UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _____ to _____
Commission file number: 33-11059-A
TELESERVICES INTERNATIONAL GROUP INC.
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(Exact name of small business issuer as specified in it charter)
Florida 59-2773602
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
100 Second Avenue South, Suite 1000, St. Petersburg, Florida 33701
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(Address of principal executive offices)
(813) 895-4410
--------------------------
(issuer's telephone number)
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(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 such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the issuer filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of May 19, 1998, of the issuer's
Common Stock, $.0001 par value, there were 39,307,740 shares outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
<PAGE>
TELESERVICES INTERNATIONAL GROUP INC.
INDEX
PART I. FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Consolidated Balance Sheets 1
March 31, 1998 (Unaudited) and
December 31, 1997
Unaudited Consolidated Statements of Operations 2
Three Months ended
March 31, 1998 and
March 31, 1997
Unaudited Consolidated Statements of Cash Flows 3
Three Months ended
March 31, 1998 and
March 31, 1997
Notes to Financial Statements (Unaudited) 4-7
Item 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
PART II. OTHER INFORMATION 9
SIGNATURE PAGE 14
<PAGE>
TELESERVICES INTERNATIONAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, 1998 Dec. 31, 1997
-------------- -------------
(Audited)
ASSETS
Current assets:
Cash $ 82,069 $ --
Cash, restricted (Note 2) 195,000 175,000
Accounts receivable, net of allowance
for doubtful accounts 156,861 162,648
Other Current Assets 51,576 38,886
------------- ------------
Total current assets 485,506 376,534
============= ============
Equipment, net of accumulated
depreciation (Note 5) 491,575 649,960
Other assets 59,537 29,440
------------- ------------
Total assets $ 1,036,438 $ 1,055,934
============= ============
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current liabilities:
Outstanding checks in excess of amounts
reported by banks $ 143,382
Accounts payable and accrued expenses 6,043,999 $ 5,496,215
(Notes 6,10 and 12)
Loans payable, stockholders (Note 7) 443,397 59,315
Capital leases payable,
current portion (Note 4) 59,838 59,838
Notes payable, current portion (Note 9) 185,957 216,040
------------- ------------
Total current liabilities 6,733,191 5,973,790
Notes payable, net of current
portion (Note 9) 162,934 234,139
Capital leases payable, net of
current portion (Note 4) 13,570
------------- ------------
Total liabilities 6,909,694 6,207,929
------------- ------------
Commitments and Contingencies
(Notes 1,2,3,4,6,7,9,10,11,12,13, and 14)
<PAGE>
Stockholders' (deficit):
Preferred stock, $.001 par value
None issued and outstanding - -
Common stock, $.0001 par value 3,498 3,016
Additional Paid-In Capital 22,217,015 20,869,442
Accumulated (deficit) (28,093,769) (26,066,383)
------------- ------------
Total stockholders' (deficit) (5,873,256) (5,193,925)
Total liabilities and
stockholders' (deficit) $ 1,036,438 $ 1,014,004
============= ============
See accompanying notes
<PAGE>
TELESERVICES INTERNATIONAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
1998 1997
--------------- ---------------
Total Revenues $ 346,806 $ 591,871
--------------- ---------------
Operating Expenses:
Salaries 1,032,916 1,401,074
Payroll taxes 61,432 476,009
Contract services 373,354 137,890
Rent 88,780 304,885
Telephone 205,797 304,341
Travel and entertainment 21,190 336,246
Advertising and promotion 38,662 186,303
Depreciation 175,963 47,719
Other expenses 360,376 354,884
--------------- ---------------
Total Operating Expenses 2,358,471 3,549,351
--------------- ---------------
Net (loss) from operations (2,011,665) (2,957,480)
Other income (expenses):
Interest income 2,515 3,978
Interest (expense) (18,236) (71,238)
--------------- ---------------
Net (loss) $ (2,027,386) $ (3,024,740)
================ ===============
Net (loss) per share $ (0.06) $ (0.13)
================ ===============
Weighted Average Shares 32,563,714 22,912,531
Outstanding ================ ===============
See accompanying notes.
<PAGE>
TELESERVICES INTERNATIONAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
1998 1997
------------ --------------
Cash flows from operating activities:
Net (loss) $ (2,027,386) $ (3,024,740)
Adjustments to reconcile net (loss) to
net cash (used in) operating activities:
Decrease (Increase) in accounts receivable 22,665 (166,229)
Depreciation and Amortization 175,963 234,022
Increase (decrease) in accounts payable
and accrued expenses 405,402 765,122
Increase in accrued payroll and taxes - 157,235
Increase in accrued interest to stockholder - 50,684
Other (42,607) 18,622
------------ --------------
Net cash (used in) operating activities: (1,465,963) (1,965,284)
------------ --------------
Cash flows from investing activities:
Disposal (Acquisition) of equipment (17,579) (136,189)
(Acquisition) of new business - (1,099,893)
------------ --------------
Net cash (used in) investing activities: (17,597) (1,236,082)
------------ --------------
Cash flows from financing activities:
Cash proceeds from loans from stockholders 384,082 1,411,272
Issuance of common stock 1,331,177 1,715,692
Proceeds from (repayment of) leases payable (28,360) (13,788)
Proceeds from (repayment of) notes payable (101,288) 38,599
Net cash provided by financing activities 1,585,611 3,151,775
------------ --------------
Increase (decrease) in cash 102,069 (49,591)
Cash, beginning of period 175,000 119,130
------------ --------------
Cash, end of period $ 277,069 $ 69,539
============ ==============
Interest paid $ 18,236 $ -
============ ==============
Income taxes paid $ - $ -
============ ==============
See accompanying notes.
<PAGE>
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(unaudited)
(1) Organization and Operations:
TeleServices International Group Inc. (TSIG), formerly Dynasty Capital
Corporation (Dynasty), was formed under the laws of the State of Florida on
October 1, 1986. TSIG issued common stock for 100% of the issued and
outstanding common stock of Visitors Services, Inc. (VSI). This transaction
was accounted for as a reverse acquisition since the former controlling
shareholders of VSI control TSIG after the business combination. Prior to
the transaction TSIG was an inactive public shell corporation with no net
assets. Since Dynasty had no net monetary assets at the time of the
business combination, par value of these shares was transferred from
additional paid-in capital to common stock.
VSI was formed under the laws of the State of Florida in November 1992 to
provide automated reservations and information services specifically
designed to support the special needs of convention and visitors bureaus
and other organizations.
American International Travel Agency, Inc. was acquired from Phoenix
Information Systems Corp. (Phoenix), and related party on December 6, 1996
in exchange for 31,579 shares of Phoenix Systems and related party. The
Company had a cost basis of $15,829 in the shares of Phoenix. The market
value of the shares was $90,000 at the time of the transaction, resulting
in a gain of $74,171 to the Company. The transaction was accounted for as
a purchase.
(2) Summary of Significant Accounting Policies
(a) Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash
investments and trade accounts receivable. The Company grants credit to
various business and entities, in the U.S.A. The Company does not
require collateral for its accounts receivable. The Company maintains
its cash balance in one financial institution located in Florida. The
balances are insured by the Federal Deposit Insurance Corporation up to
$100,000.
<PAGE>
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(unaudited)
(2) Summary of Significant Accounting Policies, Continued
(b) Income Tax
The Company has net operating loss carryovers totaling approximately
$26,000,000 at December 31, 1997 which expire in various years through
2012. The Company has deferred tax assets of approximately $1,300,000
at December 31, 1997 related to loss carryovers but due to the
uncertainty of the Company's ability to utilize these carryovers, a
valuation allowance of the total $1,300,000 has been provided.
Therefore, as of December 31, 1997 the Company's financial statements
do not include any provision for deferred tax assets. A change in
ownership of more than 50% of the Company could reduce or eliminate the
Company's ability to utilize these loss carryovers.
(c) Equipment - Equipment is carried at cost, net of accumulated
depreciation. Depreciation is computed using the straight-line method
over the estimated useful lives of the assets ranging from 3 to 5
years.
(d) Per Share Information
The per share information is computed based upon the weighted average
shares outstanding.
(e) Use of Estimates in the Preparation of Financial Statements
Preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting periods. Significant assumptions in
the accompanying financial statements relate to the Company's ability
to continue as a going concern as described in note 3 and estimated
useful lives of equipment as disclosed in note 2(c). The ultimate
resolution of the reasonableness of the related assumptions cannot
presently be determined. Actual results could differ from the Company's
estimates.
<PAGE>
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(unaudited)
(2) Summary of Significant Accounting Policies, Continued
(f) Bad Debts
An allowance for uncollectible accounts has been provided based on the
Company's past collection history.
(g) Advertising and Promotion Costs
Advertising and promotion costs are expensed as incurred.
(h) Geographic Area of Operations
The Company provides services to customers in the U.S.A. The potential
for severe financial impact can result from negative effects of
economic conditions within the market or geographic area. Since the
Company's business is principally in one area and in one industry, this
concentration of operations results in an associated risk and
uncertainty.
(i) Stock Split
Effective January 16, 1996 the Company effected a 1.065 to 1 forward
stock split. All shares and per share amounts referred to have been
adjusted retroactively.
(j) Restricted Cash
Included in cash on March 31, 1998 is $195,000 being held in
separate certificates of deposit as collateral for notes payable.
(3) Basis of Presentation - Going Concern
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
recurring operating losses since its inception and has working capital
deficit. Management is attempting to raise additional capital and
attempting to complete a business combination.
<PAGE>
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(unaudited)
(3) Basis of Presentation - Going Concern, Continued
In view of these matters, realization of certain 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
financial requirements, raise additional capital, and the success of its
future operations. Management believes that its ability to raise
additional capital provides the opportunity for the Company to continue as
a going concern. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
(4) Lease Commitments
In September, 1995 the Company entered into an operating lease
agreement for its office facilities for a term of seven years.
Minimum future rental payments under operating leases with terms greater
than one year are summarized as follows:
Year ending December 31
1998 $ 244,141
1999 $ 252,418
2000 $ 261,114
2001 $ 268,970
2002 $ 273,112
The Company entered into a capital finance lease agreement covering its
telephone equipment. Under the terms of the agreement which commenced in
September, 1995 the Company is making aggregate lease payments over a
three year period of $185,196, which includes deferred interest of
approximately $27,000. The Company made a down payment of approximately
$82,000 at the beginning of the lease period. At the end of the lease
period, the equipment will be owned by the Company for a nominal charge of
$1.00. The Company has accounted for this transaction as a capital lease.
At December 31, 1997 the Company's financial statements included equipment
leased through capital leases in the amount of approximately $240,000 with
accumulated depreciation of approximately $170,000.
<PAGE>
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(unaudited)
(4) Lease Commitments, Continued
Total future minimum lease payments under this capital lease are
summarized as follows:
Year ending December 31, 1998 $ 66,119
Year ending December 31, 1999 46,332
Amount representing interest (10,683)
----------
Net after interest reduction 101,768
Current portion 59,838
----------
Noncurrent portion $ 41,930
==========
(5) Equipment
The company's equipment as of December 31, 1997 is summarized as follows:
Furniture, fixtures and office equipment $ 487,793
Telephone equipment 911,433
Computer equipment and software 834,945
Leasehold improvements 42,905
Allowance for idle and excess capacity equipment (500,000)
----------
1,777,076
Accumulated depreciation (1,127,116)
----------
$ 649,960
==========
(6) Other Expenses
In addition to normal other operating expenses, other expenses include the
following:
Provision for litigation contingencies $1,277,250
Loss on special event contract 1,100,158
Write off of goodwill 801,665
Provision for severance pay 272,808
Provision for idle and over capacity equipment 500,000
----------
$3,951,881
==========
<PAGE>
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(unaudited)
(7) Related Party Transactions
The stockholders of the Company have made various demand loans to the
Company or expansion and operating capital. During the year ended
September 30, 1996 the stockholders converted $2,250,000 into 2,798,750
shares of the common stock of the Company. During the three month period
ended December 31, 1996 the stockholders converted $329,965 into 440,000
shares of Common Stock. During the year ended December 31, 1997 the
stockholders converted $9,797,635 into 7,410,878 shares of Common Stock.
As of December 31, 1997 loans payable to a stockholder totaled $59,315.
The loan from the stockholder accrues interest at 11% per annum. The loan
is payable on demand and is uncollateralized. Included in other current
assets is $30,866 of advances to the same stockholder.
The Company has an aggregate of 16,056,161 options outstanding to various
employees, officers and related parties at purchase prices ranging from
$.30 to $3.50 per share. While some of these options are fully vested, the
majority of options vest over periods of up to three years. These options
expire at various dates through 2002. The above referenced securities are
restricted securities under the Securities Act of 1933, as amended.
(8) Preferred Stock
The Company is authorized to issue 10,000,000 shares of preferred
stock, having a par value of $.001 each. The preferred stock may be issued
in a series from time to time with such designation, rights, preferences
and limitations as the Board of Directors of the Company may determine by
resolution.
(9) Notes Payable
The Company has notes payable, principally to a bank, of approximately
$450,179 at December 31, 1997, collateralized by $175,000 of certificates
of deposit and certain furniture and equipment. Of this amount $50,000 was
due and payable as of December 31, 1997. The remaining notes payable are
payable in monthly payments totaling approximately $22,000, with interest
at an approximate weighted average of 10% per annum.
The majority of the notes payable are personally guaranteed by a
stockholder of the Company.
Maturities of the notes payable are summarized as follows:
Years ending December 31:
1998 $ 216,040
1999 234,139
----------
Total $ 450,179
==========
<PAGE>
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(unaudited)
(10) Severance Pay Commitments
The Company has entered into various contracts for services, ranging in
terms from two to four years, as of December 31, 1997 which provide for
continued payment if the person is terminated prior to the end of the
contract period. Total commitments for severance on these contracts amount
to approximately $724,750 for employees still employed by the Company as
of December 31, 1997. In addition, accrued expenses as of December 31,
1997 include $272,808 related to severance requirements for former
employees.
(11) Subsequent Events
The Company has, subsequent to December 31, 1997, signed a letter of
intent related to a possible business combination. This potential
combination letter of intent includes various commitments by the Company
but is subject to various contingencies.
(12) Litigation
The Company is a party to numerous litigation and threatened litigation
matters related to alleged nonperformance of contracts and nonpayment of
various obligations. Contingencies exist with respect to these matters.
The ultimate costs, if any, related to these matters cannot presently be
determined. The financial statements as of December 31, 1997 include a
$1,277,250 provision for estimated potential costs related to these
matters.
(13) Creditor Delinquencies
The Company is materially delinquent on payment of various creditor
obligations including various obligations to the Internal Revenue Service.
Failure to pay these balances due could result in the inability of the
Company to continue in business.
(14) Fourth Quarter Adjustments
The Company recognized as expenses various previously unrecorded accruals
for potential litigation matters and various other accrued expenses
and provisions for losses, which were recorded in the fourth quarter.
These fourth quarter material adjustments totaled approximately
$6,000,000.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Total revenues for the three months ended March 31, 1998 were $346,806,
a 41% decrease from revenues for the three months ended March 31, 1997.
Operating expenses for the same period also decreased, from $3,549, 351 to
$2,358,471, a 33% decrease. These decreases were exhibited in most expense
categories, particularly salaries, rent, and travel and entertainment. This was
the result of cutbacks in these areas. For the period, the Company sustained a
net loss of $2,027,386, compared to a net loss of $3,024,740 for the same period
last year. This decrease in the loss was primarily the result of the reductions
in operating spending, partially offset by decreases in revenues. These losses
are expected to continue for the foreseeable future.
Sales And Revenues
The Registrant's sales and revenues are derived from VSI. VSI has
derived revenues from: per call fees for visitor guide requests; booking fees
aid by hotels or lodging properties for each made and used reservation provided
by VSI; transaction fees for attraction and events for which tickets are sold
by VSI; subscription fees charged to the properties and for information services
to attractions and events.
Limited Working Capital; Financial Instability
As of March 31, 1998, the Registrant had a negative stockholder's
equity of ($5,873,256), an accumulated deficit of ($28,093,769), and a working
capital deficit of ($6,247,685).
Various factors effecting the Registrant's operations raise doubt as
to the Registrant's ability to continue as a going concern. There can be no
assurance that the Registrant will be able to continue as a going concern, or
achieve material revenues and profitable operations. The Registrant is dependent
upon sufficient cash flows from operations to meet its short term and long-term
liquidity needs. These operations have not and are not expected to provide
sufficient cash flows, and as such the Registrant requires additional financing.
No assurances can be given that financing will be available to the Registrant in
the amounts required, or that, if available, the financing will be available on
terms satisfactory to the Registrant.
The financial statements include all adjustments which in the opinion
of and to the best of management's knowledge are necessary to make the financial
statements not misleading.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings:
The Registrant is not a party to any pending material legal proceeding;
however; the Registrant's subsidiaries are involved in the following legal
proceedings:
1. Call Management Systems, Inc. filed a lawsuit against the
Registrant's subsidiaries, Visitors Services International Corp. ("VSIC") and
American International Travel Agency, Inc. ("AIT"), in Chancery Court of Sevier
County, State of Tennessee on March 12, 1998, claiming approximately $60,000 for
alleged breaches of the contract among the parties wherein VSIC and AIT provided
travel related call management services. Following a hearing held on May 13,
1998, VSIC agreed to a injunction on an AIT "commission pool" bank account and
to supply a detailed accounting/commission reconciliation to Plaintiff within 30
days.
2. Clarity Consulting, Inc. filed a lawsuit against the Registrant's
subsidiary, VSIC, in the Circuit Court of Cook County, Illinois on January 15,
1998, claiming approximately $550,000 for alleged breaches of the contract
between the parties regarding the development of certain software for use by
VSIC. VSIC has filed a Motion to Strike a portion of the Complaint.
3. Valley Forge Convention & Visitors Bureau filed a lawsuit against
the Registrant's subsidiary, VSIC (under its prior name, Visitors Services,
Inc.), in the Court of Common Please of Montgomery County, Pennsylvania on March
17, 1998, claiming approximately $430,000 for alleged breaches of the contract
between the parties wherein VSIC provided travel related call management
services. The case has been removed to United States District Court for the
Eastern District of Pennsylvania, and VSIC has filed a Motion to Dismiss the
Complaint.
4. Boehringer Ingelheim Pharmaceuticals, Inc. filed a lawsuit against
the Registrant's subsidiary, VSIC (under its prior name, Visitors Services,
Inc.), and Ray Wilson, an officer of the Registrant, in Superior Court, Judicial
District of Danbury, Connecticut on December 9, 1997, claiming approximately
$96,000 for alleged amounts due for use of office space under an alleged verbal
agreement. VSIC is pursuing settlement negotiations.
5. Harley-Davidson Motor Company filed a lawsuit against the
Registrant's subsidiary, VSIC, in the Circuit Court, Milwaukee County, State of
Wisconsin, on February 2, 1998, seeking a Declaratory Judgment to terminate the
contract between the parties VSIC provided travel related call management
services, and claiming unspecified damages. Following a hearing held on April 1,
1998, the Court entered a Default Judgment against VSIC. A hearing on possible
damages is scheduled for June 12, 1998.
6. Camino Real Associates, Inc. and Brian D. Chipman filed a lawsuit
against the Registrant's subsidiary, VSIC (under its prior name, Visitors
Services, Inc.), in the District Court, El Paso County, State of Colorado, on
June 20, 1997, claiming damages of approximately $100,000 for alleged payments
owed under a Trade License Agreement with the Plaintiffs that was assumed by
VSIC when it acquired the assets of Global Reservation Systems, Inc. A Default
Judgment was entered on January 8, 1998, and VSIC has been making payments to
Plaintiffs in accordance with an informal payment schedule.
<PAGE>
7. Subsequent to the end of the period covered by this report, Siemens
Business Communication Systems, Inc. filed a lawsuit against the Registrant's
subsidiary, VSIC, in the Circuit Court for Pinellas County, Florida, on April
10, 1998, claiming damages of approximately $181,000 representing an alleged
unpaid balance due on equipment sold to VSIC, and an action for replevin of the
equipment. On May 19, 1998, VSIC filed a Motion to Strike a portion of the
Complaint, a Motion for a More Definitive Statement, a Request for an Extension
of Time to File a Counterclaim, and an Answer and Affirmative Defenses.
The Registrant and its subsidiaries are also involved in several
miscellaneous legal proceedings, with total claims against the subsidiaries
aggregating approximately $75,000.
Item 2. Changes in Securities: None.
Item 3. Defaults Upon Senior Securities: None.
Item 4. Submissions of Matters to a Vote of Security Holders: None.
Item 5. Other Information:
A. Acquisition of Compact Connection, Inc.
The Registrant, through a subsidiary corporation, Compact Connection,
Inc., a Delaware corporation, ("CCI"), acquired substantially all of the assets
of Compact Connection, Inc., an unaffiliated Nevada corporation ("Seller"),
effective at the close of business on April 30, 1998. The Registrant intends to
utilize all such assets to operate the former business of Seller as the business
of CCI.
The assets of Seller consist primarily of equipment, distributor
contracts, tradenames and trademarks, and goodwill. The business involves the
direct-music marketing of compact disks and cassettes through the use of a music
card that allows purchasers of the card the ability to buy a specific number of
compact disks or cassettes from over 200,000 titles, including the music
industry's latest top releases, at "below-retail" prices. Orders are taken over
a toll-free number and are delivered via mail. Music cards can be purchased
directly from the business or from authorized distributors.
Details of the acquisition are reported on a Current Report on Form
8-K, dated April 30, 1998 and filed May 14, 1998.
B. Matters related to the Registrant's "TeleServices Stock Option Plan"
(the "TeleServices Plan")
On April 20, 1998, the Registrant increased the number of shares
eligible to be issued under the TeleServices Plan from 10,000,000 to 20,000,000
shares of common stock of the Registrant, and the TeleServices Plan was restated
to reflect this increase.
<PAGE>
On May 8, 1998, the Registrant filed a Registration Statement on Form
S-8 (Registration No. 333-52271) to register 12,000,000 shares of common stock
for issuance under the TeleServices Plan. The Registration Statement included a
reoffer prospectus covering "control securities."
C. Revolving Credit Loan Agreement
On April 23, 1998, the Registrant entered in to a Revolving Credit Loan
Agreement (the "Agreement") and Revolving Credit Master Note (the "Note") with
Robert P. Gordon, the Registrant's Chairman, whereby Mr. Gordon would loan, at
his discretion, up to $5,000,000 to the Registrant over the following year, if
and when requested by the disinterested members of the Board of Directors. The
loan may be repaid in cash or in restricted common stock of the Registrant, at
the option of Mr. Gordon. The specific terms of the transaction are set forth in
the Agreement and the Note, which are being filed herewith as Exhibit 10.5.
D. Consulting Contracts
On March 30, 1998, the Registrant entered into a six-month management
consulting agreement with Alyce Cucurullo. The Registrant agreed to pay Ms.
Cucurullo a weekly fee of $3,850 until May 31, 1998, and $4,425 per week
thereafter. The Registrant also granted Ms. Cucurullo options to acquire 600,000
shares of Common Stock, exercisable for two years at an exercise price of $.30
per share. The options vest at the rate of 20,000 per month so long as Ms.
Cucurullo remains a consultant or employee of the Registrant.
On April 9, 1998, the Registrant entered into a two-year consulting
agreement with Paul W. Henry, who is Secretary, Treasurer and a Director of the
Registrant. The Registrant agreed to pay Mr. Henry a monthly fee of $5,000 until
Mr. Henry is no longer engaged by Phoenix Information Systems Corp., then a
monthly fee of $10,000 thereafter. The Registrant also granted Mr. Henry options
to acquire 1,000,000 shares of Common Stock, exercisable for five years at an
exercise price of $.30 per share. The options vest at the rate of 250,000
immediately, and 30,000 per month commencing May 1, 1998, so long as Mr. Henry
remains a consultant or employee of the Registrant.
On April 22, 1998, Robert J. Conrads, a director of the Registrant's
subsidiary, VSIC, resigned as a director to pursue other opportunities. There
was no disagreement on any matter between Mr. Conrads and VSIC or the
Registrant.
The Registrant entered into the following consulting and advisory
agreements for business development services: on April 23, 1998, the Registrant
entered into an agreement to grant 3,900,000 options to acquire shares of Common
Stock of the Registrant to Lexus Partners Ltd.; and on April 30, 1998, the
Registrant entered into an agreement to grant 3,600,000 options to acquire
shares of Common Stock of the Registrant to Ira Group, Inc. Each agreement has a
term of two years. The options have exercise prices ranging from $.15 to $.50
per share and expire after two years.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
Exhibit No. Description
2.5 Agreement for Purchase of Assets of Compact Connection,
Inc, (a Nevada corporation), dated April 23, 1998, and
Addendum dated April 24, 1998. (Incorporated by
reference to Exhibit 2.5 of the Registrant's Current
Report on Form 8-K dated April 30, 1998, and filed May
14, 1998.)
3.3 Bylaws as restated October 18, 1996. (Incorporated by
referenced to Exhibit 3.3 to the Registrant's Form 8-K
dated October 17, 1996, and filed on October 23, 1996.)
3.5 Articles of Incorporation, as amended and currently in
effect. (Incorporated by referenced to Exhibit 3.5 to the
Registrant's Form 10-QSB for the quarter ended March 31,
1997, and filed on May 15, 1997.)
10.1 TeleServices International Group Inc. (formerly Visitors
Services International Corp.) Employee Benefit and
Consulting Services Compensation Plan (the "TSIG Plan").
(Incorporated by referenced to Exhibit 10.1 to the
Registrant's Post-Effective Amendment No. 1 to the
Registration Statement on Form S-8 (file no. 333-14271)
filed February 19, 1997.)
10.2 Visitors Services International Corp. (formerly Visitors
Services, Inc.) Employee Benefit and Consulting Services
Compensation Plan (the "VSI Plan"). (Incorporated by
referenced to Exhibit 10.2 to the Registrant's
Registration Statement on Form S-8 (file no. 333-22093)
filed February 20, 1997.)
10.3 TeleServices Stock Option Plan (the "TeleServices Plan").
(Incorporated by reference to Exhibit 10.3 the
registration statement filed on Form S-8 for the
TeleServices Stock Option Plan, Registration No.
333-52271, filed May 8, 1998.)
10.4 Employment Agreement between the Registrant's subsidiary,
Compact Connection, Inc. (a Delaware corporation), and
Darrell W. Piercy, dated April 23, 1998. (Incorporated by
reference to Exhibit 10.4 of the Registrant's Current
Report on Form 8-K dated April 30, 1998, and filed May
14, 1998.)
10.5 Revolving Credit Loan Agreement and Revolving Credit
Master Note between the Registrant and Robert P. Gordon,
each dated April 23, 1998. (Filed herewith.)
27 Financial Data Schedule. (Filed herewith.)
<PAGE>
(b) Reports on Form 8-K.
No current reports on Form 8-K were filed during the quarter ended
March 31, 1998.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TELESERVICES INTERNATIONAL GROUP INC.
Dated: May 20, 1998 /s/ Stephen G. McLean
---------------------
Stephen G. McLean,
Chief Executive Officer and Director
/s/ Raymond P. Wilson
---------------------
Raymond P. Wilson,
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
2.5 Agreement for Purchase of Assets of Compact Connection,
Inc., (a Nevada corporation), dated April 23, 1998,
and Addendum dated April 24, 1998. (Incorporated by
reference to Exhibit 2.5 of the Registrant's Current
Report on Form 8-K dated April 30, 1998, and filed May
14, 1998.)
3.3 Bylaws as restated October 18, 1996. (Incorporated by
referenced to Exhibit 3.3 to the Registrant's Form 8-K
dated October 17, 1996, and filed on October 23, 1996.)
3.5 Articles of Incorporation, as amended and currently in
effect. (Incorporated by referenced to Exhibit 3.5
to the Registrant's Form 10-QSB for the quarter ended
March 31, 1997, and filed on May 15, 1997.)
10.1 TeleServices International Group Inc. (formerly Visitors
Services International Corp.) Employee Benefit and
Consulting Services Compensation Plan (the "TSIG Plan").
(Incorporated by referenced to Exhibit 10.1 to the
Registrant's Post-Effective Amendment No. 1 to the
Registration Statement on Form S-8 (file no. 333-14271)
filed February 19, 1997.)
10.2 Visitors Services International Corp. (formerly Visitors
Services, Inc.) Employee Benefit and Consulting Services
Compensation Plan (the "VSI Plan"). (Incorporated by
referenced to Exhibit 10.2 to the Registrant's
Registration Statement on Form S-8 (file no. 333-22093)
filed February 20, 1997.)
10.3 TeleServices Stock Option Plan (the "TeleServices
Plan"). (Incorporated by reference to Exhibit 10.3 the
registration statement filed on Form S-8 for the
TeleServices Stock Option Plan, Registration No.
333-52271, filed May 8, 1998.)
10.4 Employment Agreement between the Registrant's
subsidiary, Compact Connection, Inc. (a Delaware
corporation), and Darrell W. Piercy, dated April 23,
1998. (Incorporated by reference to Exhibit 10.4 of
the Registrant's Current Report on Form 8-K dated
April 30, 1998, and filed May 14, 1998.)
10.5 Revolving Credit Loan Agreement and Revolving Credit
Master Note between the Registrant and Robert P. Gordon,
each dated April 23, 1998. (Filed herewith.)
27 Financial Data Schedule. (Filed herewith).
REVOLVING CREDIT LOAN AGREEMENT
THIS REVOLVING CREDIT LOAN AGREEMENT (the "Agreement"), is made this
23rd day of April, 1998, by and between TeleServices International Group Inc.
(the "Borrower"), and Robert P. Gordon ("Lender").
WHEREAS, Borrower is desirous of borrowing sums from time to time up to
an aggregate amount of Five Million Dollars ($5,000,000) from Lender in the form
of a revolving line of credit;
WHEREAS, Lender is willing to provide the above-described loans to
Borrower on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, the parties agree as follows:
1. Terms of Revolving Credit. Subject to the terms and conditions of
this Agreement, Lender hereby agrees to establish a revolving credit facility
(hereinafter, the "Revolving Credit") in the maximum amount of Five Million
Dollars ($5,000,000) in favor of Borrower on the following terms and conditions:
a. The term of the Revolving Credit shall begin on the date
hereof and shall end on April 22, 1999, unless accelerated pursuant to Section 5
hereinbelow (the "Repayment Date").
b. Concurrently herewith, Borrower shall execute a Revolving Credit
Master Note in favor of Lender in the face amount of Five Million Dollars
($5,000,000) (the "Note"), payable on or before the Repayment Date, in the form
attached hereto as Exhibit A and incorporated by reference herein.
c. Advances under the Revolving Credit may be made, at the
discretion of Lender in accordance with the terms of this Agreement, at any time
prior to the Repayment Date upon receipt by Lender of oral or written request
therefor from Borrower; at no time shall the aggregate obligation of Borrower to
Lender exceed One Million U.S. Dollars (US$1,000,000). Borrower may at any time
prior to the Repayment Date repay all or any part of said loans under the
Revolving Credit and subsequently receive further advances, consistent with the
terms and conditions hereof.
d. Principal amounts due under the Revolving Credit shall bear
interest and shall be payable in accordance with the terms of the Note.
e. Borrower may prepay under the Note at any time in any amount
without premium or penalty.
f. Amounts borrowed under the Revolving Credit shall be used for
the purposes specified in Section 9.a(2) of this Agreement.
2. Fees and Expenses. Borrower agrees to reimburse Lender for all
out-of-pocket costs and expenses incurred by Lender in connection with this
Agreement and the making, protection, enforcement and collection of all amounts
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REVOLVING CREDIT LOAN AGREEMENT Page 1 of 7
<PAGE>
advanced under the Revolving Credit. These costs are to include all costs and
expenses incurred in enforcing the rights of Lender under this Agreement whether
or not upon the occurrence of any Event of Default (hereinafter defined).
3. Promises to Pay. Borrower promises to pay to Lender when due,
whether by normal maturity, acceleration or otherwise, the entire outstanding
principal amount of the Revolving Credit, together with interest, and all other
amounts payable by Borrower to Lender hereunder, including costs of collection.
4. Repayment of Principal and Interest in Common Stock of Borrower at
Option of Lender. Lender shall have the right to demand payment from Borrower of
all principal and interest due and payable hereunder and under the Note, in
whole or in part, in the form of restricted shares of Common Stock of the
Borrower. The number of shares of Common Stock of the Borrower that would be
issued to Lender in payment of any amount due to Lender would be determined by
totaling all principal and interest due (the "Amount Due") as of the date that
payment is due and demand for payment may be made under this Agreement (the
"Demand Date") and dividing the Amount Due by fifteen cents ($.15). Lender would
be required to execute such other documents and make such other representations
and warranties as may be required for Borrower to issue the securities to
Lender; and Borrower would not be required to issue shares of Common Stock if
doing so, in the opinion of Borrower's legal counsel, would result in any
violations of applicable securities laws. Any shares of Common Stock of Borrower
that may be issued shall be restricted and all certificates shall bear a
standard "Rule 144" restrictive legend.
5. Events of Default; Acceleration. Any or all of the liabilities of
Borrower to the Lender in connection with the Revolving Credit shall, at the
option of Lender, be immediately due and payable upon the occurrence of any of
the following events of default (each of which shall be hereinafter referred to
as an "Event of Default"): (a) default in the payment, when due or payable, of
any obligation of Borrower under this Agreement or the Note; (b) if any
representation or warranty by Borrower hereunder is not complete or accurate at
any time that any advances are outstanding hereunder; (c) failure of Borrower
after request by Lender to permit the inspection of books or records of
Borrower; (d) issuance of any injunction or of an attachment or judgment against
any property of Borrower that is not discharged within thirty (30) days after
issuance; (e) the insolvency of Borrower, or the filing of any bankruptcy,
reorganization, debt arrangement or other proceeding or case against Borrower
under any bankruptcy or insolvency law or commencement of any dissolution or
liquidation proceeding against Borrower, any of which is either consented to or
acquiesced in by Borrower or remains undismissed for sixty (60) days after the
date of entry or the commencement by Borrower of a voluntary case under the
federal bankruptcy laws or any state insolvency or similar laws, or the consent
by Borrower to the appointment of a receiver, liquidator, assignee, trustee,
custodian or similar official for Borrower or any of its property, or the making
by Borrower of any assignment for the benefit of creditors or the failure by
Borrower generally to pay Borrower's debts, as the case may be, as they become
due; (f) a change in the condition or affairs (financial or otherwise) of
Borrower that in the opinion of the Lender increases Lender's risk in connection
with the Revolving Credit or impairs the prospect of timely payment of the
Revolving Credit; (g) default in the performance of any obligation, covenant or
agreement contained or referred to herein or in the Note; or (h) failure of a
"Condition of Lending" described hereinafter in Section 7. For purposes of the
Section 5, an Event of Default by any subsidiary of Borrower shall be deemed an
Event of Default by Borrower.
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REVOLVING CREDIT LOAN AGREEMENT Page 2 of 7
<PAGE>
6. Waivers. Borrower waives demand, notice, protest, notice of
acceptance of this Agreement, notice of loans made, credit extended, and all
other action taken in reliance hereon and all other demands and notices of any
type.
7. Conditions of Lending. This Agreement and any and all advances
under the Revolving Credit are and shall at all times be subject to the
following:
a. The representations and warranties of Borrower to Lender shall
be complete and accurate on the date hereof and on and as of the date of each
advance under the Revolving Credit with the same effect as though such
representations and warranties had been made on and as of such date.
b. All covenants and agreements required to be performed by
Borrower under this Agreement and under the Note shall have been performed to
the satisfaction of Lender as and when required.
c. On the date hereof and on and as of the date of each
advance under the Revolving Credit, no Event of Default shall have occurred and
no condition, event or act which, with the giving of notice or the lapse of time
or both, would constitute an Event of Default shall have occurred or shall
exist.
d. All legal details and proceedings in connection with the
transactions contemplated by this Agreement shall be in form and substance
satisfactory to Lender.
8. Borrower's Representations and Warranties. To induce Lender to
enter into this Agreement, Borrower represents and warrants to Lender as
follows:
a. Existence; Power; Authority. Borrower (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida, and (b) has the power to own its property and to carry on its business
and is qualified to do business and is in good standing in each jurisdiction in
which the character of properties owned by it or the transaction of its business
makes such qualification necessary. Borrower is duly and validly authorized by
all necessary corporation action and has full power and authority to enter into
this Agreement, to make the borrowings hereunder, to execute and deliver this
Agreement and the Note, and to perform and comply with the terms, conditions,
and agreements set forth herein and therein.
b. Binding Agreement. This Agreement constitutes, and the Note,
when made and delivered for value received will constitute, the valid and
legally binding obligations of Borrower, enforceable in accordance with their
respective terms.
c. No Conflicting Agreements. The execution of and performance
under this Agreement and the Note and the borrowings hereunder and thereunder by
Borrower will not violate: (A) any statute, regulation or other provision of
law; (B) any order of a court or instrumentality of government having
jurisdiction over Borrower; (C) any provision of the Articles of Incorporation
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REVOLVING CREDIT LOAN AGREEMENT Page 3 of 7
<PAGE>
or Bylaws of Borrower; and (D) any indenture, contract, agreement or other
instrument to which Borrower is a party or by which Borrower or any of its
property is bound. There are no provisions of any existing mortgage, deed of
trust, contract, lease, or other agreement of any kind binding on Borrower or
affecting its business or property that would conflict with or in any way
restrict or prohibit the execution, delivery or performance of the terms of this
Agreement or the Note.
d. Information. All information, whether provided orally or
contained in any financial statement, report, certificate, opinion, letter or
any other written document, given to Lender by Borrower or by any other person
in connection with the Revolving Credit at any time during the term hereof is
and shall constitute a representation and warranty by Borrower hereunder.
Borrower hereby represents and warrants that all such information is in all
material respects true, complete and accurate, and does not and shall not fail
to state any material fact or any fact necessary to make such information not
misleading.
e. Assets and Properties. Borrower has good and marketable title
to all of its assets and properties, free and clear of any security interests,
liens or encumbrances of any type or kind whatsoever, except as may be permitted
by Lender.
f. Violation of Laws, etc. (1) Neither the consummation of this
Agreement nor the use, directly or indirectly, of all or any portion of the
proceeds of the Revolving Credit will violate or result in a violation of any
provision of any applicable law or of any applicable order of, or restriction
imposed by, any applicable governmental or regulatory entity or authority.
(2) There are no plans of a type described in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), in
respect of which Borrower (or an entity, whether or not incorporated, that is
under common control with Borrower within the meaning of Section 414(c) of the
Internal Revenue Code of 1986, as amended) is an "Employer" as defined in
Section 3(5) of ERISA, maintained by Borrower or any subsidiary of Borrower, or
under which Borrower or any such subsidiary has any liability. Borrower shall
give Lender prompt written notice of the adoption of any such plans.
9. Borrower's Covenants. Until all obligations and liabilities of
Borrower to Lender under this Agreement and the Note have been paid and
performed in full, Borrower shall keep and perform the following covenants, and
does hereby covenant, agree and promise to Lender as follows:
a. General Affirmative Covenants. Borrower shall, at all times
during the term of the Revolving Credit and at all times that any advances
hereunder are outstanding, unless waived by Lender, do the following:
(1) Insurance. Obtain and maintain adequate insurance as is
customarily maintained by similar companies operating in the same vicinities as
Borrower, all insurance to be in such form and written by such companies as may
be reasonably satisfactory to Lender, and will upon request of Lender, deliver
to Lender copies of the policies concerned.
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REVOLVING CREDIT LOAN AGREEMENT Page 4 of 7
<PAGE>
(2) Use of Proceeds. Use any and all amounts advanced under
this Agreement solely for the working capital needs of Borrower or its
subsidiaries, including any closing costs incurred in connection with this
Agreement, monthly rental payments, the purchase of insurance, and the payment
of salaries to employees of Borrower and its subsidiaries.
(3) Information. Furnish to Lender, promptly from time to
time, such information concerning the operations, business, affairs, and
financial condition of Borrower as Lender may reasonably request.
(4) Books, Records, and Inspections. At all times (a) maintain
complete and accurate books and records and (b) permit any person designated by
Lender to enter, examine, audit, and inspect all properties, books, operations
and records of Borrower at any reasonable time and from time to time wherever
such properties, books, operations and records are located.
(5) Litigation. Promptly notify Lender of any litigation
instituted or threatened against Borrower and of the entry of any judgment or
lien against any of Borrower's assets or properties.
(6) Compliance with Laws. At all times comply with all
applicable laws and orders of any court or other governmental authority, and all
regulations and standards of any applicable regulatory entity.
(7) Maintain Existence. At all times maintain in full force
and effect its corporate existence, rights, privileges, and qualify and remain
qualified in all jurisdictions where qualification is required.
(8) Taxes. Except to the extent that the validity or amount
thereof is being contested in good faith and by appropriate proceedings, pay and
discharge all Taxes prior to the date when any interest or penalty would accrue
for nonpayment thereof.
(9) Events of Default. Promptly inform Lender of the
occurrence of any Event of Default or the occurrence of any condition, event or
act which, with the giving of notice or lapse of time or both, would constitute
an Event of Default hereunder.
b. General Negative Covenants. Without the prior written consent
of Lender, Borrower shall not at any time during the term of the Revolving
Credit:
(1) Guaranties. Indorse, guaranty or become surety for the
obligation of any person, firm or corporation, except that Borrower may indorse
checks or other instruments for deposit or collection in the ordinary course of
business.
(2) Transfers and Encumbrances. Sell, mortgage, pledge or
otherwise encumber or dispose of any of Borrower's property, real or personal,
now owned or hereafter acquired, or permit any lien or security interest to
exist thereon, except in the ordinary course of Borrower's business or as
permitted by Lender.
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REVOLVING CREDIT LOAN AGREEMENT Page 5 of 7
<PAGE>
10. Notices. All notices, consents, approvals, requests, demands and
other communications that are required or may be given hereunder shall be in
writing and shall be duly given if personally delivered, sent by telefax,
telegram or overnight courier or posted by registered or certified mail, return
receipt requested, postage prepaid and addressed to the other parties at the
addresses set forth below.
Lender: Robert P. Gordon
234 - 21st Avenue N.E.
St. Petersburg, FL 33704
Borrower: TeleServices International Group Inc.
100 Second Avenue South, Suite 1000
St. Petersburg, FL 33701
Any party may from time to time change the address to which notices to it are to
be sent by giving notice of such change to the other parties in the manner set
forth herein. Notices shall be deemed given on the next business day following
the day such notice is posted or sent by courier in the manner described above,
and if sent by telefax or telegram, on the date such notice is sent, and if
delivered in person, on the date so delivered. Any notice period shall commence
on the day such notice is deemed given. For the purposes of this Agreement, the
term "business day" shall include all days other than Saturdays, Sundays and
federal banking holidays in the United States.
11. Miscellaneous.
a. No Waiver. No failure or delay of any party hereto to
exercise any right given to it hereunder, or to insist on strict compliance with
any provision hereunder, shall constitute a waiver of such provision or of any
other provision hereof, or a waiver of any breach, and no waiver of any
provision or breach of any provision shall constitute a waiver of any other
provision or breach or of any subsequent breach of the same provision. No waiver
shall be effective unless in writing and signed by the party having the right to
waive such provision.
b. Survival. All covenants, agreements, representations and
warranties made herein and in any other instruments or documents delivered
pursuant hereto shall survive the execution and delivery of this Agreement and
shall continue in full force and effect so long as any of the amounts due
hereunder are outstanding and unpaid.
c. Entire Agreement; Modification. This Agreement constitutes
the entire agreement between the parties hereto with respect to the subject
matter hereof, superseding all prior negotiations, correspondence,
understandings and agreements, if any, between the parties; no amendment or
modification of this Agreement shall be binding on the parties unless made in
writing and duly executed by all parties. There are no oral or implied
agreements and no oral or implied warranties between the parties hereto other
than those expressed herein.
d. Binding Effect; Assignability. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. This Agreement shall not be assignable by Borrower
without the prior written consent of Lender.
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REVOLVING CREDIT LOAN AGREEMENT Page 6 of 7
<PAGE>
e. Headings. The section and other headings in this Agreement are
for reference only and shall not limit or otherwise affect any of the terms
hereof.
f. Further Assurances and Corrective Instruments. The parties
hereto agree to execute, acknowledge, seal and deliver, after the date hereof,
without additional consideration, such further assurances, instruments and
documents, and to take such further actions, as the parties hereto shall request
in order to fulfill the intent of this Agreement and the transactions
contemplated hereby.
g. Severability. Any provision in this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provisions in any other jurisdiction.
h. Governing Law. This Agreement shall be governed by and
construed and interpreted in accordance with this laws of the State of Florida.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BORROWER: TELESERVICES INTERNATIONAL GROUP INC.
By: /s/ Stephen G. McLean
---------------------------------
Stephen G. McLean, CEO
Attest:
/s/ Paul W. Henry
- ------------------------
Paul W. Henry, Secretary
LENDER: ROBERT P. GORDON
/s/ Robert P. Gordon
-------------------------------------
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REVOLVING CREDIT LOAN AGREEMENT Page 7 of 7
<PAGE>
EXHIBIT A
REVOLVING CREDIT MASTER NOTE
US$5,000,000 April 23, 1998
FOR VALUE RECEIVED, the undersigned (hereinafter, the "Borrower")
promises to pay to the order of Robert P. Gordon (hereinafter, "Lender") at such
place as the Lender may from time to time designate, in lawful money of the
United States of America, the principal sum of Five Million Dollars ($5,000,000)
(or so much thereof as has been advanced or re-advanced hereunder from time to
time) together with interest thereon at the rate and upon the terms hereinafter
provided. The following terms shall apply to this Note.
1. Interest Rate. For the period from the date of this Note until the
date on which the entire principal balance outstanding is paid in full (at
stated maturity, on acceleration or otherwise), interest shall accrue on the
principal balance from time to time outstanding at a fixed rate equal to eight
percent (8%) per annum.
2. Repayment. The entire unpaid balance of principal, together with all
accrued and unpaid interest thereon, shall be paid in full, in cash or in shares
of Common Stock of the Borrower a the option of Lender, in accordance with
Section 4 of the Revolving Credit Loan Agreement between the parties of even
date herewith (the "Loan Agreement"), on or before April 22, 1999 (the
"Repayment Date"), unless extended in writing by Lender.
3. Calculation of Interest. Interest shall be calculated for each
advance or re-advance based on the actual number of days on which there exists
an unpaid principal balance.
4. Application of Payments. All payments made hereunder shall be
applied first to late penalties or other sums owing the holder, next to accrued
and unpaid interest, and then to principal.
5. Optional Prepayment. Borrower may prepay this Note in whole or in
part at any time or from time to time without penalty or additional interest.
6. Event of Default. As used herein the term "Event of Default" shall
mean (a) a failure to make any payment of any amount required to be paid
pursuant to this Note on the date such payment is due under this Note; and (b)
an Event of Default as such term is defined under the Loan Agreement.
7. Late Payment Penalty. Should any payment of interest or principal
and interest due hereunder be received by the holder of this Note more than ten
(10) days after its due date, Borrower shall pay a late payment penalty equal to
one percent (1%) of the amount overdue for each month outstanding until paid,
beginning with the due date of the late payment.
8. Acceleration Upon Event of Default. Upon the occurrence of an Event
of Default, Lender may, at its option, in its sole and absolute discretion and
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REVOLVING CREDIT LOAN AGREEMENT - EXHIBIT A Page A-1
<PAGE>
without notice or demand, declare the entire unpaid balance of principal plus
accrued interest and any other sums payable hereunder immediately due and
payable.
9. Default Interest Rate. Upon the occurrence of an Event of Default,
the rate of interest accruing on the disbursed unpaid principal balance shall
automatically and without further action by Lender be increased by two (2)
percentage points above the rate of interest otherwise applicable, independent
of whether Lender elects to accelerate the unpaid principal balance as a result
of such default.
10. Interest Rate After Judgment. If judgment is entered against
Borrower on this Note, the amount of the judgment entered (which may include
principal, interest, default interest, late charges, fees and costs) shall bear
interest at the highest rate authorized under this Note as of the date of entry
of the judgment.
11. Expenses of Collection. Should this Note be referred to an attorney
for collection, whether or not judgment has been confessed or suit has been
filed, Borrower shall pay all of Lender's actual costs, fees (including
reasonable attorneys' fees) and expenses resulting from such referral.
12. Waiver of Protest. Borrower hereby waives presentment, notice of
dishonor and protest.
13. Commercial Loan. Borrower acknowledges and warrants that this Note
evidences a "commercial loan" and that the proceeds of the Note will be used for
the sole purpose of carrying on a business or commercial enterprise and not for
personal, family, household or agricultural purposes.
14. Waiver. No failure or delay by the holder hereof to insist upon the
strict performance of any term, provision, or agreement of this Note, or to
exercise any right, power or remedy consequent upon a breach thereof, shall
constitute a waiver of any such term, provision or agreement or of any such
breach, or preclude the holder hereof from exercising any such right, power or
remedy at any later time or times. By accepting payment after the due date of
any amount payable under this Note, the holder hereof shall not be deemed to
have waived the right either to require prompt payment when due of all other
amounts due under this Note, or to declare a default hereunder.
15. Notices. All notices, consents, approvals, requests, demands and
other communications that are required or may be given hereunder shall be in
writing and shall be duly given if personally delivered, sent by telefax,
telegram or overnight courier or posted by registered or certified mail, return
receipt requested, postage prepaid and addressed to the other parties at the
addresses set forth below.
Lender: Robert P. Gordon
234 - 21st Avenue N.E.
St. Petersburg, FL 33704
Borrower: TeleServices International Group Inc.
100 Second Avenue South, Suite 1000
St. Petersburg, FL 33701
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REVOLVING CREDIT LOAN AGREEMENT - EXHIBIT A Page A-2
<PAGE>
Any party may from time to time change the address to which notices to it are to
be sent by giving notice of such change to the other parties in the manner set
forth herein. Notices shall be deemed given on the next business day following
the day such notice is posted or sent by courier in the manner described above,
and if sent by telefax or telegram, on the date such notice is sent, and if
delivered in person, on the date so delivered. Any notice period shall commence
on the day such notice is deemed given. For the purposes of this Agreement, the
term "business day" shall include all days other than Saturdays, Sundays and
federal banking holidays in the United States.
16. Headings. The section headings in this Note are for reference
only, and shall not limit or otherwise affect any of the terms hereof.
17. Choice of Law. This Note shall be governed, construed and enforced
in accordance with the laws of the State of Florida.
18. Binding Effect. This Note shall be binding upon Borrower and its
successors and assigns.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
day and year first above written.
BORROWER: TELESERVICES INTERNATIONAL GROUP INC.
By: NOT FOR EXECUTION
---------------------------------
Stephen G. McLean, CEO
Attest:
NOT FOR EXECUTION
- ------------------------
Paul W. Henry, Secretary
- --------------------------------------------------------------------------------
REVOLVING CREDIT LOAN AGREEMENT - EXHIBIT A Page A-3
<PAGE>
REVOLVING CREDIT MASTER NOTE
US$5,000,000 April 23, 1998
FOR VALUE RECEIVED, the undersigned (hereinafter, the "Borrower")
promises to pay to the order of Robert P. Gordon (hereinafter, "Lender") at such
place as the Lender may from time to time designate, in lawful money of the
United States of America, the principal sum of Five Million Dollars ($5,000,000)
(or so much thereof as has been advanced or re-advanced hereunder from time to
time) together with interest thereon at the rate and upon the terms hereinafter
provided. The following terms shall apply to this Note.
1. Interest Rate. For the period from the date of this Note until the
date on which the entire principal balance outstanding is paid in full (at
stated maturity, on acceleration or otherwise), interest shall accrue on the
principal balance from time to time outstanding at a fixed rate equal to eight
percent (8%) per annum.
2. Repayment. The entire unpaid balance of principal, together with all
accrued and unpaid interest thereon, shall be paid in full, in cash or in shares
of Common Stock of the Borrower a the option of Lender, in accordance with
Section 4 of the Revolving Credit Loan Agreement between the parties of even
date herewith (the "Loan Agreement"), on or before April 22, 1999 (the
"Repayment Date"), unless extended in writing by Lender.
3. Calculation of Interest. Interest shall be calculated for each
advance or re-advance based on the actual number of days on which there exists
an unpaid principal balance.
4. Application of Payments. All payments made hereunder shall be
applied first to late penalties or other sums owing the holder, next to accrued
and unpaid interest, and then to principal.
5. Optional Prepayment. Borrower may prepay this Note in whole or in
part at any time or from time to time without penalty or additional interest.
6. Event of Default. As used herein the term "Event of Default" shall
mean (a) a failure to make any payment of any amount required to be paid
pursuant to this Note on the date such payment is due under this Note; and (b)
an Event of Default as such term is defined under the Loan Agreement.
7. Late Payment Penalty. Should any payment of interest or principal
and interest due hereunder be received by the holder of this Note more than ten
(10) days after its due date, Borrower shall pay a late payment penalty equal to
one percent (1%) of the amount overdue for each month outstanding until paid,
beginning with the due date of the late payment.
8. Acceleration Upon Event of Default. Upon the occurrence of an Event
of Default, Lender may, at its option, in its sole and absolute discretion and
without notice or demand, declare the entire unpaid balance of principal plus
accrued interest and any other sums payable hereunder immediately due and
payable.
- --------------------------------------------------------------------------------
REVOLVING CREDIT MASTER NOTE 1 of 1 Borrower ______
<PAGE>
9. Default Interest Rate. Upon the occurrence of an Event of Default,
the rate of interest accruing on the disbursed unpaid principal balance shall
automatically and without further action by Lender be increased by two (2)
percentage points above the rate of interest otherwise applicable, independent
of whether Lender elects to accelerate the unpaid principal balance as a result
of such default.
10. Interest Rate After Judgment. If judgment is entered against
Borrower on this Note, the amount of the judgment entered (which may include
principal, interest, default interest, late charges, fees and costs) shall bear
interest at the highest rate authorized under this Note as of the date of entry
of the judgment.
11. Expenses of Collection. Should this Note be referred to an attorney
for collection, whether or not judgment has been confessed or suit has been
filed, Borrower shall pay all of Lender's actual costs, fees (including
reasonable attorneys' fees) and expenses resulting from such referral.
12. Waiver of Protest. Borrower hereby waives presentment, notice of
dishonor and protest.
13. Commercial Loan. Borrower acknowledges and warrants that this Note
evidences a "commercial loan" and that the proceeds of the Note will be used for
the sole purpose of carrying on a business or commercial enterprise and not for
personal, family, household or agricultural purposes.
14. Waiver. No failure or delay by the holder hereof to insist upon the
strict performance of any term, provision, or agreement of this Note, or to
exercise any right, power or remedy consequent upon a breach thereof, shall
constitute a waiver of any such term, provision or agreement or of any such
breach, or preclude the holder hereof from exercising any such right, power or
remedy at any later time or times. By accepting payment after the due date of
any amount payable under this Note, the holder hereof shall not be deemed to
have waived the right either to require prompt payment when due of all other
amounts due under this Note, or to declare a default hereunder.
15. Notices. All notices, consents, approvals, requests, demands and
other communications that are required or may be given hereunder shall be in
writing and shall be duly given if personally delivered, sent by telefax,
telegram or overnight courier or posted by registered or certified mail, return
receipt requested, postage prepaid and addressed to the other parties at the
addresses set forth below.
Lender: Robert P. Gordon
234 - 21st Avenue N.E.
St. Petersburg, FL 33704
Borrower: TeleServices International Group Inc.
100 Second Avenue South, Suite 1000
St. Petersburg, FL 33701
Any party may from time to time change the address to which notices to it are to
be sent by giving notice of such change to the other parties in the manner set
forth herein. Notices shall be deemed given on the next business day following
- --------------------------------------------------------------------------------
REVOLVING CREDIT MASTER NOTE 2 of 3 Borrower ______
<PAGE>
the day such notice is posted or sent by courier in the manner described above,
and if sent by telefax or telegram, on the date such notice is sent, and if
delivered in person, on the date so delivered. Any notice period shall commence
on the day such notice is deemed given. For the purposes of this Agreement, the
term "business day" shall include all days other than Saturdays, Sundays and
federal banking holidays in the United States.
16. Headings. The section headings in this Note are for reference
only, and shall not limit or otherwise affect any of the terms hereof.
17. Choice of Law. This Note shall be governed, construed and enforced
in accordance with the laws of the State of Florida.
18. Binding Effect. This Note shall be binding upon Borrower and its
successors and assigns.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
day and year first above written.
BORROWER: TELESERVICES INTERNATIONAL GROUP INC.
By: /s/ Stephen G. McLean
---------------------------------
Stephen G. McLean, CEO
Attest:
/s/ Paul W. Henry
- ------------------------
Paul W. Henry, Secretary
- --------------------------------------------------------------------------------
REVOLVING CREDIT MASTER NOTE 3 of 3 Borrower ______
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRATED FROM 10-QSB FOR
THE QUARTER ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FORM 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 277,069
<SECURITIES> 0
<RECEIVABLES> 961,999
<ALLOWANCES> (805,138)
<INVENTORY> 0
<CURRENT-ASSETS> 485,506
<PP&E> 2,294,655
<DEPRECIATION> (1,803,080)
<TOTAL-ASSETS> 1,036,438
<CURRENT-LIABILITIES> 6,733,191
<BONDS> 0
0
0
<COMMON> 3,498
<OTHER-SE> (5,876,754)
<TOTAL-LIABILITY-AND-EQUITY> 1,036,438
<SALES> 0
<TOTAL-REVENUES> 346,806
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,358,471
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,027,386)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,027,386)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,027,386)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
