UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Quarterly Period Ended September 30, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 0-24459
ACCESSTEL, INC.
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(Exact name of small business issuer as specified in its charter)
Utah 59-2159271
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9005 Cobble Canyon Lane, Sandy, Utah 84093
-------------------------------------------
(Address of principal executive offices)
Issuer's telephone number: (801) 942-0555
5201 Great American Parkway, Suite 320-3102
Santa Clara, California 95054
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(Former name, former address and former fiscal year,
if changed since last report.)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
As of September 30, 2003, the Company had 25,002,309 shares of common stock
issued and outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
Documents incorporated by reference: None.
ACCESSTEL, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets September 30, 2003 (Unaudited) and December 31,
2002
Statements of Operations (Unaudited) - Three Months and Nine
Months Ended September 30, 2003 and 2002
Statements of Cash Flows (Unaudited) - Nine Months Ended
September 30, 2003 and 2002
Notes to Financial Statements (Unaudited) - Three Months and
Nine Months Ended September 30, 2003 and 2002
Item 2. Management's Discussion and Analysis or Plan of Operation
Item 3. Controls and Procedures
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
AccessTel, Inc.
Balance Sheets
September 30, December 31,
2003 2002
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ $
Other receivables
--------- ---------
Total current assets
--------- ---------
Property and equipment
Less: Accumulated depreciation
--------- ---------
--------- ---------
Other assets
--------- ---------
Total assets $ $
========= =========
LIABILITIES AND STOCKHOLDERS'
DEFICIENCY
Current liabilities:
Accounts payable and
accrued expenses (Note 4) $ 700,643 $1,087,764
Due to major shareholder (Note 3) 428,434 333,071
Accrued interest payable (Note 3) 7,567 5,074
--------- ---------
Total current liabilities 1,136,644 1,425,909
--------- ---------
Stockholders' deficiency (Note 2):
Common stock, $0.001 par value
Authorized - 100,000,000 shares
Issued and Outstanding
25,002,309 shares at September
30, 2003 and 33,354,091 shares
at December 31, 2002 25,002 33,354
Additional paid-in capital 483,693 325,091
Accumulated deficit (1,645,339) (1,784,354)
--------- ---------
Total stockholders' deficiency (1,136,644) (1,425,909)
--------- ---------
Total liabilities and
stockholders' deficiency $ $
========= =========
See accompanying notes to financial statements.
AccessTel, Inc.
Statements of Operations (Unaudited)
Three Months Ended September 30,
--------------------------------
2003 2002
--------- ---------
Revenues $ $
Cost of revenues
------- -------
Gross profit
------- -------
General and administrative
expenses 30,243 21,240
Fees to major shareholder (Note 3) 28,500 28,500
Reversal of reserve for
contingent liabilities (Note 4) (413,678)
Interest expense (Note 3) 848 926
------- -------
Net income (loss) $ 354,087 $ (50,666)
======= =======
Net income (loss) per common
share - basic and diluted $ 0.01 $ -
===== =====
Weighted average common
shares outstanding -
basic and diluted 25,002,309 33,354,091
========== ==========
See accompanying notes to financial statements.
AccessTel, Inc.
Statements of Operations (Unaudited)
Nine Months Ended September 30,
-------------------------------
2003 2002
--------- ---------
Revenues $ $
Cost of revenues
------- -------
Gross profit
------- -------
General and administrative
expenses 36,420 50,512
Fees to major shareholder (Note 3) 85,500 85,500
Value of common shares
released in conjunction
with legal settlement (Note 2) 150,250
Reversal of reserve for
contingent liabilities (Note 4) (413,678)
Interest expense (Note 3) 2,493 2,224
------- -------
Net income (loss) $ 139,015 $(138,236)
======= =======
Net income (loss) per common
share - basic and diluted $ - $ -
===== =====
Weighted average common
shares outstanding -
basic and diluted 29,642,188 33,354,091
========== ==========
See accompanying notes to financial statements.
AccessTel, Inc.
Statements of Cash Flows (Unaudited)
Nine Months Ended September 30,
-------------------------------
2003 2002
--------- ---------
Cash flows from operating
activities:
Net income (loss) $ 139,015 $(138,236)
Adjustments to reconcile
net income (loss) to net
cash used in operating
activities:
Value of common shares
released in conjunction
with legal settlement 150,250
Reversal of reserve for
contingent liabilities (413,678)
Changes in operating
assets and liabilities:
Increase in:
Accounts payable and
accrued expenses 26,557
Accrued interest
payable 2,493 2,224
-------- --------
Net cash used in operating
activities (95,363) (136,012)
-------- --------
Cash flows from financing
activities:
Increase in accrued fees
to major shareholder 85,500 85,500
Amounts advanced by major
shareholder to or on
behalf of the Company 9,863 50,512
-------- --------
Net cash provided by
financing activities 95,363 136,012
-------- --------
Cash and cash equivalents:
Net increase (decrease) - -
At beginning of period - -
-------- --------
At end of period $ - $ -
======== ========
See accompanying notes to financial statements.
AccessTel, Inc.
Notes to Financial Statements (Unaudited)
Three Months and Nine Months Ended September 30, 2003 and 2002
1. Organization and Basis of Presentation
Organization - Shopss.com, Inc., a Utah corporation, changed its name to
AccessTel, Inc. (the "Company") effective February 16, 2001, in conjunction
with the acquisition of AccessTel, Inc., a Delaware corporation ("AccessTel"),
in a reverse merger transaction effective December 18, 2000.
Effective December 18, 2000, the Company entered into a Share Exchange
Agreement with AccessTel and the shareholders of AccessTel pursuant to which
the Company acquired all of the shares of AccessTel in exchange for 22,418,980
shares of common stock, which represented 80% of the issued and outstanding
shares of common stock of the Company after giving effect to the transaction.
An additional 13,681,560 shares of common stock were reserved for issuance
under the Company's stock option plan. At the closing of this transaction,
the existing officers and directors of the Company resigned, and new officers
and directors were appointed.
Litigation to rescind this transaction was subsequently commenced on May 1,
2001, and a receiver was appointed on May 3, 2001. This litigation was
settled during June 2003 (see Note 2).
Basis of Presentation - The accompanying financial statements as of December
31, 2002 and for the three months and nine months ended September 30, 2003 and
2002 exclude the assets and liabilities of AccessTel's operations due to the
rescission litigation.
The information contained herein is based on the information available to
current management, but due to the commencement of litigation and the
appointment of a receiver, such information may not necessarily be complete or
accurate.
Comments - The accompanying interim financial statements are unaudited, but in
the opinion of management of the Company, contain all adjustments, which
include normal recurring adjustments, necessary to present fairly the
financial position at September 30, 2003, the results of operations for the
three months and nine months ended September 30, 2003 and 2002, and the cash
flows for the nine months ended September 30, 2003 and 2002. The balance
sheet as of December 31, 2002 is derived from the Company's audited financial
statements.
Certain information and footnote disclosures normally included in financial
statements that have been presented in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission with respect to interim
financial statements, although management of the Company believes that the
disclosures contained in these financial statements are adequate to make the
information presented therein not misleading. For further information, refer
to the financial statements and notes thereto included in the Company's
Annual Report on Form 10-KSB for the fiscal year ended December 31, 2002, as
filed with the Securities and Exchange Commission.
The results of operations for the three months and nine months ended September
30, 2003 are not necessarily indicative of the results of operations to be
expected for the full fiscal year ending December 31, 2003.
Reclassification - Certain amounts have been reclassified in 2002 to conform
to the current year's presentation.
Going Concern - The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. The Company has
suffered recurring losses, has no operations and has a deficiency in working
capital and shareholders' equity at September 30, 2003 and December 31, 2002.
These factors raise substantial doubt about the Company's ability to continue
as a going concern. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty. The Company's
independent certified public accountants have included a modification
paragraph in their report on the Company's financial statements for the year
ended December 31, 2002 with respect to this matter.
The Company is currently insolvent and has no business operations. The
Company's current efforts are focused on maintaining the corporate entity, and
until recently, pursuing litigation against former management. As a result of
the matters described herein, the Company may have to file for protection
under the United States Bankruptcy Code. Accordingly, there can be no
assurances that the Company will be able to continue in existence.
Use of Estimates - The 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,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Net Income (Loss) Per Common Share - Basic income (loss) per common share is
calculated by dividing net income (loss) by the weighted average number of
common shares outstanding during the period. Diluted income (loss) per common
share reflects the potential dilution that would occur if dilutive stock
options and warrants were exercised. There were no potentially dilutive
securities outstanding during the periods presented, and accordingly,
basic and diluted income (loss) per common share is the same for all periods
presented.
Income Tax Returns - The Company has not filed federal or state income tax
returns for the last several years. The Company does not believe that such
failure to file these returns will have a material effect on its continued
existence, financial statements or results of operations.
2. Legal Proceedings
On May 1, 2001, prior management of the Company filed a complaint (the
"Complaint") in the Third Judicial District Court of Salt Lake County, State
of Utah (the "Court"), Civil No. 010903821, asserting claims against
AccessTel, Inc. a Delaware corporation ("AccessTel"), and certain of the
original shareholders of AccessTel (collectively, the "AccessTel Parties").
The Complaint was filed in regard to the December 18, 2000 Share Exchange
Agreement (the "Exchange Agreement") by and between the Company and the
AccessTel Parties. The Complaint alleged that the Company was induced to
enter into the Exchange Agreement with the AccessTel Parties through a series
of false representations made by the AccessTel Parties. The AccessTel Parties
included, among others, Lawrence Liang, the Company's former Chief Executive
Officer, President and a director, and Stuart Bockler, the Company's former
Chief Financial Officer, Secretary and a director.
A settlement was reached between the parties to the Complaint. The material
terms of the settlement include the requirement that the AccessTel Parties
surrender all right, title and interest in and to those shares of common stock
of the Company (the "Surrendered Shares") issued to them pursuant to the
Exchange Agreement, and that all members of management of the Company that had
been designated to serve as directors and executive officers of the Company at
the closing of the Exchange Agreement with the AccessTel Parties resign from
their respective management positions. As a result of the settlement, on May
6, 2003, prior management of the Company who had filed the Complaint filed
with the Court a Motion to Dismiss the Complaint. An Order of Dismissal was
signed by the Court on June 2, 2003.
Lawrence Liang and Stuart Bockler resigned as officers and directors of the
Company effective April 24, 2003. Prior to their resignation, David C.
Merrell, a former director and executive officer of the Company, was appointed
as an interim officer and director of the Company.
As a result of such settlement, the AccessTel Parties returned 11,356,782
shares of common stock to the Company for cancellation. Separately, Global
Guarantee Corporation received an aggregate of 5,600,981 shares of common
stock issued to or on behalf of Stuart Bockler pursuant to a confidential
settlement of a separate legal action involving a legal debt owed by Mr.
Bockler to Global Guarantee Corporation. As a result, at the conclusion of
the legal settlement, Global Guarantee Corporation owned an aggregate of
5,979,150 shares of the Company's common stock, equivalent to 23.9% of the
Company's issued and outstanding shares of common stock. Global Guarantee
Corporation has also periodically provided working capital advances to the
Company (see Note 3). In conjunction with the legal settlement, the Company
also released its claims on 3,005,000 shares that had been previously issued
to or on behalf of Mr. Bockler, but had been in dispute and had not been
recorded to date, as a result of which the Company's outstanding shares of
common stock were increased by such amount. As a result of the aforementioned
transactions, the Company's outstanding shares of common stock decreased by a
net of 8,351,782 shares during the nine months ended September 30, 2003, to
25,002,309 shares outstanding at September 30, 2003, as compared to 33,354,091
shares at December 31, 2002.
The return and cancellation of the 11,356,782 shares has been recorded as a
decrease to common shares outstanding and a corresponding increase to
additional paid-in capital at the par value of $0.001 per share (aggregate
amount $11,357). The 3,005,000 shares were recorded as an expense at the fair
market value of $0.05 per share at the date of the legal settlement (aggregate
amount $150,250).
As the legal settlement did not result in the Company gaining control of the
assets or operations of AccessTel, the Company did not reflect such assets or
operations in its financial statements subsequent to the settlement date.
In an unrelated matter, on April 14, 2003, the Securities and Exchange
Commission (the "SEC") filed a civil action in the United States District
Court for the Southern District of Ohio, Case Number CV-03-326, against eight
individuals and four entities. Global Guarantee Corporation, including its
Chairman and President, were named as defendants in this civil action. The
Company does not believe that this matter will have any effect on it.
3. Transactions with Global Guarantee Corporation
Global Guarantee Corporation made advances to or on behalf of the Company
aggregating $3,686 and $9,863 for the three months and nine months ended
September 30, 2003, respectively, and $21,240 and $50,512 for the three months
and nine months ended September 30, 2002, respectively. Such advances bear
interest at 1% below the prime rate. Related interest expense for the three
months and nine months ended September 30, 2003 was $848 and $2,493,
respectively, and $926 and $2,224 for the three months and nine months ended
September 30, 2002, respectively. These advances have been used to fund
general and administrative expenses, consisting primarily of legal and
accounting fees. There can be no assurances that such shareholder will
continue to make such advances to or on behalf of the Company. The Company
also incurred fees to such shareholder for services rendered of $28,500 and
$85,500 for the three months and nine months ended September 30, 2003 and
2002, respectively. As of September 30, 2003 and December 31, 2002, the
Company owed an aggregate of $436,001 and $338,145, respectively, to Global
Guarantee Corporation.
4. Reserve for Contingent Liabilities
During September 2003, the Company reviewed its reserve for contingent
liabilities and determined that it had an excess reserve relating to accounts
payable and accrued liabilities recorded in 2000 and early 2001. Accordingly,
the Company reduced its reserve for contingent liabilities by $413,678, which
was recorded as income during the three months and nine months ended September
30, 2003. The Company will continue to review the fair value of its reported
payables, and will adjust such payables periodically as necessary.
5. Recent Accounting Pronouncements
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". SFAS No. 145 rescinds the provisions of SFAS No. 4 that
requires companies to classify certain gains and losses from debt
extinguishments as extraordinary items, eliminates the provisions of SFAS No.
44 regarding transition to the Motor Carrier Act of 1980 and amends the
provisions of SFAS No. 13 to require that certain lease modifications be
treated as sale leaseback transactions. The provisions of SFAS No. 145
related to classification of debt extinguishments are effective for fiscal
years beginning after May 15, 2002. Earlier application is encouraged. The
adoption of SFAS No. 145 did not have a significant effect on the Company's
financial statement presentation or disclosures.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which requires companies to recognize costs
associated with exit or disposal activities when they are incurred rather than
at the date of a commitment to an exit or disposal plan. Such costs covered
by SFAS No. 146 include lease termination costs and certain employee severance
costs that are associated with a restructuring, discontinued operation, plant
closing, or other exit or disposal activity. SFAS No. 146 replaces the
previous accounting guidance provided by the EITF No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring)." SFAS No.
146 is to be applied prospectively to exit or disposal activities initiated
after December 31, 2002. The adoption of SFAS No. 146 did not have a
significant effect on the Company's financial statement presentation or
disclosures.
In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
Financial Acquisitions of Financial Institutions, Except Transactions Between
or More Mutual Enterprises". The Company does not expect that SFAS No. 147
will have any effect on its financial statement presentation or disclosures.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation Transition and Disclosure". SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock-Based Compensation", to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the method used on
reported results. SFAS No. 148 is effective for fiscal years beginning after
December 15, 2002. The interim disclosure provisions are effective for
financial reports containing financial statements for interim periods
beginning after December 15, 2002. The adoption of SFAS No. 148 did not have
a significant effect on the Company's financial statement presentation or
disclosures.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities". SFAS No. 149 amends and
clarifies under what circumstances a contract with an initial net investment
meets the characteristics of a derivative and when a derivative contains a
financing component. The clarification provisions of SFAS No. 149 require
that contracts with comparable characteristics be accounted for similarly.
SFAS No. 149 is effective for contracts entered into or modified after June
30, 2003. The Company does not expect that the adoption of SFAS No. 149 will
have a significant effect on the Company's financial statement presentation or
disclosures.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". SFAS No.
150 establishes standards for how an issuer classifies and measures in its
statement of financial position certain financial instruments with
characteristics of both liabilities and equity. SFAS No. 150 requires that an
issuer classify a financial instrument that is within its scope as a liability
(or an asset in some circumstances) because that financial instrument embodies
an obligation of the issuer. SFAS No. 150 is effective for financial
instruments entered into or modified after May 31, 2003 and otherwise is
effective at the beginning of the first interim period beginning after June
15, 2003. SFAS No. 150 is to be implemented by reporting the cumulative
effect of a change in accounting principle for financial instruments created
before the issuance date of SFAS No. 150 and still existing at the beginning
of the interim period of adoption. Restatement is not permitted. The Company
does not expect that the adoption of SFAS No. 150 will have a significant
effect on the Company's financial statement presentation or disclosures.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 elaborates on the
existing disclosure requirements for most guarantees, including loan
guarantees such as standby letters of credit. It also clarifies that at the
time a company issues a guarantee, the company must recognize an initial
liability for the fair market value of the obligations it assumes under that
guarantee and must disclose that information in its interim and annual
financial statements. The initial recognition and measurement provisions of
FIN 45 apply on a prospective basis to guarantees issued or modified after
December 31, 2002. The Company implemented the disclosure provisions of FIN
45 in its December 31, 2002 consolidated financial statements, and the
measurement and recording provisions of FIN No. 45 effective January 1, 2003.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities (and Interpretation of ARB No. 51)" ("FIN 46").
FIN 46 requires that the primary beneficiary in a variable interest entity
consolidate the entity even if the primary beneficiary does not have a
majority voting interest. The consolidation requirements of FIN 46 are
required to be implemented for any variable interest entity created on or
after January 31, 2003. In addition, FIN 46 requires disclosure of
information regarding guarantees or exposures to loss relating to any variable
interest entity existing prior to January 31, 2003 in financial statements
issued after January 31, 2003. The implementation of the provisions of FIN 46
effective January 31, 2003 did not have any effect on the Company's
consolidated financial statement presentation or disclosures.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Cautionary Statement Pursuant to Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995:
This Quarterly Report on Form 10-QSB for the quarterly period ended September
30, 2003 contains "forward-looking" statements within the meaning of Section
27A of the Securities Act of 1933, as amended, including statements that
include the words "believes", "expects", "anticipates", or similar
expressions. These forward-looking statements may include, among others,
statements of expectations, beliefs, future plans and strategies, anticipated
events or trends, and similar expressions concerning matters that are not
historical facts. The forward-looking statements in this Quarterly Report on
Form 10-QSB for the quarterly period ended September 30, 2003 involve known
and unknown risks, uncertainties and other factors that could the cause actual
results, performance or achievements of the Company to differ materially from
those expressed in or implied by the forward-looking statements contained
herein.
Overview:
The information contained herein is based on the information available to
current management, but due to the commencement of litigation and the
appointment of a receiver, such information may not necessarily be complete or
accurate.
The Company is currently insolvent and has no business operations. The
Company's current efforts are focused on maintaining the corporate entity, and
until recently, pursuing litigation against former management. As a result of
the matters described herein, the Company may have to file for protection
under the United States Bankruptcy Code. Accordingly, there can be no
assurances that the Company will be able to continue in existence.
Legal Proceedings:
On May 1, 2001, prior management of the Company filed a complaint (the
"Complaint") in the Third Judicial District Court of Salt Lake County, State
of Utah (the "Court"), Civil No. 010903821, asserting claims against
AccessTel, Inc. a Delaware corporation ("AccessTel"), and certain of the
original shareholders of AccessTel (collectively, the "AccessTel Parties").
The Complaint was filed in regard to the December 18, 2000 Share Exchange
Agreement (the "Exchange Agreement") by and between the Company and the
AccessTel Parties. The Complaint alleged that the Company was induced to
enter into the Exchange Agreement with the AccessTel Parties through a series
of false representations made by the AccessTel Parties. The AccessTel Parties
included, among others, Lawrence Liang, the Company's former Chief Executive
Officer, President and a director, and Stuart Bockler, the Company's former
Chief Financial Officer, Secretary and a director.
A settlement was reached between the parties to the Complaint. The material
terms of the settlement include the requirement that the AccessTel Parties
surrender all right, title and interest in and to those shares of common stock
of the Company (the "Surrendered Shares") issued to them pursuant to the
Exchange Agreement, and that all members of management of the Company that had
been designated to serve as directors and executive officers of the Company at
the closing of the Exchange Agreement with the AccessTel Parties resign from
their respective management positions. As a result of the settlement, on May
6, 2003, prior management of the Company who had filed the Complaint filed
with the Court a Motion to Dismiss the Complaint. An Order of Dismissal was
signed by the Court on June 2, 2003.
Lawrence Liang and Stuart Bockler resigned as officers and directors of the
Company effective April 24, 2003. Prior to their resignation, David C.
Merrell, a former director and executive officer of the Company, was appointed
as an interim officer and director of the Company.
As a result of such settlement, the AccessTel Parties returned 11,356,782
shares of common stock to the Company for cancellation. Separately, Global
Guarantee Corporation received an aggregate of 5,600,981 shares of common
stock issued to or on behalf of Stuart Bockler pursuant to a confidential
settlement of a separate legal action involving a legal debt owed by Mr.
Bockler to Global Guarantee Corporation. As a result, at the conclusion of
the legal settlement, Global Guarantee Corporation owned an aggregate of
5,979,150 shares of the Company's common stock, equivalent to 23.9% of the
Company's issued and outstanding shares of common stock. Global Guarantee
Corporation has also periodically provided working capital advances to the
Company (see "Liquidity and Capital Resources June 30, 2003 Financing
Activities" below). In conjunction with the legal settlement, the Company
also released its claims on 3,005,000 shares that had been previously issued
to or on behalf of Mr. Bockler, but had been in dispute and had not been
recorded to date, as a result of which the Company's outstanding shares of
common stock were increased by such amount. As a result of the aforementioned
transactions, the Company's outstanding shares of common stock decreased by a
net of 8,351,782 shares during the nine months ended September 30, 2003, to
25,002,309 shares outstanding at September 30, 2003, as compared to 33,354,091
shares at December 31, 2002.
The return and cancellation of the 11,356,782 shares has been recorded as a
decrease to common shares outstanding and a corresponding increase to
additional paid-in capital at the par value of $0.001 per share (aggregate
amount $11,357). The 3,005,000 shares were recorded at the fair market value
of $0.05 per share at the date of the legal settlement (aggregate amount
$150,250) and charged to operations.
As the legal settlement did not result in the Company gaining control of the
assets or operations of AccessTel, the Company did not reflect such assets or
operations in its financial statements subsequent to the settlement date.
In an unrelated matter, on April 14, 2003, the Securities and Exchange
Commission (the "SEC") filed a civil action in the United States District
Court for the Southern District of Ohio, Case Number CV-03-326, against eight
individuals and four entities. Global Guarantee Corporation, including its
Chairman and President, were named as defendants in this civil action. The
Company does not believe that this matter will have any effect on it.
Results of Operations:
Three Months Ended September 30, 2003 and 2002 -
During the three months ended September 30, 2003, the Company incurred general
and administrative expenses of $30,243, fees to a major shareholder of $28,500
for services rendered, and interest expense of $848 related to previous
advances by the major shareholder for legal and accounting expenses. During
the three months ended September 30, 2003, the major shareholder advanced
$3,686 primarily for legal and accounting expenses.
During the three months ended September 30, 2002, the Company incurred general
and administrative expenses of $21,240, fees to a major shareholder of $28,500
for services rendered, and interest expense of $926 related to previous
advances by the major shareholder for legal and accounting expenses. During
the three months ended September 30, 2002, the major shareholder advanced
$21,240 primarily for legal and accounting expenses.
During September 2003, the Company reviewed its reserve for contingent
liabilities and determined that it had an excess reserve relating to accounts
payable and accrued liabilities recorded in 2000 and early 2001. Accordingly,
the Company reduced its reserve for contingent liabilities by $413,678, which
was recorded as income during the three months ended September 30, 2003.
As a result of the aforementioned factors, during the three months ended
September 30, 2003, the Company recorded net income of $354,087, as compared
to a net loss of $50,666 for the three months ended September 30, 2002.
Nine Months Ended September 30, 2003 and 2002 -
During the nine months ended September 30, 2003, the Company incurred general
and administrative expenses of $36,420, fees to a major shareholder of $85,500
for services rendered, and interest expense of $2,493 related to previous
advances by the major shareholder for legal and accounting expenses. During
the nine months ended September 30, 2003, the major shareholder advanced
$9,863 primarily for legal and accounting expenses.
During the nine months ended September 30, 2002, the Company incurred general
and administrative expenses of $50,512, fees to a major shareholder of $28,500
for services rendered, and interest expense of $2,224 related to previous
advances by the major shareholder for legal and accounting expenses. During
the nine months ended September 30, 2002, the major shareholder advanced
$50,512 primarily for legal and accounting expenses.
During the nine months ended September 30, 2003, in conjunction with the legal
settlement described above, the Company recorded a charge to operations of
$150,250 with respect to its release of claims on 3,005,000 shares that had
been previously issued but had been in dispute and had not been recorded to
date. The 3,005,000 shares were recorded as an expense at the fair market
value of $0.05 per share at the date of the legal settlement (aggregate amount
$150,250).
During September 2003, the Company reviewed its reserve for contingent
liabilities and determined that it had an excess reserve relating to accounts
payable and accrued liabilities recorded in 2000 and early 2001. Accordingly,
the Company reduced its reserve for contingent liabilities by $413,678, which
was recorded as income during the nine months ended September 30, 2003.
As a result of the aforementioned factors, during the nine months ended
September 30, 2003, the Company recorded net income of $139,015, as compared
to a net loss of $138,236 for the nine months ended September 30, 2002.
Liquidity and Capital Resources - September 30, 2003:
Operating Activities -
At September 30, 2003, the Company had no cash resources and a working capital
deficit of $1,136,644, as a result of which the Company was insolvent.
Financing Activities -
Global Guarantee Corporation made advances to or on behalf of the Company
aggregating $3,686 and $9,863 for the three months and nine months ended
September 30, 2003, respectively, and $21,240 and $50,512 for the three months
and nine months ended September 30, 2002, respectively. Such advances bear
interest at 1% below the prime rate. Related interest expense for the three
months and nine months ended September 30, 2003 was $848 and $2,493,
respectively, and $926 and $2,224 for the three months and nine months ended
September 30, 2002, respectively. These advances have been used to fund
general and administrative expenses, consisting primarily of legal and
accounting fees. There can be no assurances that such shareholder will
continue to make such advances to or on behalf of the Company. The Company
also incurred fees to such shareholder for services rendered of $28,500 and
$85,500 for the three months and nine months ended September 30, 2003 and
2002, respectively. As of September 30, 2003 and December 31, 2002, the
Company owed an aggregate of $436,001 and $338,145, respectively, to Global
Guarantee Corporation.
ITEM 3. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information
required to be disclosed in the reports filed or submitted under the Exchange
Act of 1934 is recorded, processed, summarized and reported, within the time
periods specified in the rules and forms of the Securities and Exchange
Commission. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed in the reports filed under the Exchange Act of 1934 is accumulated
and communicated to the Company's management, including its principal
executive and financial officers, as appropriate, to allow timely decisions
regarding required disclosure.
The Company carried out an evaluation, under the supervision and with the
participation of the Company's management, including its principal executive
and financial officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures as of the end of the fiscal
quarter. Based upon and as of the date of that evaluation, the Company's
principal executive and financial officer concluded that the Company's
disclosure controls and procedures are effective to ensure that information
required to be disclosed in the reports the Company files and submits under
the Exchange Act of 1934 is recorded, processed, summarized and reported as
and when required.
(b) Changes in Internal Controls
There were no changes in the Company's internal controls or in other factors
that could have significantly affected those controls subsequent to the date
of the Company's most recent evaluation.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
A list of exhibits required to be filed as part of this report is set
forth in the Index to Exhibits, which immediately precedes such
exhibits, and is incorporated herein by reference.
(b) Reports on Form 8-K
Three Months Ended September 30, 2003: None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AccessTel, Inc.
---------------
(Registrant)
/s/ DAVID C. MERRELL
Date: November 1, 2003 By: _________________________
David C. Merrell
President and Chief
Financial Officer
INDEX TO EXHIBITS
Exhibit
Number Description of Document
------ -----------------------
31 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
32 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002