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U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
TELESERVICES INTERNET GROUP INC.
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(Name of small business issuer in its charter)
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Florida 7389 59-2773602
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(State or jurisdiction of (Primary Standard Industrial I.R.S. Employer Identification No.
incorporation or organization Classification Code Number)
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100 Second Avenue South, Suite 1000, St. Petersburg, Florida 33701
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(Address and telephone number of principal executive offices)
100 Second Avenue South, Suite 1000, St. Petersburg, Florida 33701
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(Address of principal place of business or intended principal place of
business)
Robert P. Gordon, 100 Second Avenue South, Suite 1000, St. Petersburg, Florida
33701 (727) 895-4410
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(Name, address and telephone number of agent for service)
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Copies to:
Troy A. Young, Esq.
Futro & Trauernicht, LLC
1401 Seventeenth Street, 11th Floor
Denver, Colorado 80202
phone: (303) 295-3360
facsimile: (303) 295-1563
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Approximate date of proposed sale to the public: From time to time after the
effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ___
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ___
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ___
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. ___
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum Amount of
Title of each Class of Securities Amount to be Offering Price Aggregate Offering Registration
to be Registered Registered Per Security (1) Price (1) Fee
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Common Stock, $.0001 par value (2) 7,360,755 $ 1.25 $9,200,943.75 $2,429.05
Common Stock, $.0001 par value (3) 6,100,000 $ 1.25 $7,625,000.00 $2,013.00
Total: 13,460,747 $16,825,943.75 $4,442.05
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(1) In accordance with Rule 457(c), the aggregate offering price of shares
of common stock of TeleServices is estimated solely for purposes of
calculating the registration fees payable pursuant hereto, as
determined in accordance with Rule 457(c), using the average of the
high and low sales price reported by the OTC Bulletin Board for the
Common Stock on August 29, 2000, which was $1.25 per share and, with
respect to shares of common stock of TeleServices issuable upon
exercise of outstanding warrants, the higher of (1) such average sales
price or (2) the exercise price of such warrants.
(2) Represents outstanding shares of common stock held by certain selling
securityholders.
(3) Represents shares issuable pursuant to warrants held by certain selling
securityholders.
The company hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the company shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act or until the registration statement shall become effective on
such date as the Securities and Exchange Commission, acting pursuant to said
section 8(a), may determine.
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PROSPECTUS
TELESERVICES INTERNET GROUP INC.
As of August __, 2000
THE RESALE OF 13,460,755 SHARES OF COMMON STOCK
The selling securityholders named below are selling up to 13,460,755 shares of
the common stock of TeleServices Internet Group, Inc. under this prospectus.
This includes:
1) up to 7,360,755 shares held by selling securityholders
2) up to 6,100,000 shares underlying warrants held by selling
securityholders
TeleServices has not made any underwriting arrangements with respect to this
common stock. The common stock is traded on the over the counter ("OTC")
electronic bulletin board maintained by the National Association of Securities
Dealers under the symbol "TIGI."
Selling securityholders may offer their shares of common stock in the manner
described under the caption "Plan of Distribution" on page 22. According to this
plan, shares of common stock may be sold:
o in public or private transactions;
o on or off the OTC electronic bulletin board or any other national
securities exchange or automated quotation system on which the common
stock may be listed or traded; and
o at prevailing market prices or privately negotiated prices.
Sales may be made through brokers, dealers, or other agents who may receive
compensation in the form of commissions, discounts, or concessions. The selling
securityholders and participating brokers or dealers may be deemed to be
underwriters within the meaning of the Securities Act. If so, any commission,
discount, or concession they receive may be deemed to be underwriting
compensation.
TeleServices will not receive any proceeds from the sale of the common stock.
However, it will receive proceeds from the sale of convertible debentures and
may receive proceeds from the exercise price of the warrants.
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THIS COMMON STOCK IS A SPECULATIVE INVESTMENT AND INVOLVES A HIGH DEGREE OF
RISK. YOU SHOULD READ THE DESCRIPTION OF CERTAIN RISKS UNDER THE CAPTION "RISK
FACTORS" BEGINNING ON PAGE 2 BEFORE PURCHASING THIS COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The information in this prospectus is subject to completion or amendment. These
securities may not be sold, and offers to buy may not be accepted, until the
registration statement we filed with the Securities and Exchange Commission
becomes effective.
This prospectus is not an offer to sell and does not solicit offers to buy this
common stock. These securities cannot be sold in states where an offer,
solicitation, or sale of them would be unlawful until they are registered or
qualified under the securities laws of such states.
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TABLE OF CONTENTS
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SECTION PAGE
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1. Cautionary Statement Concerning Forward Looking Statements............1
2. Risk Factors..........................................................2
3. Description Of Teleservices...........................................4
4. Legal Proceedings.....................................................9
5. Description Of Property...............................................9
6. Market For Common Stock And Related Shareholder Matters...............9
7. Management's Discussion And Analysis Of Financial Condition..........10
8. Directors And Executive Officers.....................................11
9. Ownership Of Securities By Beneficial Owners And Management..........13
10. Executive Compensation...............................................14
11. Certain Relationships And Related Transactions.......................18
12. Selling Securityholders..............................................20
13. Plan Of Distribution.................................................22
14. Description Of Securities............................................22
15. Legal Matters........................................................24
16. Indemnification Disclosure...........................................24
17. Changes In And Disagreements With Accountants........................24
18. Where You Can Find More Information..................................25
19. Financial Statements.................................................25
20. Exhibit Index.......................................................F-1
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DEALER PROSPECTUS DELIVERY OBLIGATION
All dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
This prospectus is part of a registration we filed with the Commission. You
should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide you with different information.
No offer of the common stock will be made in any state where the offer is not
permitted. Do not assume that the information in this prospectus is accurate
after the date on the cover.
CAUTIONARY STATEMENT FOR PURPOSES
OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This prospectus and documents included by reference contain forward-looking
statements within the meaning of:
1) Section 27 of the Securities Act of 1933;
2) Section 21E of the Securities Exchange Act of 1934; and
3) The Private Securities Litigation Reform Act of 1995.
Forward-looking statements relate to our future operations. They estimate the
happening of future events and are not based on historical facts.
Forward-looking statements may be identified by terms such as:
o believes o predicts o estimates
o intends o may o anticipates
o projects o will o probable
o forecasts o expects o continue
This is not a comprehensive list. Similar terms, variations of those terms, and
the negative of those terms may also identify forward-looking statements.
The "Risk Factors" discussed in this prospectus are cautionary statements. They
identify some of the factors that could cause actual results to be significantly
different from those predicted in the forward-looking statements. The
forward-looking statements and documents included by reference were compiled by
our management based upon assumptions they considered reasonable. These
assumptions are subject to significant business, economic, and competitive
uncertainties and contingencies, many of which are beyond our control.
Therefore, forecasted and actual results will likely vary and those variations
may be material.
There can be no assurance that the statements, estimates, and projections
contained in this prospectus will be achieved. Thus, we make no representation
or warranty as to their accuracy or completeness. In addition, we also cannot
guarantee that any forecast in this prospectus will be achieved.
These forward-looking statements were compiled as of the date of this prospectus
or the date of the documents included by reference, as the case may be. We do
not intend to update these statements. Therefore, you should evaluate them by
considering any changes that may have occurred after the date such
forward-looking statements appear.
We cannot guarantee that any of the assumptions relating to the forward-looking
statements or the documents included by reference will prove to be accurate.
Therefore, we urge you and your advisors to review these forward-looking
statements, to consider the assumptions upon which they are based, and to
ascertain their reasonableness.
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RISK FACTORS
An investment in TeleServices' common stock involves risks. Prospective
investors should carefully consider the following risk factors, in addition to
all of the other information in this prospectus, in determining whether to
purchase shares of TeleServices' stock.
WE ARE A HIGHLY SPECULATIVE INVESTMENT. The telecommunications and internet
industries are subject to intense competition. TeleServices has been operating
at a loss since inception, and you cannot assume that TeleServices' plans will
either materialize or prove successful. There is no assurance that our
operations will become profitable. In the event TeleServices' plans are
unsuccessful, you may lose all or a substantial part of your investment. For
these and other reasons, the purchase of TeleServices' stock must be considered
a highly speculative investment.
WE HAVE A HISTORY OF OPERATING LOSSES, DEPLETION OF WORKING CAPITAL AND
FINANCIAL INSTABILITY. As of June 30, 2000, the Company had a negative
stockholder's equity of $3,728,877, an accumulated deficit of $58,223,015, and a
working capital deficit $4,188,845. Various factors affecting the Company's
operations raise doubt as to our ability to continue as a going concern. There
can be no assurance that the Company will be able to achieve material revenues
or profitable operations.
WE CANNOT BE SURE THAT FUTURE CAPITAL WILL BE AVAILABLE. TeleServices' business
will continue to require substantial funds for capital expenditures and related
expenses in pursuit of our business plans. The timing and amount of such
spending is difficult to predict accurately and will depend upon many factors.
To the extent required, TeleServices may seek additional funds through
additional private placements that will be exempt from registration. Such
private placements will not require prior shareholder approval and may include
offerings of equity securities such as:
o common stock;
o preferred stock which is convertible into common stock; or
o debt securities, such as notes or debentures convertible into
common stock.
If additional funds are raised by issuing equity or debt securities, further
dilution to shareholders could occur. Additionally, investors purchasing future
equity or debt securities could be granted registration rights to TeleServices.
There can be no assurances that additional financing will be available when
needed or on terms acceptable to TeleServices.
WE ARE INVOLVED IN SEVERAL PENDING LAWSUITS. TeleServices and its subsidiaries
are currently involved in several pending lawsuits. The outcome of these
actions, as well as any future lawsuits, could result in substantial costs and
uncertainty to the Company.
ONE OF OUR SUBSIDIARIES FILED FOR BANKRUPTCY. VSI, a subsidiary that accounted
for a significant portion of Teleservices' information services business in
prior years, filed for Chapter 7 bankruptcy in March 1999. This could have a
material adverse effect on Teleservices' business, financial condition, and
operational results.
WE DEPEND ON EXISTING MANAGEMENT; NO ADDITIONAL LIFE INSURANCE ON KEY PERSONNEL
IS CARRIED. TeleServices' future success depends in significant part upon the
continued service of certain key management personnel. Competition for such
personnel is intense. There can be no assurance that we can retain our key
managerial personnel or that we will be able to attract, assimilate, or retain
other highly qualified managerial personnel in the future. The loss of key
personnel, especially without advance notice, or the inability to hire or retain
qualified personnel could have a material adverse effect upon TeleServices'
business, financial condition, and result of operations. TeleServices does not
currently maintain additional life insurance on its key officers, directors,
employees, or consultants.
INDEMNIFICATION OF DIRECTORS AND OFFICERS. TeleServices' by-laws provide that
the company will indemnify the following persons against all reasonably incurred
costs and amounts paid to settle any proceeding where he has been named as a
party because of his role:
o current or past director or officer;
o any person who has acted as an officer or director for another
corporation at the request of TeleServices; and
o heirs and legal representatives of such persons.
TeleServices has also entered into indemnification agreements with several of
the officers and directors of TeleServices and its subsidiaries, and may enter
into similar agreements in the future.
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TeleServices' currently has directors' and officers' liability insurance
policies with a total liability limit of $10,000,000, including costs of
defense. The current policies expire June 2001.
Florida law provides that directors will not be personally liable to
TeleServices or its shareholders for monetary damages for breach of fiduciary
duty as a director if:
o he acted honestly and in good faith with a view to the best
interests of TeleServices;
o in the case of a criminal or administrative action or proceeding
that is enforced by a monetary penalty, he had reasonable grounds
for believing that his conduct was lawful;
o he did not receive an improper personal benefit from a
transaction; and
o the did not authorize a distribution that is unlawful under
Florida law.
TeleServices has been advised that while indemnification may be invoked to
disclaim liability for damages by directors, officers or persons controlling
TeleServices under these circumstances, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy and
unenforceable.
PREFERRED STOCK. TeleServices' Articles of Incorporation authorize the issuance
of 10,000,000 shares of preferred stock. This stock may be divided into one or
more series. The board of directors has the authority to determine the rights,
provisions, privileges, restrictions, and number of authorized shares of any
series of preferred stock. Additionally, the preferred stock can have other
rights, including voting and economic rights which are senior to the common
stock.
The issuance of preferred stock could adversely affect the market value of our
common stock. The Company recently offered and sold a total of 1,250,000
restricted shares of Series A Convertible Preferred Stock for gross proceeds of
$2,500,000 to approximately 31 investors. The sale was pursuant to a private
placement that commenced in August 1999 and closed on March 31, 2000. As of the
date of this prospectus, all 1,250,000 shares of Series A Convertible Preferred
Stock have been converted into an aggregate of 5,062,963 shares of common stock
and warrants to purchase an additional 5,000,000 shares of common stock at an
exercise price of $1.50 per share.
WE HAVE NEVER PAID DIVIDENDS. TeleServices' board of directors has the sole
authority to determine whether cash dividends will be paid. This decision will
depend on many factors including TeleServices' earnings, capital requirements,
and financial condition. TeleServices has not paid cash dividends in the past
and does not anticipate paying cash dividends in the near future.
HOW FUTURE ISSUANCE OF COMMON STOCK WILL AFFECT YOUR RIGHTS AS A SHAREHOLDER.
TeleServices has two separate non-qualified stock option plans. These plans,
combined, initially reserved for issuance up to 14,500,000 shares of
TeleServices' common stock to officers, directors, employees, and consultants of
TeleServices and its subsidiaries. Approximately 4,197,723 of these shares have
been issued. When additional shares are issued under these plans, your stock
ownership will be diluted. TeleServices also has additional non-plan options and
other contingent commitments to issue approximately 5,200,000 shares of common
stock. Additional stock or options to acquire stock of TeleServices can be
granted at any time by the board of directors, usually without shareholder
approval.
HOW FUTURE SALES OF COMMON STOCK MAY AFFECT YOU. Future sales of common stock by
management personnel and others may be made under Rule 144 of the 1933 Act. In
general, under Rule 144, a person who has held their stock for one year may,
under certain circumstances, sell within any three-month period a number of
shares which is not greater than:
o one percent of the then outstanding shares of common stock; or
o if qualified, the average weekly trading volume in shares during the
four calendar weeks immediately prior to such sale.
Shares held for two years by a person who is not affiliated with TeleServices
may also be sold under certain circumstances.
Management personnel and others may acquire shares of common stock registered on
Form S-8 that may be sold in compliance with state securities laws without
restriction. These shares can be sold by non-affiliates without restriction, and
by those affiliated with TeleServices, in two ways:
1. Under Rule 144, without the one-year holding period.
2. Pursuant to an effective reoffer prospectus filed for the Form S-8.
Future sales of common stock could adversely affect the current market price of
our common stock and our ability to obtain future funding. This could also
create a potential market overhang.
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OUR STOCK HAS BEEN LIMITED IN ITS PUBLIC TRADING; POSSIBLE VOLATILITY OF STOCK.
There has been a limited public trading market for the common stock of
TeleServices and there can be no assurance that an active trading market will be
sustained in the future. The issuance of common stock on conversion of the
preferred stock or exercise of the warrants and the subsequent sale of the
common stock pursuant to this prospectus can dilute the common stock and
adversely affect its market price.
There can be no assurance that the market price of the stock will not decline
below its current price. The market price for securities of telecommunications
and Internet companies have historically been highly volatile. TeleServices
believes that fluctuations in its operating results and even mild expressions of
interest on a particular day (being traded on the OTC Bulletin Board) can cause
the market price of its shares to fluctuate, perhaps substantially. The stock
can expect to experience substantial price changes in short periods of time due
to the unpredictability of the Bulletin Board. Stock markets in the United
States have, from time to time, experienced significant price and volume
fluctuations which are not necessarily related to TeleServices net worth or any
other established criteria of value. Substantial swings in the stock's price can
be expected for the foreseeable future. In addition, percentage changes in stock
indices, such as the Dow Jones Industrial Average, could also be magnified,
especially in downward movements. These fluctuations may adversely affect the
price of our common stock.
FUTURE DEPENDENCE ON MARKET ACCEPTANCE OF TELESERVICES' PRODUCTS AND SERVICES.
Teleservices' future will depend upon the success of its current and future
products and services. We cannot guarantee that any of these products or
services will be successfully introduced. Even if they are, we can't assure you
that they will achieve market acceptance in such a way that combines with our
existing products to sustain the company or allow it to achieve profitable
operations.
RESTRICTIONS ON SECONDARY TRADING. TeleServices' common stock will be subject to
certain legal restriction as long as it is posted on the OTC Bulletin Board and
trades below $5.00 per share. These restrictions limit the ability of
broker-dealers to sell such securities to anyone other than established
customers and investors who meet certain sophisticated investor tests. These
legal barriers can affect the ability of broker-dealers to sell TeleServices'
stock and can also affect your ability to resell TeleServices stock in any
trading market that may develop.
Cautionary Statement Concerning Forward-Looking Statements Included In This
Prospectus. With the exception of historical matters, the matters discussed or
incorporated by reference in this prospectus are forward looking statements that
involve risks and uncertainties that could cause actual results to differ
materially from targeted or projected results. These forward-looking statements
include statements regarding the intent, belief or current expectations of
TeleServices and members of its senior management team. This includes, without
limitation, future economic, competitive and market conditions and future
business decisions, all of which are difficult or impossible to predict
accurately. Many of these factors are beyond the ability of TeleServices to
control. You should not place undue reliance on forward-looking statements.
DESCRIPTION OF TELESERVICES
BUSINESS DEVELOPMENT
TeleServices Internet Group Inc. was formed under the laws of the State of
Florida in 1986. TeleServices is in the business of providing teleservices and
internet solutions to both domestic and international companies. TeleServices'
is also known as TSIG.com.
History of TeleServices and its Initial Acquisitions
The company sold 2,500,000 units of $.0001 par value common stock at $.02 per
unit for total proceeds of $50,000 in a public offering that closed on June 8,
1987. The company was formerly known as TeleServices International Group Inc.,
Visitors Services International Corp., and Dynasty Capital Corporation.
Visitors Services International Corp.
Visitors Services International Corp., formerly known as Visitors Services, Inc.
("VSI"), was in the business of providing reservations and information services
to Convention and Visitors Bureaus and convention/event organizers. VSI
originally became a subsidiary of the company as a result of an Agreement and
Plan of Reorganization between the company, VSI, and certain VSI stockholders,
dated September 26, 1996.
According to this agreement, at least 80% of the issued and outstanding shares
of VSI were to be exchanged on a one-to-one basis for shares of restricted
stock. This was to be completed after the company effected a 14.4 to 1 reverse
stock split of the shares
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outstanding before the date of the agreement, reducing the number of outstanding
shares from 10,801,000 to 750,093. Fractional shares created by the reverse
stock split were converted into one additional whole share.
The closing date of the agreement was September 27, 1996, when the company's
reverse stock split was effected and certain VSI stockholders holding at least
80% of the outstanding VSI shares executed the agreement. The offer to exchange
shares was then extended to and accepted by all of the remaining VSI
shareholders. By virtue of the reorganization, VSI became a wholly-owned
subsidiary of TeleServices.
After becoming a subsidiary of the company, VSI entered into the following
business acquisitions:
1. On December 23, 1996, VSI entered into an Asset Purchase
Agreement with Global Reservation Systems, Inc. ("GRS"), a
Colorado corporation, to acquire all of GRS's interests in any
asset used in connection with GRS's business of:
o answering toll-free telephone numbers advertised by
contracted marketing organizations;
o providing information to callers of such toll-free
telephone numbers;
o making reservations with lodging properties and
attractions; and
o providing advertising effectiveness statistics to such
contracted marketing organizations of every kind, nature,
and description.
2. On January 21, 1997, VSI acquired and took possession of all
the assets of International Reservation Services, Limited
("IRSL"), to utilize all such assets to operate the former
business of IRSL as the business of VSI. VSI acquired these
assets from IRSL as a result of a bankruptcy proceeding of
IRSL. The assets of IRSL consisted primarily of equipment,
account receivables, customer contracts and the rights to
approximately one hundred "800" telephone numbers. IRSL was a
destination database marketing service company, specializing
in the provision of a centralized nationwide lodging
reservation service and other travel related services.
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.
GuaranTEE Time, Inc.
The company acquired all of the outstanding capital stock of GuaranTEE Time,
Inc. ("GTT") on February 24, 1997, in exchange for restricted common stock of
the company. Initially 100,000 shares of the company were issued to the selling
shareholders of GTT in exchange for their 100% interest in GTT. GTT provided
automated tee-time scheduling for daily-fee golf courses and their customers.
The company disposed of substantially all of the assets of GTT on October 3,
1997, following a sale by GTT, as seller, to Guarantee Time Acquisitions, Inc.,
an unaffiliated third-party. The company and GTT agreed not to compete with
Guarantee Time Acquisitions for three years in the business of tee-time
reservation services.
International Travel Agency, Inc.
On December 6, 1996, the company, through VSI, entered into a Stock Purchase
Agreement with Phoenix Information Systems Corp. ("Phoenix") to acquire all the
capital stock of American International Travel Agency, Inc. ("AIT") from Phoenix
in exchange for 31,579 shares of common stock of Phoenix owned by VSI. This
transaction was closed on December 6, 1996. The consideration paid was based
upon arms-length negotiations and an independent fair-market evaluation.
Following a corporate restructuring by the company, AIT became a wholly-owned
subsidiary of the company. AIT enables the company to access to the major travel
agency computerized reservation systems world-wide, and the ability to issue
airline tickets.
PRESENT BUSINESS OF THE COMPANY
Summary
TeleServices has created its myCard programs to benefit both corporate and
non-profit communities, as well as consumers. TSIG.com forms myCard partnership
agreements with national corporations and non-profit organizations, and then
works with its partners to design revenue-generating programs that attract
consumers to the web sites of both companies. The first myCard
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program was myMusicCard, which allows consumers to purchase CDs and cassettes at
low prices. Similarly, TSIG.com's myPhotoCard programs provide low-cost film
processing and Kodak Film and myPhoneCard programs provide low-cost prepaid
long-distance calling card services. For all new myCard users, TSIG.com has
arranged, through recently-acquired GeneralSearch.com, to provide free internet
access for life, e-mail, integrated messaging, and other features. TeleServices'
customized marketing programs are intended to provide recurring revenues to
TeleServices and its partners, and to help develop strong brand loyalty and
awareness within target communities. TeleServices also provides customer service
and support with its web-based call center and related services.
TeleServices offers its "My Card" programs through two wholly-owned
subsidiaries, My MusicCard Company and My Card, Inc. The Company uses
third-party fulfillment houses to handle order fulfillment of current and future
products and may develop its own fulfillment facility.
Recent Acquisitions
GeneralSearch.com, Inc.
In June 2000, TeleServices entered into a definitive agreement to acquire
General Search.com, Inc. The agreement was amended in August 2000. General
Search is an Internet portal designed to enhance an individual's online
experience via a powerful and accurate search engine that utilizes filters to
avoid content that may be construed as pornographic, obscene, violent or
otherwise questionable. In addition to its powerful search engine, General
Search offers free Internet access, e-mail, voice-mail, fax, and integrated
messaging with unlimited lifetime use. This acquisition complements the myCard
programs.
On August 23, 2000, TeleServices acquired approximately 85% of the issued and
outstanding common stock of General Search in exchange for 38,152,178 shares of
TeleServices' common stock. In accordance with TeleServices' intent to complete
a 100% acquisition of General Search, it will register an exchange offer to the
remaining minority shareholders of General Search in exchange for approximately
6,847,822 shares of TeleServices common stock. General Search will remain as a
subsidiary of TeleServices. Pursuant to the agreement, Jeffrey Bruss, the
president of General Search, was appointed as a director of TeleServices.
Reliant Interactive Media, Inc.
In June 2000, TeleServices entered into a definitive agreement to acquire the
business of Reliant Interactive Media, Inc. Reliant is a direct marketing
company that specializes in the production of long-form commercial programming
that drives retail sales via television and the Internet.
The Affinity Group
In June 2000, TeleServices entered into a definitive agreement to acquire The
Affinity Group LLC. Affinity specializes in database mining, product development
and sales. Affinity forms partnerships with other successful companies in order
to create synergies that offer the best products at attractive margins for
Affinity and its partners.
TeleServices' Programs
The myCard Program
The myCard program is based on the $10.00 myMusicCard, which enables its holders
to buy up to 20 CDs at the current price of no more than $10.99 each, a savings
over the typical $16.99 cost of new releases. The myPhotoCard program provides
low cost film processing using Kodak film. The myPhoneCard program provides
low-cost, prepaid long-distance calling card services.
In the myCard programs, TSIG.com forms revenue-sharing joint-venture
partnerships with corporations and non-profit organizations. Typically, the
proceeds from the sale of the myMusicCards are split 50/50 between TSIG.com and
the partner organization. Non-profits use the myMusicCard for fund-raisers,
while corporations use the myCards as corporate premium promotions. In effect,
the corporations and the non-profits act as marketing agents for TSIG.com.
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Upon successful closing of the General Search, Reliant and Affinity
acquisitions, TeleServices plans to fully implement its myCard affinity
marketing programs with national corporations, non-profits, and other
organizations. These customized affinity marketing programs are designed to:
o acquire Internet customers at a very low cost;
o provide recurring revenues to TSIG.com and its partners;
o help develop strong brand loyalty and awareness within target
communities; and
o drive customers to GeneralSearch.com and the other Web sites of
TSIG.com and its partners.
The Company enhances its myCard programs by providing customer service and
support with its Web-based call center and related services. The Company's Web
sites are www.tsig.com and www.mymusiccard.com.
Lufthansa City Center, Teleglobe and TSIG.com to Launch myCard Programs
in Europe
In March 2000, TSIG entered into a five-year license agreement with ETC,
STS/Lufthansa City Center, the sales arm of Lufthansa Airlines, to market and
sell TSIG.com's myMusic&Phone Card programs through the travel and airline
industries in all European countries. ETC, STS/Lufthansa City Center will market
TSIG.com's myMusic&Phone Card through its 500 Lufthansa City Centers, which
served 98 million travelers last year including 44 million on the Lufthansa AG
passenger airline.
The Perfect Pitch 2000 Family Program in Schools with Lifetime Learning
Systems
In March 2000, TSIG.com reached an agreement with Lifetime Learning Systems of
Stamford, Connecticut, to offer its Perfect Pitch 2000 Family Package in over
100,000 schools nationwide, with a potential audience of more than 50 million
K-12 students. The Perfect Pitch Package contains both the myMusicCard, which
offers music CDs and cassettes at greatly discounted prices, as well as an
Internet Access Software Disc, which provides free lifetime use of a powerful
Internet Web browser with e-mail, voice mail, and fax services. The internet
access is provided through TSIG.com's agreement with General Search.com, a
family oriented and adult-content free website. General Search offers one of the
most powerful and accurate search engines on the Internet, with a data base of
more than 100 million links. It also has more than 800 Internet-based
affiliates, including Amazon.com, AOL, Priceline, American Greetings and eToys.
Lifetime Learning Systems is the leader in creating corporate-sponsored
educational programs in schools. Over the past several decades, it has created
programs for such companies as American Express, AT&T, Coca-Cola, Delta
Airlines, Kodak, General Mills, Hershey, McDonald's, Microsoft, Pepsi, Sears,
and Sony.
The Perfect Pitch 2000 Family Package can be used in schools as a fund-raising
program. For each myMusicCard sold, the school would receive $5.00, the National
Music Foundation would receive $0.75, and TSIG would receive the remaining
$4.25. If 2% of the students participate in the program, and each student sells
an average of 2 myMusicCards, then 2 million cards would be sold. This would
generate $20 million in revenues, of which TSIG.com would receive $8.5 million.
Coca-Cola Promotional Campaigns
In January 2000, the Atlanta Coca-Cola Bottling Corp., a division of Coca-Cola
Enterprises, used the myMusicCard program to conduct a promotional campaign
targeted at the teen market for Superbowl 2000. My MusicCard Company and Coke
collaborated to produce a promotional 3-unit Coca-Cola Superbowl MusicCard,
allowing Coke customers to purchase three CDs at $10.99 each or less. The
promotion featured special offers from Circle K, AMC Theaters, AMF Bowling
Centers, Athletes Foot, and the NFL Experience. My MusicCard Company also
produced a customized Coca-Cola MusicCard web page and agreed to assist
Coca-Cola with database marketing efforts resulting from the promotion.
Recently, the Atlanta Coca-Cola Bottling Company decided to conduct a
Music/Phone Card Promotion with TSIG.com and distribute 2 million Coca-Cola
Music/Phone Cards and 15 million Virtual MusicCards in connection with the
"Refresh the Rivalry" campaign centered around the annual Georgia vs. Georgia
Tech College fall football classic. The promotion is targeted to reach an
estimated 4.6 million people in the greater Atlanta market commencing August 28,
2000 and concluding on October 31, 2000.
TSIG.com also entered into a similar agreement with Coca-Cola Enterprises -
Tennessee/Alabama Division to utilize the Music/Phone Card for two other college
football rivalries. The first is the "Celebrate the Rivalry" sweepstakes, which
highlights the annual Alabama vs. Auburn football showdown, and the second
centers around the Tennessee vs. Kentucky game. These programs kicked off in
Alabama, Kentucky and Tennessee in August and will conclude at the end of
September.
7
<PAGE> 12
National Marketing Partner of United Cerebral Palsy Associations
In December 1999, TSIG.com was appointed National Corporate Sponsor and National
Marketing Partner of United Cerebral Palsy Associations (UCP), and was
designated their exclusive source of music and film processing for fund-raising
purposes. Under the agreement, TSIG.com and UCP will jointly market and sell
myCard products through UCP's local affiliates and other National Corporate
Sponsors, which include Tosco, Circle K, Miller Brewing, QVC, First USA and
others.
In August 2000, TSIG.com formed an agreement with UCP to become the charity's
technology sponsor and Internet portal partner for the next five years. Working
together with TSIG.com and General Search, UCP plans to create the vertical
portal on the Internet for people with disabilities. This portal would provide
state-of-the-art information on research, assistive technology, funding
alternatives, and other needs. The TSIG.com/UCP plan includes working through
the UCP affiliate system to distribute the GeneralSearch.com free Internet
access and portal features to the 54 million Americans who have disabilities.
Opportunities with Other National Charities
TSIG.com regards the charitable marketplace as a tremendous source of potential
revenues, and is currently in discussions with several national charities, each
of which has between 500,000 and 2,000,000 donors. As a result of its
acquisitions and partnerships, TSIG.com can offer the charities Internet
services, call center services and broad marketing and distribution
capabilities, while the charities can bring to TSIG.com and its affiliates their
donor lists and their national corporate partners. Together, the charities and
TSIG.com can design marketing programs designed to increase donations to the
charities, bring revenues and new customers to TSIG.com and its partners, and
drive donor/customers to Internet portals to the benefit of both the charities
and TSIG.com.
Marketing Pact with Public Radio Station
In November 1999, TSIG.com formed an agreement with WUFT-FM, a public radio
station in Gainesville, Florida, to market myMusicCard to public radio stations
nationwide. Under the Agreement, WUFT will introduce myMusicCard as a
fund-raising and awareness vehicle for public radio stations.
The 4-H Club Program
TSIG.com and the National 4-H Council have formed a revenue-sharing agreement,
such that TSIG.com and local 4-H Clubs would split 50/50 the revenue from the
$10.00 myMusicCards sold by 4-H. The program is being marketed to the nation's
156,000 4-H Clubs with 6,500,000 members.
TSIG.com Private-Label websites
TSIG.com can also "private label" its websites for other users. The first such
agreement was with Nettaxi, a premiere commerce-enabled online community with
more than 100 million monthly page views. Visitors to the Nettaxi home page can
click onto the Nettaxi myMusicCard site and purchase myMusicCards and CDs.
Strategic Marketing Alliance with TEMPO for Corporate Clients
TSIG.com has formed a strategic marketing alliance with The Entertainment
Marketing and Promotion Organization (TEMPO), the leader in custom-entertainment
software-based promotions for Fortune 500 companies. Under the alliance, TEMPO
is TSIG.com's exclusive provider of custom compilations, and the companies work
together to promote the myMusicCard program to the corporate and non-profit
customers of both companies.
Trademarks
The Company and its subsidiaries have applied for federal registration of
several trademarks and service-marks which are currently pending approval.
Employees
As of the date of this prospectus, the Company and its subsidiaries employ 47
individuals, of which 27 are full-time employees.
8
<PAGE> 13
LEGAL PROCEEDINGS
The company or its subsidiaries are parties to the following material legal
proceedings:
1. On December 28, 1998, EIS International, Inc., of Herndon, Virginia,
issued a Demand for Arbitration to the company. This resulted from a
dispute arising under a contract with TeleServices dated May 7, 1998.
EIS is seeking $223,261 for software, licenses, and services which it
claims are due under the contract, plus interest, attorneys' fees, and
costs. TeleServices claims that it notified EIS of major defects in the
software and demanded that they be remedied. The company maintains that
EIS refused to fix the defects and instead demanded payment.
TeleServices also counter-claimed for damages in excess of $200,000,
plus costs and attorneys' fees, because it was forced to create
alternative systems for performing the functions for which the EIS
software was intended. The company also claimed that it suffered a
significant loss of business opportunities as a result of the failure
of EIS's software to perform as promised. A date for an arbitration
proceeding has not been set.
2. On March 5, 1999, the company's wholly owned subsidiary, Visitors
Services International Corp., filed a voluntary petition for relief
under Chapter 7 of the United States Bankruptcy Code for the Middle
District of Florida, Tampa Division. Visitors Services International
Corp. was a party to several previously reported material litigation
proceedings, all of which have been automatically stayed as a result of
the bankruptcy filing.
3. On June 17, 1999, the Company and Robert P. Gordon, individually and as
an officer of the Company, were named as defendants, among others, in
an amended complaint field by Miles and Rosalie Lerman in United States
District Court for the District of New Jersey. The Lerman's claim that
their broker-dealers (also named as defendants) made unauthorized
transactions in their accounts in "high risk penny stocks," including
the common stock of the Company, that resulted in losses in excess of
$2 million. The complaint seeks recovery of actual and consequential
damages, costs and attorneys' fees, and other forms of equitable relief
from all defendants. The Company and Mr. Gordon have filed a motion to
dismiss, which is pending.
4. On October 15, 1999, Clarity Consulting, Inc. ("Clarity"), filed an
amended complaint in the Circuit Court of Cook County, Illinois, adding
the Company as a defendant in their suit to recover monies that they
originally alleged were owed by Visitors Services International Corp.
("VSI"). The complaint alleges that on June 24, 1997, Clarity and the
defendants entered into an agreement for consulting services, that
consulting services were provided between October 1996 and August 1997,
and that the defendants promised to pay for the consulting services and
failed to do so. Clarity seeks a judgment against the defendants in the
amount of $552,635, plus service charges at the rate of one and
one-half percent per month, plus such other relief as the court may
deem equitable and just, as well as attorneys fees and court costs. On
March 13, 2000, the Company filed a Motion to Quash Service For Lack of
Personal Jurisdiction on the basis that Illinois does not have proper
jurisdiction over the Company in this dispute. On July 7, 2000, the
Court granted the Company's Motion.
DESCRIPTION OF PROPERTY
The company owns no property. All of its facilities are leased. Its corporate
headquarters are housed in approximately 16,000 square feet of commercial space
at 100 Second Avenue South, St. Petersburg, Florida. The company has no real
estate related investments.
MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS
(a) Market Information
The company's common stock is traded over-the-counter on the Electronic Bulletin
Board maintained by the National Association of Securities Dealers under the
Symbol "TIGI" (formerly traded under "TSIG"). There is no assurance that the
common stock will continue to be quoted or that any liquidity exists for the
company's shareholders.
9
<PAGE> 14
The following table sets forth the range of high and low bid quotations for the
company's common stock on the OTC Bulletin Board for each quarter of 1998 and
1999 and the first two quarters of 2000.
<TABLE>
<CAPTION>
Low Bid High Bid
<S> <C> <C>
1st Qtr. 1998 $ .15 $ .51
2nd Qtr. 1998 $ .125 $ .48
3rd Qtr. 1998 $ .1875 $ .39
4th Qtr. 1998 $ .18 $ .52
1st Qtr. 1999 $ .31 $ .48
2nd Qtr. 1999 $ .04 $ .38
3rd Qtr. 1999 $ .04 $ .08
4th Qtr. 1999 $ .038 $ .072
1st Qtr. 2000 $ .039 $ 1.00
2nd Qtr. 2000 $ .101 $ 2.50*
</TABLE>
The source of this information is InterQuote quotation services and
broker-dealers making a market in the company's common stock. These prices
reflect inter-dealer prices, without retail markup, mark-down or commission and
may not represent actual transactions.
* On June 23, 2000, the stock price was affected by a combination
(reverse-split) of TeleServices' outstanding (but not authorized) common stock,
whereby one post-split share was issued for every ten pre-split shares.
(b) Holders
As of August 30, 2000, there were approximately 302 holders of record of the
company's common stock. This number does not include beneficial owners who hold
shares at broker/dealers in "street-name".
(c) Dividends
The company has paid no cash dividends on its common stock and management does
not anticipate that such dividends will be paid in the foreseeable future.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
A. For the Year Ended December 31, 1999
Total revenues for the fiscal year ended December 31, 1999, were
$395,767, representing a 176% increase from revenues of $143,472 for the prior
fiscal year ended December 31, 1998. The Company sustained a net loss of
$8,633,350 in 1999, compared to a net loss of $11,882,251 for fiscal 1998.
Operating expenses increased from $6,564,133 in 1998 to $10,382,965 in 1999,
with most of the increases attributable to salaries and outside advisory fees.
The Company booked a one-time gain of $4,541,689 from discontinued
operations in 1999 as a result of the bankruptcy filing of Visitors Services
International Corp., the Company's subsidiary, which was in the business of
providing reservation and information services to Conventions and Visitors
Bureaus and convention/event organizers.
The Company initiated aggressive restructuring during the year. The
Company added several new members to its management team in December 1999,
sharply reduced expenses in the first quarter of 2000, and is making fundamental
changes to its strategic focus.
As of December 31, 1999, the Company had a negative stockholder's
equity of $4,066,278, an accumulated deficit of $46,521,984, and a working
capital deficit of $4,527,880.
10
<PAGE> 15
B. For the Six Months Ended June 30, 2000
Similarly, for the six months ended June 30, 2000, revenues were
$107,233, versus $267,211 for the same period in 1999. Again, while cash
operating expenses decreased in almost every major category, the reported total
operating expenses increased from $3,184,854 for the first six months of 1999 to
$11,728,913 for the first half of 2000. This difference is due to the recording
of non-cash expenses resulting from the issuance of shares and the grant of
stock options, to employees, consultants and advisors, based on the market value
of the shares at the time of issuance.
Net cash used for continuing operating activities for the six months
ended June 30, 2000 was $2,833,599. Net cash used for investing activities for
the first two quarters ended June 30, 2000 was $166,294, of which $161,138
related to advances to the Company's Chairman/CEO net of accrued but unpaid
salary. Net cash provided by financing activities for the six months ended June
30, 2000 was $3,011,394. Of this amount, $1,870,000 was received from the sale
of $2,500,000 in preferred stock with a 10% dividend rate, the balance of which
was received prior to December 31, 1999. Additionally, the Company received
$623,475 from the issuance of common stock and $700,000 from borrowings under
notes payable to GeneralSearch.Com. The Company also used $165,387 for the
repayment of loans to stockholders during the six months ended June 30, 2000.
As of June 30, 2000, the Company had a total stockholder deficit of $3,728,877,
an accumulated deficit of $58,223,015, and a working capital deficit $4,188,845.
To finance its operations, the Company has relied in part on loans from
GeneralSearch.Com, which is now a majority-owned subsidiary of the Company. Such
loans totaled $700,000 for the quarter ended June 30, 2000, and since then, the
Company has borrowed an additional $555,000.
The Company's consolidated financial statements are presented on the
going concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. However, the
Company has sustained recurring operating losses since its inception and has a
working capital deficit of $4,188,845 and a stockholder deficit of $3,728,877 as
of June 30, 2000 and has not begun to generate any significant revenues from its
Internet business. The Company is materially delinquent on payments to various
creditor obligations including the Internal Revenue Service. There can be no
assurance that the Company will be able to achieve material revenues or
profitable operations. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. The consolidated financial
statements do not include any adjustments to reflect the possible future affects
on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the possible inability of the
Company to continue as a going concern.
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS OF THE COMPANY
The company has a board of directors which is comprised of five members. Each
director holds office until the next annual meeting of shareholders or until a
successor is elected or appointed. The members of the board of directors of the
company are:
<TABLE>
<CAPTION>
Director of
Directors Age Company Since
----------------------------- --- --------------
<S> <C> <C>
Robert P. Gordon 49 September 1996
Paul W. Henry 52 September 1996
J.R. LeShufy 75 June 1999
Frank Ragano 71 October 1999
Jeffrey Bruss 33 August 2000
</TABLE>
ROBERT P. GORDON has served as a director of the company since September 1996.
Mr. Gordon founded the company's subsidiary, VSI, in 1992 to meet the demanding
requirements of the domestic tourism industry. He was also the founder and
chairman of Phoenix Information Systems Corp., a firm that invested ten years
and millions of dollars to develop an airline and hotel reservation system for
international markets. In this position, Mr. Gordon recognized that
sophisticated automated destination system software could be programmed to
exceed the specifications of any domestic or international hospitality and
tourism marketing program currently in use. Mr. Gordon is chairman of Heaven
International, Inc. (formerly Harvest International of America, Inc.), a company
engaged in the development of global tourism. Mr. Gordon has a B.A. in
Philosophy and Biology from New York University, where he also did his graduate
studies.
11
<PAGE> 16
PAUL W. HENRY has served as a director of the company since September 1996, and
as a full-time consultant since October 1998. During the past ten years, Mr.
Henry has been retained as an independent financial consultant by various
institutions, including: Phoenix Information Systems, an airline reservation
system company; Essex Investment Management Company, Boston, an institutional
fund manager; and Caithness Corporation, New York, a natural resources
development company. Mr. Henry holds a bachelor's degree in Economics from Yale
University and a master's degree in Business Administration from Northeastern
University.
J. R. LESHUFY has served as a director of the company since June 1999. Mr.
LeShufy is a private investor and entrepreneur with a background in developing
companies. Mr. LeShufy was formerly president of Basic Investments Ltd., a major
investor in TSIG.com. He is a director of Inkine Pharmaceuticals, a
biopharmaceutical company, whose stock trades on the NASDAQ under the symbol
INKP. Mr. LeShufy was the president and founder of Consolidated Fine Arts Ltd.,
an innovative marketing company for the visual arts, primarily in graphics and
art books.
FRANK P. RAGANO, Maj. General, U.S. Army (ret.), joined TSIG.com as a director
in October 1999. Mr. Ragano is currently chairman of the board of directors of
Skylynx Communications, Inc. (OTCBB:SKYK), where he has served as a director
since 1998. Mr. Ragano is also a director of Irvine Sensors Corp.
(NasdaqSC:IRSN), where he has served as a director since 1995. Mr. Ragano was
President and CEO of CMS, Inc., a wholly owned subsidiary of Daimler-Benz GmbH.
He graduated with a B.S. degree from Duquesne University in 1950 and later
graduated with a Master of Business Administration (MBA) from Syracuse
University, New York. After a well-decorated career in the military, Mr. Ragano
retired from active Army service and became Vice-President of the American
Defense Preparedness Association and Chairman and CEO of BEI Defense Systems
Company.
JEFFREY BRUSS has served as a director of the company since August 2000. Mr.
Bruss is the Chief Executive officer of GeneralSearch.com, Inc., a subsidiary of
the company. Mr. Bruss founded GeneralSearch in 1998. From 1995 to 1998, Mr.
Bruss owned and operated several Internet companies, including FundFinder Inc.
and Discover Wall Street. From 1990 to 1995, Mr. Bruss was the owner and
President of Sports Investors, a sports marketing company that specialized in
sports memorabilia.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the company and their respective positions are as
follows:
ROBERT P. GORDON
Chairman
In addition to being a director of the Company, Mr. Gordon has served as
Chairman of the Company since September 1996 and as Chief Executive Officer
since approximately August 1998. The Chairman is an executive officer of the
Company. Mr. Gordon is also presently serving as Chief Financial and Accounting
Officer for the Company. Mr. Gordon's biography is set forth above.
PAUL W. HENRY
Secretary and Treasurer
In addition to being a director of the Company, Mr. Henry has served as
Secretary and Treasurer of the Company since September 1996. Mr. Henry's
biography is set forth above.
JOSEPH KEEGAN
President and Chief Operating Officer
Joe Keegan joined TSIG.com as President and Chief Operating Officer in December
1999. Previously, he was Senior Vice-President for Domestic Operations of
Teledex Corporation, a private company based in San Jose, California. Teledex is
the leading provider of guestroom telephones to national hotel chains, including
Marriott, Hilton, Starwood, and others. Mr. Keegan and Mr. Potenberg (see below)
were part of the original, start-up management team at Teledex, and were later
joined there by Mr. Wheeler (see below). This three-man team was an integral
part of the senior management that built Teledex into the national leader for
hotel guestroom telephones. Mr. Keegan, who grew up in New England, holds a
bachelor's degree in Education from Ripon College in Wisconsin and later did his
graduate studies at Keller Graduate School of Business in Chicago.
RICHARD WHEELER
Senior Vice President, Operations and Strategic Development
Dick Wheeler joined TSIG.com in December 1999. He formerly worked with Messrs.
Keegan and Potenberg at Teledex, where he held the position of director and was
responsible for distribution channel development and strategic alliances.
Previously, Mr. Wheeler was executive vice president for a division of Barlow
Rand, a Fortune 500 international company. Earlier, he was vice president of
sales and marketing for Control Laser Corporation, where he managed a worldwide
network of 65 sales and service
12
<PAGE> 17
branch offices. Additionally, he held executive positions with Datalogic and
LazerData Corporation. Mr. Wheeler holds an Electrical Engineering degree from
the University of Maryland.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
In December 1997, Phoenix Information Systems Corp. declared bankruptcy under
Chapter 11 of the U.S. Bankruptcy Code. At that time, Robert P. Gordon and Paul
W. Henry were directors and Mr. Henry was an officer of Phoenix.
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. At that time, Robert P. Gordon and
Paul W. Henry were directors and officers of VSI.
OWNERSHIP OF SECURITIES BY BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of August 30, 2000, the stock ownership of
each person known by the company to be the beneficial owner of five percent or
more of the company's common stock, each executive officer and director
individually, and all executive officers and directors of the company as a
group. No other class of voting securities is outstanding. Each person is
believed to have sole voting and investment power over the shares except as
noted.
<TABLE>
<CAPTION>
========================================== ========================== ====================
Amount and Nature of
Name and Address of Beneficial Owner (1) Beneficial Ownership(1)(2) Percent of Class (3)
------------------------------------------ -------------------------- --------------------
<S> <C> <C>
Robert P. Gordon (4) 7,492,619 9.13%
------------------------------------------ -------------------------- --------------------
Paul W. Henry (5) 285,336 *
------------------------------------------ -------------------------- --------------------
J.R. LeShufy (6) 85,000 *
------------------------------------------ -------------------------- --------------------
Frank Ragano (7) 356,200 *
------------------------------------------ -------------------------- --------------------
Joseph K. Keegan (8) 262,500 *
------------------------------------------ -------------------------- --------------------
Jeffrey Bruss(9) 18,230,865 23.57%
------------------------------------------ -------------------------- --------------------
Nick Salerno(10) 3,913,044 5.09%
------------------------------------------ -------------------------- --------------------
Jane Hollister(11) 3,913,044 5.09%
------------------------------------------ -------------------------- --------------------
Dave Venchus(12) 2,934,783 3.82%
------------------------------------------ -------------------------- --------------------
Chuck & Camille Sensale(13) 5,869,566 7.63%
------------------------------------------ -------------------------- --------------------
Includes all officers and directors of the
company as a group (6 persons)(14) 26,712,520 31.93%
========================================== ========================== ====================
</TABLE>
----------
* Represents less than one percent.
(1) Unless otherwise indicated, all shares are beneficially owned by the
persons named, and the address of each person is 100 Second Avenue
South, City Center, Suite 1000, St. Petersburg, Florida 33701.
(2) Includes the amount of shares each person or group has the right to
acquire within 60 days pursuant to options, warrants, rights,
conversion privileges, or similar obligations.
(3) Based upon 76,918,556 shares of common stock outstanding, plus the
amount of shares each person or group has the right to acquire within
60 days pursuant to options, warrants, rights, conversion privileges or
similar obligations.
(4) Robert P. Gordon is Chairman, CEO, and a director of the Company.
Robert P. Gordon individually owns 2,352,630 shares. Also included in
the table are 36,201 shares owned by a corporation controlled by Mr.
Gordon, 1,503,788 shares
13
<PAGE> 18
which Mr. Gordon may have the right to acquire pursuant to warrants,
and 3,600,000 shares which Mr. Gordon has the right to acquire pursuant
to options that have vested or will be vested within the next 60 days.
(5) Paul W. Henry is Secretary, Treasurer and a director of the Company.
Included in the table are 3,500 shares owned by Mr. Henry and options
that have vested or will be vested within the next 60 days to purchase
281,836 shares.
(6) J.R. LeShufy is a director of the Company. Included in the table are
options that have vested or will be vested within the next 60 days to
purchase 85,000 shares of common stock.
(7) Frank Ragano is a director of the Company. Included in the table are
139,000 shares owned by Mr. Ragano; 2,200 shares owned by his spouse;
options that have vested or will be vested within the next 60 days to
purchase 115,000 shares; and an aggregate of 100,000 shares of common
stock which Mr. Ragano and his wife have the right to acquire upon
exercise of common stock purchase warrants.
(8) Joseph K. Keegan is President of the Company. Included in the table are
5,000 shares held in the names of the minor children of Mr. Keegan, and
options that have vested or will be vested within the next 60 days to
purchase 262,500 shares of common stock.
(9) Jeffrey Bruss is a director of the Company. Included in the table are
17,804,348 shares owned by his wife, Michele Bruss. Also included in
the table are vested options to acquire 109,000 shares of common stock
of GeneralSearch.com, Inc. at an exercise price of $2.50 per share,
which if exercised, will result in the issuance of 426,517 shares of
common stock of the Company (rather than shares of GeneralSearch.com,
Inc.).
(10) Mr. Salerno's address is 902 Boulevard of the Arts, Sarasota, Florida
34236.
(11) Ms. Hollister's address is 10941 N. Blvd., Tampa, Florida 33612.
(12) Mr. Venchus' address is 255 Eagle Ridge Ct., West Chicago, Illinois,
60185.
(13) Chuck and Camille Sensale's address is 68 Table Rock Rd., Wakefield,
Illinois 60506.
(14) This group includes Messrs. Gordon, Henry, LeShufy, Ragano, Keegan and
Bruss.
EXECUTIVE COMPENSATION
The following information discloses all plan and non-plan compensation
awarded to, earned by, or paid to the Company's Chief Executive Officer and each
of the four highest paid executive officers of the Company and its subsidiaries.
In reading the following, the reader should be aware that one June 23, 2000,
TeleServices completed a combination (reverse-split) of its outstanding (but not
authorized) common stock, whereby one post-split share was issued for every ten
pre-split shares. Unless otherwise noted, information provided in this section
describe shares on a pre-split basis.
Summary Compensation Table
The following table sets forth all compensation, including bonuses, stock option
awards, and other payments, paid or accrued by the Company and its subsidiaries
during the fiscal years ended December 31, 1999, 1998 and 1997. This table shows
the compensation to the Company's CEO and each of the other executive officers
of the Company and its subsidiaries whose total annual salary and bonus exceeded
$100,000 for the year ended 1999.
14
<PAGE> 19
<TABLE>
<CAPTION>
Annual Compensation
------------------------------------
(a) (b) (c) (d) (e)
Name Year Other
And Ended Annual
Principal Dec. 31, Salary Bonus Compensation
Position 1999 ($) ($) ($)
------------------------------ -------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Robert P. Gordon, 1999 $360,000(n1) -0- -0-
Chairman, CEO, Director 1998 $178,846 -0- -0-
1997 $158,247 $35,000 -0-
Paul W. Henry, 1999 $180,000(n2) -0- -0-
Secretary, Treasurer, Director 1998 $ 73,333(n3) -0- -0-
1997 $ -0- -0- -0-
</TABLE>
(n1) Of this amount, $200,769 was actually paid in 1999, and the balance of
$159,230 was accrued and payable as of December 31, 1999.
(n2) Of this amount, $121,667 was actually paid in 1999, and the balance of
$58,833 is accrued and payable as of December 31, 1999.
(n3) Of this amount, $37,500 was actually paid in 1998, and the balance of
$35,833 was accrued and paid in 1999.
<TABLE>
<CAPTION>
Long Term Compensation
------------------------------------------------------
Awards Payouts
--------------------------------- --------------------
(a) (b) (f) (g) (h) (i)
Name Year Restricted
And Ended Stock Shares LTIP All Other
Principal December Award(s) Underlying Options Payouts Compensation
Position 31 ($) ($) ($)
------------------------------ -------- -------------- ------------------ ------- ------------
<S> <C> <C> <C> <C> <C>
Robert P. Gordon, 1999 -0- 10,000,000(n1) -0- -0-
Chairman, CEO, Director 1998 1,250,000 (n2) 16,809,122(n3) -0- -0-
1997 -0- 15,000,000 -0- -0-
Paul W. Henry, 1999 -0- 2,068,360(n4) -0- -0-
Secretary, Treasurer, Director 1998 -0- 1,000,000 -0- -0-
1997 -0- -0- -0- -0-
</TABLE>
(n1) On December 17, 1999, Mr. Gordon was granted options to acquire
10,000,000 shares of common stock at an exercise price of $.07 per
share.
(n2) On December 4, 1998, Mr. Gordon was issued 5,000,000 shares of
restricted common stock as long-term compensation. The shares are
considered fully-vested and will be eligible to receive dividends, if
any. Although the shares are restricted from resale, the dollar value
of this restricted stock award is calculated by multiplying the closing
market price of the Company's unrestricted stock on the date of grant
by the number of shares awarded. Using this formula, the value of the
5,000,000 restricted shares at year end was $2,187,500.
(n3) 1998 total includes 7,000,000 options granted in 1998 and 9,809,122
options originally granted in 1997 that were repriced in 1998.
Repricing details are as follows:
15
<PAGE> 20
o 7,000,000 options, originally granted on December 8, 1997 with an
exercise price of $.30 per share, were repriced to $.20 on January
27, 1998, and were further repriced to $.15 on April 20, 1998.
o 2,809,122 options, originally granted on September 22, 1997 with
an exercise price of $2.00 per share, were repriced to $.30 on
December 30, 1997, and further repriced to $.20 on January 27,
1998.
(n4) On December 17, 1999, Mr. Henry was granted options to acquire
2,068,360 shares of common stock at an exercise price of $.07 per
share. These options replaced any outstanding options that had been
granted in prior years.
Option/SAR Grants in Last Fiscal Year
The information provided in the table below provides information with respect to
individual grants of stock options during 1999 to each of the executive officers
named in the Summary Compensation Table above. The Company did not grant any
stock appreciation rights during 1999.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
% of Total
Number of Options/SARS
Securities Granted to
Underlying Employees Exercise or
Options/SARs in Fiscal Base Price Expiration
Name Granted (#) Year (n1) ($/Sh) Date
---------------- ------------ ------------- ----------- ----------
<S> <C> <C> <C> <C>
Robert P. Gordon 10,000,000 8.3% $ .07 12/31/04
Paul W. Henry 2,068,360 1.7% $ .07 12/31/04
</TABLE>
Notes:
(n1) The percentage of total options granted in the fiscal year is based
upon all options (approximately 120,442,805) granted to eligible
participants under each of the Company's employee stock option plans in
fiscal 1999. Eligible participants include officers, directors,
employees, consultants, and advisors. Not all options granted during
1999 remained outstanding as of December 31, 1999.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
The information provided in the table below provides information with respect to
each exercise of stock options during fiscal 1999 by the executive officers
named in the Summary Compensation Table and the fiscal year end value of
unexercised options.
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Value of
Securities Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Shares Value FY-End (#) FY-End($)
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) (n1) Unexercisable Unexercisable (n1)
---------------- ------------ -------- --------------------- ------------------
<S> <C> <C> <C> <C>
Robert P. Gordon -0- N/A 3,333,333/6,666,667 $6,667/$13,333
Paul W. Henry -0- N/A 1,423,360/ 645,000 $2,846/$ 1,290
</TABLE>
(n1) The aggregate dollar values in columns (c) and (e) are calculated by
determining the difference between the fair market value (based on the
reported low bid quotations) of the common stock underlying the options
and the exercise price for the options at exercise or fiscal year end,
respectively.
16
<PAGE> 21
Long-Term Incentive Plans ("LTIP") - Awards in Last Fiscal Year
This table has been omitted, as no executive officers named in the Summary
Compensation Table above received any awards pursuant to any LTIP during fiscal
1999.
Compensation of Directors.
On July 31, 2000, the Company's Board of Directors accelerated the vesting of
all options held by directors such that the options immediately vested. In
addition, the Board resolved that each current member of the Board be granted an
option to acquire 300,000 shares of common stock. Each such option granted to
expire in five years, have an exercise price of $1.20 per share, and shall vest
and become exercisable on a quarterly basis over three years, so long as the
director remains a director of the Company.
On July 31, 2000, the Company's Board of Directors granted Robert P. Gordon an
option to acquire 4,000,000 shares of common stock, all with an exercise price
of $1.20 per share and an exercise period of five years, of which 2,000,000
vested immediately, 1,600,000 shares which vested upon the closing of the
acquisition of GeneralSearch.com, Inc., 200,000 shares to vest upon acquisition
of The Affinity Group, and 200,000 shares to vest upon the closing of the
acquisition of Reliant Interactive Media Corp. (Mr. Gordon abstained from voting
on this matter).
On December 17, 1999, J.R. LeShufy, a director of the Company, was granted
options to acquire 600,000 shares of the Company's common stock at an exercise
price of $.07 per share. The options vest and become exercisable at the time
they vest, subject to termination of the agreement, on a quarterly basis on the
last day of each quarter for a period of three years. As of December 31, 1999,
175,000 options were vested with the balance to vest on a quarterly basis on the
last day of each quarter for the next two years. All options expire on December
31, 2004.
On December 17, 1999, Robert P. Gordon, an office and director of the Company,
was granted options to acquire 10,000,000 shares of the Company's common stock
at an exercise price of $.07 per share. The options vest and become exercisable
at the time they vest, subject to termination of the agreement, on a quarterly
basis on the last day of each quarter for a period of three years. As of
December 31, 1999, 3,333,333 options were vested with the balance to vest on a
quarterly basis on the last day of each quarter for the next two years. All
options expire on December 31, 2004.
On December 17, 1999, Paul W. Henry, an officer and director of the Company, was
granted options to acquire 2,068,360 shares of the Company's common stock at an
exercise price of $.07 per share. The options vest and become exercisable at the
time they vest, subject to termination of the agreement, on a quarterly basis on
the last day of each quarter for a period of three years. As of December 31,
1999, 1,423,360 options were vested with the balance to vest on a quarterly
basis on the last day of each quarter for the next two years. All options expire
on December 31, 2004. These options supercede and replace any prior options held
by Mr. Henry.
Pursuant to the Agreement to Serve as a Director dated September 29, 1999, Frank
Ragano was granted options to acquire 900,000 shares of the Company's common
stock at an exercise price of $.05 per share. The options vest and become
exercisable at the time they vest, subject to termination of the agreement, on a
quarterly basis on the last day of each quarter for a period of two years. All
options expire on December 31, 2004.
Pursuant to a consulting agreement dated May 15, 2000, the Company retained Paul
Henry, a director of the Company, to continue to serve as Secretary and
Treasurer of the Company. Pursuant to the agreement, Mr. Henry will be paid at
the rate of $150,000 per year until October 2000, when he will be paid at a rate
of $180,000 per year.
Except as set forth above, no compensation was paid by the Company to its
directors for any service provided as a director during the fiscal year covered
by this report. There are no formal or informal understandings or arrangements
relating to compensation; however, directors may be reimbursed for all
reasonable expenses incurred by them in conducting the Company's business. These
expenses include out-of-pocket expenses for such items as travel, telephone,
postage, and federal express charges.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
The Company's board of directors has complete discretion as to the
appropriateness of (a) key-man life insurance, (b) obtaining officer and
director liability insurance, (c) employment contracts with and compensation of
executive officers and directors, (d) indemnification contracts, and (e)
incentive plans to award executive officers and key employees.
17
<PAGE> 22
Pursuant to an employment agreement dated December 4, 1998, the Company engaged
Robert P. Gordon to continue to serve as Chairman (an officer position) for a
term of five years. Pursuant to the agreement, Mr. Gordon will be paid a salary
of $360,000 per year. In addition, Mr. Gordon received a restricted stock award
of 5,000,000 shares of common stock, which are fully-vested. Mr. Gordon is also
entitled to the following:
o car expense allowance;
o major medical health benefits equivalent to that provided to other
officers;
o indemnification from any claim or law suit that may be asserted against
him when acting as an officer of the Company, provided that said
indemnification is not in violation of any federal or state law or rule
or regulation of the Securities and Exchange Commission. The agreement
also contains certain provisions with respect to disability,
termination, confidentiality, and non-competition.
The Company also has employment agreements in place with other officers and
significant employees not required to be listed in the compensation tables.
The Company's board of directors is responsible for reviewing and determining
the annual salary and other compensation of the executive officers and key
employees of the Company and its subsidiaries. The goals of the Company are to
align compensation with business objectives and performance and to enable the
Company and its subsidiaries to attract, retain, and reward executive officers
and other key employees who contribute to the long-term success of the company.
The Company and its subsidiaries provide base salaries to executive officers and
key employees sufficient to motivate them to achieve certain operating goals.
Although salaries are not specifically tied to performance, incentive bonuses
are available to certain executive officers and key employees. In the future,
executive compensation may include without limitation cash bonuses, stock option
grants and stock reward grants. In addition, the Company may set up a pension
plan or similar retirement plans.
Employee Benefit and Consulting Services Compensation Plans
The Company currently has two Employee Benefit and Consulting Services
Compensation Plan in effect, the TSIG.com Incentive Stock Plan, which covers up
to 5 million shares of common stock (post-split); and the TSIG.com 2000 Stock
Plan, which covers 9,500,000 shares of common stock (post-split).
Under each of these plans, the Company may issue shares of common stock or grant
options to purchase common stock to qualified consultants, advisors, officers,
directors, and employees of the Company and its subsidiaries. The purpose of the
plans is to promote the best interests of the Company and its stockholders by
providing a means of non-cash remuneration to eligible participants who
contribute to the operating progress of the Company. The plans are administered
by the Company's Board of Directors or a committee thereof and has the
discretion to determine:
o the eligible participants to receive an award;
o the number of shares of stock issuable directly or to be granted
pursuant to an option;
o the price at which an option may be exercised;
o the price per share in cash, cancellation of fees, or other payment
which the Company or its subsidiaries are liable for a direct issue of
stock; and
o all other terms under which each option shall be granted.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In reading the following, the reader should be aware that one June 23, 2000,
TeleServices completed a combination (reverse-split) of its outstanding (but not
authorized) common stock, whereby one post-split share was issued for every ten
pre-split shares. Transactions dated prior to June 23, 2000 describe shares of
common stock on a pre-split basis.
In connection with the Company's August 23, 2000 acquisition of
GeneralSearch.com, Inc., Michele J. Bruss, the wife of Jeffrey Bruss, received
17,804,348 shares (post-split) of the Company's common stock in exchange for her
shares of GeneralSearch. As part of the acquisition agreement, Mr. Bruss became
a director of the Company.
In connection with the Company's private placement of Series A Convertible
Preferred Stock, Frank Ragano and his wife purchased 25,000 Series A shares for
$50,000 in August 1999. Mr. Ragano subsequently became a director of the
Company. The purchase was made on the same terms as other investors in the
offering.
In connection with the Company's private placement of Series A Convertible
Preferred Stock, a trust benefiting the children of Robert P. Gordon, an officer
and director of the Company, purchased 50,000 shares for $100,000 in January
2000. The purchase
18
<PAGE> 23
was made on the same terms as other investors in the offering. Mr. Gordon
disclaims any control over the trust or any beneficial ownership of the shares
of Series A Convertible Preferred Stock purchased by the trust.
On December 15, 1999, the board of directors of the Company authorized the
issuance of 9,500,000 shares of restricted common stock and a warrant to
purchase 9,500,000 shares of restricted common stock for a period of five years
at an exercise price of $.04 per share, to Robert P. Gordon, an officer and
director of the Company. The stock and warrants were issued in cancellation of
$380,000 in principal owed to Mr. Gordon for funds previously loaned to the
Company by Mr. Gordon.
On November 19, 1999, the board of directors of the Company authorized the
issuance of 16,537,880 shares of restricted common stock and a warrant to
purchase 16,537,880 shares of restricted common stock for a period of five years
at an exercise price of $.04 per share, to Robert P. Gordon, an officer and
director of the Company. The stock and warrants were issued in cancellation of
$826,894 in principal and interest owed to Mr. Gordon for funds previously
loaned to the Company by Mr. Gordon.
On April 23, 1998, the Company entered into a Revolving Credit Loan Agreement
and Revolving Credit Master Note with Robert P. Gordon, the Company's Chairman,
whereby Mr. Gordon would loan, at his discretion, up to $5 million to
TeleServices 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 Company, at the option of Mr. Gordon. On February
22, 1999, Mr. Gordon elected to convert $1 million in principal due under the
loan into shares of restricted common stock at the conversion rate of $.15 per
share, resulting in the issuance of 6,666,667 shares.
TeleServices acquired a controlling interest in VSI from certain VSI
shareholders in September 1996, and completed an exchange offer with the
remaining VSI shareholders in early 1997. Pursuant to the acquisition of VSI,
the Company issued shares of TeleServices common stock to the following persons
in exchange for their controlling interest (over 80%) of VSI:
o Robert P. Gordon: 11,585,472 shares
o Elizabeth Gordon (wife of Robert P. Gordon): 1,409,857 shares
o Mr. And Mrs. Gordon, jointly: 48,750 shares
o Harvest International of America, Inc. (a corporation controlled by Robert
P. Gordon): 362,010 shares
o James F. Gordon (brother of Robert P. Gordon): 1,814,206 shares
The reorganization was reported on Form 8-K dated September 30, 1996.
In October 1996, TeleServices raised $843,750.75 in cash through a private
placement of its common stock. The Company sold 1,124,999 shares of common
stock, par value $.0001 per share, at a cash purchase price of $0.75 per share
to the following parties:
o Stephen G. McLean, a former officer and director of both TeleServices and
VSI, purchased 33,333 shares.
o Paul W. Henry, an officer and director of both TeleServices and VSI,
purchased 50,000 shares, which includes 15,000 shares in the name of his
minor son.
o R.P. Gordon Children Family Trust, a trust benefiting the minor children of
Robert P. Gordon, purchased 333,333 shares. Mr. Gordon has no control over
and disclaims any interest in the trust, beneficial or otherwise.
o Robert J. Conrads, a former director of VSI, purchased 400,000 shares.
o Michael Gordon, brother of Robert P. Gordon and a current director of
TeleServices, purchased 33,333 shares.
o Samuel Jacobs, a former officer of VSI, purchased 33,333 shares.
o Russel R. Uhlmann, Jr., a former officer of VSI, purchased 33,333 shares.
VSI was indebted to Robert P. Gordon in the amount of approximately $1,829,965
in principal for funds loaned to VSI, plus accrued interest. Robert P. Gordon
agreed to convert his debt into shares of restricted common stock of VSI, in
whole or in part, at the rate of $.75 per share. On September 26, 1996, 2
million shares of VSI restricted stock were issued to Robert P. Gordon for the
conversion of $1,500,000 in principal owed to him by VSI. On October 15, 1996,
439,953 shares of restricted stock were issued to Robert P. Gordon for the
conversion of the remaining principal balance of $329,965 owed to him by VSI.
All shares of common stock were converted into shares of restricted common stock
of the Company pursuant to the reorganization described above.
19
<PAGE> 24
SELLING SECURITYHOLDERS
The following table sets forth the names of the selling securityholders, the
number of shares of common stock beneficially owned by each selling
securityholder as of August 30, 2000, the number of shares that each may offer,
and the number of shares of common stock beneficially owned by each selling
securityholder upon completion of the offering, assuming all of the shares are
sold. The number of shares sold by each selling securityholder may depend upon a
number of factors, including the market price of the common stock. None of the
selling securityholders has, or within the past three years has had, any
position, office, or other material relationship with us or any of our
predecessors or affiliates.
<TABLE>
<CAPTION>
SHARES
MAXIMUM BENEFICIALLY
SHARES SHARES OWNED AFTER
BENEFICIALLY OFFERED IN OFFERING
NAME OF SELLING OWNED PRIOR OFFERING ------------------------
SECURITYHOLDER TO OFFERING (1) NUMBER(2) NUMBER PERCENT
-------------- --------------- --------- ------ -------
<S> <C> <C> <C> <C>
Basic Investments, Ltd. 3,197,792 3,197,792 0 0
Margaret A. Alesci 60,378 60,378 0 0
Angel Alfaro 46,290 46,290 0 0
Robert Rheintgen
& Virginia Berg Rheintgen 2,012,591 2,012,591 0 0
Andrew G. & Iidiko Boyer 100,630 100,630 0 0
Dave E. Braman 145,630 100,630 45,000 *
Myriam C. Castellano 24,151 24,151 0 0
Ken Dandar 1,106,925 1,106,925 0 0
Cheryl Demler 281,886 221,386 60,500 *
Douglas Emery 100,630 100,630 0 0
Eric T. Evans 62,378 60,378 2,000 *
James R. Gardner, Jr. 40,252 40,252 0 0
William Georgiou 20,126 20,126 0 0
John A. Geremia 42,752 40,252 2,500 *
Michael Gerwe 80,504 80,504 0 0
Michael Gerwe, Jr. 80,504 80,504 0 0
Gordon Children Trust of 2000 (3) 301,889 301,889 0 0
James F. Gordon (4) 200,000 200,000 0 0
James Harrison 80,504 80,504 0 0
Bill Hartman 100,630 100,630 0 0
Joseph R. Klammer 63,378 60,378 3,000 *
Frank J. Manfredi 733,652 583,652 150,000 *
</TABLE>
20
<PAGE> 25
<TABLE>
<S> <C> <C> <C> <C>
James A. and Jana Marx 100,504 80,504 20,000 *
Teresa I. Morgan 549,437 549,437 0 0
PDP Properties, LLC 40,252 40,252 0 0
Cesare A. Piccirilli 145,881 140,881 5,000 *
Frank & Myra Ragano (5) 342,460 201,260 141,200 *
Beshara E. Salwan 472,896 462,896 10,000 *
Mario F. Salwan 865,162 825,162 40,000 *
Guy Bradley Savelli 840,162 825,162 15,000 *
Aaron Sharp 20,126 20,126 0 0
Alberto Souto 24,151 24,000 0 0
Rebecca Walter 1,421,314 1,408,814 12,500 *
Harold Werth, Jr. 256,134 181,134 75,000 *
Thomas F.X. Zaller 80,504 80,504 0 0
</TABLE>
* Represents less than one percent.
(1) Unless otherwise indicated, each person has sole investment and voting
power with respect to the shares indicated. For purposes of computing
the percentage of outstanding shares held by each selling
securityholder on August 30, 2000, any security that such person has
the right to acquire within 60 days after such date is deemed to be
outstanding for the purpose of computing the percentage ownership for
such person. However, such securities are not deemed to be outstanding
for the purpose of computing the percentage ownership of any other
person.
(2) Includes the following:
o Shares of common stock currently outstanding; and
o Shares of common stock issuable upon exercise of warrants
(3) The trust benefits the children of Robert P. Gordon, an officer and
director of the company. Mr. Gordon has no control over and disclaims
any interest in the trust, beneficial of otherwise.
(4) James F. Gordon is the brother of Robert P. Gordon, an officer and
director of the company.
(5) Frank Ragano is a director of the company.
We are registering the shares for resale by selling securityholders in
accordance with registration rights granted to them. We will pay the
registration and filing fees, printing expenses, listing fees, blue sky fees (if
any), and fees and disbursements of our counsel in connection with this
offering. The selling securityholders will pay any underwriting discounts,
selling commissions, and similar expenses relating to the sale of our shares, as
well as the fees and expenses of their counsel.
In addition, we have agreed to indemnify certain selling securityholders,
underwriters who may be selected by the selling securityholders, and certain
affiliated parties against certain liabilities in connection with the offering,
including liabilities under the Securities Act. The selling securityholders may
agree to indemnify any agent, dealer, or broker-dealer that participates in
transactions involving sales of the shares against certain liabilities,
including liabilities under the Securities Act. The selling securityholders have
agreed to indemnify us and our directors and officers, as well as any person
controlling the company, against certain liabilities, including liabilities
under the Securities Act.
21
<PAGE> 26
Insofar as indemnification for liabilities under the Securities Act may be
permitted to our directors or officers, or persons controlling the company, we
have been informed that in the opinion of the SEC such indemnification is
against public policy and is unenforceable.
PLAN OF DISTRIBUTION
The selling securityholders may, from time to time, sell all or a portion of the
shares on the OTC Bulletin Board, in privately negotiated transactions or
otherwise, at fixed prices that may be changed, at market prices prevailing at
the time of sale, at prices related to such market prices, or at negotiated
prices. The shares may be sold by the selling securityholders by one or more of
the following methods, without limitation:
(a) block trades in which the broker or dealer will attempt to sell the
shares as agent, but may position and resell a portion of the block as
principal to facilitate the transaction,
(b) purchases by a broker or dealer as principal and resale by such broker
or dealer for its account pursuant to this prospectus,
(c) an exchange distribution in accordance with the rules of such an
exchange,
(d) ordinary brokerage transactions and transactions in which the broker
solicits purchasers,
(e) privately negotiated transactions,
(f) short sales and
(g) a combination of any such methods of sale. In effecting sales, brokers
and dealers engaged by the selling securityholders may arrange for
other brokers or dealers to participate. Brokers or dealers may receive
commissions or discounts from the selling securityholders or, if any
such broker-dealer acts as agent for the purchaser of such shares, from
such purchaser, in amounts to be negotiated which are not expected to
exceed those customary in the types of transactions involved.
Broker-dealers may agree with the selling securityholders to sell a specified
number of such shares at a stipulated price per share. To the extent a
broker-dealer is unable to do so acting as an agent for a selling
securityholder, the broker-dealer may purchase as principal any unsold shares at
the price required to fulfill its commitment to the selling securityholders.
Broker-dealers who acquire shares as principal may subsequently resell such
shares from time to time in transactions (which may involve block transactions
and sales to and through other broker-dealers, including transactions of the
nature described above) in the over-the-counter market or otherwise. Such
resales may be at prices and on terms then prevailing at the time of sale, at
prices related to the current market price, or in negotiated transactions. In
connection with such resales, broker-dealers may pay to or receive from the
purchasers of such shares commissions as described above. The selling
securityholders may also sell the shares in accordance with Rule 144 under the
Securities Act, rather than pursuant to this prospectus.
The selling securityholders and any broker-dealers or agents that participate
with the selling securityholders in sales of the shares may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales. In such event, any commissions received by such broker-dealers or agents
and any profit on the resale of the shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
The company is required to pay all fees and expenses incident to the
registration of the shares. The company has agreed to indemnify certain selling
securityholders against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act.
DESCRIPTION OF SECURITIES
CAPITAL STOCK
The authorized capital stock of the company consists of 300 million shares of
common stock, par value $.0001 per share and 10 million shares of preferred
stock, par value $.001 per share.
22
<PAGE> 27
COMMON STOCK
On June 23, 2000, TeleServices completed a combination (reverse-split) of
TeleServices' outstanding, but not authorized, common stock, whereby one
post-split share was issued for every ten pre-split shares. This combination was
approved by the company's shareholders at a meeting held on March 27, 2000.
As of August 30, 2000, there were 76,918,548 shares of common stock outstanding.
Each share of common stock is entitled to one vote on all matters to be voted
upon by the shareholders generally. The shares do not have cumulative voting
rights, which means that holders of more than 50% of the shares of common stock
voting for the election of directors can elect all the directors, and that in
such an event the holders of the remaining shares would not be able to elect a
single director. Common stock shareholders are entitled to receive pro-rata such
dividends, if any, as may be declared from time to time by the board of
directors out of funds legally available therefor subject to the rights of any
holders of preferred stock. However, it is the present intention of the company
not to pay cash dividends to holders of common stock, but to reinvest company
earnings, if any. In the event of liquidation, dissolution, or winding up of the
company, common stock shareholders are entitled to share pro-rata in all assets
remaining after payment of liabilities and the preferences of any preferred
shareholders. Shares of common stock have no preemptive, conversion or other
subscription rights. There are no redemption or sinking fund provisions
applicable to the common stock.
PREFERRED STOCK
TeleServices' Articles of Incorporation authorize the company to issue 10
million shares of preferred stock, $.001 par value. Of this, 1,250,000 shares
have been issued. The preferred stock may be divided into and issued in one or
more series as determined by resolution of the board of directors. The board of
directors is authorized, without any further action by the shareholders, to
determine dividend rates, liquidation preferences, redemption provisions,
sinking fund provisions, conversion rights, voting rights, and other rights,
preferences, privileges and restrictions of any wholly unissued series of
preferred stock, as well as the number of shares constituting any such series.
In addition, such preferred stock could have other rights, including voting and
economic rights senior to the common stock, so that the issuance of such
preferred stock could adversely affect the market value of the common stock. The
creation of one or more series of preferred stock also may have the effect of
delaying, deferring or preventing a change in control of the company without any
action by shareholders.
The company has designated 1,250,000 shares of preferred stock as "Series A
Convertible Preferred Stock," all of which has been issued. The dividend rates,
liquidation preferences, redemption provisions, sinking fund provisions,
conversion rights, voting rights, and other rights, preferences, privileges and
restrictions are set forth in the "Designation of Rights and Preferences of
Series A Convertible Preferred Stock" that was filed as an amendment to the
company's Articles of Incorporation on March 31, 2000.
TeleServices' Articles of Incorporation have been amended to rescind the
existing Designation of Rights and Preferences of Series A Convertible Preferred
Stock and replace it with a revised designation which reflects that 1,250,000
shares were sold and provides that each share of Series A Convertible Preferred
Stock:
o has a stated value of $2.00;
o has a liquidation preference of $2.00;
o bears interest at the rate of 10% per annum, payable in cash or in
shares of restricted common stock, at the option of the Company;
o is convertible into 40 shares of restricted common stock at a
conversion rate of $.05 per share and a warrant entitling the
holder to purchase an additional 40 shares of restricted common
stock for a period of 5 years at an exercise price of $.20 per
share;
o is generally non-voting; and
o is redeemable by the Company if the Company's common stock trades
above $1.00.
As of August 30, 2000, all 1,250,000 shares of Series A Convertible Preferred
Stock were converted into shares of common stock and common stock purchase
warrants.
23
<PAGE> 28
LEGAL MATTERS
Futro & Trauernicht, LLC, Attorneys and Counselors at Law, (the "Firm"), has
acted as our counsel and has given its opinion as to the validity of the
original issuance of the securities registered in this registration statement.
Our Board has granted options to a member of the Firm, who currently holds the
following options: 1) 180,000 options exercisable at $.70 per share; and 2)
1,000,000 options exercisable at $1.00 per share.
INDEMNIFICATION DISCLOSURE FOR SECURITIES ACT LIABILITIES
Indemnification for liabilities under the Securities Act may be permitted to
directors, officers, and controlling persons of the company pursuant to the
Florida General Corporation Law, the company's Articles of Incorporation (as
amended) or Bylaws, or otherwise. However, the company has been advised that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
In the event that a claim for indemnification against such liabilities is
asserted by a director, officer, or controlling person in connection with the
securities being registered, the company will submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act. TeleServices will be governed
by the final adjudication of this issue. Such action will not be necessary if,
in the opinion of the company's counsel, controlling precedent has settled the
question.
Payment by the company of expenses incurred or paid by a director, officer, or
controlling person of the company in the successful defense of any action, suit,
or proceeding is not subject to the public policy limitations on
indemnification.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
On June 27, 2000, TeleServices engaged the accounting firm of BDO Seidman LLP to
serve as its new principal independent accountant. BDO Seidman LLP replaces
Schumacher & Associates, Inc. as the Company's principal auditor.
The dismissal of Schumacher & Associates, Inc., was approved by the
TeleServices' board of directors on June 27, 2000.
The former accountant's report on the financial statements for each of the past
two fiscal years contained a "going concern" qualification. However, it did not
contain an adverse opinion or disclaimer of opinion, and was not qualified or
modified as to uncertainty, audit scope, or accounting principles.
During the two most recent fiscal years and the subsequent interim period
preceding the dismissal of Schumacher & Associates, Inc., there were no
disagreements with the former accountant on any matters of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure.
Which disagreement(s), if any, if not resolved to the satisfaction of the former
accountant would have caused it to make reference to the subject matter of the
disagreement(s), if any, in connection with its reports.
24
<PAGE> 29
WHERE YOU CAN FIND MORE INFORMATION
We file reports and other information with the Securities and Exchange
Commission. You may read and copy any document we file at the Public Reference
Room of the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 and at the Regional Offices of the Commission at Seven World Trade Center,
Suite 1300, New York, New York 10048 and at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Please call 1-800-SEC-0330 for further information
concerning the Public Reference Room. Our filings are also available to the
public on the Commission's website at www.sec.gov.
We are not required to deliver an annual report to shareholders. However, upon
request, we will provide, at no cost to our shareholders, annual reports
containing audited financial statements. You may request a copy of these filings
by writing or calling us at:
TELESERVICES INTERNET GROUP INC.
100 Second Avenue South, Suite 1000
St. Petersburg, Florida 33701
Attn: Investor Relations
Telephone: (727) 895-4410
FINANCIAL STATEMENTS
The audited financial statements of the company as of December 31, 1998 and
December 31, 1999 were audited by Schumacher & Associates, Inc., CPA's, an
independent public accounting firm located in Denver, Colorado. Their report
regarding the company's financial statements is included in this prospectus in
reliance upon their authority as experts in accounting, auditing, and giving
such reports.
The company's Financial Statements and Independent Auditor's Report for the
fiscal years ending December 31, 1999 and December 31, 1998 are included.
Also included are the company's unaudited financial statements for the period
ended June 30, 2000.
25
<PAGE> 30
<TABLE>
<CAPTION>
INDEX PAGE
----- ----
<S> <C>
1. Consolidated Financial Statements F-2
December 1999, and 1998
2. Unaudited Consolidated Financial Statements F-17
June 30, 2000
</TABLE>
F-1
<PAGE> 31
TELESERVICES INTERNET GROUP INC.
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
December 31, 1998
F-2
<PAGE> 32
<TABLE>
<CAPTION>
INDEX
----- Pages
-----
<S> <C>
Report of Independent Certified Public Accountants F4
Consolidated Financial Statements:
Consolidated Balance Sheet F5
Consolidated Statements of Operations F6
Consolidated Statements of Cash Flows F7
Consolidated Statement of Changes in Stockholders' Deficit F8
Notes to Consolidated Financial Statements F9 - F16
</TABLE>
F-3
<PAGE> 33
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
TeleServices Internet Group Inc.
We have audited the accompanying consolidated balance sheet of TeleServices
Internet Group Inc. as of December 31, 1999, and the related statements of
operations, changes in stockholders' (deficit), and cash flows for the two years
ended December 31, 1999 and 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of TeleServices
Internet Group Inc. as of December 31, 1999, and the results of its operations,
its changes in stockholders' (deficit) and its cash flows for the two years
ended December 31, 1999 and 1998, in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 3 to the
accompanying financial statements, the Company has suffered recurring losses
from operations and has a net capital deficiency. These conditions raise
substantial doubt about the ability of 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.
Schumacher & Associates, Inc.
Certified Public Accountants
2525 15th Street, Suite 3H
Denver, CO 80211
February 11, 2000
F-4
<PAGE> 34
TeleServices Internet Group Inc.
Consolidated Balance Sheet
At December 31, 1999
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash, restricted (Note 2) $ 30,000
Other current assets 45,533
------------
Total current assets 75,533
Equipment, net of accumulated depreciation of
$417,970 (Note 5) 474,699
Other assets 4,255
------------
Total assets $ 554,487
============
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses (Notes 13, 14) $ 3,261,427
Loans payable, stockholder (Note 8) 165,387
Notes payable, current portion (Note 12) 256,599
Convertible debentures (Note 12) 300,000
Preferred stock subscription received (Note 11) 620,000
-----------
Total current liabilities 4,603,413
Long-term liabilities
Notes payable 17,352
------------
Total liabilities 4,620,765
------------
Commitments and Contingencies (See Notes)
Stockholders' (deficit):
Preferred stock, $.001 par value
10,000,000 shares authorized
No shares issued and outstanding
Common stock, $.0001 par value,
300,000,000 shares authorized,
240,083,155 shares issued and outstanding 25,059
Additional paid-in capital 42,555,647
Treasury Stock, 13,130 shares at cost (125,000)
Accumulated (deficit) (46,521,984)
------------
Total stockholders' (deficit) (4,066,278)
------------
Total liabilities and stockholders' (deficit) $ 554,487
============
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
F-5
<PAGE> 35
TeleServices Internet Group Inc.
Consolidated Statements of Operations
For the Years Ended December 31
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Total Revenues $ 395,767 $ 143,472
------------- -------------
Operating Expenses:
Salaries and contract services 2,948,153 1,285,268
Payroll taxes 335,858 349,547
Rent 305,042 316,383
Telephone 397,937 222,126
Travel and entertainment 221,060 98,641
Advertising and promotion 88,693 80,868
Depreciation and amortization 234,009 183,307
Outside advisory services 2,725,000 --
Other expenses (Note 6) 3,127,213 4,027,993
------------- -------------
Total operating expenses 10,382,965 6,564,133
------------- -------------
Net (loss) from operations (9,987,198) (6,420,661)
Other income (expenses):
Interest income 3,342 9,832
Interest (expense) (214,052) (201,867)
Discounts on stock conversions (2,815,143) (3,765,740)
------------- -------------
Net (loss) from continuing operations (13,013,051) (10,378,435)
------------- -------------
Discontinued operations:
Loss from operations of VSI (161,988) (1,443,816)
Gain on bankruptcy of VSI 4,541,689 --
------------- -------------
Total gain from discontinued operations 4,379,701 (1,443,816)
------------- -------------
Net (loss) $ (8,633,350) $ (11,822,251)
============= =============
Net (loss) per share $ (0.065) $ (0.23)
============= =============
Weighted Average Shares Outstanding 133,320,665 50,470,972
============= =============
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
F-6
<PAGE> 36
TeleServices Internet Group, Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) from continuing operations $(13,013,051) $(10,378,435)
Adjustments to reconcile net (loss) to
net cash (used in) operating activities:
Net gain from sale of affiliated business (325,323) --
Decrease in accounts receivable 71,347 154,118
Depreciation and Amortization 234,009 183,307
Increase in accounts payable and accrued expenses 1,474,864 1,000,105
(Increase) decrease in other assets 65,172 (116,115)
------------ ------------
Net cash (used in) operating activities (11,492,982) (9,157,021)
------------ ------------
Cash flows from investing activities:
(Acquisition) of equipment (341,615) (14,924)
(Investment) in affiliate company 706,309 (380,986)
------------ ------------
Net cash provided by (used in) investing activities 364,694 (395,910)
------------ ------------
Cash flows from financing activities:
(Repayment of) leases payable (18,790) (82,978)
Cash proceeds from (repayment of) loans from stockholders 34,292 4,044,024
Issuance of common stock 366,400 1,211,265
Preferred stock subscription received 620,000 --
Sale of convertible debentures 2,902,000 875,000
Acquisition of treasury stock -- (125,000)
(Repayment of) notes payable (54,722) (121,205)
(Increase) decrease in cash collateral 95,000
------------ ------------
Net cash provided by financing activities 3,849,180 5,895,806
------------ ------------
(Decrease) in cash (7,279,106) (3,657,126)
Cash, beginning of period -- --
Non-cash transactions 7,279,106 3,657,126
------------ ------------
Cash, end of period $ -- $ --
============ ============
Schedule of non-cash operating, financing and investing activities:
Net gain from discontinued operation (161,988) (1,443,816)
Net gain on disposal of discontinued operations 92,697
Repayment of stockholder loan (1,000,000) (2,752,244)
Issuance of common stock 11,825,397 7,925,185
Stock subscription receivable (72,000)
Conversion of debentures into common stock (3,477,000) --
------------ ------------
Increase in non-cash items $ 7,279,106 $ 3,657,125
============ ============
Interest paid $ 214,052 $ 201,867
============ ============
Income taxes paid $ -- $ --
============ ============
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
F-7
<PAGE> 37
TeleServices Internet Group Inc.
Consolidated Statement of Changes in Stockholders' (Deficit)
From December 31, 1997 through December 31, 1999
<TABLE>
<CAPTION>
Shares Additional
Common ------------ Paid-in Accumulated Treasury
Stock Amount Capital Deficit Stock Total
------------ ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 30,155,947 $ 3,016 $ 20,869,442 $(26,066,383) $ -- $ (5,193,925)
Issuance of Common Stock 34,815,691 3,482 8,757,969 -- -- 8,761,450
Imputed Interest on Convertible Debentures -- -- 375,000 -- -- 375,000
Acquisition of Treasury Stock -- -- -- -- (125,000) (125,000)
Net (loss) year ended December 31, 1998 -- -- -- (11,822,251) -- (11,822,251)
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 1998 64,971,638 6,498 30,002,411 (37,888,635) (125,000) (8,004,726)
Issuance of Common Stock 185,611,517 18,561 11,438,093 -- -- 11,456,654
Imputed Interest on Convertible Debentures -- -- 1,115,143 -- -- 1,115,143
Net (loss) year ended December 31, 1999 -- -- -- (8,633,350) -- (8,633,350)
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 1999 250,583,155 $ 25,059 $ 42,555,647 $(46,521,984) $ (125,000) $ (4,066,278)
============ ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
F-8
<PAGE> 38
TELESERVICES INTERNET GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998
(1) Organization and Operations:
TeleServices Internet Group Inc. (TSIG), formerly TeleServices
International Inc. and 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. The Company
changed its name to TeleServices Internet Group Inc. on July 8, 1999.
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. The Company's board of directors prepared a
unanimous written consent dated December 3, 1998 approving the acquisition
of AIT by TSIG from VSI by assumption of approximately $72,000 of AIT debt
and a credit to TSIG's intercompany receivable from VSI of $20,000. As a
transaction among wholly-owned subsidiaries of TSIG, there was neither a
contract nor a bill of sale documenting this transaction; there also was no
stock certificate prepared evidencing this transaction.
Compact Connection, Inc. (CCI), 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. CCI changed its name to The MusicCard Co. on January 19, 1999 and
then to My MusicCard Company (MMC) on February 16, 1999.
My Card, Inc. (MCI), a Delaware corporation, was incorporated on February
11, 1999, as a wholly-owned subsidiary of TSIG for the purpose of expanding
the Company's product lines and e-commerce business.
The source of sales revenue during the years 1999 and 1998 are summarized
as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
TSIG 0% 0%
VSI 0% 87%
AIT 30% 12%
MMC 37% 1%
MCI 33% 0%
---- -----
Total 100% 100%
</TABLE>
The proportion of revenues derived from VSI is no longer included in
the financial statements for either 1999 or 1998 as it is included in
the discontinued operations.
F-9
<PAGE> 39
TELESERVICES INTERNET GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998
(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 years ended December 31, 1999 and 1998, the accounts of
MMC since April 17, 1998 and the accounts of MCI since
February 11, 1999, the date if its formation. 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 December 31, 1999 the Company had no uninsured
cash balances, but at various times throughout the year, the
balance exceeded the insured limit.
(c) Income Tax
The Company has net operating loss carryovers totaling
approximately $46,000,000 at December 31, 1999, which expire
in various years through 2019. The Company has deferred tax
assets of approximately $6,900,000 at December 31, 1999
related to loss carryovers but due to the uncertainty of the
Company's ability to utilize these carryovers, a valuation
allowance of the total $6,900,000 has been provided.
Therefore, as of December 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. The equipment was principally owned by VSI, which filed
a petition for relief under Chapter 7 of the United States
Bankruptcy Code. The equipment was acquired by TSIG from the
trustee of the Bankruptcy Court at an appraised liquidation
value.
(e) Per Share Information
The per-share information is computed based upon the weighted
average shares outstanding.
F-10
<PAGE> 40
TELESERVICES INTERNET GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998
(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) Advertising and Promotion Costs
Advertising, promotion and sales materials 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) Restricted Cash
Included in cash on December 31, 1999 is $30,000 being held in
separate certificates of deposit as collateral for operating
licenses.
(j) Software Development
The Company incurred $215,000 in total outside costs related
to the development of computer software designed for the
purpose of providing an internet-based order transaction
system for MMC. At December 31, 1999, the net book value of
this software was $56,312.
(k) Write Down of Equipment Value
During 1999 and 1998, the Company wrote down the value of its
equipment and other assets by $100,000 and $325,000,
respectively, due to reasonable doubt as to its ability to be
able to recover the full value from future operations.
F-11
<PAGE> 41
TELESERVICES INTERNET GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998
(l) Investment in Affiliate
At December 31, 1998, TSIG had an investment in an affiliate
company totaling $380,986, equal to the costs related to
attempting to complete the proposed acquisition of certain
entities. During 1998, 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 current reporting period, the Company sold its
equity position for $706,000 in cash, resulting in a gain of
$326,000 recognized in 1999.
(m) Stock Issuance Discounts
During the year ended December 31, 1999 and 1998, the Company
recognized an expense totaling $1,115,143 and $375,000,
respectively, related to the conversion of convertible
debentures at a 30 percent discount to the public market price
at the time of conversion. In addition, in 1999, an expense of
$1,700,000 was recognized related to the conversion of a
stockholder loan into common shares at a below-market price of
$.15 (see Note 8). In 1998, the discount recognized on the
stockholder conversion was $3,390,740.
(n) Advisory and Consulting Fees
During 1999, the Company issued common stock with a value of
$2,725,000 for various consulting and advisory services
related to the financing and development of the Company and
its operations.
(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 Florida office facilities for a term of seven years.
On March 15, 1999, the Company entered into a 3-year operating lease
agreement for an office/warehouse facility in Southern California.
Minimum future rental payments due under operating leases with terms
greater than one year are summarized as follows:
F-12
<PAGE> 42
TELESERVICES INTERNET GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998
(4) Lease Commitments, continued
<TABLE>
<CAPTION>
Year ending December 31
<S> <C>
2000 $ 367,257
2001 $ 340,406
2002 $ 220,172
</TABLE>
(5) Equipment
The company's equipment as of December 31, 1999 is summarized as
follows:
<TABLE>
<S> <C>
Furniture, fixtures and office equipment $ 36,750
Telephone equipment 477,385
Computer equipment and software 357,694
Vehicles 20,841
---------
892,669
Accumulated depreciation (417,970)
---------
$ 474,699
=========
</TABLE>
(6) OTHER EXPENSES
In addition to normal other operating expenses, other expenses include
the following:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Provision for contingencies $ 360,000 $ 666,886
Write off software development 100,000 810,795
Provision for asset writedown -- 325,283
---------- ----------
$ 460,000 $1,802,964
========== ==========
</TABLE>
(7) VSI Bankruptcy
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, resulting in a net realized gain from the
liquidation of the assets and relief from liabilities of the business.
The gain, totaling $4,541,689, is summarized as follows:
<TABLE>
<S> <C>
Accounts payable & accrued expense $1,647,701
Notes & leases payable 78,243
Payroll taxes payable 611,083
Litigation reserve 2,477,809
----------
Total liabilities relieved 4,814,836
----------
</TABLE>
F-13
<PAGE> 43
TELESERVICES INTERNET GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998
(7) VSI Bankruptcy, continued
<TABLE>
<S> <C>
Current assets (128,664)
Property and equipment, net of depreciation (144,483)
-----------
Total assets disposed of (273,147)
-----------
Net Gain $ 4,541,689
-----------
</TABLE>
(8) Related Party Transactions
The stockholders of the Company have made various demand loans to the
Company for expansion and operating capital. During the year ended
December 31, 1999 the stockholders converted $1,380,000 into 16,166,667
shares of the common stock of the Company. During the year ended
December 31, 1998 the stockholders converted $2,752,244 into 17,110,522
shares of Common Stock.
As of December 31, 1999 loans payable to a stockholder totaled $5,387,
accruing interest at 11% per annum. This balance includes $160,000 of
compensation accrued but unpaid as of December 31, 1999. The loan is
payable on demand and is uncollateralized.
Effective December 4, 1998 TSIG entered into a five-year employment
agreement with its Chairman of the Board of Directors. Annual
compensation according to the terms of the agreement is $360,000. In
addition, the Chairman was awarded 5,000,000 shares of restricted
common stock of the Company for services. At December 4, 1998 the
closing price for the Company's common stock was $.25 per share. Due to
the large block and the restrictive nature of the stock issued for
services, the compensation was recorded at 50% of the closing price for
the common stock on December 4, 1998. The employment agreement also
entitles the Chairman to receive a car allowance, major medical
insurance benefits, indemnification from any claim or law suit which
may be asserted against him when acting as an officer of the Company
provided that said indemnification is not in violation of any federal
or state law or rule or regulation of the Securities and Exchange
commission. The agreement also contains certain provisions with respect
to disability, termination, confidentially and non-competition.
(9) Stock Options
On August 25, 1999, the Company's Board of Directors adopted the
TSIG.com 1999 Stock Plan, which consists of 25,000,000 shares. Also on
December 17, 1999, the Company's Board of Directors adopted the
TSIG.com Incentive Plan which consists of 30,000,000 shares. Options on
these shares are to be granted at the Board's discretion.
F-14
<PAGE> 44
TELESERVICES INTERNET GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998
(9) Stock Options, continued
<TABLE>
<CAPTION>
Number of Weighted Average
Options Exercise Price
---------- ---------------
<S> <C> <C>
Outstanding at December 31, 1998 3,643,726 $ .3027
Outstanding at December 31, 1999 30,988,703 $ .0708
Exercisable at December 31, 1999 30,988,703 $ .0708
Options granted during 1999 29,000,000 $ .0567
Options exercised during 1999 4,483,854 $ .077
Options forfeited or expired during 1999 1,171,169 $ .5825
</TABLE>
Options outstanding as of December 31, 1999 expire at various dates
through May 31, 2004.
(10) Common Stock
On July 31, 1999, the Company held a special meeting of the
shareholders, during which the number of authorized common shares was
increased to 300,000,000 from 100,000,000.
(11) 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. As of December 31, 1999, the Company had
received subscriptions and funds representing 310,000 shares of the
preferred stock at a price of $2.00 per share. However, no shares have
been issued and the $620,000 received has been recorded as a stock
subscription received liability. The shares will be issued upon
determination of the terms and necessary documentation related to the
transaction.
(12) Notes, Loans and Debentures Payable
The Company had notes and loans payable of approximately $274,000 at
December 31, 1999. The amounts due consist of $96,500 payable for the
repurchase of treasury stock, $20,588 for the purchase of a vehicle,
$112,000 in a bank loan owed by VSI but assumed by TSIG and $44,500 due
to individuals. All of the debts have a current due date with the
exception of the vehicle loan, which has a current maturity of $3,236
and a long-term maturity of $17,352.
In November 1998, the Company authorized the issuance of $2,000,000 of
convertible debentures. In 1998 and 1999, a total of $3,777,000 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. As of December 31, 1999,
$3,477,000 of the outstanding debentures plus accrued interest of
$73,072 were converted into a total of 83,077,994 shares of common
stock at an average price of $.0427 per share.
F-15
<PAGE> 45
TELESERVICES INTERNET GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998
(13) Contingent Liabilities
Creditors of VSI, including the Internal Revenue Service, may assert a
claim against TSIG. A contingency exists with respect to these matters,
including final determination if the transactions between TSIG and VSI
are legitimate transactions allowable by Federal Bankruptcy Code or if
they are determined to be in violation of preference of creditor
statutes, rules and regulations. A provision of $475,000 was accrued by
the Company for the trust fund portion of the federal payroll tax
withholdings owed by VSI and a provision of $130,000 was accrued for a
bank loan guaranteed by an officer of TSIG.
(14) 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.
(15) Fourth Quarter Adjustments
The Company recognized as expenses various previously unrecorded
accruals for potential litigation matters and various accrued expenses
and provisions for losses, which were recorded in the fourth quarter.
These fourth quarter adjustments totaled $360,000. Additionally, the
expenses related to stock issuance for outside advisory services and
the discounted stock conversion were recorded in the fourth quarter, a
total of $5,540,000.
F-16
<PAGE> 46
TELESERVICES INTERNET GROUP INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 2000
<TABLE>
<CAPTION>
INDEX Page
----- ----
<S> <C>
Consolidated Financial Statements (unaudited):
Consolidated Balance Sheets F18
Consolidated Statements of Operations F19
Consolidated Statement of Stockholders' Deficit F20
Consolidated Statements of Cash Flows F21
Notes to Consolidated Financial Statements F22 - F28
</TABLE>
F-17
<PAGE> 47
TELESERVICES INTERNET GROUP INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
June 30, 2000 1999
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 11,501 $ --
Cash, restricted 30,000 30,000
Other current assets 122,787 45,533
------------ ------------
Total Current Assets $ 164,288 $ 75,533
Officer loan receivable, net 161,138 --
Equipment, net of accumulated depreciation 307,566 474,699
Other assets 6,948 4,255
------------ ------------
Total Assets $ 639,940 $ 554,487
============ ============
LIABILITIES AND CAPITAL DEFICIT
Current Liabilities:
Accounts payable and accrued expenses $ 3,406,222 $ 3,261,427
Loans payable, stockholder -- 165,387
Loans payable, related party 705,348 --
Notes payable, current portion 241,563 256,599
Convertible debentures -- 300,000
Preferred stock subscription received -- 620,000
------------ ------------
Total Current Liabilities $ 4,353,133 $ 4,603,413
Long-term liabilities
Notes payable, less current portion 15,684 17,352
------------ ------------
Total Liabilities $ 4,368,817 $ 4,620,765
------------ ------------
Stockholders' deficit:
Preferred stock, $2.00 stated value
10,000,000 shares authorized, 1,250 --
1,250,000 issued and outstanding
Common stock, $.0001 par value
300,000,000 shares authorized,
28,163,415 and 25,058,316 shares issued and outstanding 2,816 2,506
Additional paid-in capital 54,615,072 42,578,200
Treasury stock, 13,130 shares at cost (125,000) (125,000)
Accumulated deficit (58,223,015) (46,521,984)
------------ ------------
Total Stockholders' deficit (3,728,877) (4,066,278)
------------ ------------
Total Liabilities and Stockholders' deficit $ 639,940 $ 554,487
============ ============
</TABLE>
F-18
<PAGE> 48
TELESERVICES INTERNET GROUP INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Total Revenues $ 56,125 $ 164,910 $ 107,233 $ 267,211
------------ ------------ ------------ ------------
Operating Expenses
Salaries & contract services 499,696 744,746 1,128,910 1,454,835
Payroll taxes and benefits 45,860 118,063 88,917 196,300
Rent 95,446 83,903 182,257 123,288
Telephone 61,153 102,842 132,374 241,028
Travel and entertainment 52,093 82,249 93,489 169,496
Advertising and promotion 1,365 39,476 40,536 56,843
Depreciation and amortization 86,118 55,439 173,088 89,902
Outside advisory services 4,485,438 -- 7,853,199
Other expenses 1,314,007 474,851 2,036,143 853,162
------------ ------------ ------------ ------------
Total Operating Expenses 6,641,176 1,701,569 11,728,913 3,184,854
------------ ------------ ------------ ------------
Net (loss) from operations (6,585,051) (1,536,659) (11,621,680) (2,917,643)
Other income (expenses)
Interest income 20,689 818 25,502 2,664
Interest (expense) (116,915) (37,008) (117,731) (60,188)
Gain on sale of assets -- -- 12,875 --
------------ ------------ ------------ ------------
Total Other Income (Expense) (96,226) (36,190) (79,354) (57,524)
------------ ------------ ------------ ------------
Net (loss) from continuing operations (6,681,277) (1,572,849) (11,701,034) (2,975,167)
------------ ------------ ------------ ------------
Discontinued operations:
Loss from operations of VSI -- -- -- (161,988)
Gain on liquidation of subsidiary -- -- -- 4,541,689
------------ ------------ ------------ ------------
Total gain from discontinued operations -- -- -- 4,379,701
------------ ------------ ------------ ------------
Net income (loss) (6,681,277) (1,572,849) (11,701,034) 1,404,534
Preferred Stock dividends (62,334) -- (18,812,334) --
------------ ------------ ------------ ------------
Net income (loss) applicable to Common Stock $ (6,743,611) $ (1,572,849) $(30,513,368) $ 1,404,534
============ ============ ============ ============
Basic and diluted loss per common share:
Continuing operations (0.243) (0.178) (1.134) (0.372)
From discontinued operations -- -- -- 0.547
------------ ------------ ------------ ------------
Net income (loss) per common share: $ (0.243) $ (0.178) $ (1.134) $ 0.175
============ ============ ============ ============
Weighted Average
Shares Outstanding 27,753,817 8,856,333 26,911,736 8,005,504
============ ============ ============ ============
</TABLE>
F-19
<PAGE> 49
TELESERVICES INTERNET GROUP, INC. AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' (Deficit)
From December 31, 1999 through June 30, 2000
<TABLE>
<CAPTION>
Common Preferred Additional
Stock Stock Paid-in
Shares Amount Shares Amount Capital
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1999 25,058,316 $ 2,506 $ 42,578,200
Conversion of debt to common stock 620,120 62 -- -- 299,938
Issuance of common stock in settlements 205,392 20 -- -- 390,614
Repricing of stock options -- -- -- -- 2,518,548
Exercise of options for services 290,000 29 -- -- 863,000
Exercise of options for cash 745,924 75 -- -- 588,485
Issuance of Preferred Stock -- -- 1,250,000 1,250 2,498,750
Net loss quarter ended March 31, 2000 -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance, March 31, 2000 26,919,752 2,692 1,250,000 1,250 49,737,535
------------ ------------ ------------ ------------ ------------
Repricing of stock options -- -- -- -- 2,960,000
Exercise of options 800,000 80 -- -- 399,920
Adjustment to reconcile with
transfer agent (6,337) (1) -- -- 1
Issuance of common stock in settlement 450,000 45 -- -- 1,079,950
Issuance of options for services -- -- -- -- 500,000
Accrued preferred stock dividends -- -- -- -- (62,334)
Net loss quarter ended June 30, 2000 -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance, June 30, 2000 28,163,415 $ 2,816 1,250,000 $ 1,250 $ 54,615,072
------------ ------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
Accumulated Treasury
Deficit Stock Total
------------ ------------ ------------
<S> <C> <C> <C>
Balance, December 31, 1999 $(46,521,984) $ (125,000) $ (4,066,278)
Conversion of debt to common stock -- -- 300,000
Issuance of common stock in settlements -- -- 390,634
Repricing of stock options -- -- 2,518,548
Exercise of options for services -- -- 863,029
Exercise of options for cash -- -- 588,560
Issuance of Preferred Stock -- -- 2,500,000
Net loss quarter ended March 31, 2000 (5,019,754) -- (5,019,754)
------------ ------------ ------------
Balance, March 31, 2000 (51,541,738) (125,000) (1,925,261)
------------ ------------ ------------
Repricing of stock options -- -- 2,960,000
Exercise of options -- -- 400,000
Adjustment to reconcile with
transfer agent -- -- --
Issuance of common stock in settlement -- -- 1,079,995
Issuance of options for services -- -- 500,000
Accrued preferred stock dividends -- -- (62,334)
Net loss quarter ended June 30, 2000 (6,681,277) -- (6,681,277)
------------ ------------ ------------
Balance, June 30, 2000 $(58,223,015) $ (125,000) $ (3,728,877)
------------ ------------ ------------
</TABLE>
F-20
<PAGE> 50
TELESERVICES INTERNET GROUP INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flow
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Six Months Six Months
Ended June 30 Ended June 30
2000 1999
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(11,701,034) $ (2,975,167)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Services paid through issuance of common stock and options 8,687,281 --
Net gain from sale of affiliated business -- (325,323)
Depreciation and amortization 173,088 89,902
Changes in current assets and liabilities:
Decrease (increase) in accounts receivable (2,877) 8,442
Decrease (increase) in prepaid marketing expense -- (809,065)
(Increase) decrease in other assets (77,070) 58,261
(Increase) decrease in accounts payable and accrued expenses 87,013 876,247
------------ ------------
Net cash (used in) operating activities: (2,833,599) (3,076,703)
------------ ------------
Cash flows from investing activities:
Acquisition disposal of equipment (5,156) (221,285)
(Acquisition) disposal of new business -- 706,309
Net advances to officer (161,138) --
------------ ------------
Net cash (used in) investing activities: (166,294) 485,024
------------ ------------
Cash flows from financing activities:
Repayment of loans payable (16,704) (18,790)
Cash proceeds from (repayment of)
loans from stockholders (165,387.00) 320,484
Cash proceeds from related party note payable 700,000 --
Issuance of common stock 623,475 166,400
Issuance of preferred stock 1,870,010 --
Sale of convertible debentures -- 2,064,000
Repayment of notes payable -- (102,110)
(Increase) decrease in cash collateral -- 50,000
------------ ------------
Net cash provided by financing activities: 3,011,394 2,479,984
------------ ------------
Increase (decrease) in cash 11,501 (111,695)
Cash, beginning of period -- --
Non-cash transactions -- 111,695
------------ ------------
Cash, end of period $ 11,501 $ --
============ ============
Schedule of non-cash operating, financing and investing activities:
Net gain from discontinued operation -- (161,988)
Net gain on disposal of discontinued operations -- (141,649)
Repayment of stockholder loan -- (1,000,000)
Issuance of common stock -- 3,690,404
Stock subscription received 620,000 (488,000)
Conversion of debentures into common stock 300,000 (1,787,072)
------------ ------------
Increase in non-cash items 920,000 111,695
============ ============
Interest paid $ 19,819 $ 60,188
============ ============
Income taxes paid $ -- $ --
============ ============
</TABLE>
F-21
<PAGE> 51
TELESERVICES INTERNET GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
(1) Condensed Financial Statements:
The financial statements included herein have been prepared by
TeleServices Internet Group Inc. (Company) without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted as allowed by such
rules and regulations, and the Company believes that the disclosures
are adequate to make the information presented not misleading. It is
suggested that these financial statements are read in conjunction with
the December 31, 1999 audited financial statements and the accompanying
notes thereto. While management believes the procedures followed in
preparing these financial statements are reasonable, the accuracy of
the amounts are in some respects dependent upon the facts that will
exist, and procedures that will be accomplished by the Company later in
the year.
The management of the Company believes that the accompanying unaudited
condensed financial statements contain all adjustments (including
normal recurring adjustments) necessary to present fairly the
operations and cash flows for the periods presented.
(2) Basis of Presentation - Going Concern
The Company's consolidated financial statements are presented on the
going concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. However,
the Company has sustained recurring operating losses since its
inception and has a working capital deficit of $4,188,845 and a
stockholder deficit of $3,728,877 as of June 30, 2000 and has not begun
to generate any significant revenues from its Internet business. The
Company is materially delinquent on payments to various creditor
obligations including the Internal Revenue Service. These conditions
raise substantial doubt about the Company's ability to continue as a
going concern. The consolidated financial statements do not include any
adjustments to reflect the possible future affects on the
recoverability and classification of assets or the amounts and
classification of liabilities that may result from the possible
inability of the Company to continue as a going concern.
Management is attempting to expand its operation through the potential
acquisition of three companies through a stock exchange (see Note 5)
which management believes will be synergistic with its existing
Internet business. The Company has continued to raise capital through
the issuance of preferred stock on March 31, 2000 and the issuance of
common stock and borrowings under promissory notes during the three
months ended June 30, 2000. Management is attempting to raise
additional capital and has engaged an investment-banking firm to assist
with its acquisitions and capital formation.
F-22
<PAGE> 52
TELESERVICES INTERNET GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
(3) Net Income (Loss) Per Common Share
Basic EPS is calculated by dividing the income (loss) available to
common shareholders by the weighted average number of common shares
outstanding for the period without consideration for potential common
shares. Potential common shares were not included for the three or six
months ended June 30, 2000 since their effects are antidilutive under
the treasury stock method for options and warrants and if-converted
method for convertible preferred stock. Potential common shares consist
of options and common stock warrants and shares of convertible
preferred stock.
(4) Payroll Tax Liability
Visitors Services, Inc. ("VSI"), a formerly wholly owned subsidiary
filed 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. Creditors of VSI, including the Internal
Revenue Service, may assert a claim against the Company. A contingency
exists with respect to these matters, including final determination if
the transactions between the Company and VSI are legitimate
transactions allowable by Federal Bankruptcy Code or if they are
determined to be in violation of preference of creditor statutes, rules
and regulations. A provision of $475,000 was accrued by the Company as
of December 31, 1999 for the trust fund portion of the federal payroll
tax withholding owed by TSI. In June 2000, the Company accrued an
additional $130,588 related to additional penalties and interest
pursuant to a recent statement of account from the Internal Revenue
Service. As of June 30, 2000, the Company had accrued $605,588 related
to this contingent liability. The Company has also accrued $571,992 in
federal payroll taxes due and unpaid for 1999 and the fourth quarter of
1998. Management is in frequent contact with the Internal Revenue
Service and intends to use proceeds from capital raised subsequent to
its planned acquisitions to pay these obligations.
Common Stock and Options Issued
On January 3, 2000, the Company converted $300,000 in previously issued
debt to 620,120 shares of common stock at the previously agreed upon
conversion price equal to 70% the average bid price immediately
preceding the date of conversion or $.484 per share.
In January 2000, the Company charged operations for $390,634 related to
the issuance of 620,120 shares of common stock in settlement of several
disputes with former consultants to the Company. The shares issued were
valued at on the market price of the stock on the date of issuance.
F-23
<PAGE> 53
TELESERVICES INTERNET GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
(5) Common Stock and Options Issued (continued)
During the three months ended March 31, 2000 the Company recorded a
$2,518,548 charge to operations related to the repricing of previously
granted options to purchase 835,925 shares of common stock that were
then immediately exercised. The charge to operations was determined by
comparing the repriced exercise price with the market price of the
Company's common stock on the date of repricing. These options were
held by current and former consultants to the Company.
During the three months ended March 31, 2000, the Company received
services valued at $863,029 in exchange for the exercise of previously
granted options to purchase 290,000 shares of common stock. All of
these options had been repriced immediately prior to exercise.
During the three months ended March 31, 2000, the Company received cash
of $588,560 in exchange for the exercise of previously granted options
to purchase 745,924 shares of common stock. All of these options had
been repriced immediately prior to exercise.
In April 2000, the Company received cash of $325,000 and services
valued at $75,000 for payment of the exercise price of previously
granted options to purchase 800,000 share of common stock. The exercise
price of the options was decreased from $1.00 to $.50 per share as a
result of the Company not filing a registration statement pursuant to a
consulting agreement. As a result, the Company recorded a $2,960,000
charge to operations for the difference between the market price of
$4.20 per share and the exercise price of $.50 per share.
In April 2000, the Company also issued 450,000 shares of common stock
in June 2000 pursuant to a settlement agreement with a consultant. The
Company recorded a $1,079,995 charge to operations resulting from this
settlement. The agreement requires the Company to issue 191,868 shares
of common stock on August 31, 2000 and each month end thereafter, if
the company does not file a registration statement covering shares the
consultant owns.
On May 15, 2000, the Company granted options to an officer/director to
purchase 450,000 shares of the Company's common stock with an exercise
price at market, or $1.40 per share. Options covering 50,000 shares
vest on July 1, 2000 and the balance of the options vest at the rate of
50,000 shares per quarter. The options expire on May 14, 2005.
On May 24, 2000, the Company granted options to purchase 140,000 share
of common stock with an exercised price of $1.00 per share. The value
of the options was not material and not recorded by the Company.
F-24
<PAGE> 54
TELESERVICES INTERNET GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
(5) Common Stock and Options Issued (continued)
During the three month period ended June 30, 2000, the Company issued
options to purchase 1,000,000 shares of common stock with an exercise
price of $1.00 to the Company's law firm for professional services. The
options were valued at $500,000 and charged to operations in June 2000
in accordance with Statement of Financial Accounting Standard No. 123
"Accounting for Stock-Based Compensation." The Company accelerated and
immediately vested previously granted options to acquire 180,000 shares
of common stock held by the law firm. The Company also accelerated and
immediately vested previously granted options to purchase 1,000,000
share of common stock held by it's Chairman/CEO.
(6) Reverse Stock Split
On June 23, 2000, the Company effected a one-for-ten reverse stock
split of its common stock. All references to common stock have been
retroactively adjusted to give effect to this reverse stock split.
(7) Preferred Stock Issued
Effective March 31, 2000 the Company issued 1,250,000 shares of Series
A convertible preferred stock and received net proceeds of $2,500,000,
or $2.00 per share. Each share of preferred stock is convertible into 4
shares of restricted common stock and 4 warrants exercisable at $2.00
per share, unless a registration statement does not become effective
within 120 days, then the exercise price will be reduced to $1.50 per
share. The preferred shareholders are entitled to receive an annual 10%
cumulative dividend in cash or additional shares of common stock at the
option of the Company. The Company, at its option, can require
conversion if its common stock trades above $1.00 per share for ten
consecutive days. The liquidation preference shall be the stated value
of $2.00 per preferred share plus any accrued dividends. The market
value for the Company's common stock on March 31, 2000 was $3.125.
Since the conversion price is $.50, this results in a favorable
conversion benefit of $2.625 per share, totaling $13,125,000. There is
also a favorable exercise benefit of $1.125 per share, related to the
exercise rights of the warrants resulting in a total of $5,625,000. The
accounting for these favorable conversion and exercise benefits results
in additions to paid in capital and charges to preferred stock
dividends totaling $18,750,000.
F-25
<PAGE> 55
TELESERVICES INTERNET GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
(8) Proposed Business Combinations
The Company has entered into three business combination agreements, all
of which are subject to various contingencies including variable stock
issuances depending on the trading price of the Company's stock. The
entities involved in the proposed business combinations are in the
process of completing their due diligence reviews. There can be no
assurance that any or all of the proposed transactions will be
completed because of the various contingencies. Completion of the
transactions could result in a change in control of the Company. As of
June 30, 2000, the Company has borrowed $700,000 from one of the
proposed business combination entities. Subsequent to the end of the
quarter, the Company borrowed additional amounts totaling $550,000 from
this entity. The notes bear interest at 8% per annum payable in arrears
at maturity and bear a default interest rate of 18% if not paid in full
when due. The notes are uncollateralized and are due 120 days from the
date of the various loans. The loan proceeds were received on various
dates between May 11 and July 21, 2000. In addition, the Company's
Chairman/CEO was advanced $505,000 in personal loans from this entity,
which are collateralized by certain personally owned stock of the
Company.
(9) Proposed Financing
On February 29, 2000, the Company announced that it had entered into a
letter agreement engaging a prominent New York based investment banking
firm as its exclusive agent for a private placement financing of up to
$40 million, and on April 26, 2000, the letter agreement was amended to
provide for a financing of up to $125 million. However, 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.
(10) Officer Loans Receivable
During the six month period ended June 30, 2000 the Company loaned
$423,754 to its Chairman/CEO. The loans bear interest at 11% per annum,
are uncollateralized and due on demand. As of June 30, 2000 the Company
owed the Chairman/CEO accrued salaries totaling $262,500. For financial
statement reporting purposes these two items were offset resulting in a
net receivable of $161,254 as of June 30, 2000.
(11) Litigation
On October 15, 1999, Clarity Consulting, Inc. ("Clarity"), filed an
amended complaint in the Circuit Court of Cook County, Illinois, adding
the Company as a defendant in their suit to recover monies that they
originally alleged were owed by Visitors Services International Corp.
("VSI"). The complaint alleges that on June 24, 1997, Clarity and the
defendants entered into an agreement for consulting services, that
consulting services were provided between October 1996 and August 1997,
and that the defendants promised to pay for the consulting services and
failed to do so. Clarity seeks a judgment against the defendants in the
amount of $552,635, plus service charges at the rate of one and
one-half percent per month, plus such other relief as the court may
deem equitable and just, as well as attorneys fees and court costs. On
March 13,
F-26
<PAGE> 56
TELESERVICES INTERNET GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
(11) Litigation (continued)
2000, the Company filed a Motion to Quash Service For Lack of Personal
Jurisdiction on the basis that Illinois does not have proper
jurisdiction over the Company in this dispute. On July 7, 2000, the
Court granted the Company's Motion.
On June 17, 1999, the Company and Robert P. Gordon, individually and as
an officer of the Company, were named as defendants, among others, in
an amended complaint field by Miles and Rosalie Lerman in United States
District Court for the District of New Jersey. The Lerman's claim that
their broker-dealers (also named as defendants) made unauthorized
transactions in their accounts in "high risk penny stocks," including
the common stock of the Company, that resulted in losses in excess of
$2,000,000. The complaint seeks recovery of actual and consequential
damages, costs and attorneys' fees, and other forms of equitable relief
from all defendants. The Company and Mr. Gordon have filed a motion to
dismiss, which is pending.
On December 28, 1998, EIS International, Inc., of Herndon, Virginia,
issued a Demand for Arbitration to the Company, as the result of a
dispute arising under a contract dated May 7, 1998 with the Company.
EIS seeks $223,261 for software, licenses and services, which it claims
are due and owing under the parties agreement, plus interest,
attorneys' fees and costs. The Company claims that it notified EIS of
major defects in the software, demanded that they be remedied, but EIS
refused to do so and instead demanded payment. Further, the Company
counter-claimed that it has suffered damages in excess of $200,000,
plus costs and attorneys' fees, because the Company was forced to
create alternative systems for performing the functions for which the
EIS software was intended and suffered significant loss of business
opportunities as a result of the failure of EIS's software to perform
as promised. A date for an arbitration proceeding has not been set yet.
(12) Subsequent Events
On July 14, 2000, the Company's board of directors adopted the TSIG.com
2000 Incentive Stock Plan, a non-qualified plan, that terminates on
July 13, 2005. The Plan provides for the grant of options or shares of
common stock not to exceed 9,500,000 shares to employees, directors,
officers, consultants or advisors of the Company. The terms of options
granted are determined by the board of directors (or a committee
thereof) at the date of grant.
On July 31, 2000 the Company issued 900,000 unrestricted free trading
common shares to a consultant for services to be rendered for the one
year period which commenced August 1, 2000, pursuant to an agreement
dated July 26, 2000. The closing market price for the Company's common
stock on July 25, 2000 was $1.50 per share, which results in stock for
service compensation of $1,350,000. Subsequent financial statements
will include an expense provision of $1,350,000 related to this matter.
F-27
<PAGE> 57
TELESERVICES INTERNET GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
(12) Subsequent Events (continued)
On July 31, 2000 the Company granted five year non-plan options at
$1.20 per share (approximately 120% of the market price on the date of
grant) to acquire 4,000,000 shares of the Company's common stock to its
Chairman/CEO. These options vest as follows:
2,000,000 immediately
1,600,000 upon the closing of one of the proposed business combinations
200,000 upon the closing of one of the proposed business combinations
200,000 upon the closing of one of the proposed business combinations
On July 31, 2000 the Company granted non plan options to its four
directors for 300,000 shares each, exercisable and vested quarterly
over a three year period at $1.20 per share (approximately 120% of the
market price on the date of grant). To earn the options the director
must remain a director on the vesting dates.
On July 31, 2000 the Company issued 1,000,000 shares of its common
stock to its Chairman/CEO, related to the exercise of a previously
granted option at $.70 per share. The Company's Board of Directors
approved this option exercise without payment and directed the Company
to record the $700,000 as a receivable in the Company's financial
statements.
On July 31, 2000, the Company entered into an agreement with a
consultant for business development services in Asian markets,
including China. Pursuant to the agreement, the Company issued 500,000
registered shares as advanced payment-in-full for all services to be
rendered valued at $500,000 or $1.00 per share, the approximate market
price, and granted the consultant an option under the TSIG.com 2000
Stock Plan to acquire 3,500,000 shares of common stock, of which
1,750,000 are deemed fully vested, and the remaining options, totaling
1,750,000, shall vest upon achievement of goals and performance of
milestones to be mutually agreed upon. The options are exercisable for
one year at an exercise price of $1.00 per share, the approximate
market price. The Company recorded a charge to operations in July 2000
of $2,374,000 related to the value of common stock issued and options
granted. The Company will account for the unvested options using
variable plan accounting which results in a revaluation of these
options at each period end through the date of vesting.
F-28
<PAGE> 58
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
INDEMNIFICATION AND LIMITATION OF DIRECTORS' LIABILITY. The company's by-laws
provide that the company shall indemnify in the manner and to the extent
permitted by law, any person (or that person's testator or intestate successor)
made or threatened to be made a party to any action or proceeding, whether
domestic or foreign, civil or criminal, judicial or administrative, or federal
or state, by reason of the fact that the person was a director or officer of the
company or served any other corporation in any capacity at the request of the
company. Further, the company has entered into agreements with several officers
and directors of the company and its subsidiaries, and may enter into agreements
with additional officers and directors, to indemnify and hold such persons
harmless, to the maximum extent permitted by law in the event any claims or
legal actions are brought against such person arising out of his acts or
decisions done or made in the authorized scope of such person's employment or
position with the company.
The company currently has directors' and officers' liability insurance policies
with an aggregate limit of liability of $10,000,000 (inclusive of costs of
defense). The current policies expire June 2001.
The General Corporation Law of Florida eliminates the personal
liability of its directors to the company or its stockholders for monetary
damages for breach of fiduciary duty of loyalty and care as a director, unless:
(a) the director breached or failed to perform his duties as a director; and (b)
the directors breach of, or failure to perform, those duties constitutes: (i) a
violation of criminal law, unless the director had reasonable cause to believe
his conduct was lawful or had no reasonable cause to believe his conduct was
unlawful; (ii) a transaction from which the director derived an improper person
benefit, either directly or indirectly; (iii) a circumstance under which a
director votes for or assents to an unlawful distribution; (iv) in a proceeding
by or in the right of the company to procure a judgment in its favor or in the
right of a shareholder, conscious disregard for the best interests of the
company, or willful misconduct; or (v) in a proceeding by or in the right of
someone other than the company or a shareholder with, recklessness or an act of
omission which was committed in bad faith or with malicious purpose or in a
manner exhibiting wanton and willful disregard of human rights, safety or
property.
The company has been advised that it is the position of the Securities
and Exchange Commission that insofar as the foregoing provisions may be invoked
to disclaim liability for damages arising under the 1933 Act, that such
provisions are against public policy as expressed in the 1933 Act and are
therefore unenforceable.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with the issuance and
distribution of the securities being registered, other than underwriting
compensation, are:
<TABLE>
<S> <C>
SEC filing fee for Registration Statement $ 4,442.00
Accounting Fees $ 20,000.00
Legal Fees and Expenses $145,000.00
Miscellaneous $ 10,558.00
Total: $180,000.00
</TABLE>
All of the expenses listed above will be paid by the company.
26
<PAGE> 59
RECENT SALES OF UNREGISTERED SECURITIES
In reading the following, the reader should be aware that one June 23,
2000, TeleServices completed a combination (reverse-split) of its outstanding
(but not authorized) common stock, whereby one post-split share was issued for
every ten pre-split shares.
A. On August 23, 2000, the Company acquired 84.7826% of the outstanding common
stock of General Search.com, Inc. in exchange for shares of restricted common
stock of the Company. The Company issued 38,152,178 shares (post-split) of
restricted Common Stock to the selling shareholders of GeneralSearch. The
Company also issued 2,700,000 share (post-split) of common stock of the Company
to one person as a finders fee, and executed a convertible debenture in the
amount of $2,650,000 to its investment banker for financial advisory services in
connection with the acquisition. The Company believes that this transaction is
exempt from registration pursuant to Section 4(2), 4(6) and/or Rule 506 of the
Securities Act of 1933.
B. On June 28, 2000, the Company issued 450,000 shares (post-split) restricted
common stock of the Company in settlement of a threatened legal claim against
the Company made by Basic Investments, Ltd. The Company believes that this
transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.
C. From August 1999 through February 2000, the Company offered and sold a total
of 1,250,000 restricted shares of Series A Convertible Preferred Stock for gross
proceeds of $2,500,000 to approximately 31 investors in principal pursuant to a
private placement. The Articles of Incorporation of the Company were amended to
rescind the existing Designation of Rights and Preferences of Series A
Convertible Preferred Stock and replace it with a revised designation which
reflects that 1,250,000 shares were sold and provides that each share of Series
A Convertible Preferred Stock:
o has a stated value of $2.00;
o has a liquidation preference of $2.00;
o bears interest at the rate of 10% per annum, payable in cash or in
shares of restricted common stock, at the option of the Company;
o is convertible into 40 shares of restricted common stock at a
conversion rate of $.05 per share and a warrant entitling the holder
to purchase an additional 40 shares of restricted common stock for a
period of 5 years at an exercise price of $.20 per share;
o is generally non-voting; and
o is redeemable by the Company if the Company's common stock trades
above $1.00.
In connection with the offering, the Company granted certain registration rights
to the investors. In the event that a registration statement for the resale of
the shares of common stock underlying the Series A Convertible Preferred Stock
and the warrants is not filed within 120 days of closing, the per share exercise
price of the warrants shall be reduced by $.05. 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.
D. On January 28, 2000, the Board Directors of the Company authorized the
issuance of 53,910 shares of restricted common stock to two former shareholders
of GuaranTEE Time, Inc. (a former subsidiary of the Company) in connection with
a settlement agreement dated August 6, 1998, regarding the disposition of
GuaranTEE Time, Inc. The Company believes that this transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.
E. On January 14, 2000, the Board Directors of the Company authorized the
issuance of 2,000,000 shares of restricted common stock to James F. Gordon, the
brother of Robert P. Gordon, an officer and director of the Company, in
settlement of a threatened legal claim against the Company made by James F.
Gordon. The Company believes that this transaction was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933.
27
<PAGE> 60
F. On December 17, 1999, the Board Directors of the Company authorized the
issuance of 1,000,000 shares of restricted common stock to two consultants for
business development services. The Company believes that this transaction was
exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.
G. On December 15, 1999, the Board Directors of the Company authorized the
issuance of 9,500,000 shares of restricted common stock and a warrant to
purchase 9,500,000 shares of restricted common stock for a period of five years
at an exercise price of $.04 per share, to Robert P. Gordon, an officer and
director of the Company, in cancellation of $380,000 in principal owed to Mr.
Gordon for funds previously loaned to the Company by Mr. Gordon. The Company
believes that this transaction was exempt from registration pursuant to Section
4(2) of the Securities Act of 1933.
H. On November 19, 1999, the Board Directors of the Company authorized the
issuance of 16,537,880 shares of restricted common stock and a warrant to
purchase 16,537,880 shares of restricted common stock for a period of five years
at an exercise price of $.04 per share, to Robert P. Gordon, an officer and
director of the Company, in cancellation of $826,894 in principal and interest
owed to Mr. Gordon for funds previously loaned to the Company by Mr. Gordon. The
Company believes that this transaction was exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933.
I. In November 1998 through April 1999, the Company offered and sold a total of
18 convertible debentures totaling $3,777,000 in principal to 8 investors
pursuant to a private placement The terms of the debentures included interest at
the rate of 8%, maturity on October 31, 1999, and the right to convert into
shares of common stock at a 30% discount to the average market price for the
five days prior to the date of conversion. The Company also filed a registration
statement registering the shares of common stock issuable upon conversion of the
debentures for resale by the investors. As of March 31, 1999, all debentures
(principal and interest) had been converted into an aggregate of 92,653,597
shares of common stock.
In connection with the offering, common stock purchase warrants covering
1,119,250 shares were also issued to the placement agent (250,000) and two of
the investors (869,250). Each warrant is exercisable for a period of five years
at an exercise price of $.16 per share. As of March 31, 2000, all warrants had
been exercised except for one warrant to purchase 62,500 shares. The Company
also paid 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. 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.
J. On June 8, 1999, a lawsuit pending in Circuit Court for Pinellas County,
Florida was dismissed after a court-approved settlement in the case. The lawsuit
originated on February 9, 1998, when Robert P. Gordon, who is an officer and
director of the Company, individually filed a lawsuit against Felcrest Trading
Ltd. ("Felcrest"). On October 23, 1998, Felcrest filed a third party complaint
against the Company, VSI (the Company's subsidiary), and current and former
officers and directors of the Company and VSI and other third parties. Pursuant
to the settlement, the Company issued an aggregate of 4,402,923 shares of its
common stock to Felcrest and the former officers and directors who had
indemnification claims against the Company for the legal fees they incurred,
while Mr. Gordon returned 4,402,923 of his shares to the Company for
cancellation. Consequently, there was no increase in the outstanding shares of
common stock as a result of the settlement. The issuance by the Company was
exempt from registration pursuant to Section 3(a)(10) of the Securities Act of
1933.
K. On February 22, 1999, the Board Directors of the Company authorized the
issuance of 6,666,667 shares of restricted common stock to Robert P. Gordon, an
officer and director of the Company, in cancellation of $1,000,000 in principal
owed to Mr. Gordon for funds previously loaned to the Company by Mr. Gordon. The
Company believes that this transaction was exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933
L. On February 24, 1997, the Company acquired all of the outstanding common
stock of GuaranTEE Time, Inc. ("GTT") in exchange for shares of restricted
Common Stock of the Company. The Company issued 100,000 shares of restricted
Common Stock to the selling shareholders of GTT. The Company believes that this
transaction is exempt from registration pursuant to Section 4(2) and/or Rule 506
of Regulation D of the Securities Act of 1933.
28
<PAGE> 61
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
2.8 Agreement and Plan of Reorganization between
TeleServices Internet Group Inc. and
GeneralSearch.com, Inc., dated August 22,
2000. (Incorporated by reference to Exhibit
2.8 of the Company's Form 8-K dated August
23, 2000 and filed on August 30, 2000.
3.6 Bylaws as restated April 22, 1999.
(Incorporated by reference to Exhibit 3.6 of
the Company's Registration Statement on Form
SB-2 (file no. 333-78077) filed on May 7,
1999).
3.9 Articles of Incorporation, as amended on
June 14, 2000, and currently in effect.
(Incorporated by reference to Exhibit 3.9 of
the Company's Current Report on Form 8-K
dated June 14, 2000 and filed June 15,
2000).
4.8 The Company's Articles of Incorporation, as
amended (Incorporated by reference to
Exhibit 3.7 of the Company's Current Report
on Form 8-K dated July 8, 1999 and filed
July 13, 1999).
4.9 Form of Common Stock Purchase Warrant
issuable upon conversion of Series A
Convertible Preferred Stock. (Incorporated
by reference to Exhibit 4.9 of TeleServices'
annual report on Form 10-KSB for the year
ended December 31, 1999.)
4.11 8% Convertible Debenture due December 31,
2000, issued by TeleServices Internet Group
Inc. to Ladenburg Thalmann & Co., dated
August 23, 2000 (Incorporated by reference
to Exhibit 4.11 of the Company's Form 8-K
filed on August 30, 2000).
4.12 Registration Rights Agreement by and between
TeleServices Internet Group Inc. and
Ladenburg Thalmann & Co. Inc., dated August
23, 2000 (Incorporated by reference to
Exhibit 4.12 of the Company's Form 8-K filed
on August 30, 2000).
5.14 Opinion of Counsel, Futro & Trauernicht,
LLC. (Filed herewith).
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).
10.16 TSIG.com Incentive Stock Plan dated December
17, 1999. (Incorporated by reference to
Exhibit 10.16 of the Company's Registration
Statement on Form S-8 (file no. 333-32548)
filed March 15, 2000).
10.17 Employment Agreement between the Company and
Joseph K. Keegan dated December 6, 1999.
(Incorporated by reference to Exhibit 10.17
of the Company's Annual Report on Form
10-KSB for the year ended December 31,
1999.)
10.18 Employment Agreement between the Company and
Richard H. Wheeler dated December 6, 1999.
(Incorporated by reference to Exhibit 10.18
of the
29
<PAGE> 62
Company's Annual Report on Form 10-KSB for
the year ended December 31, 1999.)
10.20 Agreement to Serve as a Director between the
Company and Frank Ragano dated September 29,
1999. (Incorporated by reference to Exhibit
10.20 of the Company's Annual Report on Form
10-KSB for the year ended December 31,
1999.)
10.21 TSIG.com 2000 Stock Plan dated July 14,
2000. (Incorporated by reference to Exhibit
10.21 of the Company's Registration
Statement on Form S-8 (file no. 333-41716)
filed July 19, 2000).
10.22 Consulting Agreement between the Company and
Paul W. Henry dated May 15, 2000.
(Incorporated by reference to Exhibit 10.22
of the Company's Quarterly Report on Form
10-QSB for the quarter ended June 30, 2000).
16.4 Letter on change in certifying accountant
from Schumacher & Associates, Inc.
(Incorporated by reference to Exhibit 16.4
of the company's 8-K/A filed July 24, 2000).
21.3 List of Subsidiaries of the company.
(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).
23.30 Consent of Schumacher & Associates, Inc.,
Certified Public Accountants. (Filed
herewith).
23.33 Consent of Futro & Trauernicht, LLC.
(Incorporated by reference to Exhibit 5.14
of this Registration Statement).
27 Financial Data Schedule. (Filed herewith).
30
<PAGE> 63
UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement; and
notwithstanding the forgoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospects filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in the volume and
price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement; and
(iii) To include any additional or changed material information on
the plan of distribution.
(2) For the purpose of determining any liability under the Securities
Act, to treat each post-effective amendment as a new registration
statement of the securities offered, and the offering of such
securities at that time to be the initial bona fide offering.
(3) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the termination of the
offering.
(b) The undersigned Registrant, hereby requesting acceleration of the
effective date of the registration statement under Rule 461 under the
Securities Act, hereby undertakes to include the following:
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors,
officers and controlling persons of the small business issuer pursuant
to the foregoing provisions, or otherwise, the small business issuer
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than
the payment by the small business issuer of the expenses incurred or
paid by a director, officer, or controlling person of the small
business issuer in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
31
<PAGE> 64
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
company certifies that it has reasonable grounds to believe that it meets all of
the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of St.
Petersburg, State of Florida on August 31, 2000.
TELESERVICES INTERNET GROUP INC.
By: /s/ Robert P. Gordon
--------------------------
Robert P. Gordon, Chairman
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Robert P. Gordon Chairman, CEO and August 31, 2000
------------------------------ Director
Robert P. Gordon
/s/ Paul W. Henry Secretary, Treasurer, and August 31, 2000
------------------------------ Director
Paul W. Henry
/s/ J.R. LeShufy Director August 31, 2000
------------------------------
J.R. LeShufy
/s/ Frank Ragano Director August 31, 2000
------------------------------
Frank Ragano
/s/ Jeffrey Bruss Director August 31, 2000
------------------------------
Jeffrey Bruss
</TABLE>
32
<PAGE> 65
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
2.8 Agreement and Plan of Reorganization between
TeleServices Internet Group Inc. and
GeneralSearch.com, Inc., dated August 22,
2000. (Incorporated by reference to Exhibit
2.8 of the Company's Form 8-K dated August
23, 2000 and filed on August 30, 2000.
3.6 Bylaws as restated April 22, 1999.
(Incorporated by reference to Exhibit 3.6 of
the Company's Registration Statement on Form
SB-2 (file no. 333-78077) filed on May 7,
1999).
3.9 Articles of Incorporation, as amended on
June 14, 2000, and currently in effect.
(Incorporated by reference to Exhibit 3.9 of
the Company's Current Report on Form 8-K
dated June 14, 2000 and filed June 15,
2000).
4.8 The Company's Articles of Incorporation, as
amended (Incorporated by reference to
Exhibit 3.7 of the Company's Current Report
on Form 8-K dated July 8, 1999 and filed
July 13, 1999).
4.9 Form of Common Stock Purchase Warrant
issuable upon conversion of Series A
Convertible Preferred Stock. (Incorporated
by reference to Exhibit 4.9 of TeleServices'
annual report on Form 10-KSB for the year
ended December 31, 1999.)
4.11 8% Convertible Debenture due December 31,
2000, issued by TeleServices Internet Group
Inc. to Ladenburg Thalmann & Co., dated
August 23, 2000 (Incorporated by reference
to Exhibit 4.11 of the Company's Form 8-K
filed on August 30, 2000).
4.12 Registration Rights Agreement by and between
TeleServices Internet Group Inc. and
Ladenburg Thalmann & Co. Inc., dated August
23, 2000 (Incorporated by reference to
Exhibit 4.12 of the Company's Form 8-K filed
on August 30, 2000).
5.14 Opinion of Counsel, Futro & Trauernicht,
LLC. (Filed herewith).
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).
10.16 TSIG.com Incentive Stock Plan dated December
17, 1999. (Incorporated by reference to
Exhibit 10.16 of the Company's Registration
Statement on Form S-8 (file no. 333-32548)
filed March 15, 2000).
10.17 Employment Agreement between the Company and
Joseph K. Keegan dated December 6, 1999.
(Incorporated by reference to Exhibit 10.17
of the Company's Annual Report on Form
10-KSB for the year ended December 31,
1999.)
10.18 Employment Agreement between the Company and
Richard H. Wheeler dated December 6, 1999.
(Incorporated by reference to Exhibit 10.18
of the
</TABLE>
<PAGE> 66
<TABLE>
<S> <C>
Company's Annual Report on Form 10-KSB for
the year ended December 31, 1999.)
10.20 Agreement to Serve as a Director between the
Company and Frank Ragano dated September 29,
1999. (Incorporated by reference to Exhibit
10.20 of the Company's Annual Report on Form
10-KSB for the year ended December 31,
1999.)
10.21 TSIG.com 2000 Stock Plan dated July 14,
2000. (Incorporated by reference to Exhibit
10.21 of the Company's Registration
Statement on Form S-8 (file no. 333-41716)
filed July 19, 2000).
10.22 Consulting Agreement between the Company and
Paul W. Henry dated May 15, 2000.
(Incorporated by reference to Exhibit 10.22
of the Company's Quarterly Report on Form
10-QSB for the quarter ended June 30, 2000).
16.4 Letter on change in certifying accountant
from Schumacher & Associates, Inc.
(Incorporated by reference to Exhibit 16.4
of the company's 8-K/A filed July 24, 2000).
21.3 List of Subsidiaries of the company.
(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).
23.30 Consent of Schumacher & Associates, Inc.,
Certified Public Accountants. (Filed
herewith).
23.33 Consent of Futro & Trauernicht, LLC.
(Incorporated by reference to Exhibit 5.14
of this Registration Statement).
27 Financial Data Schedule. (Filed herewith).
</TABLE>
