<PAGE> 1
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,
1999
[ ] 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.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in it charter)
FLORIDA 59-2773602
- --------------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
100 SECOND AVENUE SOUTH, SUITE 1000, ST. PETERSBURG, FLORIDA 33701
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(727) 895-4410
------------------------------------
(issuer's telephone number)
- --------------------------------------------------------------------------------
(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 7, 1999, OF THE ISSUER'S
COMMON STOCK, $.0001 PAR VALUE, THERE WERE 80,064,798 SHARES OUTSTANDING.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
<PAGE> 2
TELESERVICES INTERNATIONAL GROUP INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
----
<S> <C> <C> <C>
Item 1. Financial Statements F-1
TeleServices International Group, Inc. and Subsidiaries
March 31, 1999 and 1998
Consolidated Balance Sheets
December 31, 1998 and
March 31, 1999 (unaudited) F-2
Consolidated Statements of Operations
for the year ended December 31, 1998 and
for the three months ended March 31, 1999 (unaudited) F-3
Consolidated Statements of Cash Flows
for the year ended December 31, 1998 and
for the three months ended March 31, 1999 (unaudited) F-4
Notes to Consolidated Financial Statements (Unaudited) F-5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 3
PART II. OTHER INFORMATION 5
SIGNATURE PAGE 10
</TABLE>
2
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TELESERVICES INTERNATIONAL GROUP INC.
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999 and 1998
F1
<PAGE> 4
TELESERVICES INTERNATIONAL GROUP INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash, restricted $ 30,000 $ 80,000
Accounts receivable, net of allowance for
Doubtful accounts of $14,950 64,970 80,530
Other Current Assets 1,223,606 159,441
============ ============
Total Current Assets 1,318,577 319,971
Equipment, net of accumulated depreciation of
$219,780 (Note 5) 426,625 481,577
Investment in Affiliate (Note 2) 380,986
Other Assets 29,325 25,000
------------ ------------
Total Assets 1,774,527 1,207,534
============ ============
LIABILITIES AND STOCKHOLDER'S (DEFICIT)
Current Liabilities:
Accounts payable and accrued expenses (Notes 2,10) $ 2,184,381 $ 6,638,702
Loans payable, stockholder (Note 6) 149,747 1,351,095
Capital leases payable, current portion (Note 4) 0 18,790
Notes payable (Notes 8) 226,564 328,673
Convertible Debentures (Note 9) 1,994,000 875,000
------------ ------------
Total Liabilities 4,554,693 9,212,261
------------ ------------
Commitments and Contingencies (See Notes)
Stockholders' (Deficit):
Preferred Stock, $.001 par value
10,000,000 shares authorized
None Issued and Outstanding (Note 7)
Common Stock $.0001 par value,
100,000,000 shares authorized,
76,635,881 shares issued and outstanding 7,664 6,498
Additional Paid-in Capital 32,248,421 30,002,411
Treasury Stock, 13,130 shares at cost (125,000) (125,000)
Accumulated (deficit) (34,911,251) (37,888,635)
------------ ------------
Total Stockholders' (Deficit) (2,780,166) (8,004,726)
------------ ------------
Total Liabilities and Stockholder's (Deficit) $ 1,774,527 $ 1,207,534
============ ============
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
F2
<PAGE> 5
TeleServices International Group Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
(Unaudited)
For the three months For the
ended year ended
March 31, 1999 December 31, 1998
-------------------- -----------------
<S> <C> <C>
Total Revenues $ 102,302 $ 94,411
------------ ------------
Operating Expenses:
Salaries and contract services 710,089 620,225
Payroll taxes 78,237 109,683
Rent 39,385 87,816
Telephone 138,186 72,239
Travel and entertainment 87,247 16,691
Advertising and promotion 17,367 0
Depreciation and amortization 34,463 0
Other expenses (Note 6) 378,311 698,376
------------ ------------
Total operating expenses 1,483,286 1,605,031
------------ ------------
Net (loss) from continuing operations (1,380,984) (1,510,620)
Other income (expenses):
Interest income 1,846 2,515
Interest (expense) (23,180) (18,236)
------------ ------------
Net (loss) from continuing operations (1,402,318) (1,526,341)
============ ============
Discontinued Operations:
Loss from operation of VSI (161,988) (501,045)
Gain on disposal of VSI 4,541,689
------------ ------------
Net gain (loss) from discontinued operations 4,379,701 (501,045)
------------ ------------
Net income (loss) $ 2,977,383 $ (2,027,385)
------------ ------------
Per share results:
From continuing operations (.020) (.047)
From discontinued operations .061 (.015)
Net income (loss) per share $ .042 $ (0.062)
============ ============
Weighted Average Shares Outstanding 71,546,748 32,563,714
============ ============
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
F3
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TeleServices International Group, Inc.
Consolidated Statements of Cash Flow
<TABLE>
<CAPTION>
(Unaudited)
For the three For the
months ended year ended
March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) from continuing operations $(1,402,318) $(1,526,341)
Adjustments to reconcile net (loss) to
net cash (used in) operating activities:
Decrease in accounts receivable 15,560 22,665
Depreciation and Amortization 34,463 175,963
Increase in accounts payable and accrued expenses 229,019 547,784
Other (352,490) (42,607)
----------- -----------
Net cash (used in) operating activities (1,475,766) (1,323,581)
----------- -----------
Cash flows from investing activities:
(Acquisition) of equipment (79,521) (17,579)
(Investment) in affiliate company 706,309 --
----------- -----------
Net cash provided by (used in) investing activities 626,788 (17,579)
----------- -----------
Cash flows from financing activities:
(Repayment of) leases payable (18,790) (28,360)
Cash proceeds from (repayment of) loans from stockholders (201,348) 384,082
Issuance of common stock 129,400 1,331,177
Sale of convertible debentures 1,119,000
(Repayment of) notes payable (102,109) (101,288)
----------- -----------
Net cash provided by financing activities 926,153 1,585,611
----------- -----------
Increase (decrease) in cash 77,176 244,451
Cash, beginning of period 0 175,000
----------- -----------
Cash, end of period $ 77,175 $ 419,451
=========== ===========
Schedule of noncash operating, financing and
Investing activities
Net gain from discontinued operations (161,988)
Net gain on disposal of discontinued operations (1,032,964)
Conversion of loan from stockholder (1,000,000)
Issuance of common stock 2,117,777
-----------
Net noncash items $ (77,175)
===========
Interest paid $ 23,180 18,236
=========== ===========
Income taxes paid $ -- $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
F4
<PAGE> 7
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(1) Organization and Operations:
TeleServices International Group Inc. (TSIG), formerly Dynasty Capital
Corporation (Dynasty), was incorporated 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.
VSI was incorporated 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. On March 5, 1999, VSI filed a
voluntary petition for relief under Chapter 7 of the United States
Bankruptcy Code for the Middle District of Florida, Tampa Division.
American International Travel Agency, Inc. (AIT), a wholly-owned
subsidiary of TSIG, was incorporated under the laws of the State of
Florida on September 27, 1977 to provide retail travel services. AIT
was acquired by VSI on December 6, 1996 (see Note 11).
My MusicCard Company (MMC, formerly Compact Connection, Inc.), a
Delaware corporation, was incorporated on April 17, 1998, as a
wholly-owned subsidiary of TSIG for the purpose of establishing an
internet-based discount retail music CD and cassette tape business.
My Card, Inc., a Delaware corporation, was incorporated on February 11,
1999, as a wholly-owned subsidiary of TSIG for the purpose of
establishing additional internet-based retail business using the
business concept developed for MMC.
F5
<PAGE> 8
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(2) Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements of TSIG and subsidiaries
(the Company) include the accounts of TSIG and AIT for the
entire three-month periods ended March 31, 1999 and 1998, the
accounts of VSI for the entire quarter of 1998 and through
March 5, 1999 and the accounts of MMC for 1999 only. All
intercompany accounts and transactions have been eliminated in
the consolidation.
(b) 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. At March 31, 1999 the Company had no uninsured cash
balances, but at various times throughout the reporting
period, the balance exceeded the insured limit.
(c) Income Tax
The Company has net operating loss carryovers totaling
approximately $34,000,000 at March 31, 1999 which expire in
various years through 2013. The Company has deferred tax
assets of approximately $5,500,000 at December 31, 1998
related to loss carryovers but due to the uncertainty of the
Company's ability to utilize these carryovers, a valuation
allowance of the total $5,500,000 has been provided.
Therefore, as of March 31, 1999 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.
(d) 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 (see Note 11).
(e) Per Share Information
The per share information is computed based upon the weighted
average shares outstanding.
F6
<PAGE> 9
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(f) 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(d).
The ultimate resolution of the reasonableness of the related
assumptions cannot presently be determined. Actual results
could differ from the Company's estimates.
(g) Bad Debts
An allowance for uncollectible accounts has been provided
based on the Company's past collection history.
(h) Advertising and Promotion Costs
Advertising and promotion costs are generally expensed as
incurred. However, during the reporting period, the Company
made payments to a marketing company for the preparation of
materials to be used in a marketing and promotion program to
be implemented in the third quarter, 1999. These costs,
totaling $270,000 at March 31, 1999, are included as a
deferred asset on the balance sheet.
(i) 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.
(j) Restricted Cash
Included in cash on March 31, 1999 is $30,000 being held in
certificates of deposit as collateral for operating licenses.
F7
<PAGE> 10
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(k) Gain on Sale or Liquidation of Investment in Affiliate
In 1998, the Company invested $380,986 in an affiliate
company, equal to the costs related to attempting to complete
the proposed acquisition of certain entities. The efforts to
complete the proposed acquisitions were terminated and certain
former employees of the Company resigned from the Company and
acquired these entities. In exchange for transferring the
rights, if any, the Company had with regard to these
acquisitions and in exchange for terminating various
employment and severance agreements, the Company was issued an
equity position in the entity. During the quarter, the Company
sold its equity position for $706,000 in cash, resulting in a
gain of $325,000.
On March 5, 1999, VSI filed a voluntary petition for relief
under Chapter 7 of the United States Bankruptcy Code for the
Middle District of Florida, Tampa Division. The Company
realized a net gain of $4,542,000 while writing off a total of
approximately $4,700,000 in liabilities. A provision was made
for the assumption of $605,000 in liabilities of VSI which
were guaranteed by the Company. These liabilities consist of
the trust portion of unpaid federal payroll withholding taxes
and a bank loan.
(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 a
working capital deficit. Management is attempting to raise additional
capital. 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:
<TABLE>
<CAPTION>
Year ending December 31
<S> <C>
1999 $ 349,822
2000 $ 307,353
2001 $ 278,702
2002 $ 158,468
</TABLE>
F8
<PAGE> 11
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(5) Equipment
The company's equipment as of March 31, 1999 is summarized as follows:
<TABLE>
<S> <C>
Furniture, fixtures and office equipment $ 9,735
Telephone equipment 388,748
Computer equipment and software 247,924
----------
646,407
Accumulated depreciation (219,780)
----------
$ 426,625
==========
</TABLE>
(6) Related Party Transactions
A stockholder of the Company has made various demand loans to the
Company for expansion and operating capital. During the quarter ended
March 31, 1999 the stockholder converted $1,000,000 into 6,666,667
shares of the common stock of the Company pursuant to a revolving
credit loan agreement dated April 23, 1998. As of March 31, 1999 loans
payable to a stockholder totaled $149,747, accruing interest at 11% per
annum. The loan is payable on demand and is uncollateralized.
(7) 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.
(8) Notes Payable
The Company entered into a stock repurchase agreement with former
shareholders in 1998 for a total of $125,000, of which $96,000 is
remaining to be paid. Additionally, a provision of $130,000 was made
for a bank loan owed by VSI that is guaranteed by the Company.
(9) Debentures Payable
In November, 1998, the Company authorized the issuance of convertible
debentures. As of March 31, 1999, $1,994,000 was received as proceeds
from the issuance of the debentures. The terms of the debentures
include interest at 8% per annum and are due and payable one year from
issuance. The debentures are convertible at the option of the holder
into common stock of the Company at 70% of the market price of the
common stock based upon the average bid price for the five days
immediately preceding the date of conversion.
F9
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TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(10) 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.
F10
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Total revenues from continuing operations for the three months ended
March 31, 1999, were $102,302, representing a 8% increase from comparable
revenues of $94,411 for the three months ended March 31, 1998. Operating
expenses experienced an 8% decrease to $1,483,286 from a total of $1,605,031
resulting in an operating loss of $1,380,984 for 1999 versus a loss of
$1,510,620, a 9% improvement.
During the reporting period, the Company's wholly-owned subsidiary VSI
filed a voluntary petition for relief under Chapter 7 of the United States
Bankruptcy Code for the Middle District of Florida, Tampa Division. The results
from discontinued operations were a net loss of $161,988 for the three months
ended March 31, 1999 compared to a loss of $501,045 for the comparable period in
1998.
In addition, there was a net gain on the disposal of VSI of $4,541,689.
The overall combined net gain for the quarter was $2,977,383.
In the TeleServices Division, the Company is continuing to target its
sales and marketing efforts toward traditional outsourced teleservices. Call
center services are offered on a time-billing basis, with revenues based upon
the time a customer service representative spends on customer calls as opposed
to commissions generated from sales made. In January, 1999, the Company was
selected by The Signature Group, a leader in the direct marketing industry, to
provide bilingual teleservice and travel reservation services for its Loyalty
and Rewards program.
Additionally, the Company's Product and Services Division, through its
My MusicCard program, has entered into several promotional agreements to market
its discount card and retail music internet site. Agreements have been reached
with the National Music Foundation, a leading charitable organization for the
music industry; TEMPO (The Entertainment Marketing Promotion Organization),
which offers corporate premium and incentive services for the Association For
Independent Music, PolyGram Records and Philips Electronics; and Nettaxi, Inc.,
a premier internet community and portal website that has more than 80 million
monthly page views. Although no assurances can be given, management anticipates
each of these promotional affiliations to substantially increase the sales of
both the My MusicCard discount card and the music CDs.
The Online Services division is currently establishing its presence
with a suite of fully-integrated e-commerce and internet hosting products and
services. The first development contract has been executed and client work has
begun.
The company employs sales staff in all three divisions and additional
new business opportunities are continually being developed in all three business
areas.
Limited Working Capital; Financial Instability
As of March 31, 1999, the Company had a negative stockholder's equity
of $2,780,000, an accumulated deficit of $34,911,000, and a working capital
deficit of $3,266,000.
Various factors affecting the Company's operations raise doubt as to
the Company's ability to continue as a going concern. There can be no assurance
that the Company will be able to continue as a going concern or achieve material
revenues or profitable operations. The Company requires additional financing. In
this event, no assurances can be given that such financing will be available in
the amount required or, if available, that it can be on terms satisfactory to
the Company.
3
<PAGE> 14
The Year 2000 issue is the result of computer programs that use two
digits rather than four to define the applicable year. The Company has been
evaluating its state of readiness with respect to the Year 2000 issue on a
continuing basis. Investigations to date have determined that affected systems
comprise are very limited, specifically: a) an old reservation system that has
not been used since May 1998; and b) an employee time-clock system, which will
be phased out of use prior to December 1999. An inventory of the remainder of
the Company's computer systems is approximately 90% complete. To date, all
computer hardware is Year 2000 compliant. All software has been inventoried and
each software manufacturer has been contacted to verify Year 2000 readiness. To
date it has been determined that no software will need to be replaced, but some
will require minor intervention in the form of software patches. Once the full
inventory is completed and all necessary patches are installed, the Company will
perform tests to ensure Year 2000 compliance. The Company can make no assurances
regarding the impact of the Year 2000 issue on its business as a result of acts
or omissions not within its control, such as acts or omissions of non-affiliated
parties with whom the Company does business.
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.
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, readers of this documents and any
document incorporated by reference herein, are advised that this document and
documents incorporated by reference into this document contain both statements
of historical facts and forward looking statements. Forward looking statements
are subject to certain risks and uncertainties, which could cause actual results
to differ materially for those indicated by the forward looking statements.
Examples of forward looking statements include, but are not limited to (i)
projections of revenues, income or loss, earnings or loss per share, capital
expenditures, dividends, capital structure and other financial items, (ii)
statements of the plans and objectives of the Company or its management of Board
of Directors, including the introduction of new products, or estimates or
predictions of actions by customers, suppliers, competitors or regulatory
authorities, (iii) statements of future economic performance, and (iv)
statements of assumptions underlying other statements and statements about the
Company or its business. Forward looking statements are beyond the ability of
the Company to control and in many cases the Company cannot predict what factors
would cause results to differ materially from those indicated by the forward
looking statements.
4
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings:
1. On February 9, 1998, Robert P. Gordon, individually, filed a lawsuit
against Felcrest Trading Ltd. ("Felcrest") in Circuit Court for Pinellas County,
Florida in connection with a private loan made by Felcrest to Gordon. On October
23, 1998, Felcrest filed a third party complaint against the Company, VSI, and
current and former officers and directors of the company and VSI and other third
parties (collectively the "Third Party Defendants") asserting claims for
unspecified damages against the Third Party Defendants. All parties have
executed a Stipulation of Dismissal based on a settlement agreement that is
subject to court approval.
2. On March 5, 1999, the Company's wholly owned subsidiary, VSI, filed
a voluntary petition for relief under Chapter 7 of the United States Bankruptcy
Code for the Middle District of Florida, Tampa Division. VSI was a party to
several previously reported material litigation proceedings, all of which have
been automatically stayed as a result of the bankruptcy filing.
ITEM 2. Changes in Securities:
The Company offered convertible debentures pursuant to a private
placement which commenced in November 1998 and concluded on April 28, 1999. The
debentures bear interest at the rate of 8%, mature on October 31, 1999, and are
convertible into shares of common stock at a 30% discount to the average market
price for the five days prior to the date of conversion. Convertible debentures
totaling $2,369,000 in face value had been sold to 8 investors. Three of the
investors have committed to purchase another $2,800,000 of the debentures if
certain conditions are met when this registration statement for the resale of
the shares of common stock issuable upon conversion of the debentures is
declared effective by the SEC. The Company is contractually subject to a
penalties equal to a further discount upon conversion of 5% per month for
failure to timely file the registration statement and to cause the registration
statement to become effective. The Company agreed to pay to a placement agent,
Grady & Hatch and Co., Inc. a commission of 10% and a non-accountable expense
allowance of 3% of the gross proceeds on all debentures sold with the assistance
of the placement agent.
In connection with the offering, warrants were also issued to the
placement agent and two of the investors. The Company issued 1,274,250 common
stock purchase warrants to two investors, and 250,000 warrants to the placement
agent. The warrants issued to the investors are exercisable to the extent of
25,000 shares for each $100,000 of debentures actually purchased. The warrants
may be converted into shares of common stock at an exercise price of $0.16 per
share, and also contain a "cashless exercise" provision that permits the warrant
holder to exercise the warrant without paying the exercise price and instead
receives fewer shares of common stock.
In connection with the offering, a total of 17,000,000 shares of
restricted common stock were placed in escrow for five of the investors. The
Company does not consider these shares to be outstanding unless and until the
debentures are converted. Debentures totaling $486,736 have been converted by
one investor and 2,000,000 of the escrowed shares have been delivered to the
investor.
All purchasers are accredited investors, and the Company believes that
this private placement is exempt from registration pursuant to Sections 4(2),
4(6) and/or Rule 506 of the Securities Act of 1933.
ITEM 3. Defaults Upon Senior Securities: None.
ITEM 4. Submissions of Matters to a Vote of Security Holders: None.
5
<PAGE> 16
ITEM 5. Other Information:
A. MATTERS RELATED TO THE VISITORS SERVICES, INC. EMPLOYEE BENEFIT AND
CONSULTING SERVICES COMPENSATION PLAN (THE "VSI PLAN")
On March 15, 1999, the Registrant increased the number of shares
eligible to be issued under the VSI Plan from 10,000,000 to 17,500,000 shares of
common stock of the Company, and the VSI Plan was restated to reflect this
increase.
On March 17, 1999, the Company filed a Registration Statement on Form
S-8 (Registration No. 333-74561) to register 7,500,000 additional shares of
common stock of the Company for issuance under the VSI Plan.
B. FILING OF REGISTRATION STATEMENT ON FORM SB-2
On May 7, 1999, the Company filed a Registration Statement on Form SB-2
(Registration No. 333-78077) to register up to 50,346,890 shares of the
Company's common stock to be sold by certain selling securityholders, including
up to 48,822,640 shares that the selling securityholders have acquired or may
acquire upon conversion of convertible debentures and 1,524,250 shares that they
may acquire upon exercise of warrants.
6
<PAGE> 17
ITEM 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2.1 Agreement and Plan of Reorganization between Dynasty Capital
Corporation and Visitors Services, Inc., dated September 26,
1996. (Incorporated by reference to Exhibit 2.1 to the
company's Form 8-K dated and filed on September 30, 1996).
2.7 Termination Agreement dated February 2, 1999 regarding
termination of previous agreements relating to proposed
acquisition of assets of Compact Connection, Inc.
(Incorporated by reference to Exhibit 2.7 of the Company's
current report on Form 8-K/A-2 dated April 30, 1998 and filed
on February 16, 1999).
3.5 Articles of Incorporation, as amended and currently in effect.
(Incorporated by reference to Exhibit 3.5 of the Company's
Form 10-QSB for the quarter ended March 31, 1997 and filed on
May 15, 1997).
3.6 Bylaws as restated April 22, 1999. (Incorporated by reference
to Exhibit 3.6 of the Company's Form SB-2, (file no.
333-78077), filed May 7, 1999).
4.3 Form of Debenture Purchase Agreement for private placement
which commenced in November 1998. (Incorporated by reference
to Exhibit 4.3 of the Company's Form 10-KSB for the fiscal
year ended December 31, 1998, filed March 31, 1999).
4.4 Form of 8% Convertible Debenture for private placement which
commenced in November 1998. (Incorporated by reference to
Exhibit 4.4 of the Company's Form 10-KSB for the fiscal year
ended December 31, 1998, filed March 31, 1999).
4.5 Form of Registration Rights Agreement for private placement
which commenced in November 1998. (Incorporated by reference
to Exhibit 4.5 of the Company's Form 10-KSB for the fiscal
year ended December 31, 1998, filed March 31, 1999).
4.6 Form of Escrow Agreement for private placement which commenced
in November 1998. (Incorporated by reference to Exhibit 4.6 of
the Company's Form 10-KSB for the fiscal year ended December
31, 1998, filed March 31, 1999).
4.7 Form of Common Stock Purchase Warrant for private placement
which commenced in November 1998. (Incorporated by reference
to Exhibit 4.7 of the Company's Form 10-KSB for the fiscal
year ended December 31, 1998, filed March 31, 1999).
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 Company's
</TABLE>
7
<PAGE> 18
<TABLE>
<S> <C>
Post-Effective Amendment No. 1 to the Registration Statement
on Form S-8 (file no. 333-14271) filed February 19, 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).
10.5 Revolving Credit Loan Agreement and Revolving Credit Master
Note between the Company and Robert P. Gordon, each dated
April 23, 1998. (Incorporated by referenced to Exhibit 10.5 to
the Company's Form 10-QSB for the quarter ended March 31,
1998, filed on May 20, 1998).
10.6 Employment Agreement between the company and James H. Guild
dated August 24, 1998. (Incorporated by referenced to Exhibit
10.6 to the Company's Form 10-QSB for the quarter ended
September 30, 1998, filed on November 13, 1998).
10.7 Visitors Services, Inc. Employee Benefit and Consulting
Services Compensation Plan (the "VSI Plan"), as restated March
15, 1999. (Incorporated by referenced to Exhibit 10.7 to the
Company's Registration Statement on Form S-8 (file no.
333-74561) filed March 17, 1999).
10.8 Addendum to Employment Agreement between the Company and James
H. Guild dated December 2, 1998. (Incorporated by reference to
Exhibit 10.8 of the Company's Form 10-KSB for the fiscal year
ended December 31, 1998, filed March 31, 1999).
10.9 Employment Agreement between the Company and Robert P. Gordon
dated December 4, 1998. (Incorporated by reference to Exhibit
10.9 of the Company's Form 10-KSB for the fiscal year ended
December 31, 1998, filed March 31, 1999).
10.10 Agreement to Serve as a Director between the Company and John
Hwang dated December 7, 1998. (Incorporated by reference to
Exhibit 10.10 of the Company's Form 10-KSB for the fiscal year
ended December 31, 1998, filed March 31, 1999).
10.11 Employment Agreement and Indemnification Agreement between the
Company and John Hwang, each dated February 2, 1999.
(Incorporated by reference to Exhibit 10.11 of the Company's
Form 10-KSB for the fiscal year ended December 31, 1998, filed
March 31, 1999).
10.12 Consulting Agreement between the Company and Paul W. Henry
dated April 9, 1998. (Incorporated by reference to Exhibit
10.12 of the Company's Form SB-2, (file no. 333-78077), filed
May 7, 1999).
27 Financial Data Schedule. (Filed herewith).
</TABLE>
(b) Reports on Form 8-K.
On February 16, 1999, the Company filed a Current Report on
Form 8-K/A-2 regarding the termination of previous agreements relating
to the proposed acquisition of assets of Compact Connection, Inc. (the
"Seller'). The report states that because the Seller was not able to
provide audited financial
8
<PAGE> 19
statements the parties entered into a Termination Agreement which
provided that previous agreements entered into in connection with the
proposed acquisition would be terminated, unwound to the fullest extent
possible, and deemed void. A copy of the Termination Agreement was
filed as an exhibit to the report.
On March 8, 1999, the Company filed a Current Report on Form
8-K regarding the filing by the Company's wholly-owned subsidiary,
Visitors Services International Corp., of a voluntary petition for
relief under Chapter 7 of the United States Bankruptcy Code for the
Middle District of Florida, Tampa Division, on March 5, 1999.
9
<PAGE> 20
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 17, 1999 /s/ Robert P. Gordon
---------------------------------------
Robert P. Gordon, Chairman and
Interim Chief Financial Officer
10
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2.1 Agreement and Plan of Reorganization between Dynasty Capital
Corporation and Visitors Services, Inc., dated September 26,
1996. (Incorporated by reference to Exhibit 2.1 to the
company's Form 8-K dated and filed on September 30, 1996).
2.7 Termination Agreement dated February 2, 1999 regarding
termination of previous agreements relating to proposed
acquisition of assets of Compact Connection, Inc.
(Incorporated by reference to Exhibit 2.7 of the Company's
current report on Form 8-K/A-2 dated April 30, 1998 and filed
on February 16, 1999).
3.5 Articles of Incorporation, as amended and currently in effect.
(Incorporated by reference to Exhibit 3.5 of the Company's
Form 10-QSB for the quarter ended March 31, 1997 and filed on
May 15, 1997).
3.6 Bylaws as restated April 22, 1999. (Incorporated by reference
to Exhibit 3.6 of the Company's Form SB-2, (file no.
333-78077), filed May 7, 1999).
4.3 Form of Debenture Purchase Agreement for private placement
which commenced in November 1998. (Incorporated by reference
to Exhibit 4.3 of the Company's Form 10-KSB for the fiscal
year ended December 31, 1998, filed March 31, 1999).
4.4 Form of 8% Convertible Debenture for private placement which
commenced in November 1998. (Incorporated by reference to
Exhibit 4.4 of the Company's Form 10-KSB for the fiscal year
ended December 31, 1998, filed March 31, 1999).
4.5 Form of Registration Rights Agreement for private placement
which commenced in November 1998. (Incorporated by reference
to Exhibit 4.5 of the Company's Form 10-KSB for the fiscal
year ended December 31, 1998, filed March 31, 1999).
4.6 Form of Escrow Agreement for private placement which commenced
in November 1998. (Incorporated by reference to Exhibit 4.6 of
the Company's Form 10-KSB for the fiscal year ended December
31, 1998, filed March 31, 1999).
4.7 Form of Common Stock Purchase Warrant for private placement
which commenced in November 1998. (Incorporated by reference
to Exhibit 4.7 of the Company's Form 10-KSB for the fiscal
year ended December 31, 1998, filed March 31, 1999).
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 Company's Post-Effective
Amendment No. 1 to the Registration Statement on Form S-8
(file no. 333-14271) filed February 19, 1997).
</TABLE>
<PAGE> 22
<TABLE>
<S> <C>
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).
10.5 Revolving Credit Loan Agreement and Revolving Credit Master
Note between the Company and Robert P. Gordon, each dated
April 23, 1998. (Incorporated by referenced to Exhibit 10.5 to
the Company's Form 10-QSB for the quarter ended March 31,
1998, filed on May 20, 1998).
10.6 Employment Agreement between the company and James H. Guild
dated August 24, 1998. (Incorporated by referenced to Exhibit
10.6 to the Company's Form 10-QSB for the quarter ended
September 30, 1998, filed on November 13, 1998).
10.7 Visitors Services, Inc. Employee Benefit and Consulting
Services Compensation Plan (the "VSI Plan"), as restated March
15, 1999. (Incorporated by referenced to Exhibit 10.7 to the
Company's Registration Statement on Form S-8 (file no.
333-74561) filed March 17, 1999).
10.8 Addendum to Employment Agreement between the Company and James
H. Guild dated December 2, 1998. (Incorporated by reference to
Exhibit 10.8 of the Company's Form 10-KSB for the fiscal year
ended December 31, 1998, filed March 31, 1999).
10.9 Employment Agreement between the Company and Robert P. Gordon
dated December 4, 1998. (Incorporated by reference to Exhibit
10.9 of the Company's Form 10-KSB for the fiscal year ended
December 31, 1998, filed March 31, 1999).
10.10 Agreement to Serve as a Director between the Company and John
Hwang dated December 7, 1998. (Incorporated by reference to
Exhibit 10.10 of the Company's Form 10-KSB for the fiscal year
ended December 31, 1998, filed March 31, 1999).
10.11 Employment Agreement and Indemnification Agreement between the
Company and John Hwang, each dated February 2, 1999.
(Incorporated by reference to Exhibit 10.11 of the Company's
Form 10-KSB for the fiscal year ended December 31, 1998, filed
March 31, 1999).
10.12 Consulting Agreement between the Company and Paul W. Henry
dated April 9, 1998. (Incorporated by reference to Exhibit
10.12 of the Company's Form SB-2, (file no. 333-78077), filed
May 7, 1999).
27 Financial Data Schedule. (Filed herewith).
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM A FORM
10-QSB FOR THE QUARTER ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 30,000
<SECURITIES> 0
<RECEIVABLES> 79,921
<ALLOWANCES> (14,950)
<INVENTORY> 0
<CURRENT-ASSETS> 1,318,577
<PP&E> 646,405
<DEPRECIATION> (219,780)
<TOTAL-ASSETS> 1,774,527
<CURRENT-LIABILITIES> 4,554,693
<BONDS> 0
0
0
<COMMON> 7,664
<OTHER-SE> (2,787,830)
<TOTAL-LIABILITY-AND-EQUITY> 1,774,527
<SALES> 102,302
<TOTAL-REVENUES> 102,302
<CGS> 291,433
<TOTAL-COSTS> 1,483,286
<OTHER-EXPENSES> 21,334
<LOSS-PROVISION> 14,950
<INTEREST-EXPENSE> 23,180
<INCOME-PRETAX> 2,977,383
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,402,318)
<DISCONTINUED> 4,379,701
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,977,383
<EPS-PRIMARY> .042
<EPS-DILUTED> 0
</TABLE>
