,000
--------
Total Accrued Payroll $193,400
Both Mr. Meyer and Mr. Weidenhammer have employment contracts with the
company. Mr. Meyer's employment contract provides for a base salary of $7,500
per month plus fringe benefits of 30%. Mr. Weidenhammer's employment contract
provides for a base salary of $6,500 or month plus fringe benefits of 30%.
Interest is accrued on both contracts at the rate of 1% per month on any
unpaid amounts. On December 31, 1998 the Company offered both Mr. Meyer and
Mr. Weidenhammer the option of converting all or a portion of their accrued
payroll into Common Stock of the Company at the conversion price of 50 cents
per share. Mr. Meyer opted to convert $200,000 of accrued salary into a
convertible note which is convertible into 400,000 shares of Common Stock.
Mr. Weidenhammer opted to convert $150,000 of accrued salary into a
convertible note which is convertible into 300,000 shares of Common Stock.
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.
(a)(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, 1998 and 1997 6
Statements of Operations - Years Ended December 31, 1998, 1997 and 1996 7
Statements of Shareholders' Deficit - Years Ended December 31, 1998, 1997 and
1996 8
Statements of Cash Flows - Years Ended December 31, 1998, 1997 and 1996 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, 1998, 1997, and 1996
Schedule II - Amounts Receivable from Related Parties and Underwriters,
Promoters and Employees other than Related Parties 18
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 -- -- -- -- $33,650 --
31, 1998
========== ========== ========== ========== ========== ==========
Year
Ended
December -- -- -- -- $15,350 --
31, 1997
========== ========== ========== ========== ========== ==========
Year
Ended
December -- -- -- -- -- --
31, 1996
========== ========== ========== ========== ========== ==========
</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, 1998 $23,212 -- -- $23,212
=========== =========== =========== ===========
Furniture and
Equipment
Year Ended
December 31, 1997 $23,212 -- -- $23,212
=========== =========== =========== ===========
Furniture and
Equipment
Year Ended
December 31, 1996 $23,212 -- -- $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, 1998 $21,723 $1,489 -- $23,212
=========== =========== =========== ===========
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
=========== =========== =========== ===========
</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, 1998
Allowance for Doubtful $2,300 -- -- -- $2,300
Accts.
========== =========== =========== =========== ===========
Year Ended
December 31, 1997
Allowance for Doubtful $2,300 -- -- -- $2,300
Accts.
========== =========== =========== =========== ===========
Year Ended
December 31, 1996
Allowance for Doubtful $2,300 -- -- -- $2,300
Accts.
========== =========== =========== =========== ===========
</TABLE>
20
<PAGE>
Inter-Continental Services Corporation
Schedule
IX
Short-Term Borrowings
<TABLE>
<CAPTION>
Weighted Maximum Average Weighted
Balan 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
1998 $25,000 12.00% $25,000 $25,000 12.00%
============ ============ ============ ============ ============
1997 $25,000 12.00% $25,000 $25,000 12.00%
============ ============ ============ ============ ============
1996 $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.
<TABLE>
<CAPTION>
Note Payable
To Others
<S> <C> <C> <C> <C> <C>
1998 $338,061 12.00% $338,061 $299,740 12.00%
============ ============ ============ ============ ============
1997 $261,418 12.00% $261,418 $178,990 12.00%
============ ============ ============ ============ ============
1996 -- 12.00% $71,500 $49,625 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.
<TABLE>
<CAPTION>
Convertible Notes Payable
<S> <C> <C> <C> <C> <C>
1998 $459,700 12.00% $459,700 $284,700 12.00%
============ ============ ============ ============ ============
1997 $109,700 12.00% $248,099 $179,400 12.00%
============ ============ ============ ============ ============
1996 $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
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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 16,777
<SECURITIES> 0
<RECEIVABLES> 36,562
<ALLOWANCES> 2,300
<INVENTORY> 0
<CURRENT-ASSETS> 51,039
<PP&E> 23,212
<DEPRECIATION> 23,212
<TOTAL-ASSETS> 158,244
<CURRENT-LIABILITIES> 1,211,693
<BONDS> 0
0
0
<COMMON> 1,787,817
<OTHER-SE> (2,841,266)
<TOTAL-LIABILITY-AND-EQUITY> 158,244
<SALES> 154,979
<TOTAL-REVENUES> 154,979
<CGS> 0
<TOTAL-COSTS> 492,586
<OTHER-EXPENSES> 40,396
<LOSS-PROVISION> 2,300
<INTEREST-EXPENSE> 40,396
<INCOME-PRETAX> (378,003)
<INCOME-TAX> 0
<INCOME-CONTINUING> (378,003)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (378,003)
<EPS-BASIC> (0.20)
<EPS-DILUTED> (0.11)
</TABLE>
