United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission File No. 000-24459
ACCESSTEL, INC.
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(Name of small business issuer in its charter)
UTAH 59-2159271
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2904 E. Shady Lane, Highland Ranch, CO 80126
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(Address of principal executive offices, including zip code)
Issuer's telephone number, including area code: (720) 404-1302
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $0.001 par value
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. [ ]
The Company had no operating revenues for the fiscal year ended December
31, 2003.
The aggregate market value of the Company's common stock held by non-
affiliates of the Company as of May 13, 2004, was $8,281, which represents
8,281,031 shares at par value of $0.001.
Transitional Small Business Disclosure Format: Yes [X] No [ ]
Cautionary Statement Pursuant to Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995:
This Annual Report on Form 10-KSB for the fiscal year ended December 31,
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 Annual Report on Form 10-KSB
for the fiscal year ended December 31, 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.
PART I.
ITEM 1. DESCRIPTION OF BUSINESS
Overview:
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-Delaware"),
in a reverse merger transaction effective December 18, 2000.
Effective December 18, 2000, the Company entered into a Share Exchange
Agreement with AccessTel-Delaware and the shareholders of AccessTel-Delaware
pursuant to which the Company acquired all of the shares of AccessTel-Delaware
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. On May 6, 2003, a
settlement was reached whereby the parties to the Share Exchange Agreement
surrendered all shares that were issued to them pursuant the Share 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 Share Exchange Agreement with the AccessTel-Delaware
Parties resign from their respective management positions. 11,356,782 shares
of common stock were returned to the treasury and prior to resigning from
their respective management positions of the Company, David C. Merrell, a
former director and executive officer of the Company, was appointed as an
interim officer and director of the Company. See the Company's 8-K Current
Report dated May 6, 2003, which has been previously filed with the Securities
and Exchange Commission. See Part III, Item 13.
The Company effected a 1:89 reverse split in the shares of its common
stock of that were outstanding as of December 12, 2003. The Company had
25,002,309 shares of common stock outstanding immediately prior to the reverse
stock split and 280,925 shares of common stock outstanding immediately
following the reverse split.
On December 16, 2003, the Company purchased all of the issued and
outstanding shares of common stock of Euro Offline pursuant to that certain
Stock Purchase Agreement and Plan of Reorganization (the "Agreement and
Reorganization") dated December 16, 2003, between the Company and Euro
Offline, Inc. ("Euro Offline"), a privately-held, Colorado corporation. As a
result of the closing of the Agreement and Plan of Reorganization, 31,000,000
"restricted" shares of common stock were issued to six persons, including
Messrs. Randall L. Middleton and Thomas Rowan, executive officers, directors
and shareholders of Euro Offline. Messrs. Middleton and Rowan each received
13,750,000 newly-issued, "restricted" shares of common stock of the Company.
The aggregate 27,500,000 shares of common stock of the Company owned of record
and beneficially by Messrs. Middleton and Rowan as a result of the Agreement
and Plan of Reorganization represented approximately 88% of the voting
securities of AccessTel. As part of the 31,000,000 "restricted" shares of
common stock that were issued pursuant to the Agreement and Plan of
Reorganization, 1,000,000 "restricted" shares of common stock were issued to
Global Guarantee Corporation ("Global") for which Global agreed to forgive
certain indebtedness of the Company to it in consideration of the stock and
for a certain amount of cash.
David C. Merrell resigned as the sole executive officer and director of
the Company on December 16, 2003, in connection with the Agreement
and Plan of Reorganization. Prior to his resignation, Mr. Merrell appointed
Messrs. Middleton and Rowan as directors to fill the vacancies in the Board of
Directors created by his and prior resignations. In addition, Mr. Middleton
was elected to serve as the President, and Mr. Rowan was elected to serve as
the Secretary/Treasurer, of the Company. See the Company's 8-K Current Report
dated December 16, 2003, which has been previously filed with the Securities
and Exchange Commission. See Part III, Item 13.
Global, a former principal shareholder of the Company and shareholder
subsequent to the completion of the Euro Offline Agreement and Plan of
Reorganization, was a third party beneficiary to the representations and
warranties of Euro Offline that were made under the Agreement and Plan of
Reorganization that referenced the October 3, 2003, Agreement, between Global
and Messrs. Middleton and Rowan that provided for certain payments to be made
to Global in connection with the closing of the Agreement and Plan or
Reorganization. That Agreement also provided that if the reorganization were
not completed as provided in Section 2 of that Agreement by the payment of
certain sums and the issuance of certain securities of the Company to Global,
that Global would have the right to essentially rescind its Agreement with
Messrs. Middleton and Rowan by the return of the consideration received under
their Agreement, less reasonable attorney's fees incurred. Global has
asserted a claim of rescission and damages in connection with the rescission
of the Agreement and Plan of Reorganization with Euro Offline; that claim has
not yet been resolved. The effects of that claim may result in a further
change in control of the Company, by returning Global to a principal
shareholder of the Company. The Company disputes Global's claim, and asserts
that the recision of the Euro Offline Agreement and Plan of Reorganization
does not grant Global the right of recision under its Agreement with Messrs.
Middleton and Rowan, but merely asserts the right of payment, which has been
made to and received by Global under that Agreement. A copy of the Agreement
is attached hereto and incorporated herein by reference. See Part III, Item
13.
On April 9, 2004, which is subsequent to the date of this Annual Report,
Mr. Middleton and Mr. Rowan resigned and appointed Kevin Marion as President
and director of our Company; and the Company completed a Compromise and
Settlement Agreement with Euro Offline that was executed by Messrs. Middleton
and Rowan. Each party contended that a substantial, irreconcilable dispute
existed among them and each resolved that they should resolve this dispute
through this Compromise and Settlement Agreement. by rescinding the Agreement
and Plan or Reorganization between the Company and Euro Offline, and with the
Company agreeing to pay $40,000 to Euro Offline and Euro Offline agreeing to
cancel the 27,000,000 shares of "restricted" common stock issued to Messrs.
Middleton and Rowan back to the Company's treasury. A copy of the Compromise
and Settlement Agreement is attached to and incorporated herein. See Part
III, Item 13.
History Prior to December 31, 2003:
See the Company's 10-KSB Annual Report for the year ended December 31,
2002, which has been previously filed with the Securities and Exchange
Commission and is incorporated herein by reference. See Part III, Item 13.
Business:
Our Company's plan of operation for the next 12 months is to:(i)
consider guidelines of industries in which we may have an interest; (ii) adopt
a business plan regarding engaging in the business of any selected industry;
and (iii) to commence such operations through funding and/or the acquisition
of a "going concern" engaged in any industry selected.
Our Company is not currently engaged in any substantive business
activity, and we have no plans to engage in any such activity in the
foreseeable future. In our present form, we may be deemed to be a vehicle to
acquire or merge with a business or company. Regardless, the commencement of
any business opportunity will be preceded by the consideration and adoption of
a business plan by our Board of Directors. We do not intend to restrict our
search for business opportunities to any particular business or industry, and
the areas in which we will seek out business opportunities or acquisitions,
reorganizations or mergers may include, but will not be limited to, the fields
of high technology, manufacturing, natural resources, service, research and
development, communications, transportation, insurance, brokerage, finance and
all medically related fields, among others. We recognize that the number of
suitable potential business ventures that may be available to us may be
extremely limited, and may be restricted to entities who desire to avoid
what such entities may deem to be the adverse factors related to an initial
public offering ("IPO"). The most prevalent of these factors include
substantial time requirements, legal and accounting costs, the inability to
obtain an underwriter who is willing to publicly offer and sell shares, the
lack of or the inability to obtain the required financial statements for such
an undertaking, limitations on the amount of dilution to public investors in
comparison to the stockholders of any such entities, along with other
conditions or requirements imposed by various federal and state securities
laws, rules and regulations and federal and state agencies that implement such
laws, rules and regulations. Any of these types of transactions, regardless
of the particular prospect, would require us to issue a substantial number of
shares of our common stock, that could amount to as much as 95% of our
outstanding securities following the completion of any such transaction;
accordingly, investments in any such private enterprise, if available, would
be much more favorable than any investment in our Company.
Management intends to consider a number of factors prior to making any
decision as to whether to participate in any specific business endeavor, none
of which may be determinative or provide any assurance of success. These may
include, but will not be limited to, as applicable, an analysis of the quality
of the particular entity's management personnel; the anticipated acceptability
of any new products or marketing concepts that it may have; the merit of its
technological changes; its present financial condition, projected growth
potential and available technical, financial and managerial resources; its
working capital, history of operations and future prospects; the nature of its
present and expected competition; the quality and experience of its management
services and the depth of its management; its potential for further research,
development or exploration; risk factors specifically related to its business
operations; its potential for growth, expansion and profit; the perceived
public recognition or acceptance of its products, services, trademarks and
name identification; and numerous other factors which are difficult, if not
impossible, to properly or accurately analyze, let alone describe or identify,
without referring to specific objective criteria.
Regardless, the results of operations of any specific entity may not
necessarily be indicative of what may occur in the future, by reason of
changing market strategies, plant or product expansion, changes in product
emphasis, future management personnel and changes in innumerable other
factors. Further, in the case of a new business venture or one that is in a
research and development mode, the risks will be substantial, and there will
be no objective criteria to examine the effectiveness or the abilities of its
management or its business objectives. Also, a firm market for its products
or services may yet need to be established, and with no past track record, the
profitability of any such entity will be unproven and cannot be predicted with
any certainty.
Management will attempt to meet personally with management and key
personnel of the entity providing any potential business opportunity afforded
to our Company, visit and inspect material facilities, obtain independent
analysis or verification of information provided and gathered, check
references of management and key personnel and conduct other reasonably
prudent measures calculated to ensure a reasonably thorough review of any
particular business opportunity; however, due to time constraints of
management, these activities may be limited. See the heading "Business
Experience," Part I, Item 5.
We are unable to predict the time as to when and if we may actually
participate in any specific business endeavor. Our Company anticipates that
proposed business ventures will be made available to us through personal
contacts of directors, executive officers and principal stockholders,
professional advisors, broker dealers in securities, venture capital
personnel, members of the financial community and others who may present
unsolicited proposals. In certain cases, we may agree to pay a finder's fee
or to otherwise compensate the persons who submit a potential business
endeavor in which our Company eventually participates. Such persons
may include our directors, executive officers and beneficial owners our
securities or their affiliates. In this event, such fees may become a factor
in negotiations regarding any potential venture and, accordingly, may present
a conflict of interest for such individuals. Management does not presently
intend to acquire or merge with any business enterprise in which any member
has a prior ownership interest.
Our Company's directors and executive officers have not used any
particular consultants, advisors or finders on a regular basis.
Although we currently has no plans to do so, depending on the nature and
extent of services rendered, we may compensate members of management in the
future for services that they may perform for our Company. Because we
currently have extremely limited resources, and we are unlikely to have any
significant resources until we have determined a business or enterprise
to engage in or have completed a merger or acquisition, management expects
that any such compensation would take the form of an issuance of our Company's
common stock to these persons; this would have the effect of further diluting
the holdings of our other stockholders. There are presently no preliminary
agreements or understandings between us and members of management respecting
such compensation.
Substantial fees are often paid in connection with the completion of all
types of acquisitions, reorganizations or mergers, ranging from a small amount
to as much as $400,000. These fees are usually divided among promoters or
founders, after deduction of legal, accounting and other related expenses, and
it is not unusual for a portion of these fees to be paid to members of
management or to principal stockholders as consideration for their agreement
to retire a portion of the shares of common stock owned by them. Management
may actively negotiate or otherwise consent to the purchase of all or any
portion of their common stock as a condition to, or in connection with, a
proposed reorganization, merger or acquisition. It is not anticipated that
any such opportunity will be afforded to other stockholders or that such other
stockholders will be afforded the opportunity to approve or consent to any
particular stock buy-out transaction. In the event that any such fees are
paid, they may become a factor in negotiations regarding any potential
acquisition or merger by our Company and, accordingly, may also present a
conflict of interest for such individuals. We have no present arrangements or
understandings respecting any of these types of fees or opportunities.
None of our directors, executive officers, founders or their affiliates
or associates has had any negotiations with any representatives of the owners
of any business or company regarding the possibility of an acquisition,
reorganization, merger or other business opportunity for our Company; nor are
there any similar arrangements with us.
ITEM 2. DESCRIPTION OF PROPERTY
As of December 31, 2003, the Company did not own or lease any property.
ITEM 3. LEGAL PROCEEDINGS
On May 1, 2001, Reed & Wangsgard, L.C. (formerly Droz, Reed & Wangsgard,
L.C.) filed suit in the Third Judicial District Court of Salt Lake County,
State of Utah (the "Court"), Civil No. 010903821 (the "Action"), to assert
claims, on behalf of its clients, prior management of the Company, against
AccessTel and the original shareholders of AccessTel. The complaint in the
Action 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 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 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 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
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 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.
On January 17, 2002, Reed & Wangsgard, L.C. received written confirmation
from an agent of the Board of Directors of the Company that said Board of
Directors have come to a unanimous decision to settle the claim for rescission
of the Share Exchange Agreement by rescinding the Share Exchange Agreement.
However, the Board of Directors of the Company failed and/or refused to follow
through with their agreement to rescind the Share Exchange Agreement. As a
result, Reed & Wangsgard, L.C. filed a Motion to Enforce Settlement with
respect to the agreement to rescind the Share Exchange Agreement.
During February 2002, pursuant to the motion of counsel for AccessTel and
the original shareholders of AccessTel, the Honorable L.A. Dever, Judge of the
Court, issued an order limiting the Court's jurisdiction over certain of the
defendants to the Action. As a result, the Court continued to have
jurisdiction over the corporate defendants and through it, plaintiffs may
assert claims arising from the allegedly wrongful conduct of current
management.
On May 1, 2003, a settlement was reached between the remaining parties to
the Action. The material terms of the settlement include the requirement that
the corporate defendants surrender all right, title and interest in and to
those shares of common stock of the Company 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 resign from their respective management
positions. As a result of the settlement, on May 6, 2003, prior management of
the Company that had filed the complaint, caused to be filed with the Court a
Motion to Dismiss the complaint. An 8-K Current Report with the Order to
Dismiss as an exhibit was filed with the Securities and Exchange Commission on
June 6, 2004. Purusant to the Order to Dismiss the complaint, of the
16,718,763 shares issued to the corporate defendants, 11,356,782 of the common
shares have been canceled and returned to the authorized but unissued common
stock of the Company, and 5,361,981 shares will be transferred to a private
third party unrelated to the AccessTel parties pursuant to a confidential
settlement of a separate legal action involving a legal debt owed by one of
the AccessTel parties to the private third party. The current officers and
directors of the Company resigned, and David C. Merrell, a former director and
executive officer of the Company, was appointed as an interim officer and
director of the Company.
Lawrence Liang, the Company's Chief Executive Officer, President and a
director, and Stuart Bockler, the Company's Chief Financial Officer, Secretary
and a director as of December 31, 2002, were named as defendants in the
Complaint, and resigned as officers and directors of the Company effective
April 24, 2003.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year ended December 31, 2002.
However, on February 20, 2004, which is subsequent to the date of this
Report; we filed a Definitive Information Statement with the Securities and
Exchange Commission regarding changing the name of our Company and approval
for us to take action pursuant to written consent of the majority
stockholders. See Part III, Item 13.
PART II.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information
Since February 27, 2001, the common stock of the Company has been traded
on the OTC Bulletin Board under the symbol "ATEL." The following table sets
forth the range of reported closing bid prices of the Company's common stock
during the periods indicated. Such quotations reflect prices between dealers
in securities and do not include any retail mark-up, mark-down or commission,
and may not necessarily represent actual transactions. Trading in the
Company's common stock has been limited and sporadic, and should not be deemed
to constitute an "established trading market". The information set forth
below reflects the 1-for-8 reverse stock split effective May 29, 1998, the
5.435034 forward stock split effective October 27, 1999 and a 1 for 89 reverse
stock split effective December 12, 2004.
Low High
--- ----
Fiscal Year Ended December 31, 2002:
Three months ended
March 31, 2002 $0.03 $0.11
June 30, 2002 0.03 0.14
September 30, 2002 0.02 0.08
December 31, 2002 0.02 0.08
Fiscal Year Ended December 31, 2003:
Three months ended
March 31, 2003 $0.035 $0.01
June 30, 2003 0.085 0.02
September 30, 2003 0.045 0.02
October 1, 2003 through
December 11, 2003 0.045 0.013
December 12, 2003 through
December 31, 2003** 0.61 0.30
** 1 for 89 reverse split
(b) Holders
As of May 14, 2004, the Company had 149 common shareholders of record,
excluding shares held in "street name" by brokerage firms and other nominees
who hold shares for multiple investors.
(c) Dividends
Holders of common stock are entitled to receive dividends if, as and when
declared by the Board of Directors out of funds legally available for
distribution, subject to the dividend and liquidation rights of any preferred
stock that may be issued and outstanding. The Company has not paid cash
dividends on its common stock and has no present intention of paying cash
dividends in the foreseeable future. It is the present policy of the Board of
Directors to retain all earnings to provide for the future growth and
development of the Company's business operations.
(d) Sales of Unregistered Securities
Name Shares Consideration
Ron Girardi 1,000,000 Agreement and Plan
Largess, Inc. 1,000,000 Agreement and Plan
Lyons Capital Group LLP 1,000,000 Agreement and Plan
Pagentry Place Investments, LTD. 500,000 Agreement and Plan
Professional Traders fund, LLC 200,000 Agreement and Plan
Thomas Rowan 13,750,000* Agreement and Plan
Randall Middleton 13,550,000* Agreement and plan
Pagentry Place 500,000 $18,000
*All of the 13,750,000 shares issued to Thomas Rowan and 13,250,000 of the
shares issued to Randall Middleton, for a total of 27,000,000, are to be
cancelled pursuant to the Compromise and Settlement Agreement dated April 9,
2004.
Securities Authorized for Issuance under Equity Compensation Plans
Plan category Number of shares of Weighted-average Number of shares of
common stock to be exercise price of common stock
issued upon exercise outstanding options remaining available
of outstanding options, warrants for future issuance
warrants and rights and rights under equity
Plan category compensation plans
Equity compensation
plans approved by
stockholders: - - -
Equity compensation
plans not approved
by stockholders: 3,500,000 $0.32 -
--------- ----- -------
Total 3,500,000 $0.32 -
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company's plan of operation subsequent to the settlement of the
AccessTel litigation outlined in Part I, Item 3, is to: (i) consider
guidelines of industries in which the Company may have an interest; (ii) adopt
a business plan regarding engaging in the business of any selected industry;
and (iii) commence such operations through funding and/or the acquisition of a
"going concern" engaged in any industry selected.
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 December 31, 2003 and 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, 2003 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. 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.
Results of Operations:
During the years ended December 31, 2003 and 2002, the Company incurred
general and administrative expenses of $908,492 and $166,335, which consisted
mainly of legal and accounting expenses, and interest expense of $2,493 and
$3,266, respectively, related to advances by a shareholder to or on behalf of
the Company.
Liquidity and Capital Resources December 31, 2003:
Operating Activities -
At December 31, 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.
The Company utilized $908,492 of cash in operating activities during the year
ended December 31, 2003, as compared to utilizing $166,335 of cash during the
year ended December 31, 2002.
Financing Activities -
During the years ended December 31, 2003 and 2002, a shareholder made
advances to or on behalf of the Company aggregating $9,863 and $52,335,
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 $85,500 and $114,000 for the years ended December 31,
2003 and 2002.
ITEM 7. FINANCIAL STATEMENTS
ACCESSTEL, INC.
INDEX TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003 AND 2002
Independent Auditors' Report Radin, Glass & Co., LLP
Financial Statements:
Balance Sheets December 31, 2003 and 2002
Statements of Operations Years Ended December 31, 2003 and 2002
Statements of Cash Flows Years Ended December 31, 2003 and 2002
Statements of Stockholders' Deficiency Years Ended December 31, 2003
and 2002
Notes to Financial Statements Years Ended December 31, 2003 and 2002
INDEPENDENT AUDITORS' REPORT
Shareholders and Directors
AccessTel, Inc.
We have audited the accompanying balance sheets of AccessTel, Inc. as of
December 31, 2003 and 2002, and the related statements of operations,
shareholders' deficiency and cash flows for the years then ended. 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 auditing standards generally
accepted in the United States. 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 financial statements referred to above present fairly, in
all material respects, the financial position of AccessTel, Inc. as of
December 31, 2003 and 2002, and the results of its operations and its cash
flows for the years then ended, in conformity with accounting principles
generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has suffered from
recurring losses from operations, including net losses of $910,985 and
$169,601 for the years ended December 31, 2003 and 2002, respectively, and had
a deficit in working capital and a deficiency in stockholders' equity as of
December 31, 2003. These factors raise substantial doubt 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.
On May 1, 2001, the Company was sued by the former shareholders of Shopss.com,
Inc., which had been merged with the Company on December 18, 2000 as described
at Note 1. The complaint alleged that AccessTel, Inc. and its former
shareholders made false representations, inducing Shopss.com, Inc. to enter
into the merger. The complaint demanded rescission. On May 3, 2001, the
Court issued an order appointing a receiver for the Company to perform certain
duties. This litigation was resolved during May 2003. The financial
statements as of December 31, 2003 and 2002 and for the years then ended
include the assets and liabilities of Shopss.com, Inc.'s operations and
exclude the assets and liabilities of AccessTel, Inc.'s operations due to the
rescission litigation.
In December 16,2003, the Company issued shares to acquire Euro Offline, Inc.
As described in Note 1, the acquisition was rescinded, with Euro Offline, Inc.
due to certain material irreconcilable differences by both parties by April
2004, all but 4 million shares were returned to treasury. The financial
statements as of December 31, 2003 and for the year then ended include the
assets and liabilities of Shopps.com, Inc.'s operations and exclude the assets
and liabilities of Euro Offline, Inc.'s operations due to a subsequent
Comprise and Settlement Agreement.
/S/Radin, Glass & Co.
Radin, Glass & Co., LLP
Certified Public Accountants
New York, New York
May 14, 2004
ACCESSTEL, INC.
BALANCE SHEETS
DECEMBER 31, 2003 AND 2002
2003 2002
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ - $ -
--------- ---------
Total current assets - -
--------- ---------
Property and equipment - -
Less: accumulated depreciation - -
--------- ---------
- -
--------- ---------
Deposits - -
--------- ---------
Total assets $ - $ -
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable and accrued
liabilities $700,643 $1,087,764
Due to stockholder 428,434 333,071
Accrued interest payable 7,567 5,074
--------- ---------
Total current liabilities 1,136,644 1,425,909
--------- ---------
Stockholders' deficiency:
Preferred stock, $1.00 par value;
authorized 20,000,000 shares;
issued and outstanding none - -
Common stock, $0.001 par value;
authorized - 100,000,000 shares;
issued and outstanding
34,781,031 and 374,871
shares, respectively 34,781 375
Additional paid-in capital 2,423,914 358,070
Accumulated deficit (3,595,339) (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
YEARS ENDED DECEMBER 31, 2003 AND 2002
2003 2002
---- ----
Revenues $ - $ -
Cost of revenues - -
------- -------
Gross profit - -
------- -------
General and administrative
expenses 908,492 166,335
Aborted acquisition costs 900,000 0
Interest expense 2,493 3,266
------- -------
Net loss $(1,810,985) $(169,601)
======= =======
Net loss per common share
(basic and diluted) $(0.60) $(0.45)
===== ====
Weighted average common
shares outstanding
(basic and diluted) 2,995,984 374,871
========== ==========
See accompanying notes to financial statements.
ACCESSTEL, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2003 AND 2002
2003 2002
---- ----
Cash flows from operating
activities:
Net loss $(1,810,985) $ (169,601)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Changes in operating
assets and liabilities:
Increase in:
Value of common shares
released in conjunction
with legal settlement 150,250
Stock based compensation 1,050,000
Aborted acquisition costs 900,000
Accounts payable and
accrued expenses (387,121) -
Accrued interest
payable 2,493 3,266
--------- ---------
Net cash used in operating
activities (95,363) (166,335)
--------- ---------
Cash flows from financing
activities:
Increase in due to shareholder 95,363 166,335
--------- ---------
Net cash provided by financing
activities 95,363 166,335
--------- ---------
Cash and cash equivalents:
Net increase (decrease) - -
At beginning of period - -
--------- ---------
At end of period $ - $ -
========= =========
Supplemental Disclosures of
Cash Flow Information:
Interest paid - -
Taxes paid - -
See accompanying notes to financial statements.
ACCESSTEL, INC.
STATEMENT OF STOCKHOLDERS' DEFICIENCY
YEARS ENDED DECEMBER 31, 2003 AND 2002
Preferred Stock Common Stock
-------------------- ------------------
Shares Amount Shares Amount
------ ------ ------ ------
Balance, December 31, 2001 - - 374,871 375
Net loss for the year - - - -
--------- --------- ---------- ------
Balance, December 31, 2002 - - 374,871 $ 375
Release of stock held in dispute 33,764 34
Cancellation of shares issued (127,604) (128)
Issuance of stock* 31,000,000 31,000
Stock based compensation 3,500,000 3,500
Net loss for the year
--------- --------- ---------- ------
Balance, December 31, 2003 34,781,031 34,781
========= ========= ========== ======
*Includes 27 million shares returned to treasury April 2004.
[CONTINUED]
ACCESSTEL, INC.
STATEMENT OF STOCKHOLDERS' DEFICIENCY
YEARS ENDED DECEMBER 31, 2003 AND 2002
Additional Total
Paid-In Accumulated Stockholders'
Capital Deficit Deficiency
---------- ----------- ------------
Balance, December 31, 2001 358,070 (1,614,753) (1,256,308)
Net loss for the year - (169,601) (169,601)
---------- --------- ---------
Balance, December 31, 2002 $ 358,070 $ (1,784,354) $(1,425,909)
Release of stock held in dispute 150,216 150,250
Cancellation of shares issued 128
Issuance of stock* 869,000 - -
Stock based compensation 1,046,500 1,050,000
Net loss for the year (1,810,985) (910,985)
---------- --------- ---------
Balance, December 31, 2003 2,423,914 (3,595,339) (1,136,644)
========== ========= =========
*Includes 27 million shares returned to treasury in April 2004.
See accompanying notes to financial statements.
ACCESSTEL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003 AND 2002
1. Business
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.
The information contained herein is based on the information available to the
receiver, 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 the best knowledge of
the receiver, and not management.
The financial statements for the years ended December 31, 2002 and 2003
exclude the operations of AccessTel. The balance sheets as of December 31,
2002 and 2003 include the assets and liabilities of Shopss.com, Inc.'s
operations and excludes the assets and liabilities of AccessTel's operations
due to the rescission litigation.
In December 2003, the Company entered into a "Stock Purchase Agreement and
Plan of Reorganization" to issue 30,000,000 shares for all of the outstanding
common stock of Euro Offline, Inc., a privately held entity. Prior to the
closing and condition to the closing, the Company effectuated a reverse stock
split of 89 shares for 1 share. In addition a shareholder / related party debt
holder was to receive $100,000 for consideration to forgive amounts due from
the Company currently recorded and shown as "due to major shareholder of
$428,434 plus interest of $7,567 as of the closing date" plus 1,000,000 shares
of post split common stock of the Company. The Company and certain of its
shareholders have negotiated a "Compromise and Settlement" with the former
shareholders of Euro Offline, Inc. Each party contends that a substantial,
irreconcilable dispute exists among them for the failure of not consumating
the merger with Euro OffLine, Inc., therefore 27 million shares will be
returned to treasury with the former Euro Offline shareholders to receive
$40,000 in April 2004. The 3 million shares of common stock issued with the
aforementioned transaction with Euro Offline, Inc. not under an agreement to
be returned to treasury as of the date of this audit report will be recorded
as a $900,000 cost of the aborted transaction with Euro Offline, Inc.
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 December 31, 2002 and 2003. 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, 2003 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
pursuing litigation against 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.
2. Summary of Significant Accounting Principles
Cash and Cash Equivalents
The Company classifies highly liquid temporary investments with an original
maturity of three months or less when purchased as cash equivalents.
Property and Equipment
Property and equipment are stated at cost. Maintenance and repairs are
charged to expenses as incurred. Depreciation is provided for over the
estimated useful lives of the individual assets using the straight-line
method.
Fair Value of Financial Instruments
The carrying amounts reported in the balance sheet for cash, receivables, and
accrued expenses approximate fair value based on the short-term maturity of
these instruments.
Stock-Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation", establishes a fair
value method of accounting for stock-based compensation plans and for
transactions in which an entity acquires goods or services from non-employees
in exchange for equity instruments. SFAS No. 123 also encourages, but does
not require, companies to record compensation cost for stock-based employee
compensation. The Company has chosen to continue to account for stock-based
compensation utilizing the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees",
with pro forma disclosures of net income (loss) as if the fair value method
had been applied. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the fair market price of the Company's
common stock at the date of grant over the amount an employee must pay to
acquire the stock.
Income Taxes
The Company utilizes the liability method of accounting for income taxes as
set forth in SFAS No. 109, "Accounting for Income Taxes." Under the liability
method, deferred taxes are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect in the years in which the differences are expected to reverse.
As of December 31, 2003, the Company had federal net operating loss
carryforwards of approximately $2.5 million, which expire beginning in 2021.
A 100% valuation allowance has been provided with respect to the deferred tax
assets as the Company cannot determine that it is more likely than not that it
will be able to realize the deferred tax assets.
Due to restrictions imposed by the Internal Revenue Code regarding substantial
changes in ownership of companies with loss carryforwards, the utilization of
the Company's federal net operating loss carryforwards will be limited as a
result of changes in the Company's stock ownership in prior years.
Loss Per Share
The Company has adopted SFAS No. 128, "Earnings Per Share". SFAS No. 128
provides for the calculation of basic and diluted earnings per share. Basic
earnings per share includes no dilution and is computed by dividing net income
(loss) available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted earnings per share reflects
the potential dilution relating to outstanding stock options, warrants and
convertible debt. The loss per common share does not include the exercise of
outstanding stock options and warrants, since their effect would be anti-
dilutive.
Accounting for Long-Lived Assets
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of", establishes guidelines regarding when
impairment losses on long-lived assets, which include plant and equipment and
certain identifiable intangible assets, should be recognized and how
impairment losses should be measures. The Company periodically reviews such
assets for impairment whenever circumstances and situations indicate that the
carrying amounts may not be recoverable, and records any such losses in the
period in which such determination is made.
Accounting Estimates and Assumptions
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.
3. Transactions with Shareholder
During the years ended December 31, 2003 and 2002, pursuant to a line of
credit with interest at 1% below the prime rate, a shareholder made advances
to or on behalf of the Company aggregating $9,863 and $52,335, respectively.
Related interest expense recorded during the years ended December 31, 2003 and
2002 was $2,493 and $3,266, 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 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 $85,500 and
$114,000 for the years ended December 31, 2003 and 2002.
This shareholder sold his right to amounts due from the Company of $428,434 as
part of the "Stock Purchase Agreement and Plan of Reorganization" with Euro
Offline, Inc in December 2003. This shareholder was to receive $100,000 and
one million shares of post split common stock. The shareholder also had a
right of return, should the Euro Offline, Inc reorganization or a similar
transaction does not occur. The shareholder was also entitled to reimbursement
of certain expenses should the reorganization not occur. Although the
shareholder was paid the one million shares and a substantial portion of the
$100,000, the shareholder has asserted a material breach of contract in May
2004. The Company is in active negotiations to settle such dispute.
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 defendants in this civil action, whom are
the entity and individual discussed in the aforementioned transactions with
shareholder.
4. 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.
On February 16, 2001, the Company filed Articles of Amendment to its Articles
of Incorporation with the State of Utah to change the name of the Company from
Shopss.com, Inc. to AccessTel, Inc., and to increase the Company's equity
capitalization to 100,000,000 shares of common stock and 20,000,000 shares of
preferred stock.
Pursuant to the settlement of a legal action described hereafter, 11,356,782
shares were returned to treasury and recorded as a reduction to stockholders
deficit at par value. There was an additional 3,005,000 shares recorded as
issued and expensed at fair market value of $150,250 as of the legal
settlement date.
In December 2003, the Company effectuated a 89 for 1 reverse stock split. All
of such share data has been retroactively adjusted for such reverse split.
In December 2003, the Company issued 31 million shares pursuant to the Stock
Purchase Agreement and Plan of Reorganization with Euro Offline, Inc.
In December 2003, the Company issued 3,500,000 shares of common stock to
various consultants under a "Non-employee, directors and consultants retainer
stock plan". These shares were valued at $.30 per share or $1,050,000 and
expensed in December 2003.
In April 2004, the Company agreed to a "Compromise and Settlement Agreement"
whereby 27 million shares are to be returned to treasury as part of the
aborted transaction with Euro Offline, Inc. The 3 million shares not under an
agreement yet to be returned to the Company has been recorded as a cost of the
aborted Euro Offline, Inc. at $.30 per share or $900,000, the fair market
value of the stock at issuance date.
5. Legal Proceedings
On May 1, 2001, Reed & Wangsgard, L.C. (formerly Droz, Reed & Wangsgard, L.C.)
filed suit in the Third Judicial District Court of Salt Lake County, State of
Utah (the "Court"), Civil No. 010903821 (the "Action"), to assert claims, on
behalf of its clients, prior management of the Company, against AccessTel and
the original shareholders of AccessTel. The complaint in the Action 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 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 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 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
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 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.
On January 17, 2002, Reed & Wangsgard, L.C. received written confirmation from
an agent of the Board of Directors of the Company that said Board of Directors
have come to a unanimous decision to settle the claim for rescission of the
Share Exchange Agreement by rescinding the Share Exchange Agreement. However,
the Board of Directors of the Company failed and/or refused to follow through
with their agreement to rescind the Share Exchange Agreement. As a result,
Reed & Wangsgard, L.C. filed a Motion to Enforce Settlement with respect to
the agreement to rescind the Share Exchange Agreement.
During February 2002, pursuant to the motion of counsel for AccessTel and the
original shareholders of AccessTel, the Honorable L.A. Dever, Judge of the
Court, issued an order limiting the Court's jurisdiction over certain of the
defendants to the Action. As a result, the Court continued to have
jurisdiction over the corporate defendants and through it, plaintiffs may
assert claims arising from the allegedly wrongful conduct of current
management.
On May 1, 2003, a settlement was reached between the remaining parties to the
Action. The material terms of the settlement include the requirement that the
corporate defendants surrender all right, title and interest in and to those
shares of common stock of the Company 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 resign from their respective management
positions. As a result of the settlement, on May 6, 2003, prior management of
the Company that had filed the complaint, caused to be filed with the Court a
Motion to Dismiss the complaint. Subject to the granting of the Motion to
Dismiss the complaint, of the 16,718,763 shares issued to the corporate
defendants, 11,356,782 of the surrendered shares have been delivered to
counsel for prior management of the Company and will be duly canceled and
returned to the authorized but unissued common stock of the Company, and
5,361,981 shares will be transferred to a private third party unrelated to the
AccessTel parties pursuant to a confidential settlement of a separate legal
action involving a legal debt owed by one of the AccessTel parties to the
private third party. The current officers and directors of the Company
resigned, and David C. Merrell, a former director and executive officer of the
Company, was appointed as an interim officer and director of the Company.
Lawrence Liang, the Company's Chief Executive Officer, President and a
director, and Stuart Bockler, the Company's Chief Financial Officer, Secretary
and a director as of December 31, 2002, were named as defendants in the
Complaint, and resigned as officers and directors of the Company effective
April 24, 2003.
As a result of this settlement, the Company will record the cancellation of
11,356,782 shares of common stock during May 2003. As the settlement did not
result in the Company gaining control of the assets or operations of
AccessTel, the Company will not reflect such assets or operations in its
financial statements subsequent to the settlement date.
The Company has also been sued by several creditors for non-payment of debts,
and judgments have been entered for the payment of such debts, plus interest
and legal fees, in some cases.
6. New Accounting Pronouncements
In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities, an Interpretation of ARB 51". FIN No. 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 No. 46 are required to be implemented for
any variable interest entity created on or after January 31, 2003. In
addition, FIN No. 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.
FIN No. 46 is effective for the Company on January 31, 2003, and is not
expected to have a significant impact on the Company's financial statement
presentation or disclosures.
In April 2003, the FASB issued Statements of Financial Accounting Standards
No. 149 ("SFAS No. 149"), an amendment to SFAS No. 133. SFAS No. 149 clarifies
under what circumstances a contract with initial investments meets the
characteristics of a derivative and when a derivative contains a financing
component. This SFAS is effective for contracts entered into or modified after
June 30, 2003.
In May 2003, the FASB issued Statements of Financial Accounting Standards No.
150 ("SFAS No. 150"), SFAS No. 150 established standards for how an issuer
classifies and measures in its statement of financial position certain
financial instruments with characteristics of both liabilities and equity. It
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. This SFAS 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. It 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 adoption of SFAS No. 150 will not have a material effect
on the financial statements. We will adopt SFAS No. 150 in the first quarter
of fiscal 2004.
In December 2003, the FASB revised SFAS No. 132 Employers' Disclosures about
Pensions and Other Post Retirement Benefits. This revision requires
additional disclosures to those in the original SFAS No. 132 about assets,
obligations, cash flows and net periodic benefit cost of deferred benefit
pension plans and other deferred benefit post-retirement plans. The required
information should be provided separately for pension plans and for other
post-retirement benefit plans. This statement revision is effective for
fiscal year ending after December 14, 2003 and interim periods beginning after
December 15, 2003. The adoption of this revision is not expected to have a
material impact on our results of operations, financial position or
disclosures
7. SUBSEQUENT EVENTS
In May 2004, the Company and certain of its shareholders are have negotiated a
"Compromise and Settlement" with the former shareholders of Euro Offline, Inc.
Each party contends that a substantial, irreconcilable dispute exists among
them for the failure of not consummating the merger with Euro OffLine, Inc.,
therefore 27 million shares will be returned to treasury with the former Euro
Offline shareholders to receive $40,000.
In May 2004, a shareholder and creditor has asserted a material breach of
contract relating to the Euro Offline, Inc. merger. The Company is currently
negotiating with the shareholder / creditor relating to this matter. See Note
3.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 8(a). CONTROLS AND PROCEDURES.
Within 90 days prior to the date of this Annual Report and as of the
period covered thereby or December 31, 2003, we carried out an evaluation,
under the supervision and with the participation of our President of the
effectiveness of the design and operation of our disclosure controls and
procedures. Based on this evaluation, our President concluded that our
disclosure controls and procedures are effective in timely alerting them to
material information required to be included in our periodic Securities and
Exchange Commission reports. It should be noted that the design of any system
of controls is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions, regardless
of how remote. In addition, we reviewed our internal controls, and there have
been no significant changes in our internal controls or in other factors that
could significantly affect those controls subsequent to the date of their last
evaluation.
PART III.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The following table and text set forth the names and ages of all
directors and executive officers of the Company as of May 14, 2004. The Board
of Directors is comprised of only one class. All of the directors will serve
until the next annual meeting of stockholders and until their successors are
elected and qualified, or until their earlier death, retirement, resignation
or removal. Officers are elected at the Annual Meeting of the Board of
Directors, which immediately follows the Annual Meeting of Stockholders.
There are no family relationships among directors and executive officers.
Also provided herein is a brief description of the business experience of each
director and executive officer during the past five years and an indication of
directorships held by each director in other companies subject to the
reporting requirements under the Federal securities laws.
Name Age Positions Date Appointed
---- --- --------- --------------
Kevin Marion President, and April 9, 2004
Director
David C. Merrell, the Company's President, Chief Financial Officer,
Secretary and director since April 24, 2003, resigned as officer and director
of the Company effective December 12, 2003.
Randall Middleton, the Company's President and director since December 12,
2003, and Thomas Rowan, the Company's Secretary, Treasurer and director since
December 12, 2003, both resigned as officers and directors of the Company
effective April 9, 2004.
Biographies of Directors and Executive Officers:
Kevin Marion, president, chief financial officer, secretary and director. Mr.
Marion received his bachelor of Science in Forensic Psychology from the John
Jay College of Criminal Justice. He served one year as a New York City Police
Officer and 4 1/2 years with the New York State Police where he achieved the
rank of Sargent.
In 1995 he left the Fraternal Order of Police to become Vice President and
Operations Director of a national retail business. He owned and operated 4
franchises personally and assisted the company's growth to achieve 20 stores
nationwide. Mr. Marion was very instrumental in assisting the companby to be
listed on the Nasdaq Small Cap market
Involvement in Certain Legal Proceedings.
Except as stated below, during the past five years, no director, person
nominated to become a director, executive officer, promoter or control person
of our Company:
(1) was a general partner or executive officer of any business against
which any bankruptcy petition was filed, either at the time of the bankruptcy
or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);
(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities; or
(4) was found by a court of competent jurisdiction (in a civil action),
the Securities and Exchange Commission or the Commodity Futures Trading
Commission to have violated a federal or state securities or commodities law,
and the judgment has not been reversed, suspended or vacated.
Compliance with Section 16(a) of the Securities Exchange Act of 1934, as
Amended:
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers and persons who own
more than 10% of a registered class of the Company's equity securities to file
various reports with the Securities and Exchange Commission concerning their
holdings of, and transactions in, securities of the Company. Copies of these
filings must be furnished to the Company.
The Company believes that all individual filing requirements applicable
to the Company's directors and executive officers were complied with under
Section 16(a) during the year ended December 31, 2003.
Audit Committee
Our Company does not have an Audit Committee due to the lack of
operations. If our Company does start to have revenues then we will appoint
an audit committee.
Code of Ethics
The Company has not yet adopted a Code of Ethics due to our Company's lack
of operations. But, when we do adopt a Code of Ethics we will attach it as an
exhibit to a periodic report.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth certain information as to the Company's
officers whose total compensation exceeded $100,000 during the years ended
December 31, 2001, 2002 and 2003. This information below is presented to the
best of the Company's knowledge.
Summary Compensation Table
--------------------------
Name and
Principal Other Annual All Other
Position(s) Year Salary Compensation Compensation
----------- ---- ------ ------------ ------------
Lawrence Liang 2002 $0 $0 $0
Chief Executive 2001 0 0 0
Officer and President
Stuart Bockler 2002 $0 $0 $0
Chief Financial Officer 2001 0 0 0
and Secretary
David C. Merrell 2003 $0 $0 $0
President, Chief Financial
Officer
The Company did not have any deferred compensation or long-term incentive
plans during the years ended December 31, 2001, 2002 and 2003, nor did the
Company issue any stock options or stock appreciation rights during such
periods.
Compensation of Directors:
The Company's directors are not compensated for their services as a
member of the Board of Directors or for their serving on any committee of the
Board of Directors.
Independent Public Accountants:
Radin, Glass & Co., LLP has served as the Company's independent auditors
since 1999. Services provided to the Company by Radin, Glass & Co., LLP
during the years ended December 31, 2001 and 2002 included audits of the
Company's consolidated financial statements and limited reviews of interim
financial statements included in quarterly reports, and an audit of financial
statements included in a Current Report on Form 8-K. During the years ended
December 31, 2001 and 2002, payments to Radin, Glass & Co., LLP were $20,500
and $13,073 for such services.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As used in this section, the term beneficial ownership with respect to a
security is defined by Rule 13d-3 under the Securities Exchange Act of 1934,
as amended, as consisting of sole or shared voting power (including the power
to vote or direct the vote) and/or sole or shared investment power (including
the power to dispose of or direct the disposition of) with respect to the
security through any contract, arrangement, understanding, relationship or
otherwise, subject to community property laws where applicable.
As of May 13, 2004, the Company had a total of 35,281,031 shares of
common stock issued and outstanding, which is the only issued and outstanding
voting equity security of the Company. The information set forth below
reflects the 1-for-8 reverse stock split effective May 29, 1998, the
5.435034 forward stock split effective October 27, 1999 and the 1 for 89
reverse stock split effective December 12, 2003.
The following table sets forth, as of May 13, 2004: (a) the names and
addresses of each beneficial owner of more than five percent (5%) of the
Company's common stock known to the Company, the number of shares of common
stock beneficially owned by each such person, and the percent of the Company's
common stock so owned; and (b) the names and addresses of each director and
executive officer, the number of shares of common stock beneficially owned,
and the percentage of the Company's common stock so owned, by each such
person, and by all directors and executive officers of the Company as a group.
Each person has sole voting and investment power with respect to the shares of
common stock, except as otherwise indicated. Beneficial ownership consists of
a direct interest in the shares of common stock, except as otherwise
indicated.
Percent of
Name and Address Amount and Nature of Shares of Common
of Beneficial Owner Beneficial Ownership Stock Outstanding
------------------- -------------------- -----------------
Kevin Marion - - %
2904 E. Shady Lane
Highland Ranch, CO 80126
Randall L. Middleton 13,250,000* 37.55%
Thomas Rowan 13,750,000* 38.97%
---------------------------
* These shares are to be cancelled pursuant to the Compromise and Settlement
Agreement dated April 9, 2004, but have not yet been cancelled.
Changes in Control:
The Stock Purchase Agreement and Plan of Reorganization dated December 16,
2003, resulted in a change of control of our Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits:
10.1 Compromise and Settlement Agreement dated April 9, 2004.
10.2 October 2, 2003, Agreement between Global Guarantee Corporation and
Messrs. Middleton and Rowan.
31.1 302 Certification of Kevin Marion
32 906 Certification
Reports on Form 8-K:
8-K Current Report dated May 6, 2003, regarding the Order for
Dismissal and filed May 12, 2003.
8-K/A Current Report dated May 6, 2003, regarding the Motion to
Dismiss and filed June 6, 2003.
8-K Current Report dated December 16, 2003, regarding the Stock
Purchase Agreement and Plan of Reorganization and filed January 6, 2004.
10-KSB Annual Report for the year ended December 31, 2002 and filed
May 21, 2003.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following is a summary of the fees billed to Accesstel by its
principal accountants during the calendar years ended December 31, 2003 and
2002:
Fee category 2003 2002
------------ ---- ----
Audit fees $14,500 $9,500
Audit-related fees $ 0 $ 0
Tax fees $ 0 $ 0
All other fees $ 0 $ 0
------- ------
Total fees $14,500 $9,500
Audit fees. Consists of fees for professional services rendered by our
principal accountants for the audit of our annual financial statements and the
review of financial statements included in our Forms 10-QSB Quarterly Reports
or services that are normally provided by our principal accountants in
connection with statutory and regulatory filings or engagements.
Audit-related fees. Consists of fees for assurance and related services
by our principal accountants that are reasonably related to the performance of
the audit or review of Accesstel's financial statements and are not reported
under "Audit fees."
Tax fees. Consists of fees for professional services rendered by our
principal accountants for tax compliance, tax advice and tax planning.
All other fees. Consists of fees for products and services provided by
our principal accountants, other than the services reported under "Audit
fees," "Audit-related fees" and "Tax fees" above.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ACCESSTEL, INC.
---------------
(Registrant)
Date: May 17, 2004 By: /s/ Kevin Marion
-------------------------------
Kevin Marion