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, 2001
[ ] 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)
5201 Great American Parkway, Suite 320-3102
Santa Clara, California 95054
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(Address of principal executive offices)
Issuer's telephone number: (408) 216-4756
Not applicable
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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, 2001, the Company had 33,354,091 shares of common stock
issued and outstanding.
Transitional Small Business Disclosure Format: Yes [X] No [ ]
Documents incorporated by reference: None.
-1-
ACCESSTEL, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 2001 (Unaudited)
and December 31, 2000
Consolidated Statements of Operations (Unaudited) - Three
Months and Nine Months Ended September 30, 2001 and 2000
Consolidated Statements of Cash Flows (Unaudited) - Nine Months
Ended September 30, 2001 and 2000
Notes to Consolidated Financial Statements (Unaudited) - Three
Months and Nine Months Ended September 30, 2001 and 2000
Item 2. Management's Discussion and Analysis or Plan of Operation
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
-2-
Accesstel, Inc.
Balance Sheets
September 30, December 31,
2001 2000
--------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ $ 542,952
Other receivables 1,302
-
-------- ---------
Total current assets 544,272
--------- ---------
Property and equipment 38,223
Less: Accumulated depreciation (3,326)
--------- ---------
34,897
--------- ---------
Other assets 3,994
--------- ---------
Total assets $ $ 583,163
========= =========
(continued)
-3-
Accesstel, Inc.
Balance Sheets (continued)
September 30, December 31,
2001 2000
--------- ---------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable and accrued
expenses $1,087,764 $1,028,631
Taxes payable 116,719
Due to shareholder 125,959
Accrued interest payable 1,342
--------- ---------
Total current liabilities 1,215,065 1,145,350
--------- ---------
Stockholders' deficiency:
Common stock, $.001 par value -
Authorized - 100,000,000 shares
Issued and Outstanding -
33,354,091 shares at September
30, 2001 and December 31, 2000,
respectively 33,354 33,354
Additional paid-in capital 325,091 759,535
Accumulated deficit (1,573,510) (1,355,076)
--------- ---------
Total stockholders' deficiency (1,215,065) (562,187)
--------- ---------
Total liabilities and
stockholders' deficiency $ $ 583,163
========= =========
See accompanying notes to financial statements.
-4-
Accesstel, Inc.
Statements of Operations (Unaudited)
Three Months Ended
September 30,
--------------------------
2001 2000
--------- ---------
Revenues $ $
Cost of revenues
------- -------
Gross profit
------- -------
General and administrative
expenses 33,497
Interest expense 1,342 1,520
------- -------
Loss from continuing operations (34,839) (1,520)
------- -------
Discontinued operations:
Loss from operations (114,255)
------- -------
(114,255)
------- -------
Net loss $ (34,839) $(115,775)
======= =======
Net loss per common share
(basic and diluted):
Continuing operations $ - $ -
Discontinued operations - (0.01)
----- -----
$ - $(0.01)
===== ====
Weighted average common
shares outstanding
(basic and diluted) 33,354,091 8,997,160
========== =========
See accompanying notes to financial statements.
-5-
Accesstel, Inc.
Statements of Operations (Unaudited)
Nine Months Ended
September 30,
--------------------------
2001 2000
--------- ---------
Revenues $ $
Cost of revenues
------- ---------
Gross profit
------- ---------
General and administrative
expenses 217,092
Interest expense 1,342 7,621
------- ---------
Loss from continuing operations (218,434) (7,621)
------- ---------
Discontinued operations:
Loss from operations (575,672)
Write-off of goodwill (586,077)
------- ---------
(1,161,749)
------- ---------
Net loss $(218,434) $(1,169,370)
======= =========
Net loss per common share
(basic and diluted):
Continuing operations $(0.01) $ -
Discontinued operations - (0.08)
----- -----
$(0.01) $(0.08)
===== ====
Weighted average common
shares outstanding
(basic and diluted) 33,354,091 14,497,160
========== ==========
See accompanying notes to financial statements.
-6-
Accesstel, Inc.
Statements of Cash Flows (Unaudited)
Nine Months Ended
September 30,
--------------------------
2001 2000
--------- ---------
Cash flows from operating
activities:
Net loss $(218,434) $(1,169,370)
Adjustments to reconcile
net loss to net cash
provided by (used in)
operating activities:
Depreciation and
amortization 52,431
Loss on disposal of
fixed assets 26,107
Write-off of goodwill 586,077
Changes in operating
assets and liabilities:
(Increase) decrease in:
Accounts receivable 93,102
Inventory 121,081
Prepaid expenses 240
Other assets 12,781
Increase (decrease) in:
Accounts payable and
accrued expenses 91,133 974,906
Taxes payable 25,313
Customer deposits 226,586
Accrued interest
payable 1,342
--------- ---------
Net cash provided by (used in)
operating activities (125,959) 949,254
--------- ---------
Cash flows from investing
activities:
Proceeds from sales of
fixed assets 10,800
--------- ---------
Net cash provided by investing
activities 10,800
--------- ---------
(continued)
-7-
Accesstel, Inc.
Statements of Cash Flows (Unaudited) (continued)
Nine Months Ended
September 30,
--------------------------
2001 2000
--------- ---------
Cash flows from financing
activities:
Repayments to OSCM (396,966)
Decrease in bank payable (585,763)
Principal payments on leases
payable (4,664)
Increase in notes payable -
related parties 29,565
Due to shareholder 125,959
--------- ---------
Net cash provided by (used in)
financing activities 125,959 (957,828)
--------- ---------
Cash and cash equivalents:
Net increase (decrease) - 2,226
At beginning of period - 891
--------- ---------
At end of period $ - $ 3,117
========= =========
See accompanying notes to financial statements.
-8-
Accesstel, Inc.
Notes to Financial Statements (Unaudited)
Three Months and Nine Months Ended September 30, 2001 and 2000
1. Organization and Basis of Presentation
Basis of Presentation - The accompanying financial statements include the
operations of Accesstel, Inc. and Shopss.com, Inc. as described below.
Shopss.com, Inc., a Utah corporation, changed its name to Accesstel, Inc.
on February 15, 2001, in conjunction with the acquisition of Accesstel,
Inc., a Delaware corporation, in a reverse merger transaction effective
December 18, 2000. Litigation to rescind this transaction was subsequently
commenced on May 1, 2001, and a receiver was appointed on May 3, 2001.
The accompanying financial statements have been prepared 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 be
complete or accurate. Information provided herein is given to the best
knowledge of the receiver, and where it is indicated herein that
"management believes" or similar references to management's knowledge, this
information is provided to best knowledge of the receiver, and not
management. A copy of this document has been provided to members of
management, and the receiver has used his best efforts to have this
document reviewed by them and, if appropriate, amended and updated.
The financial statements for the three months and nine months ended
September 30, 2000 consist of the operations of Shopss.com, Inc., which
have been presented as discontinued operations. The financial statements
for the three months and nine months ended September 30, 2001 include the
operations of Accesstel, Inc. The balance sheet as of December 31, 2000
includes the assets and liabilities of both the Accesstel, Inc. and
Shopss.com, Inc. operations. The balance sheet as of September 30, 2001
includes the assets and liabilities of Shopss.com, Inc.'s operations and
excludes the assets and liabilities of Accesstel, Inc.'s operations due to
the rescission litigation.
Accesstel, Inc., formerly Shopss.com, Inc., is referred to herein as the
"Company".
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, 2001, the results of operations for the
three months and nine months ended September 30, 2001 and 2000, and the
cash flows for the nine months ended September 30, 2001 and 2000. The
balance sheet as of December 31, 2000 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, 2000, as filed with the Securities and Exchange Commission.
-9-
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.
The results of operations for the three months and nine months ended
September 30, 2001 are not necessarily indicative of the results of
operations to be expected for the full fiscal year ending December 31,
2001.
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, 2001 and December
31, 2000. 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, 2000 with respect to this
matter.
Net Loss Per Common Share - Basic loss per common share is calculated by
dividing net loss by the weighted average number of common shares
outstanding during the period. Diluted loss per common share reflects the
potential dilution that would occur if all dilutive stock options and
warrants were exercised. These potentially dilutive securities were anti-
dilutive for all periods presented, and accordingly, basic and diluted loss
per common share is the same for all periods presented.
2. Termination of Operations and Write-off of Goodwill
After the closing of the Asset Purchase Agreement with OSCM - OneStop.com,
Inc., a Florida corporation ("OSCM"), on October 27, 1999, the Company
relied on OSCM for a substantial portion of its working capital and
provided OSCM with computers and other equipment. As a result of certain
financial difficulties experienced by OSCM, OSCM was unable to provide
working capital to the Company and was also unable to pay the Company for
the equipment that the Company had delivered to OSCM and its affiliated
entities. As a result of these financial difficulties, the Company ceased
operations and became insolvent, sold or wrote-off its operating assets,
and terminated all of its employees during the three months ended June 30,
2000.
-10-
As a result of the foregoing, the Company determined that its decision to
refocus its business efforts to develop voice-over-internet protocol and
broadband wireless technology had impaired existing goodwill. Accordingly,
the Company wrote-off unamortized goodwill of $586,077 at June 30, 2000.
3. Acquisition of Accesstel, Inc.
Effective December 18, 2000, the Company entered into a Share Exchange
Agreement by and among Shopss.com, Inc., Accesstel, Inc., a Delaware
corporation, and the shareholders of Accesstel, Inc., pursuant to which the
Company acquired all of the shares of Accesstel, Inc. in exchange for
36,100,540 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.
On May 1, 2001, Droz, Reed & Wangsgard, L.C. filed suit in the Third
Judicial District Court of Salt Lake County, State of Utah, Civil No.
010903821, to assert claims, on behalf of its clients, prior management of
the Company, against Accesstel, Inc., a Delaware corporation, and the
original shareholders of Accesstel, Inc. The Complaint demands rescission
of the Share Exchange Agreement, and alleges that the Company was induced
to enter into the Share Exchange Agreement through a series of false
representations made by Accesstel, Inc. and its shareholders. The
Complaint also includes alternative causes of actions for fraud,
conversion, injunctive relief, and the issuance of a Writ of Replevin. On
May 3, 2001, pursuant to the motion of Droz, Reed & Wangsgard, L.C., the
Honorable Raymond Uno, Judge of the Court, issued an Order appointing
Leonard W. Burningham, Esq., a member of the Utah State Bar, as receiver
for the Company. Pursuant to such Order, the receiver is authorized to
prepare and file reports with the Securities and Exchange Commission.
On May 16, 2001, pursuant to the motion of Droz, Reed & Wangsgard, L.C.,
the Honorable L.A. Dever, Judge of the Court, issued a Temporary
Restraining Order prohibiting the transfer of any shares of common stock
issued by Accesstel, Inc. and/or Shopss.com, Inc. which were issued in the
name of any defendant (other than the transfer agent) or held for the
benefit of any such defendant.
On May 27, 2001, pursuant to the motion of Droz, Reed & Wangsgard, L.C.,
the Honorable L.A. Dever, Judge of the Court, issued a Preliminary
Injunction enjoining Atlas Stock Transfer Company from registering the
transfer of, or reissuing, any shares of common stock issued by the Company
and/or Shopss.com, Inc. which were issued in the name of any defendant
(other than Atlas Stock Transfer Company) or are held for the benefit of
any defendant to the suit.
The parties to the lawsuit are currently involved in settlement
negotiations. Although it is currently anticipated that this lawsuit will
be settled, which is expected to include rescission of the Share Exchange
Agreement, there can be no assurances in this regard. It is anticipated
that once the lawsuit is settled and the Share Exchange Agreement is
rescinded, the Company will seek to acquire a new business opportunity,
which may require related debt or equity financing, although there can be
no assurances that the Company will be successful in this regard.
-11-
4. Transactions with Shareholder
During the three months and nine months ended September 30, 2001, a
shareholder made advances to or on behalf of the Company aggregating $4,997
and $40,459, respectively, pursuant to a line of credit with interest at 1%
below the prime rate. These advances have been used to fund general and
administrative expenses, consisting primarily of legal and accounting fees.
There can be no assurances that the shareholder will continue to make such
advances to or on behalf of the Company. The Company also incurred fees to
the shareholder for services rendered of $28,500 and $85,500 for the three
months and nine months ended September 30, 2001, respectively.
5. Stockholders' Deficiency
On January 16, 2001, the Board of Directors of the Company unanimously
adopted and a majority of the shareholders approved a stock option plan
that provides for the issuance of up to 20,000,000 shares of common stock
of the Company.
On January 24, 2001, the Board of Directors of the Company unanimously
adopted and a majority of the shareholders approved an amendment to the
Articles of Incorporation to increase the total authorized number of shares
of capital stock from 50,000,000 to 120,000,000, of which 100,000,000
shares are common stock and 20,000,000 shares are preferred stock.
6. New Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141 ("SFAS 141"), "Business
Combinations". SFAS 141 requires the purchase method of accounting for
business combinations initiated after June 30, 2001 and eliminates the
pooling-of-interests method. The Company does not believe that the
adoption of SFAS 141 will have a material effect on the Company's financial
statement presentation or disclosures.
-12-
In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets", which is
effective January 1, 2002. SFAS 142 requires, among other things, the
discontinuance of goodwill amortization. In addition, SFAS 142 includes
provisions for the reclassification of certain existing recognized
intangibles as goodwill, reassessment of the useful lives of the existing
recognized intangibles, reclassification of certain intangibles out of
previously reported goodwill and the identification of reporting units for
purposes of assessing potential future impairments of goodwill. SFAS 142
also requires the Company to complete a transitional goodwill impairment
test six months from the date of adoption. The Company is reviewing the
requirements for adopting and the implications of adopting SFAS 142. The
Company does not believe that the adoption of SFAS 142 will have a material
effect on the Company's financial statement presentation or disclosures.
In August 2001, the FASB issued Statement of Financial Accounting Standards
No. 143 ("SFAS 143"), "Accounting for Asset Retirement Obligations", which
is effective January 1, 2003. The Company is reviewing the requirements
for adopting and the implications of adopting SFAS 143. The Company does
not believe that the adoption of SFAS 143 will have a material effect on
the Company's financial statement presentation or disclosures.
In October 2001, the FASB issued Statement of Financial Accounting
Standards No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal
of Long-Lived Assets", which is effective January 1, 2002. The Company is
reviewing the requirements for adopting and the implications of adopting
SFAS 144. The Company does not believe that the adoption of SFAS 144 will
have a material effect on the Company's financial statement presentation or
disclosures.
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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, 2001 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 include, among others, statements concerning the
Company's expectations regarding its working capital requirements, its
business, growth prospects, competition and results of operations, and
other 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, 2001 involve known and unknown risks, uncertainties and other factors
that could cause the actual results, performance or achievements of the
Company to differ materially from those expressed in or implied by the
forward-looking statements contained herein.
The accompanying financial statements have been prepared 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 be
complete or accurate. Information provided herein is given to the best
knowledge of the receiver, and where it is indicated herein that
"management believes" or similar references to management's knowledge, this
information is provided to best knowledge of the receiver, and not
management. A copy of this document has been provided to members of
management, and the receiver has used his best efforts to have this
document reviewed by them and, if appropriate, amended and updated.
The Company is currently insolvent and has no business operations. 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.
Summary of Recent Transactions:
Immediately prior to October 27, 1999, the Company was an inactive public
company. Effective October 27, 1999, pursuant to an Asset Purchase
Agreement, the Company purchased from OSCM - OneStop.com, Inc., a Florida
corporation ("OSCM"), an 80% ownership interest in CCM, all rights to an
option to purchase the remaining 20% ownership interest in CCM, and all
assets relating to the Shopss.com virtual shopping mall owned by OSCM,
including all software, web-sites, and related technology, customers and
customer lists, patents, trademarks and trade names. In exchange for the
acquired assets, the Company issued to OSCM 12,000,000 shares of its common
stock, which represented approximately 60% of its outstanding shares of
common stock after giving effect to the transaction. The Company also
agreed to assume the liabilities relating to the Shopss.com business as
recorded on the financial statements of OSCM and the liabilities relating
to the option of the stockholders of CCM to require OSCM to purchase the
remaining 20% interest in CCM. Pursuant to a subsequent agreement in
principle between the Company and OSCM, clarifications were made to the
effect that none of the assets relating to the Shopss.com virtual shopping
mall would include any of the assets or liabilities relating to the virtual
shopping mall operated by a subsidiary of OSCM in Israel, any obligation of
the Company to pay cash for the assets acquired from OSCM was cancelled,
the holdings of OSCM in the Company were decreased by canceling 11,000,000
shares of common stock owned by OSCM, the Company issued a warrant to OSCM
to purchase 3,000,000 shares of common stock at $5.00 per share for a
period of two years, and the Company agreed to cancel all amounts due from
OSCM to the Company aggregating approximately $1,600,000. Immediately
after the closing of the Asset Purchase Agreement, the Company effected a
5.435034 forward split of its common stock.
-14-
After the closing of the Asset Purchase Agreement, the Company relied on
OSCM for a substantial portion of its working capital and provided OSCM
with computers and other equipment. As a result of certain financial
difficulties experienced by OSCM, OSCM was unable to provide working
capital to the Company and was also unable to pay the Company for the
equipment which the Company had delivered to OSCM and its affiliated
entities. As a result of these financial difficulties, the Company ceased
operations and became insolvent, sold or wrote-off its operating assets,
and terminated all of its employees during the three months ended June 30,
2000.
Effective December 18, 2000, the Company entered into a Share Exchange
Agreement by and among Shopss.com, Inc., Accesstel, Inc., a Delaware
corporation, and the shareholders of Accesstel, Inc., pursuant to which the
Company acquired all of the shares of Accesstel, Inc. in exchange for
36,100,540 shares of common stock, which represented 80% of the issued and
outstanding of common stock of the Company after giving effect to the
transaction.
On May 1, 2001, Droz, Reed & Wangsgard, L.C. filed suit in the Third
Judicial District Court of Salt Lake County, State of Utah, Civil No.
010903821, to assert claims, on behalf of its clients, prior management of
the Company, against Accesstel, Inc., a Delaware corporation, and the
original shareholders of Accesstel, Inc. The Complaint demands rescission
of the Share Exchange Agreement, and alleges that the Company was induced
to enter into the Share Exchange Agreement through a series of false
representations made by Accesstel, Inc. and its shareholders. The
Complaint also includes alternative causes of actions for fraud,
conversion, injunctive relief, and the issuance of a Writ of Replevin. On
May 3, 2001, pursuant to the motion of Droz, Reed & Wangsgard, L.C., the
Honorable Raymond Uno, Judge of the Court, issued an Order appointing
Leonard W. Burningham, Esq., a member of the Utah State Bar, as receiver
for the Company. Pursuant to such Order, the receiver is authorized to
prepare and file reports with the Securities and Exchange Commission.
On May 16, 2001, pursuant to the motion of Droz, Reed & Wangsgard, L.C.,
the Honorable L.A. Dever, Judge of the Court, issued a Temporary
Restraining Order prohibiting the transfer of any shares of common stock
issued by Accesstel, Inc. and/or Shopss.com, Inc. which were issued in the
name of any defendant (other than the transfer agent) or held for the
benefit of any such defendant.
On May 27, 2001, pursuant to the motion of Droz, Reed & Wangsgard, L.C.,
the Honorable L.A. Dever, Judge of the Court, issued a Preliminary
Injunction enjoining Atlas Stock Transfer Company from registering the
transfer of, or reissuing, any shares of common stock issued by the Company
and/or Shopss.com, Inc. which were issued in the name of any defendant
(other than Atlas Stock Transfer Company) or are held for the benefit of
any defendant to the suit.
The parties to the lawsuit are currently involved in settlement
negotiations. Although it is currently anticipated that this lawsuit will
be settled, which is expected to include rescission of the Share Exchange
Agreement, there can be no assurances in this regard. It is anticipated
that once the lawsuit is settled and the Share Exchange Agreement is
rescinded, the Company will seek to acquire a new business opportunity,
which may require related debt or equity financing, although there can be
no assurances that the Company will be successful in this regard.
-15-
Results of Operations:
Three Months Ended September 30, 2001 and 2000 -
During the three months ended September 30, 2001, the Company incurred
general and administrative expenses of $33,497, which consisted of legal
and accounting expenses of $4,997 and charges by a shareholder for services
rendered of $28,500, and interest expense of $1,342 related to advances by
a shareholder to or on behalf of the Company.
During the three months ended September 30, 2000, the Company incurred a
loss from discontinued operations of $114,255 and interest expense of
$1,520, resulting in a net loss of $115,775.
Nine Months Ended September 30, 2001 and 2000 -
During the nine months ended September 30, 2001, the Company incurred
general and administrative expenses of $217,092, which consisted of legal
and accounting expenses of $131,592 and charges by a shareholder for
services rendered of $85,500, and interest expense of $1,342 related to
advances by a shareholder to or on behalf of the Company.
During the nine months ended September 30, 2000, the Company incurred a
loss from discontinued operations of $1,161,749 and interest expense of
$7,621, resulting in a net loss of $1,169,370. The loss from discontinued
operations consisted of a loss from operations of $575,672 and a write-off
of goodwill of $586,077. The Company wrote-off unamortized goodwill of
$586,077 at June 30, 2000 as a result of its decision to refocus its
business efforts to develop voice-over-internet protocol and broadband
wireless technology.
Liquidity and Capital Resources - September 30, 2001:
Operating Activities -
At September 30, 2001, the Company had no cash resources and a working
capital deficit of $1,215,065, as a result of which the Company was
insolvent. The Company utilized $125,959 of cash in operating activities
during the nine months ended September 30, 2001, as compared to generating
$949,254 of cash during the nine months ended September 30, 2000.
Financing Activities -
During the three months and nine months ended September 30, 2001, a
shareholder made advances to or on behalf of the Company aggregating $4,997
and $40,459, respectively, pursuant to a line of credit with interest at 1%
below the prime rate. These advances have been used to fund general and
administrative expenses, consisting primarily of legal and accounting fees.
There can be no assurances that the shareholder will continue to make such
advances to or on behalf of the Company. The Company also incurred fees to
the shareholder for services rendered of $28,500 and $85,500 for the three
months and nine months ended September 30, 2001, respectively.
During 1999, OSCM, through its subsidiary Shopss.com in Israel ("Shopss.com
- Israel"), was providing services similar to the Company in Israel.
Shopss.com - Israel collected monies through credit cards in 1999, which
were cleared through the Company. In January 2000, as a result of customer
dissatisfaction issues, the Company began getting chargebacks from the bank
for sales by Shopss.com - Israel. The Company received chargebacks of
$585,763 against its bank account, which was recorded as a liability due
the bank at December 31, 1999. During the nine months ended September 30,
2000, the Company paid the bank $585,763 and made net payments to OSCM of
$396,966.
-16-
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Effective December 18, 2000, the Company entered into a Share Exchange
Agreement by and among Shopss.com, Inc., Accesstel, Inc., a Delaware
corporation, and the shareholders of Accesstel, Inc., pursuant to which the
Company acquired all of the shares of Accesstel, Inc. in exchange for
36,100,540 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.
On May 1, 2001, Droz, Reed & Wangsgard, L.C. filed suit in the Third
Judicial District Court of Salt Lake County, State of Utah, Civil No.
010903821, to assert claims, on behalf of its clients, prior management of
the Company, against Accesstel, Inc., a Delaware corporation, and the
original shareholders of Accesstel, Inc. The Complaint demands rescission
of the Share Exchange Agreement, and alleges that the Company was induced
to enter into the Share Exchange Agreement through a series of false
representations made by Accesstel, Inc. and its shareholders. The
Complaint also includes alternative causes of actions for fraud,
conversion, injunctive relief, and the issuance of a Writ of Replevin. On
May 3, 2001, pursuant to the motion of Droz, Reed & Wangsgard, L.C., the
Honorable Raymond Uno, Judge of the Court, issued an Order appointing
Leonard W. Burningham, Esq., a member of the Utah State Bar, as receiver
for the Company. Pursuant to such Order, the receiver is authorized to
prepare and file reports with the Securities and Exchange Commission.
On May 16, 2001, pursuant to the motion of Droz, Reed & Wangsgard, L.C.,
the Honorable L.A. Dever, Judge of the Court, issued a Temporary
Restraining Order prohibiting the transfer of any shares of common stock
issued by Accesstel, Inc. and/or Shopss.com, Inc. which were issued in the
name of any defendant (other than the transfer agent) or held for the
benefit of any such defendant.
On May 27, 2001, pursuant to the motion of Droz, Reed & Wangsgard, L.C.,
the Honorable L.A. Dever, Judge of the Court, issued a Preliminary
Injunction enjoining Atlas Stock Transfer Company from registering the
transfer of, or reissuing, any shares of common stock issued by the Company
and/or Shopss.com, Inc. which were issued in the name of any defendant
(other than Atlas Stock Transfer Company) or are held for the benefit of
any defendant to the suit.
The parties to the lawsuit are currently involved in settlement
negotiations. Although it is currently anticipated that the lawsuit will be
settled, which is expected to include rescission of the Share Exchange
Agreement, there can be no assurances in this regard. It is anticipated
that once the lawsuit is settled and the Share Exchange Agreement is
rescinded, the Company will seek to acquire a new business opportunity,
which may require related debt or equity financing, although there can be
no assurances that the Company will be successful in this regard.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) Reports on Form 8-K:
Three Months Ended September 30, 2001 - None
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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/ LEONARD W. BURNINGHAM
Date: November 19, 2001 By: _________________________
Leonard W. Burningham
Receiver
(Duly Authorized Officer)
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