U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 0-14279
INTERCONTINENTAL TECHNOLOGIES GROUP, INC., NV
_________________________________________________________________
(Exact name of small business issuer as specified in its
charter)
Nevada 88-0199585
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1408 Pawnee Drive, Las Vegas, Nevada 89109
(Address of principal executive offices) (Zip Code)
(310) 425-2376
(Issuer's telephone number, including area code)
Former address: 2950 31st Street, #240, Santa Monica, CA 90405
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the Issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
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 number of shares outstanding of the Issuer's Common
Stock, its sole class of common equity, was 5,151,593 as of
September 30, 1996.
This report consists of 20 pages.
Part 1
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE COMPANY
Background The Registrant was originally organized in 1966
for the purpose of seeking to acquire subsidiary businesses. The
discretion of the Registrant in acquiring such other businesses
was very broad.
On May 13, 1985 the Registrant acquired 100% of the
outstanding stock of Continental Connector Corp. (Continental) in
exchange for 2,200,000 shares of the Registrant's common stock.
Continental Co. is a Colorado corporation that was engaged in the
development, manufacture and marketing of a broad line of multi-
contact, precision, rack and panel card edge connectors.
Operations consisted primarily of the manufacture,
processing, and assembly of plated metal contacts, receptacles of
various types designed and molded by Continental from thermal
setting compounds and other products, into precision connectors.
From May 13, 1985 through June 30th of the year ended
December 31, 1993, the Company operated only in this line of
business. However, all manufacturing and marketing operations
related to the connector business ceased, as to Registrant, as of
June 30, 1993.
On May 13, 1993 Registrant completed the sale of certain
machinery and equipment and inventory to PMC, Inc. a private
Delaware corporation having a diverse array of operations in
electronics and other businesses. The agreement of sale provided
for a payment of $200,000 for manufacturing equipment essential
in the operation of the business. The purchaser was required to
purchase inventory from the Registrant during the period from the
closing date through December 31, 1993, and effectively assumed
control of all employees and operations in July, 1993. After
that date the parties could continue this arrangement at their
option, however the Registrant would be able to liquidate
remaining inventory (if any) by any means available.
In December, 1994, Registrant sold the entirety of its
remaining interest in the subsidiary, Continental, to EFTS, Inc.,
of Florida. This sale contained a contingent interest on the
part of Registrant, based upon ultimately-received proceeds from
the inventory liquidation, which resulted in cash receipts of
$290,000 during February, 1996, when EFTS disposed of the
remainder of the inventory.
On August 15, 1993, Registrant changed its name from
Continental Connector Industries to Intercontinental Technologies
Group, Inc., shortened in normal usage to ITG. On August 23,
1993, Registrant also effected a 1 for 100 reverse stock split,
such that for each 100 shares of Continental Connector Industries
stock previously outstanding, a single share of new ITG stock
would be issued.
ITG Energy, Inc. Energy continued its oil production
business during the first quarter, selling approximately $20,000
of oil. No material changes occurred in its operations.
International Semiconductor Investment
Effective December 31, 1994, ITG entered into an agreement
to acquire 1,600,000 shares of the common stock of International
Semiconductor Corp. (formerly known as Israel Semiconductor
Corp.), ISC, in exchange for 1,000,000 shares of ITG common
stock. The actual shares of ISC stock were received from Lema
Investments, Ltd., the majority shareholder of ISC, and the
entity that received the 1,000,000 shares of ITG common. ISC is
in the business of producing gallium arsenide diodes for use in
the high-tech electronics industry, and is based in Migdal
Haemek, Israel. ISC is a Nevada corporation, publicly held, and
currently trading on the over-the-counter market. ISC is still
in its start-up phase and has yet to achieve any meaningful sale
of product.
Business Development
During February, 1996, ITG entered into negotiations with
Skysite Communications Corporation ("Skysite") to invest in
Skysite and aid in its management governance and market
penetration. Skysite is a retail supplier of MSAT-1 satellite
telephony hardware and air time, which it purchases at wholesale,
generally from Westinghouse Wireless Communications and American
Mobile Satellite Co., respectively. Skysite commenced operations
in January of 1996, after it was awarded the re-seller contract
from AMSC.
Results of Operations Skysite has been a development
stage Company since its inception and has incurred general and
administrative, financing, marketing and start-up expenses in
increasing amounts as it was awaiting the green light from AMSC
for utilization of the MSAT-1 satellite, which occurred on April
17, 1996. Prior to that time, all phone usage was on a test
basis, and no revenue was generated either for hardware sales or
through airtime utilization. Since April 17, 1996, over 100
handsets have been delivered and installed, orders for an
additional 160 have been received, and airtime usage has just
started to accrue for the phones already installed. Monthly
operations are currently running at a loss of approximately
$20,000, reduced from the $40,000 per month incurred during the
initial phases when sales were non-existent. The company
estimates an additional 3 months of losses before achieving
breakeven, assuming fulfillment of all backlogged orders and an
average airtime utilization of 200 minutes per installed
telephone.
The Product: The Skysite Digital Satellite Telephone System
is an integrated web of mobile satellite services for voice, fax
and data, that spans land mobile, fixed site, aeronautical and
maritime applications.
Subscribers telephone directly through a communications
satellite using a variety of mobile satellite terminals. These
mobile terminals come in a series of application- oriented
configurations and are built by four leaders in wireless
electronic communications: Westinghouse Electric Corporation,
Mitsubishi Electric of America, Cal Corporation and KVH Maritime
Products.
Telephone calls made on the mobile terminals initiate contact
with the outside world through a GM/Hughes communications
satellite which is in a geo-synchronous orbit 22,000 miles in
space, above the equator. The satellite is down-lined into the
Public Switched Telephone Network through a Westinghouse Electric
Communications Ground Segment (CGS) earth station located in
Reston, Virginia, and owned by AMSC.
The Skysite Digital Satellite Telephone System covers virtually
all of North and Central America, Hawaii and the Caribbean Basin.
Within the satellite coverage area a subscriber can make or
receive direct dial calls to or from anywhere in the world. This
is a dialup-on-demand system that only charges the subscriber for
the time actual used. If there is a three minute call made or
received over the system, the subscriber is charged for only
three minutes.
Product Strategy The life cycle for Skysite s Satellite
Telephone Service on the MSAT-1 Satellite is estimated to be
approximately 5 to 7 years, which has just recently commenced.
Although this is a new product, it has depth and maturity in
the fact that it s operating system is technology that has been
developed and brought to market over an 8 year period at a cost
in excess of $500 million. From September of 1995 through March
of 1996, AMSC and Skysite performed experimental test sales and
airtime usage. Beginning in April, 1996, Skysite began
commercial sales and usage of the satellite.
Skysite has determined that the satellite owner, AMSC, and its
sales arm, Skycell , have not focused on the areas of interest
and opportunity identified by Skysite. This new digital
technology meets immediate needs for customers in Skysite s
identified vertical market segments. These needs range from
better price points over existing terrestrial based (SMR &
cellular) and satellite (INMARSAT) systems, to establishment of
basic reliable telephone communications where it previously did
not exist, such as the bayous of Louisiana.
Skysite has entered into a marketing agreement with Westinghouse,
purveyor of the most popular fixed site equipment, for
distribution of handsets, antennas and support hardware, and has
attended and participated as an exhibitor, frequently in tandem
with the Westinghouse display at the invitation and expense of
Westinghouse, and has received many of its initial orders from
these shows.
Both Mitsubishi and Cal Corporation are also actively engaged in
promoting the sale of their equipment and are committed to
providing market support for their specific equipment at the
various trade shows.
Marketing Plan The overall marketing plan for the Skysite
product is based upon the delivery of voice, fax and data
telecommunications services to customers having specific needs
which can be addressed by value-added services provided by
Skysite. The products and services being offered by the company
will be sold and distributed by a 3-tiered network of National
Resellers, geographically protected territorial Dealers, original
equipment Integrators and Skysite s own field service and
telemarketing sales associates. Skysite has already secured 2
National Resellers: Arcus Data Security and IBM Business
Recovery Systems, which are unlimited in their geographic
territory, but are focused on emergency response customers; 4
Integrators: BAF (satellite news gathering truck fabricator), MG
Nitrogen (natural resource and oilfield equipment manufacturer),
Raytheon (aircraft equipment manufacturer) and HMS Marine
Services (ocean-going ship equipment manufacturer); and several
territorial dealers, which include, Sat Link of Costa Rica,
Advantage Cellular, Alaska Telecom, and Event Rental (Portland).
At this time the products and services are new to the market and
there is no established market share. There are two competing
entities: AMSC/Skycell, marketing the Skycell satellite telephone
product and Cruisephone Industries, marketing a maritime
telephone system for pleasure boats and cruise vessels. Skysite
will focus on the targeted industry segments, rather than the
general public or maritime industries.
Sales Strategy As noted earlier, Skysite believes that the
service window on the MSAT-1 satellite is approximately 7 years
before the technology is either obsolete or improved. During
that period, AMSC will continue to update its equipment and is
tentatively scheduling a second satellite launch to improve both
service area and capability. If this does not occur, the
ultimate result will be the movement of Skysite s customers into
other emerging communications technology when it becomes
available.
Skysite is targeting these 6 markets:
1- TRANSPORTATION GROUP: AERONAUTICAL, RAIL AND TRUCKING
Each of these three groups has unique applications and needs
which requires 3 different services and approaches. The
aeronautical group applications include voice, fax and data for
passengers on board general aviation and commercial aircraft.
Flight crews can utilize the same system for dispatch
communications and Global Positioning Satellite ( GPS )
indications, because GPS is includable within the mobile
telephone equipment for a minimal extra charge. The specific
equipment is manufactured for aircraft by Cal Corporation of
Ottawa, Canada.
Rail can be split into GPS applications and dispatch and
voice applications for locomotive crews. Passenger rail cars can
be equipped with the voice, fax and data version of the phone for
commercial service.
Trucking can utilize a full range of services. There is
Standard C dispatch and positioning service available and the
regular satellite telephone service for voice, fax and data.
Active pursuit of these three groups will be limited to
aeronautical in the near term as it has the highest potential
rate of return.
2 - BROADCAST MEDIA AND MOTION PICTURE INDUSTRY
This segment includes electronic news gathering activities,
field broadcasting and on-location production activities. This
includes any number of remote locations throughout the MSAT 1
coverage area. These entities require seamless reliable
communications, and in significant amounts when they are on the
air. Subscribers in this group can be measured in hours, not
minutes per month. Skysite has already installed 30 such
Satellite News Gathering trucks and has a current backlog of over
20.
3 - DISASTER RECOVERY MARKET
This group involves voice, fax and data communications for
business resumption activities in the event of any number of
manmade or natural disasters. Every corporate disaster recovery
and emergency operations center throughout the United States will
need at least one of these telephones. Many will gather multiple
units for both fixed site and mobile use. The potential users in
this category include each and every major U.S. Corporation with
disaster readiness and recovery plans. These customers will be a
source of monthly subscriber revenues with intermittent use for
exercises and readiness testing. When these corporations
activate their recovery plans, they will become high sustained
users for the period of the crisis or disaster. In this
category, Skysite has teamed with IBM as its agent, and
specifically the IBM Business Recovery Division, which is
handling the Oklahoma disaster and similar manmade calamities.
Skysite most recently assisted the State of Virginia Governor's
office of Engineering Services in providing field communications
for recovery after Hurricane Bertha battered the Virginia coastal
communities.
4 - GOVERNMENT AND PUBLIC SAFETY MARKET
This market crosses many agency and jurisdictional
boundaries. Every fire and police department, medical center,
emergency operations center and overall coordinating agency
(local, state and federal) needs this system for assured
communications when normal channels fail. History has shown,
with an increasing regularity, that ground-based systems fail in
the time of crisis. This satellite system is the first low-cost
solution available to solve this problem. There is the potential
for placement of in excess of 30,000 fixed site, mobile and
transportable units in this industry segment alone.
5 - PETROLEUM, MINING AND UTILITIES SEGMENT
This sector has potential needs which extend in numbers
beyond the capabilities of the Skysite Telephone System as it
exists today. Oil, gas and mineral production activities in
remote locations require voice, fax and data communications.
Pipeline transportation activities require constant contact and
monitoring. Oil spill response companies need constant and
consistent communication during all phases of these critical
operations. Remote locations on utility transmission lines, at
pumping, compressor and converter stations require 100% reliable
communications. Additionally, there are special government
mandated field monitoring activities in production and pipeline
transportation for which Skysite has been approached to provide
service. The potential exists for 150,000 plus units in this
market segment.
6 - RURAL TELEPHONY MARKET
This group essentially needs the provision of regular
telephone service, via satellite, in areas where either none
exists at present, or in an area that is not readily accessible
on a consistent, safe and secure basis to the public switched
telephone network. This includes areas offshore within range of
the satellite where U.S. corporations have facilities and
personnel. Interest in this area extends to hotel and resort
complexes, factories and entire remote communities where
multi-trunk systems are needed just to get basic communications
with the outside world. Total unit sales in this segment are
unknown at this time. However, the usage rate for customers in
the category is expected to be high on a consistent basis. The
pricing of the Skysite system brings this communications medium
to reality on both an acquisition and ownership/ongoing cost
basis.
Positioning At this time, the Skysite Satellite telephone
Service and competitors' products are only dimly perceived
within these most critical market segments. Getting to market
quickly and efficiently and emphasizing good customer
applications support will be key to capturing a major share of
the available customers. The only other satellite communications
technology available for the public switched telephone network,
INMARSAT, has a basic unit price for both acquisition and
operation of at least 3 times the expense of the Skysite system.
This is a key reason why INMARSAT has never become a standard for
communications within the Skysite customer segments, except where
absolutely needed out of desperation.
The MSAT 1 satellite is the first FCC licensed system
specifically for land and aeronautical mobile use. As such it is
protected on a regulatory basis from incursions by outside
maritime based systems.
With Skysite s pricing equal to the existing MSAT satellite
telephone competition, the battle then becomes with competitive
media - roaming cellular and INMARSAT satellite service.
Roaming cellular has become a nightmare for companies with
personnel on the road, with prices in excess of $2.00 per minute
away from home areas. The worst part of this problem is that
the customers do not have control over or know readily what they
are actually paying for these services until the bills arrive.
Telephone bills in the thousands of dollars per month have become
commonplace for these companies. The Skysite Satellite Telephone
Service provides single price service ($1.49 per minute) without
any further per-minute charges for all calls originating and
terminating within the 48 contiguous United States. The charges
outside these areas will also be at a fixed, per- minute rate,
with international long distance charges for out-of-country
dialed calls-- currently provided by AT&T at rates based upon
origination of the call from Reston, Virginia.
INMARSAT service costs a minimum of $4.50 per connected minute,
plus an initial terminal acquisition cost of at least $12,000.
The costs escalate from there. INMARSAT telephone units with
fax, data and voice capabilities can range upward of $20,000.
Also, each INMARSAT unit must be specifically FCC licensed for it
s proposed service. This licensing will be harder to obtain as
soon as the MSAT system is active in commercial service zones
targeted by INMARSAT.
There are also overwhelming technical advantages to the Skysite
Satellite Telephone Service. The Skysite System features
single-number calling throughout the entire coverage area which
encompasses virtually all of North and Central America, Hawaii,
the Western Atlantic and Eastern Pacific Oceans, the entire
Caribbean Basin and the Northern half of Colombia and Venezuela.
There is no registering in a roaming area as the overall
coverage is seamless. The satellite signal is a full duplex
digital signal, which means better clarity for voice, and better
fax and data transmission.
Further, the telephone cannot be readily monitored like cellular,
allowing for immensely higher security. The Skysite System also
has full STU 3 encryption available for a low additional cost per
unit for fully scrambled communications when required. With the
special security system unique to the MSAT 1 satellite, the
telephones cannot be cloned , which is the number one cause of
fraud among cellular customers today. This is a service on
demand" telephone system. Customers only pay for completed
calls, not for no-answers or busy signals.
Margin Structure Skysite s contract with American Mobile
Satellite Corporation yields margins ranging from 30% to 102% on
all subscriber services being offered by the Company. A portion
of this margin will be shared in some instances with Agents,
National Resellers and Skysite s Sales Associates. Details of
these margin splits are outlined in the contract with AMSC and
with the Resellers. The margin available from AMSC is guaranteed
by contract, such that a lowering of rates by AMSC to other
customers or the public at large will generate a corresponding
percentage drop in the wholesale rate charged to Skysite by
AMSC. The Skysite contract with AMSC is for five years with a
5-year renewal option.
Internet/on-line services Skysite maintains an extensive
presence on the world wide web, which may be accessed at
http://www.skysite.com . This web site provides the same product
and service information through a home page interface as is
available from fax back services operated by the company or from
direct contact with the company. Skysite s web site provides a
forum for customer questions to management, customer service and
technical support on the net, and for actual order entry and data
acquisition via the net. Skysite s web site is linked to
Disaster Recovery Journal s and the International Disaster
Recovery Association s home pages for exposure to the disaster
recovery community. It will also be linked to PR Newswire s home
page for direct connection to information by people looking up
Skysite news in their Company news on Call service. Links are
being established with other web sites on both a paid and unpaid
basis, as a method of spreading the influence and awareness of
the company throughout different market segments as the company
expands its reach.
ITG INVESTMENT IN SKYSITE: ITG, through the Second Quarter,
has invested $250,000 in cash and an additional $250,000 in
guarantees in Skysite and has a 50% equity stake with rights to
obtain additional equity upon certain performance conditions.
Skysite has steadily improved its gross sales from $8,000 per
month in March (1st month of ITG investment) to $65,000 in
September, 1996. Skysite's losses have improved, on a monthly
basis, from the start-up in March, and the company anticipates
profitability in December of 1996.
Skysite operates out of 5,000 square feet of office space at
11500 Sherman Way, Burbank, California, and employs, directly, 7
people, with additional representation through 10 dealers, 2
master distributors and 4 value-added resellers.
Capital Resources and Liquidity of ITG
Operating Loans During 1995, Registrant borrowed $302,500
from several parties to finance its ongoing operations.
Registrant pledged its interest in the income from the secured
promissory note issued by the Gita Ashram Temple, and has been
directing the income from that note to the repayment of the debt
to the various lenders. This is an amortizing series of notes,
however they all become due and payable during a six-month period
commencing in January of 1997. These notes all carry conversion
rights enabling the lenders to acquire ITG common stock at a
purchase price of $1.50 per share in exchange for cancellation of
an equivalent value of the principal and interest due on the
notes. As of March 31, 1996, a total of $213,800 was due on the
notes secured by a first position in the Gita Ashram promissory
note, and $62,500 was due to holders of notes secured by a second
position in the Gita Ashram note.
Inventory Cash Out In December, 1994, Registrant sold the
entirety of its remaining interest in the subsidiary,
Continental, to EFTS, Inc., of Florida. This sale contained a
contingent interest on the part of Registrant, based upon
ultimately received proceeds from the inventory liquidation,
which resulted in cash income of $280,000 (plus $10,000 for
purchase of 100,000 shares of the Registrant's restricted common
stock) during February, 1996, when EFTS disposed of the remainder
of the inventory.
Secondary Loans In January and February, the Company
borrowed an additional $12,500 against the Gita Temple Ashram
real estate mortgage, raising cumulative borrowings against the
note to $250,000 in the initial or "first" position, and $62,500
in the second position.
The 100,000 shares of the Company's common stock issued to
EFTS, Inc. as a result services rendered during the settlement of
the inventory liquidation by EFTS in its subsidiary, Continental
Connector Corporation (formerly owned by the Company), were
valued at $0.10 per share. This raised the total number of
shares issued by the Company to 5,151,593 shares of common.
Employee Stock Transactions The Company has only 3 employees at
the executive offices, with additional employees in each of the
subsidiaries. There are no stock compensation or option plans in
existence at this time, although the company anticipates issuing
options in the near future.
Manufacturing The company has no manufacturing operations, and
has had none since the sale of the Continental Connector
subsidiary's operations during the summer of 1993.
Selling and Marketing Other than as set forth above for Skysite,
the Company has no marketing plans in existence. Energy company
sales are to EOTT, which will buy any amount of crude oil
offered, so marketing is not an issue. The Company is currently
operating the Ft. Lauderdale leasehold of Aero Industries, but
has a long-term tenant in place and has no need for alternative
solutions to the use of available space.
Part II. Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Default Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security
Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports of Form 8-K
10.8 Memorandum of Understanding with Skysite,
dated February 18, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
INTERCONTINENTAL TECHNOLOGIES
GROUP, INC.
(Registrant)
By: /s/ Robert M. Terry
Robert M. Terry, Chairman
Dated: November 22, 1996
INTERCONTINENTAL TECHNOLOGIES GROUP, INC.
Unaudited Balance Sheet
March 31, 1996
ASSETS
Current assets:
Cash $ 94,629
Notes receivable - current portion 28,002
Accounts receivable, other 194,900
----------
Total current assets 317,531
Property and equipment, at cost, less
accumulated depreciation of $86,513 194,453
Notes receivable - non-current 617,599
Advances from stockholder 203,967
Deposits 51,000
----------
1,384,550
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable 213,804
Accounts payable and accrued expenses 26,554
Advances from stockholder 107,100
---------
Total current liabilities 347,458
Notes payable - non-current 137,500
Stockholders' equity:
Common stock $.001 par value,
750,000,000 shares authorized,
5,051,593 shares issued and
outstanding 5,152
Additional paid-in capital 3,921,720
Accumulated deficit (3,027,280)
---------
899,592
---------
1,384,550
=========
See accompanying notes to financial statements.
<PAGE>
Intercontinental Technologies Group, Inc.
Statements of Operations
For the Three Months Ended March 31, 1996 and 1995
Three Months Three Months
Ended Ended
March 31, March 31,
1996 1995
------------ ------------
Sales $ 39,140 $ 41,992
Cost of sales 8,614 17,081
------------ ------------
30,526 24,911
Other costs and expenses:
General and administrative 99,780 170,283
------------ ------------
99,780 170,283
------------ ------------
Income (loss) from operations (69,254) (145,372)
Other income and (expense):
Interest income 10,841 14,250
Interest expense (12,639) 0
Equity in losses of
unconsolidated subsidiary ( 750) 0
------------ ------------
(2,548) 14,250
------------ ------------
Income (loss) before income taxes (71,802) (131,122)
Provision for income taxes 0 0
------------ ------------
Net income (loss) (71,802) (131,122)
============ ============
Earnings (loss) per share:
Net income (loss) $ (0.01) $ (0.03)
============ ============
Weighted average shares outstanding 5,061,593 3,821,593
============ ============
See accompanying notes to financial statements.
<PAGE>
Intercontinental Technologies Group, Inc.
Statements of Cash Flows
For the Three Months Ended March 31, 1996 and 1995
Three Months Three Months
Ended Ended
March 31, March 31,
1996 1995
------------ ------------
Net cash provided by (used in)
operating activities $ (43,300) $ (271,514)
Cash flows from investing activities
repayment of notes receivable 110,756 0
------------ ------------
Net cash provided by (used in)
financing activities 110,756 0
Cash flows from financing activities:
Proceeds from notes payable 12,500 185,000
Increase in stockholder loans 86,700 135,314
Repayment of stockholder loans (70,922)
Repayment of notes payable (10,734)
------------ ------------
Net cash provided by (used in)
financing activities 17,544 320,314
------------ ------------
Increase (decrease) in cash 85,000 48,800
Cash and cash equivalents,
beginning of period 9,629 11,648
------------ ------------
Cash and cash equivalents,
end of period $ 94,629 $ 60,448
============ ============
See accompanying notes to financial statements.
Intercontinental Technologies Group, Inc.
Notes to Consolidated Financial Statements
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included.
The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the full
year. The accompanying financial statements should be read in
conjunction with the Company's Form 10KSB filed for the year
ended December 31, 1995.
Income (loss) per share was computed using the weighted average
number of common shares outstanding.
During the three months ended March 31, 1996, the Company issued
100,000 shares of its restricted common stock to an unrelated
party in exchange for services rendered to the Company valued at
$10,000.
During the current quarter, the Company issued an additional
$12,500 of secured notes for cash. The notes are secured by the
Company's long-term note receivable. Additionally, the Company
received cash advances from an unconsolidated subsidiary of
$86,700 and made cash advances to its parent of $70,922.
<PAGE>
Exhibit 10.8 MEMORANDUM OF UNDERSTANDING
Intercontinental Technologies Group, Inc. ("ITG") will
invest up to a maximum total sum of cash and credit of $500,000
into the joint venture to be formed between ITG and Skysite
Communications Corp. in exchange for a 50% interest in the equity
and profit sharing arrangements of the new venture.
Details:
1) ITG's commitment will be to the Joint Venture, and will
be in the form of satisfaction of the Letter of Credit
arrangement with American Mobile Satellite Subsidiary Corporation
("AMSC") and only upon acceptance of the proposal for use of
stock as short-term collateral, and an additional $250,000 in
cash, injected according to the needs of the business plan dated
February 1996, and upon satisfaction of at least the following
benchmarks:
a) $100,000 will be invested up to and until
cumulative orders for 150 satellite handsets are received;
b) $50,000 additional will be invested upon receipt of
the 150th order, at which time funds will be disbursed, from the
joint venture, for repayment of up to $50,000 to Zephyr Express
or similar entities named by Skysite as creditors for the initial
capitalization of the AMSC $50,000 deposit, and this deposit will
belong to ITG unless replaced later by the Joint Venture when
excess cash is available for distribution; joint venture company
will be set up prior to step (b); Zephyr may be paid out of first
$100,000;
c) the remaining $100,000 will be made available per
an agreed-upon schedule attached to this Memorandum (Attachment
A).
2) The $250,000 provided for the letter of credit will be
retired or replaced by joint venture funds or credit sources as
the creditworthiness of the joint venture grows, or out of first
proceeds that are generally acknowledged as surplus to the daily
or monthly cash needs of the joint venture. Six months after
entry into this agreement, this $250,000 will earn interest on
behalf of ITG (payable by the joint venture) at the rate of 1%
per month until retired. No distributions to the joint venture
partners will occur until after this $250,000 and the $50,000 due
Zephyr have been satisfied, or unless mutually agreed to in
writing between the parties.
3) Skysite's commitment to the joint venture will be the
assignment, transfer, contribution, tender, or similar transferal
of all rights and equipment currently held by Skysite in the
satellite communications proposal as set forth in detail in the
Business Plan, to include, at a minimum, the contract with AMSC,
any contractual or tentative arrangements with equipment
providers such as Westinghouse or Mitsubishi, all orders for
equipment and/or service requests, and generally all operational
aspects of the business as set forth in the Plan. So long as the
joint venture is in existence, Skysite cannot and will not be in
any form of competition with the joint venture in any area
concerning telephony and/or satellite communications services or
equipment for sale to a third party. ITG will have the first
right of refusal for the provision of financing to lessees or
other borrowers acquiring equipment sold by Skysite or the Joint
Venture.
4) Skysite/Tom Soumas will be designated as the managing
partner, managing member or Chairman/President for purposes of
controlling the operations of the company, depending upon which
organizational form the joint venture selects. ITG agrees that
Soumas will remain in his position according to accepted norms of
the business. Should there be a dispute concerning any aspect of
the operations of the business or conformation of the Business
Plan, resolution will take place under a board of directors or
adminstrators concept, where the board or the committee will
determine the direction of the company and this committee's
decision will be final. The "committee" (or board if a corporate
form is chosen) will be comprised of 2 members selected by
Skysite and 2 members selected by ITG, with the 5th member
selected by the unanimous agreement of the 4 members already
chosen. Once this committee has been established, the members
will retain their position for a period of one year, or unless
replaced by their respective appointing parties. Should the 5th
or swing member retire or no longer be available as a sitting
member on the committee, then the then- current 4 members of the
board or committee will unanimously select his or her
replacement.
5) Salaries and expenses will generally follow the
performance outlined in the Business Plan and will not be
increased or altered significantly without the approval of the
Committee. The parties acknowledge that stock incentive plans
and similar employee stimulation packages may be necessary to
obtain and retain talented staff and will mutually agree to
dilution at the joint venture level for purposes of satisfying
these requirements. Soumas' base salary is $12,000 per month, as
described in the Business Plan, and increases (or decreases, if
necessary) according to the schedules contained therein, with
anamolous results to be governed by the Committee. Until sales
of handsets exceed 100 units per month (either on a month by
month or average basis, at employee's choice) no salaries in
excess of $6,000 per month will be paid.
6) At any time between 12 months and 18 months after
satisfactory creation of the Letter of Credit or similar facility
for AMSC and investment of the operating capital in excess of
$200,000, Soumas/Skysite may re-acquire 20% of the equity held by
ITG at a cost as set forth on Attachment A. If this option is
exercised, ITG will retain veto power, as if it were a 50%
partner, over increases in any management compensation or
perquisite packages and over increases in costs or expenses not
attributable to increased sales or increased investment in
capital equipment or marketing. This veto power will remain in
place until the joint venture becomes a publicly traded entity,
the venture is acquired by a non-affiliated third party, or for a
period of 4 years, whichever occurs first.
7) Should either party determine that it wishes to sell its
respective interest, the non-selling party will have a 30-day
right of first refusal, upon exactly the same terms and
conditions as the selling party has received and tendered to the
non-selling party, in which to acquire the selling party's
interest in the joint venture. This right of first refusal will
be cancelled as to both parties if the joint venture becomes
publicly traded or is acquired in a combined buyout of a majority
of the company where both parties are sellers of all or most of
their interests. ITG will be allowed one assignment of its
rights in this agreement within 30 days of its execution, without
the opportunity for Skysite to effect its right of first refusal.
8) This agreement will not take effect and there shall be
no liability to ITG if AMSC is unwilling to delay its demand for
the Letter of Credit and is unwilling to accept ITG's pledge of
assets in the interim, demanding instead an immediate posting on
or before Friday, the 23rd of February, 1996.
The terms stated above are acceptable to both parties as
indicated by their signatures below. A more detailed
subscription and/or company organizational agreement will be
executed once the form of organization is selected, identifying
further areas of agreement, such as officers, directors,
significant employees, and other ministerial requirements, but
the agreement will include at least the terms stated in this
Memorandum of Understanding.
Dated: February 18, 1996
INTERCONTINENTAL TECHNOLOGIES GROUP, INC.
By: /s/ Robert M. Terry
Robert M. Terry, Chairman
SKYSITE COMMUNICATIONS CORPORATION
By: /s/ Tom Soumas
Tom Soumas, President
ATTACHMENT A
Total of funds Buyback for Price Buyback Price for
Used within 1st 10% 20%
Six (6) months: [Between Months 12 and 18]
______________ ________________________________________
$100,000 $600,000 $900,000
$150,000 $800,000 $1,200,000
$200,000 $1,000,000 $1,500,000
$250,000 $1,250,000 $1,750,000
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