United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB/A
|X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2004
|_| 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.
---------------------------------------------
(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)
66 Clinton Road, Fairfield, NJ 07004
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(Address of principal executive offices, including zip code)
Issuer's telephone number, including area code: (973) 882-8861
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 |_| No |X|
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. |X|
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|
The Company had net sales of $6,864,476 for the fiscal year ended December
31, 2004.
The aggregate market value of the Company's common stock held by non-
affiliates of the Company as of May 6th, 2005, was $2,167,488.
Transitional Small Business Disclosure Format: Yes |_| No |X|
Cautionary Statement Pursuant to Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995:
This amended Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2004, 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, 2004, 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
History
Shopss.com, Inc., a Utah corporation, changed its name to Accesstel, Inc.
("we" or the "Company") effective February 16, 2001, in conjunction with the
acquisition of AccessTel, Inc., a Delaware corporation, in a reverse merger
transaction effective December 18, 2000, in which 22,418,980 shares of Common
Stock were issued to the stockholders of the Delaware corporation. Litigation
concerning the related share exchange agreement was settled and 11,356,782
shares of common stock were returned to the treasury. The Company had 25,002,309
shares of common stock outstanding immediately prior to a reverse stock split
effective December 12, 2003, 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 , dated December 16, 2003, between the Company and Euro Offline,
Inc. That agreement was later rescinded, and 27,000,000 of the 31,000,000
"restricted" shares of common stock issued in the acquisition were cancelled and
returned to the Company's treasury. On August 11, 2004, the Company declared a
10,000 for 1 reverse stock split, with each fractional shares being rounded up
to the nearest whole share; and a subsequent forward split by dividend to all
shareholders of record, pro rata, on the basis of 100 shares for each one share
owned, with the dividend to be subject to a mandatory exchange of stock
certificates to receive the dividend. Additional shares issued due to fractional
share rounding up required the issuance of another 64,980 shares.
We entered into a definitive agreement to acquire all of the outstanding
shares of Global Invest Holdings, Inc. ("Global Invest"), a New Jersey
corporation, based in Fairfield, New Jersey, on August 30, 2004, and closed the
acquisition on October 13, 2004. In connection with the acquisition of Global
Invest, we issued 25,000,000 shares of our common stock to the six stockholders
of Global Invest; following the acquisition we had 34,091,740 shares of common
stock outstanding.
-1-
Global Invest is a US-based holding company that owns Asiatic Industries
LLC, a New Jersey limited liability company engaged in the sale of in the United
States of textile products which it obtains from Lebanon. The textile products
are purchased from Textile Industries, SAL and Authentic Garment Industries,
SAL, both Lebanese companies.
Our Address
Our principal business address and telephone numbers are 66 Clinton Road,
Fairfield, New Jersey 07004; Telephone: 973-882-8861, Fax: 973-882-8878. The
Company maintains a corporate website at www.globalinvestholdings.com.
Information contained in our website is not a part of this Offering Memorandum.
Our Business
We operate through Asiatic Industries LLC ("Asiatic"), a US-based
marketing and distribution company whose products are primarily purchased from
manufacturing companies in Lebanon. Orders are obtained from various buyers in
the US, including importers, distributors and retailers. Asiatic was established
in New Jersey in 1996 by Ralph Sayad and Louis Sayad as a distribution company
that caters to the low-end textile market. The initial product chosen was ladies
pantyhose and the production was sub-contracted to a plant in Lebanon.
Through its Lebanese suppliers, Asiatic provides innovative and basic
apparel of the various qualities to address a wide range of price points for a
wide range of customers. We provide our customers with customized vertical
solutions, which encompass every stage of production, from initial design and
development through manufacture of garments to logistics, distribution and
replenishment. Our product offerings encompass intimate apparel, underwear,
socks, pantyhose, leisurewear, nightwear and active-wear for men, ladies, and
children.
At the time Asiatic was founded, management determined that in the U.S.
only the mills that cater to the high-end market and belonging to multi-national
companies were still in operation. The supply of the low end of the market was
based on imports from Turkey, Mexico and Taiwan. All these importing mills
mainly bought their yarn from the same or similar sources and their prices were
almost identical. They were dependent on large volume production. Their cost was
very sensitive to the volume produced in relation to the orders placed. Finally,
many required up-front payments for product, and did not appear to be user
friendly to their customers. For these reasons, Asiatic's management initiated
more flexibility in serving different customers, which we believe has been
successful.
To date, we have developed a network of customers in the U.S. spanning
multiple geographical regions including New York, New Jersey, Chicago, Detroit,
Philadelphia, Washington D.C, Miami, and Baltimore. This network consists of
retailers, wholesalers, jobbers and importers.
We initially focused our sales on the smaller retailers and distributors,
heretofore for the most part ignored by our competition. This allowed us, with a
higher cost level, to sell with a higher profit margin as we started penetration
of the U.S. market and to expand our product distribution. In 1998, in line with
our strategy to reduce cost and with more understanding of the production
process, we started buying our own raw materials and contracting out only the
labor component of the production (since the raw material cost was identical to
that of other mills). By eliminating the subcontractor's profit margin on the
raw material our cost per unit decreased significantly. Controlling the
production process became the next target. Global Invest has established two
types of subcontracted textile production in Lebanon described immediately
below.
-2-
While we have a number of long-standing customer relationships, we did not
have long-term contracts with any of them. As a result, purchases generally
occurred on an order-by-order basis, and the relationship, as well as particular
orders, could generally be terminated by either party at any time. The exception
to this was with private label orders. When private label packaging is produced
and product finished, our customer is obligated to take the order unless they
issue a release waiver allowing us to sell the goods to other clients. Today we
secure contracts with letters of credit or documentary collections with most of
our major customers. The letters of credit assure a designated shipping date
that the customer cannot cancel. They also secure payment from the customer's
financial institution within a period established in the letter of credit.
Subcontracted Manufacturing Operations
Zalka, Lebanon, Manufacturing Plant
Textile Industries SAL operates a manufacturing plant for ladies'
pantyhose, located in Zalka, Lebanon. 95% of the plant's production is dedicated
to fulfilling orders placed ahead of production by Asiatic, and the remaining 5%
is sold on the local Lebanese market.
We check the standards of all incoming product. In addition, the factory
is ISO 9000 certified and has in-house laboratories that implement required
product safety policies.
Village Production
Authentic Garment Industries SAL buys sewing machines and deploys them in
villages throughout Lebanon for women to produce textile products (primarily
undergarments) out of their homes. The products are produced to fulfill firm
customer orders placed by Asiatic's U.S.-based customers. This contractor has a
variable-cost, distributed but scalable production infrastructure through a
standard model it developed that could be replicated across various villages,
whereby it would i) hire one manager per village who would be trained to
supervise production quality and schedules, ii) deploy sewing machines in the
homes of women who would like to produce items at their own time and schedule
and get paid for their production and iii) place orders for production once firm
purchase orders were received from Asiatic.
Products
The following are the various items we acquire in Lebanon:
Zalka Factory:
o Pantyhose of all types (20 denier to 70 denier, with and without
lycra)
o Knee highs and tights and trouser socks
-3-
Village Production:
o A Shirts of all types (men's, ladies, and girls) rib tank 2x2 and
1x1
o T shirts of all types - heavy (180 gr/sqm and light 135 gr/sqm)
o Underwear (Panties and boxer shorts) of all types
In the future, we plan to expand our product line by including the
following categories:
o Higher-end pantyhose to be sold to the same Asiatic customers
looking to provide better quality products to their clients as well
as marketing to new prospect; and
o Larger variety of undergarments to fulfill all the needs of
customers.
Product expansion will be driven by demand and purchase orders ahead of
production as has traditionally been the case for previously launched items.
Our Lebanon suppliers are currently operating at full capacity and growth
is currently capacity constrained for the operation. Therefore we plan to
subcontract other suppliers either within Lebanon or other countries.
Customers
We have a number of long-standing customer relationships, but we do not
have long-term contracts with any of them. In 2004 our largest customer
accounted for 23% of our sales, and no other customer accounted for in excess of
10% of sales.
Seasonality and Backlog
Although the first quarter is typically our lowest sales quarter and our
fourth quarter is typically our highest, our sales do not vary substantially by
quarter, as the apparel industry has become less seasonal due to more frequent
selling seasons and offerings of basic merchandise throughout the year.
Government Regulation
We are subject to federal, state, and local laws and regulations affecting
our business, including those related to labor, employment, worker health and
safety, environmental protection, products liability, product labeling, consumer
protection, and anti-corruption. These laws include the Occupational Safety and
Health Act, the Consumer Product Safety Act, the Flammable Fabrics Act, the
Textile Fiber Product Identification Act, the Foreign Corrupt Practices Act and
the rules and regulations of the Consumer Products Safety Commission and the
Federal Trade Commission. We are also subject to import laws, including the U.S.
economic sanctions and embargo regulations and other related laws such as the
U.S. anti-boycott law. We believe that we are in substantial compliance with the
applicable federal, state, and local, rules and regulations governing our
business.
-4-
In addition, all of our import operations are subject to tariffs and
quotas set by the U.S. government through mutual agreements or bilateral
actions. Lebanon, where our products are manufactured, may from time to time
impose additional new quotas, duties, tariffs or other restrictions on our
imports or adversely modify existing restrictions. Adverse changes in these
import costs and restrictions, or our failure to comply with customs regulations
or similar laws, could result in substantial costs and harm our business.
Our operations are also subject to the effects of international trade
agreements and regulations such as the North American Free Trade Agreement, the
Caribbean Basin Initiative and the European Economic Area Agreement, and the
activities and regulations of the World Trade Organization. Generally, these
trade agreements have positive effects on trade liberalization and benefit our
business by reducing or eliminating the duties and/or quotas assessed on
products manufactured in a particular country. However, trade agreements can
also impose requirements that adversely affect our business, such as limiting
the countries from which we can purchase and setting quotas on products that may
be imported from a particular country into the United States. In fact, some
trade agreements may result in providing our competitors with an advantage over
us, or increase our costs, either of which could have an adverse effect on our
business and financial condition.
Competition
We currently compete with numerous companies in the U.S. and on a global
basis across the textile supply chain.
o Manufacturing: Our suppliers in Lebanon compete with various manufacturers
in low labor cost countries, notably China, Taiwan, Mexico and Turkey. Our
strategy is to differentiate the Company by i) competitive pricing (equal
to or slightly higher costs than other countries), ii) quality of
production as confirmed by customers, and iii) reliability of delivery
schedules through our U.S.-based AI office.
Lebanon is competitive in terms of production cost, as labor costs in
Lebanon, with monthly wages around $200, are low compared to most countries and
identical to Turkey and Mexico, albeit double those in China ($100).
o Sales and Marketing: We compete with a very large number of players in the
first two layers of the supply chain in the U.S., i.e., national importers
and state distributors, and also with other firms at the two levels below
the first two, i.e., local distributors and large and small retailers and
jobbers. We believe that the tremendous size of the U.S. market permits
the coexistence of large numbers of competitors as long as price and
quality are at par. Differentiation then becomes driven by customer
relationships and reliability or product quality and delivery schedules.
In addition, the recent elimination of quotas on World Trade Organization
member countries could result in increased competition from developing countries
which historically have lower labor costs, including China. This increased
competition, including from those competitors who can quickly create cost and
sourcing advantages from these changes in trade arrangements, could have an
adverse effect on our business and financial condition.
-5-
Employees
In the United States, we employ 6 persons, including 3 executive officers
of the Company.
Risk Factors
Risks Related to Our Business
We have only a limited operating history.
Asiatic Industries was founded in 1996, and accordingly has a limited
operating history on which to base an evaluation of our business and prospects.
Our prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their early stage of
operations.
To address these risks, we must, among other things, increase our supply
and customer base, implement and successfully execute our business and marketing
strategy, provide superior customer service and order fulfillment, respond to
competitive developments, and attract, retain and motivate qualified personnel.
There can be no assurance that we will be successful in addressing such risks,
and the failure to do so could have a material adverse effect on our business,
prospects, financial condition and results of operations.
We will be required to raise substantial amounts of capital to grow our company.
We will be required to raise substantial amounts of capital to expand our
existing wholesale business, and there is no assurance that we will be able to
raise this additional required capital.
Our future revenues are unpredictable.
As a result of our relatively limited operating history and the nature of
the markets in which we compete, we are unable to accurately forecast our
revenues. Our current and future expense levels are based largely on our
investment plans in new equipment. Operating results will, to a large measure,
depend on the volume and timing of orders and our ability to support orders. We
will be substantially dependent on raising equity capital to expand our
business.
Management of Future Operations.
There can be no assurance that our current and planned personnel, systems,
procedures and controls will be adequate to support our future operations or
that management will be able to hire, train, retain, motivate and manage
required personnel.
Increases in the price products or their reduced availability could increase our
cost of sales and decrease our profitability.
The principal fabrics used in our business are cotton and synthetics. The
prices for these fabrics are dependent on the market price for raw materials,
primarily cotton. The price and availability of cotton may fluctuate
significantly, depending on a variety of factors, including crop yields,
weather, supply conditions, government regulation, economic climate and other
unpredictable factors. Any such raw material price increases could increase our
product costs and decrease our profitability unless we are able to pass higher
prices on to our customers. Moreover, any decrease in the availability of cotton
could impair our ability to meet our product requirements in a timely manner.
Purchasing or merging with one or more of our current suppliers or another
supplier, could help reduce this factor, by reducing our overall product cost,
thereby increasing our profit margin and increasing our competitive edge.
-6-
Our business is subject to risks associated with offshore manufacturing.
We import finished garments into the United States. All of our import
operations are subject to tariffs and quotas set by the U.S. and Lebanese
governments through mutual agreements or bilateral actions. In addition,
Lebanon, where our products come from, may from time to time impose additional
new quotas, duties, tariffs or other restrictions on our imports or exports, or
adversely modify existing restrictions. Adverse changes in these import costs
and restrictions, or on our suppliers' failure to comply with customs
regulations or similar laws, could harm our business.
Our operations are also subject to the effects of international trade
agreements and regulations such as the North American Free Trade Agreement, the
Caribbean Basin Initiative and the European Economic Area Agreement, and the
activities and regulations of the World Trade Organization. Trade agreements can
also impose requirements that adversely affect our business, such as limiting
the countries from which we can purchase raw materials and setting quotas on
products that may be imported from a particular country into our key market, the
United States. In fact, some trade agreements can provide our competitors with
an advantage over us, or increase our costs, either of which could have an
adverse effect on our business and financial condition.
Our ability to import products in a timely and cost-effective manner may
also be affected by problems at ports or issues that otherwise affect
transportation and warehousing providers, such as labor disputes, increased U.S.
homeland security requirements, and increases in fuel prices. These issues could
delay importation of products or require us to locate alternative ports or
warehousing providers to avoid disruption to our customers. These alternatives
may not be available on short notice or could result in higher transit costs,
which could have an adverse impact on our business and financial condition.
Our international operations expose us to political, economic and currency
risks.
Most of our products came from sources outside of the United States. As a
result, we are subject to the risks of doing business abroad, including:
o currency fluctuations;
o changes in tariffs and taxes;
o political and economic instability; and
o disruptions or delays in shipments.
Changes in currency exchange rates may affect the relative prices at which
we are able to purchase products and may affect the cost of certain items
required in our operation, thus possibly adversely affecting our profitability.
-7-
There are inherent risks of conducting business internationally. Language
barriers, foreign laws and customs and duties issues all have a potential
negative effect on our ability to transact business by importation of textile
products into the United States. We may be subject to the jurisdiction of the
government and/or private litigants in foreign countries where we transact
business, and we may be forced to expend funds to contest legal matters in those
countries in disputes with those governments or with customers or suppliers.
A few stockholders, who own a sufficient number of shares of our Common Stock,
can exert a major influence on major decisions to be taken by our stockholders.
Messrs. Ralph Sayad, Louis Sayad, Eddy Sayad, Karim Sayad, and Freddy
Zraick beneficially own together or control over 50% of our issued and
outstanding shares of Common Stock. Because of such ownership, they together
could control the election of all members of the Board of Directors of the
Company and determine our corporate action. Stockholders are not entitled to
accumulate their votes for the election of directors or otherwise.
Risk Factors Associated with the Industry
Our sales are heavily influenced by general economic cycles.
Apparel is a cyclical industry that is heavily dependent upon the overall
level of consumer spending. Purchases of apparel and related goods tend to be
highly correlated with cycles in the disposable income of our consumers. Our
customers anticipate and respond to adverse changes in economic conditions and
uncertainty by reducing inventories and canceling orders. As a result, any
substantial deterioration in general economic conditions or increases in
interest rates, or acts of war, terrorist or political events that diminish
consumer spending and confidence, could reduce our sales and adversely affect
our business and financial condition.
Intense competition in the worldwide apparel industry could reduce our sales and
prices.
We face a variety of competitive challenges from other foreign
manufacturers of low end textile products, some of which have greater financial
and marketing resources than we do. We compete with these companies primarily on
the basis of:
o anticipating and responding to changing consumer demands in a timely
manner;
o ensuring product availability through effective planning and
replenishment collaboration with retailers;
o offering attractively priced products; and
o anticipating and responding to changing consumer demands in a timely
manner.
The worldwide apparel industry continues to experience price deflation, which
has affected, and may continue to affect, our results of operations.
The worldwide apparel industry has experienced price deflation in recent
years. The deflation is attributable to increased competition, increased product
sourcing in lower cost countries, growth of the mass merchant channel of
distribution, changes in trade agreements and regulations and reduced relative
spending on apparel and increased value-consciousness on the part of consumers
reflecting, in part, general economic conditions. Downward pressure on prices
has, and may continue to:
-8-
o require us to introduce lower-priced products;
o require us to reduce wholesale prices on existing products;
o result in reduced gross margins;
o increase retailer demands for allowances, incentives and other forms
of economic support that could adversely affect our profitability;
and
o increase pressure on us to further reduce our product costs and our
operating expenses.
Dependence on acceptance of product in the wholesale market.
The Company's future growth and success will substantially depend on its
success in introducing and continuing to sell product in the United States
wholesale textile markets. While the Company has enjoyed strong initial success,
there is no guarantee that it can continue to source and introduce new products
that have strong market appeal and sufficient margins and sales to support and
grow the business. The resources required to support product development are not
insignificant and their availability will depend on the ongoing success of the
business. There can be no guarantee or assurance that the Company will be able
to sustain this activity or that the activity will provide the products
necessary to advance the Company.
Competition could harm our business.
The markets for the types of textile products offered by us are extremely
competitive. If we are unable to either respond adequately to the competitive
challenges we face or establish a sustainable competitive advantage, we may lose
market share or be forced to lower prices to unprofitable levels. In addition,
we have a number of existing and potential competitors, and may be unable to
predict or plan adequately for the strategies of competitors. Accordingly, we
may be unable to respond quickly or adequately to the changes in the marketplace
brought on by new product offerings and the marketing and promotional efforts of
existing or new competitors.
New laws and regulations that impact our industry could increase costs or reduce
opportunities to earn revenue.
We are currently subject to certain regulations specifically aimed at
textile imports in addition to regulations applicable to businesses in general.
In the future, however, we may become subject to additional regulation by local
or national regulatory authorities, in the United States or Lebanon, where we
manufacture our textile products.
-9-
ITEM 2. DESCRIPTION OF PROPERTY
We lease our corporate offices in Fairfield, New Jersey, under a five year
lease expiring June, 2010 at a monthly rent of $3050.00 per month.
ITEM 3. LEGAL PROCEEDINGS
The Company was involved in two collection actions against two customers. The
total amount sought in these actions was less than $6,000.00. One of the two
accounts has currently reached settlement and payments have been coming in
monthly, the other (smaller amount) is still in collection.
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, 2004.
However, on December 3, 2004, we filed a Schedule 14F1 with the Securities
and Exchange Commission regarding a change in a majority of our Board of
Directors.
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 and, subsequent to May 2005, on the "pink sheets"
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 89 reverse stock
split effective December 12, 2003, and the 10,000-for-1 reverse split and
100-for-1 forward split effective August 24, 2004.
Low High
--- ----
Three months ended March 31, 2005 $ 0.20 $ 4.50
Fiscal Year Ended December 31, 2004:
Three months ended
September 30, 2004:** $ 4.00 $ 5.00
June 30 - August 24, 2004 $ 0.01 $ 0.04
August 25 - September 30, 2004 $ 0.25 $ 4.99
December 31, 2004 $ 3.25 $ 5.77
-10-
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
** 10,000-for-1 reverse split and 100-for-1 forward split effective August
24, 2004
(b) Holders
As of May 6th, 2005, the Company had 170 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.
-11-
(d) Sales of Unregistered Securities
-----------------------------------------------------------------------------------------------------------------------
Total Offering Price/
Date Title and Amount* Purchaser Underwriter Underwriting Discounts
-----------------------------------------------------------------------------------------------------------------------
December 22, 2003 31,281,031 shares of common Stockholders of NA $0.30 per share/NA
stock issued to seven Euro Offline
stockholders of Euro Offline in
connection with acquisition of
Euro Offline (27,000,000 shares
subsequently cancelled pursuant
to the Compromise and Settlement
Agreement dated April 9, 2004)
-----------------------------------------------------------------------------------------------------------------------
March 23, 2004 500,000 shares of common stock Private Investor NA $.036 per share/NA
issued to private investor
-----------------------------------------------------------------------------------------------------------------------
July 19, 2004 10,000,000 shares of common Stockholders of NA N/A per share/NA
stock issued to six Global Invest Transaction recinded
stockholders of Global Invest Holdings, Inc.
Holdings, Inc. (transaction
rescinded on March 21, 2005,
effective ab initio.
-----------------------------------------------------------------------------------------------------------------------
September 8, 2004 500,000 shares of common stock Global Guaranty NA $.05 per share/NA
issued to Global Guaranty Corp Corp
-----------------------------------------------------------------------------------------------------------------------
September 22, 2004 5,038,840 shares of common Private Investor NA $.06 per share/NA
stock issued to a private
investor
-----------------------------------------------------------------------------------------------------------------------
October 12, 2004 25,000,000 shares of common Stockholders of NA $.25 per share/NA
stock issued to the six Global Invest
stockholders of Global Invest Holdings, Inc.
Holdings, Inc. in connection
with its acquisition by the
Company
-----------------------------------------------------------------------------------------------------------------------
December 17, 2004 1,400,000 shares of common Private Investor NA $.50 per share/NA
stock issued
-----------------------------------------------------------------------------------------------------------------------
February 2, 2005 505,391 shares of common stock Private Investor NA $.06 per share/NA
issued to a private investor
-----------------------------------------------------------------------------------------------------------------------
April 1, 2005 300,000 shares of common stock Private NA $.10 per share/NA
issued to private overseas Investors
investors
-----------------------------------------------------------------------------------------------------------------------
March 17, 2005 3,000,000 shares of common Private NA $.283 per share/NA
stock issued to private Investors
overseas investors
-----------------------------------------------------------------------------------------------------------------------
Securities Authorized for Issuance under Equity Compensation Plans
Number of shares
Number of shares of of common stock
common stock to be Weighted-average remaining available
issued upon exercise exercise price of for future issuance
of outstanding options, outstanding options under equity
Plan category warrants and rights warrants and rights compensation plans
------------- ------------------- ------------------- ------------------
Equity compensation
plans approved by
stockholders: -- -- --
Equity compensation
plans not approved
by stockholders: 0 0 --
------------------- ------------------- ------------------
Total 0 0 --
-12-
ITEM 6. 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 amended Annual Report on Form 10-KSB for the year ended December 31, 2004,
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 Report involve known and unknown
risks, uncertainties and other factors that could the cause actual results,
performance or achievements of the Company to differ materially from those
expressed in or implied by the forward-looking statements contained herein.
Overview:
Plan of Operations
We own and operate through Asiatic Industries LLC, engaged in the sale in
the United States of textile products that are manufactured in Lebanon. The
textile products are purchased from Textile Industries, SAL and Authentic
Garment Industries, SAL, both Lebanese companies. Our product offerings
encompass intimate apparel, underwear, socks, pantyhose, leisurewear, nightwear
and active-wear for men, ladies, and children.
We have focused our sales on the smaller retailers and distributors. Our
strategy for 2006 and the future is to continue to acquire new sales and new
customers utilizing Letters of Credit(LC) and Documentary Collections (DP) while
subcontracting other suppliers if necessary to be able to increase the demand
for our products. The LC and DP sales force more consistent payment from our
customers, helping to insure maintenance of our operating cash flow.
Since April, 2005, we have been paying down the debt due to the factor and
by July of 2005 discontinued factoring our accounts receivable. We have reduced
the debt to the factor to under $100,000 as of June 1, 2006, and anticipate
eliminating the debt to the by the end of July, 2006. This will eliminate the
factoring expenses which averaged about $9,000 monthly during 2004.
Results of Operations:
Years Ended December 31, 2004 and 2003 -
During the year ended December 31, 2004, the Company had a net income of
$25,261, as compared to net income of $83,693 for the year ended December 31,
2003. This reduction occurred in spite of an 18% increase in sales and occurred
because of significant charges for factoring accounts receivable ($110,486) and
a significant increase in interest expense from $37,910 in 2003 to $113,938 in
2004. These charges reflect the difficulty the Company had in financing growth.
The increased interest was related to borrowings against bank lines of credit
and credit cards. The increased cost of financing through the factor caused an
overall decrease in profitability. Additionally competitive pressure caused us
to lower prices somewhat and growth pressure caused an increase in financial
demands.
-13-
During the year ended December 31, 2004, the Company incurred operating expenses
of $544,370. Additionally, the Company incurred interest expense of $113,938 as
well as fees to a factor of $110,486. Since April, 2005, the Company has begun
paying down the advances received from the factor and by July of 2005
discontinued factoring its accounts receivable. As of the date of this report,
we do not require financing of our accounts receivable and have reduced the debt
to the factor to under $100,000. We anticipate reducing debt to the factor to $0
by the end of July, 2006. This will eliminate the factoring expenses which
averaged about $9,000 monthly during 2004. During the year ended December 31,
2003, the Company incurred operating expenses of $422,267. Additionally, the
Company recorded interest expense of $37,910. Since the factor was not involved
in 2003, interest was lower and factoring expenses were nonexistent.
Operating expenses, which include factoring charges, increased by 29%, from
$422,267 in 2003 to $544,370 in 2004. The largest items in operating expenses in
2004 were sales commissions and factor fees. Sales commissions increased from
$36,216 in 2003 to $108,153 in 2004. Fees to the factor began in 2004 and
totaled $110,486. Without the factoring charges, these expenses would have
changed very little.
Liquidity and Capital Resources December 31, 2004:
Operating Activities -
At December 31, 2004, the Company had a cash balance of $13,878 and a working
capital deficit of $171,874. The cash balance was lower than at December 31,
2003 by $18,597 and working capital was positive at December 31, 2003 ($47,234).
The unfavorable change in working capital is also reflective of the difficulty
the Company has had financing its growth.
Financing Activities -
In the year ended December 31, 2003, the Company received $373,055 in borrowings
under lines of credit. In the year ended December 31, 2004, the Company repaid
$487,339 in borrowings under lines of credit. These repayments were made
possible by advances from the factor which totaled $2,354,832 during the year.
During the years ended December 31, 2004 and 2003, two shareholders made
advances to or on behalf of the Company aggregating $82,335, which are due on
demand with interest at the rate of 12% per annum. These advances have been used
to fund operating expenses.
In the years ended December 31, 2004 and 2003, the Company made distributions of
$140,369 and $86,681, respectively.
-14-
Cash Flows:
Operating Activities -
At December 31, 2004, the Company had cash resources of $13,878, compared
with $32,475 at December 31, 2003. The Company used $1,684,225 of cash in
operating activities during the year ended December 31, 2004 as compared to
$257,887 of cash used for that purpose during the year ended December 31, 2003.
This increase was mainly the result of a $1,614,426 increase in accounts
receivable, 80% of which was sold to a factor.
-15-
ITEM 7. FINANCIAL STATEMENTS
ACCESSTEL, INC.
Financial Statements
DECEMBER 31, 2004
-16-
TABLE OF CONTENTS
Page
----
Report of Independent Registered Public Accounting Firm 18
Balance Sheet 19
Statement of Operations 20
Statement of Changes in Stockholders' Equity 21
Statement of Cash Flows 22
Notes to Financial Statements 23
-17-
ROBERT G. JEFFREY
CERTIFIED PUBLIC ACCOUNTANT
61 BERDAN AVENUE
WAYNE, NEW JERSEY 07470
LICENSED TO PRACTICE TEL: 973-628-0022
IN NEW YORK AND NEW JERSEY FAX: 973-696-9002
MEMBER OF AICPA E-MAIL: rgjcpa@optonline.net
PRIVATE COMPANIES PRACTICE SECTION
MEMBER CENTER FOR PUBLIC COMPANY AUDIT FIRMS
REGISTERED PUBLIC ACCOUNTING FIRM WITH
PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Accesstel, Inc.:
I have audited the accompanying balance sheet of Accesstel, Inc. as of December
31, 2004, and the related statements of operations, changes in stockholders'
equity, and cash flows, for the years ended December 31, 2004 and 2003. These
financial statements are the representation of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audits. I did not audit the financial statements of Accesstel, Inc. (the
predecessor company) for the year ended December 31, 2003. Those statements
reflect total assets of zero as at December 31, 2003 and total revenue of zero
for the year then ended. Those statements were audited by other auditors whose
report dated May 12, 2004 expressed an unqualified opinion on those statements.
In so far as my opinion relates to the amounts included for the predecessor
company as at December 31, 2003 and for the year then ended, it is based solely
on the report of the other auditors.
I conducted my audits in accordance with the Standards of Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audits 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. I believe that my
audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Accesstel, Inc. as of December 31,
2004, and the results of its operations and its cash flows for each of the years
ended December 31, 2004 and 2003 in conformity with U.S. generally accepted
accounting principles.
/s/ Robert G. Jeffrey, CPA
Wayne, New Jersey
May 31, 2006
-18-
ACCESSTEL, INC.
BALANCE SHEET
December 31, 2004
ASSETS
Current Assets:
Cash $ 13,878
Accounts receivable, net of allowance for doubtful accounts 582,378
Inventories 858,189
Miscellaneous receivables 57,168
------------
Total current assets 1,511,613
------------
Other Assets:
Advance 50,000
Advance to stockholder 104,000
Security deposits 5,640
------------
Total other assets 159,640
TOTAL ASSETS $ 1,671,253
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,170,192
Accrued expenses 4,127
Payroll taxes payable 2,428
Notes payable under bank lines of credit 276,916
Notes payable - stockholders 229,824
Total current liabilities 1,683,487
------------
Stockholders' Equity:
Preferred stock - authorizes, 20,000,000 shares of $1 par
value; none issued and outstanding --
Common stock - authorized, 100,000,000 shares of $.001 par
value; 34,091,740 issued and outstanding 34,092
Capital excess of par value 85,343
Retained earnings (131,669)
------------
Total stockholders' equity (12,234)
------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 1,671,253
============
See accompanying notes and accountant's audit report.
-19-
ACCESSTEL, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2004 and 2003
2004 2003
------------ ------------
NET SALES $ 6,864,476 $ 5,825,476
COST OF GOODS SOLD 6,180,907 5,281,606
------------ ------------
GROSS PROFIT ON SALES 683,569 543,870
OPERATING EXPENSES 544,370 422,267
------------ ------------
OPERATING INCOME 139,199 121,603
OTHER INCOME (EXPENSE):
Interest expense (113,938) (37,910)
------------ ------------
NET INCOME $ 25,261 $ 83,693
============ ============
NET INCOME PER SHARE - BASIC AND DILUTED $ -- $ --
WEIGHTED AVERAGE SHARES OUTSTANDING 34,091,740 34,091,740
See accompanying notes and accountant's audit report.
-20-
ACCESSTEL, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended December 31, 2004 and 2003
Common Stock Additional Total
--------------------------- Paid-In Retained Stockholders'
Shares Amount Capital Deficit Equity
------------ ------------ ------------ ------------ ------------
Balance, December 31, 2002 34,091,740 $ 34,092 $ 85,343 $ (13,573) $ 105,862
Net income for the year -- -- -- 83,693 83,693
Distributions -- -- -- (86,681) (86,681)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 2003 34,091,740 34,092 85,343 (16,561) 102,874
Net income for the year -- -- -- 25,261 25,261
Distributions -- -- -- (140,369) (140,369)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 2004 34,091,740 $ 34,092 $ 85,343 $ (131,669) $ (12,234)
============ ============ ============ ============ ============
See accompanying notes and accountant's audit report.
-21-
ACCESSTEL, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2004 and 2003
2004 2003
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 25,261 $ 83,693
Changes in assets and liabilities:
Increase in inventories (73,634) (514,874)
Increase in accounts receivable (1,614,426) (196,902)
Increase in payroll taxes payable 746 594
Decrease (increase) in prepaid expenses 2,500 (1,699)
Increase (decrease) in accounts payable (8,544) 405,060
Increase in accrued expenses 1,572 2,555
Increase in miscellaneous receivables (17,700) (36,314)
------------ ------------
Net cash consumed by operating activities (1,684,225) (257,887)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposit for potential acquisition -- (50,000)
------------ ------------
Net cash consumed by investing activities -- (50,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of borrowings under lines of credit (487,339) --
Borrowings under lines of credit -- 373,055
Increase in borrowing from shareholders 42,504 39,831
Advance to shareholder (104,000) --
Distributions (140,369) (86,681)
Advances from Factor 2,354,832 --
------------ ------------
Net cash provided by financing activities 1,665,628 326,205
------------ ------------
Increase (decrease) in cash and cash equivalents (18,597) 18,318
Cash balance, beginning of year 32,475 14,157
------------ ------------
Cash balance, end of year $ 13,878 $ 32,475
============ ============
See accompanying notes and accountant's audit report.
-22-
ACCESSTEL, INC.
Notes to Financial Statements
December 31, 2004
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Accesstel, Inc. (the Company) is a Utah corporation which has been largely
inactive for the past two years. Originally named Shopss.com, Inc. the company
changed its name to Accesstel, Inc. on February 16, 2001 in conjunction with the
acquisition of Accesstel, Inc., in a reverse merger transaction.
On October 13, 2004 Accesstel, Inc. (Accesstel or the Company) acquired all of
the outstanding capital stock of Global Invest Holdings, Inc. (Global Invest) in
return for 25,000,000 shares of its common stock, which represented 77% of the
number of shares of Accesstel outstanding after this merger. Although Accesstel
is the legal survivor of the merger and remains the registrant with the
Securities and Exchange Commission, under accounting principles generally
accepted in the United States of America, the merger was accounted for as a
reverse merger whereby Global Invest is considered the "acquirer" of Accesstel
for financial reporting purposes as its shareholders control more than 50% of
the post transaction combined company. Among other matters, this requires the
Company to present in all financial statements and other public information
filings, prior historical and other information of Global Invest, and requires a
retroactive restatement of Global Invest historical shareholders investment for
the equivalent number of shares of common stock received in the merger.
Accordingly, the accompanying consolidated financial statements present the
results of operations of Global Invest for the year ended December 31, 2004 and
reflect the acquisition of Accesstel under the purchase method of accounting.
Subsequent to October 13, 2004, the operations of the Company reflect the
combined operations of the former Accesstel and Global Invest.
Global Invest is a New Jersey corporation organized November 19, 2003. During
2004, it acquired the ownership interests of Asiatic Industries, LLC, a New
Jersey limited liability company which markets ladies hosiery, underwear, and
socks. These products are sold to a broad group of retailers and wholesalers in
the United States, with a concentration in the Northeast. The Company obtains
most of its hosiery, which is its principal product, from a factory located in
Lebanon, and most of its socks and underwear from a second factory in Lebanon.
All purchases are made in United States dollars. Management does not consider
this concentration to be a significant risk.
Cash
For purposes of the Statements of Cash Flows, the Company considers all short-
term debt securities purchased with maturity of three months or less to be cash
equivalents.
-23-
ACCESSTEL, INC.
Notes to Financial Statements
December 31, 2004
Inventories
Inventories consist principally of finished product held for sale to customers.
Inventories are valued at the lower of cost (determined on a weighted average
basis) or market.
Income Taxes
Provision is made for Federal and state income taxes in any period in which the
Company has profits. Deferred income taxes are recorded to reflect the tax
consequences or benefits to future years of temporary differences between the
tax bases of assets and liabilities.
There was no provision made for Federal or state income taxes for Global Invest
prior to 2004, because during that period Global Invest reported its income as a
limited liability company. The income or loss of the Company was reported on the
individual tax returns of the Members. Profits and losses were allocated in
accordance with each member's respective percentage interest in the limited
liability company.
Fair Value of Financial Instruments
The carrying amounts of Company financial instruments, which include cash
equivalents, accounts receivable, accounts payable, accrued liabilities, and
notes payable, approximate their fair values at December 31, 2004.
Revenue Recognition
Revenue is realized from product sales. Recognition occurs upon shipment to
customers, and where the following criteria are met: persuasive evidence of an
arrangement exists; delivery has occurred; the sales price is fixed or
determinable; and collectability is reasonably assured.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that effect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
-24-
ACCESSTEL, INC.
Notes to Financial Statements
December 31, 2004
Net Loss Per Share
The company computes net income (loss) per common share in accordance with
Statement on Financial Accounting Standards (SFAS) No. 128, Earnings Per Share,
and SEC Staff Accounting Bulletin (SAB) No. 98. Under the provisions of SFAS No.
128 and SAB 98, basic and diluted net income (loss) per common share are
computed by dividing the net income (loss) available to common shareholders for
the period by the weighted average number of shares of common stock outstanding
during the period. Accordingly, the number of weighted average shares
outstanding as well as the amount of net income (loss) per share are presented
for basic and diluted per share calculations for all periods reflected in the
accompanying financials statements.
Advertising Costs
The Company expenses advertising costs when an advertisement occurs. Advertising
costs were $1,200 during the twelve months ended December 31, 2004 and $350
during 2003.
Segment Reporting
Management treats the operations of the Company as one segment.
2. RESTATEMENTS
Certain adjustments affecting the 2004 and 2003 financial statements have been
discovered during an internal review. Correcting these errors resulted changes
in the results of operations with resultant changes in retained earning
(deficit), certain changes in the statements of cash flows, and reductions in
certain asset and liability accounts. The 2004 financial statements, and the
statements of income and cash flows for the year 2003, have, therefore, been
restated to correct these errors. The restated amounts are compared with the
amounts previously reported in the following tables.
-25-
ACCESSTEL, INC.
Notes to Financial Statements
December 31, 2004
2. RESTATEMENTS (CONTINUED)
Year Ended December 31, 2003
----------------------------
Statement of Operations
As Originally
Presented Adjustments As Restated
------------- ------------- -------------
Net Income (Loss) $ (1,622,145) $ 1,705,838(A) $ 83,693
Statement of Cash Flows
As Originally
Presented Adjustments As Restated
------------- ------------- -------------
Operating Activities:
Net income (loss) $ (1,622,145) $ 1,705,838 $ 83,693
Common stock issued as compensation 1,050,000 (1,050,000)(A) --
Common stock released in
connection with legal settlement 150,250 (150,250)(A) --
Aborted acquisition costs 900,000 (900,000)(A) --
Increase (decrease) in accounts
payable (87,208) 492,268 (A) 405,060
Increase in accrued expenses 5,048 (2,493)(A) 2,555
------------- ------------- -------------
Net cash consumed by operating
activities (353,250) 95,363 (257,187)
------------- ------------- -------------
Financing Activities:
Increase in borrowing from
shareholders 135,194 95,363 39,831
-26-
ACCESSTEL, INC.
Notes to Financial Statements
December 31, 2004
2. RESTATEMENTS (CONTINUED)
Year Ended December 31, 2004
----------------------------
Statement of Operations
As Originally
Presented Adjustments As Restated
------------- ------------- -------------
Net income (loss) $ (187,649) $ 212,910(A) $ 25,261
Statement of Cash Flows
As Originally
Presented Adjustments As Restated
------------- ------------- -------------
Operating Activities:
Net income (loss) $ (187,649) $ 212,910 $ 25,261
Common stock issued as compensation 255,000 (255,000)(A) --
Decrease (increase) in inventories 64,311 (229,226)(C) (73,634)
Increase in accounts receivable (1,624,426) 10,000 (D) (1,614,426)
Increase in accounts payable 236,371 (153,634)(A) (8,544)
Increase in accrued expenses 30,322 (28,750)(A) 1,572
------------- ------------- -------------
Net cash consumed by operating
activities (1,240,525) (443,700) (1,684,225)
------------- ------------- -------------
Financing Activities:
Increase in borrowing from
shareholders 64,313 (21,809)(A) 42,504
Distributions (540,523) 400,154 (A) (140,369)
Borrowing from Factor 2,310,501 52,331 (B) 2,354,832
Payment for recission of acquisition (13,000) 13,000 (A) --
------------- ------------- -------------
Net Cash provided by financing
activities $ 1,221,952 $ 443,676 $ 1,665,628
------------- ------------- -------------
-27-
ACCESSTEL, INC.
Notes to Financial Statements
December 31, 2004
2. RESTATEMENTS (CONTINUED)
Balance Sheet
December 31, 2004
As Originally
Presented Adjustments As Restated
------------- ------------- -------------
Accounts receivable $ 2,947,210 $ (2,364,832)(E) $ 582,378
Inventories 1,087,415 (229,226)(C) 858,189
Accounts payable 1,042,303 127,889 (A) 1,170,192
Notes payable - Factor 2,302,501 (2,302,501)(E) --
(A) Elimination of the activity of Accesstel, erroneously treated as the
accounting acquirer in previous financial statements.
(B) Correction of error in recording advances from Factor.
(C) Correction of the amount of goods in transit.
(D) Correction of year end balance of reserve for bad debts.
(E) Correction of accounting for factoring of accounts receivable.
These corrections caused changes in the opening balances of retained deficit, as
follows:
2004 2003
------------- -------------
Retained earnings at beginning of year:
As previously reported $ 1,063,935 $ 2,762,761
Adjustment to convert to purchase
accounting (1,080,496) (2,776,334)
------------- -------------
Balance at beginning of year, as restated (16,561) (13,573)
Net income, as restated 25,261 83,693
Distributions (140,369) (86,681)
------------- -------------
Retained deficit, at end of year $ (131,669) $ (16,561)
============= =============
-28-
ACCESSTEL, INC.
Notes to Financial Statements
December 31, 2004
3. COMMON STOCK
In December 2003, Accesstel entered into a "Stock Purchase Agreement and Plan of
Reorganization" under which it was to acquire all the outstanding common stock
of Euro Offline, Inc. in return for 30,000,000 shares of the common stock of
Accesstel. Prior to the closing, Accesstel affected a reverse stock split of one
share for each 89 shares outstanding. In addition, a shareholder/related party,
debt holder, was to receive $100,000 as consideration to forgive amounts due
from Accesstel. A disagreement developed, between Accesstel and former
shareholders of Euro Offline, Inc. Accesstel and certain of its shareholders
negotiated a "Compromise and Settlement" with these former shareholders. Each
party contended that a substantial and irreconcilable dispute existed for not
consummating the merger with Euro Offline, Inc. Under the settlement, 27,000,000
shares were returned to the treasury during 2004. The 3,000,000 shares of common
stock which were not part of the agreement and were not returned to Accesstel
were valued at $900,000 and were treated as the cost of the aborted acquisition
transaction.
In March 2004, Accesstel issued 500,000 shares of common stock for legal
services rendered. These shares were valued at the closing price of $.51 a share
on the day the Board of Directors approved the issuance of such stock.
In May 2004, a shareholder and creditor asserted a material breach of contract
relating to the Euro Offline, Inc. merger. Accesstel and a shareholder settled
this claim in August 2004, with a $12,500 payment and the issuance of 500,000
shares of common stock with dilution provisions.
On August 11, 2004, the Company declared a one for 10,000 reverse stock split,
with fractional shares being rounded up to the nearest whole share; and a
subsequent forward split by dividend to all shareholders on the basis of 100
shares for each one share owned.
On August 31, 2004, a shareholder of Accesstel acquired the outstanding notes
held by a creditor. These notes were exchanged for 5,038,840 shares of Accesstel
common stock.
On September 14, 2004, a shareholder of Accesstel, who assumed the majority of
the remaining Accesstel debt in the amount of $700,000, was issued 1,400,000
shares as consideration for this assumption. This shareholder placed 200,000
shares in escrow to be released at the earlier of proof of settlement of such
debts or one year from the date of the agreement.
-29-
ACCESSTEL, INC.
Notes to Financial Statements
December 31, 2004
4. NOTES PAYABLE
Banks:
The Company has revolving lines of credit with four banks. It can
borrow up to $786,000 under its lines of credit at interest rates between the
prime rate charged by the banks and 7.9%. As of December 31, 2004, outstanding
balances on these lines totaled $276,916. Borrowings under these lines are
unsecured.
5. RENTALS UNDER OPERATING LEASES
The Company conducts its operations from leased facilities in New
Jersey under a non-cancelable operating lease, which expires in June 2005.
The following is a schedule of future minimum rental payments required under the
above operating lease as of December 31, 2004.
Year ending
December 31, Amount
------------ ------
2005 $14,500
Rent expense amounted to $35,706 in 2004 and $34,800 in 2003.
6. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION NONCASH INVESTING
ACTIVITIES
Cash paid for interest was $113,398 during 2004 and $38,390 during 2003; there
was a $600 cash payment of income taxes during 2004 and $900 paid during 2003.
None of the interest paid was capitalized.
The following noncash investing and financing activity occurred during 2004.
In October 2004, 25,000,000 shares were issued to acquire the capital of stock
of Global Invest.
-30-
ACCESSTEL, INC.
Notes to Financial Statements
December 31, 2004
7. RELATED PARTY TRANSACTIONS
A shareholder made advances to or on behalf to Accesstel which together with
interest aggregated $88,380. These advances were used to fund general and
administrative expenses, consisting primarily of legal and accounting fees.
These were cancelled in connection with the merger.
The Company is also obligated for advances made by two shareholders totaling
$229,824. These obligations bear interest at 12% and are due on demand.
A former 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 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
asserted a material breach of contract in May 2004. On August 18, 2004, the
Company resolved the dispute which resulted in the settlement of certain debt
obligations of the Company and related claims that arose from the Euro-offline
reorganization rescission. This settlement required a $12,500 payment, which was
made on August 18, 2004, and the issuance of 500,000 shares of common stock for
the forgiveness of the recorded outstanding indebtedness. These shares are
protected against adjustment in the event of a reverse split for a period of
eighteen months.
The remaining amounts due to the shareholder regarding the Euro Offline, Inc.
reorganization were purchased by another shareholder in September 2004 and
converted to equity by the issuance of 5,038,840 shares of common stock.
On September 14, 2004, a shareholder of the Company, acting through an
affiliated entity, assumed the majority of the Company's outstanding debt in the
amount of $700,000 in return for 1,400,000 shares of common stock. In addition
this shareholder has placed 200,000 shares in escrow to be released at the
earlier of proof of settlement of such debts or one year from the date of the
agreement.
One of the shareholders of the Company is the general manager of two vendors,
which supply the Company with its principal products. During the years ended
December 31, 2004 and 2003, the Company purchased $1,699,758 and $3,028,144,
respectively, of product from one of these suppliers and $1,423,543 and
$968,155, respectively, from the other. At December 31, 2004, the Company had a
credit balance of $215,101 with one of these suppliers and a balance due of
$257,899 with the other supplier.
The Company is obligated to two shareholders for advances made by them (see Note
3).
-31-
ACCESSTEL, INC.
Notes to Financial Statements
December 31, 2004
8. EXPENSES.
Expenses reported on the statement of operations for the years 2004 and 2003 are
detailed below:
Sales commissions $ 108,153 $ 36,216
Factor fees 110,486 --
Salaries 74,055 146,653
Other expenses 251,676 239,398
------------- -------------
Total expenses $ 544,370 $ 422,267
============= =============
9. FACTORING OF RECEIVABLES
In April 2004, the Company entered into an agreement with a factoring company
under which eligible accounts receivable are transferred on a continuing basis
to the factor. In return for taking title to the receivables, the factor
advances to the Company 80% of the face amounts of the receivables. Fees for
this service are 1% of the accounts receivable transferred plus interest at
prime plus 1% on the unpaid balance of the accounts transferred to the factor.
Any accounts which become 90 days past due are returned to the Company. The
factor has obtained a lien to secure its advances against all Company accounts
receivable and inventories. At December 31, 2004, the balance outstanding under
this arrangement was $2,354,832. Part of the proceeds of the advances from the
factor were used to repay $500,000 of the balances due on the bank lines of
credit.
10. SUBSEQUENT EVENTS
During 2005, the Company informed the factor that it planned to terminate the
factoring arrangement and began paying down the unpaid balance. At May 31, 2006,
the balance had been reduced to $98,000.
11. RECENT ACCOUNTING PRONOUNCEMENTS
The Company does not anticipate the adoption of recently issued accounting
pronouncements to have a significant effect on the Company's results of
operations, financial position, or cash flows.
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ACCESSTEL, INC.
Notes to Financial Statements
December 31, 2004
12. CONTINGENCIES
A number of relatively small judgments were entered against Accesstel in the
year 2000, which total approximately $700,000. A former executive of Accesstel
has indemnified the Company for these liabilities and pledged 200,000 shares of
Company common stock to secure this indemnification. The indemnification calls
for release of the stock on October 12, 2005.
Since the factor has the right to return to the Company any receivables which
become 90 days old (see Note 8), the Company is contingently liable to the
factor for the uncollected receivables which have been transferred to the
factor.
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ITEM 8A. CONTROLS AND PROCEDURES.
As of the close of the period covered by this amended Annual Report, we
carried out an evaluation, under the supervision and with the participation of
our Chief Executive Officer 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 changes in our internal controls or in other factors that
could significantly affect those controls subsequent to the date of their last
evaluation.
ITEM 8B. OTHER INFORMATION.
Not applicable.
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 April 30, 2005. 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. Ralph Sayad, Louis Sayad
and Karim Sayad are first cousins. 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
---- --- --------- --------------
Ralph Sayad 42 Chief Executive Officer November 29, 2004
and Director
Louis Sayad 40 President November 29, 2004
Karim Sayad 46 Secretary November 29, 2004
Biographies of Directors and Executive Officers:
Ralph Sayad, 42, received a Bachelor of Science degree in marketing in
1984, and a Masters of Business Administration degree in finance in 1986, from
New York University. He was one of the founders of Asiatic Industries in 1996,
and has acted as Chief Executive Officer of Global Invest since its founding. He
has been responsible for setting up and managing the textile production
operations in Lebanon, and has overall responsibility for the operations of
Global Invest's subsidiaries in Lebanon. Prior to his involvement with Global
Invest, Mr. Sayad was a consultant on strategic business matters for about 20
companies and a financial controller for a leading company in Lebanon in the
medical, pharmaceutical, dental and chemical fields.
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Louis Sayad, 40, received a Bachelor of Science degree in biology in 1986,
and a Master of Science degree in molecular biology/biotechnology, in 1990 from
William Paterson State University, Wayne, New Jersey. He joined with Ralph Sayad
in the formation of Global Invest in 1996, importing hosiery products from
Lebanon and distributing the products in the United States. At Global Invest,
Louis Sayad has been primarily involved in marketing its textile products in the
United States. From August, 1988 to January, 1996, Mr. Sayad operated Asiatic
Hosiery Company, the predecessor to the Asiatic Industries subsidiary of Global
Invest, which sold textile products primarily from domestic manufacturers and
suppliers to small retail businesses and wholesalers. Currently, Mr. Sayad is
President of Global Invest and Chief Operating Officer of Asiatic Industries,
managing the marketing, purchasing, sales, and distribution of products for
Asiatic Industries.
Karim Sayad, 46, received a Bachelor of Science degree in Physiotherapy
from Brooklyn College, New York, in 1980. He has been employed by the Company's
Asiatic Industries subsidiary as its Marketing Sales Manager since 1996. At
Asiatic Industries, Mr. Sayad is responsible for developing the strategic
marketing plan, for product development and oversight of implementation, and for
a leadership program to enhance motivation and efficiency within the sales
force.
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.
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COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Number Transactions Known Failures
Of late Not Timely To File a
Name and principal position Reports Reported Required Form
--------------------------- ------- ------------ --------------
Ralph Sayad, Chief Executive Officer 3 3 0
Louis Sayad, President 3 3 0
Karim Sayad, Secretary 3 3 0
Audit Committee
Our Company does not currently have an Audit Committee.
Code of Ethics
The Company is reviewing and planning to adopt a Code of Ethics.
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
----------- ---- ------ ------------ ------------
Kevin Marion 2003 $ 0 $ 0 $ 0
Chief Executive 2004 0 0 0
Officer and President
Ralph Sayad 2004 $ 39,747 0 $ 3,330
Chief Executive Officer
The Company did not have any deferred compensation or long-term incentive
plans during the years ended December 31, 2003, and 2004, 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.
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.
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As of May 6th, 2005, the Company had a total of 35,907,831 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 10,000-for-1 reverse stock split effective August 11, 2004, and the
subsequent 100-for-1 stock dividend.
The following table sets forth, as of May 6th, 2005: (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
------------------- -------------------- -----------------
Ralph Sayad 5,750,000 16.01%
35 Stalter Drive
Wayne, NJ 07470
Louis Sayad 3,400,000 9.47%
35 Stalter Drive
Wayne, NJ 07470
Karim Sayad 3,100,000 8.63%
9 Greenbriar Road
Little Falls, NJ 07424
Eddy Sayad 4,000,000 11.14%
10 Georges Zaidan St
Achrafieh, Beirut, Lebanon
Freddy Zraick 2,500,000 6.96%
Jabra Building
34th Street, Apt 5
Kfarhabeb, Lebanon
Mario Saradar 5,750,000 16.01%
9 Greenbriar Road
Little Falls, NJ 07424
Credit Bank 3,000,000 8.35%
Freeway Center
Sin El Fil
Beirut, Lebanon
All Officers and 12,250,000 34.12%
Directors as a group
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Changes in Control:
The Agreement dated August 30, 2004, pursuant to which the Company
acquired Global Invest Holdings on October 14, 2004 resulted in a change of
control of our Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A shareholder made advances to or on behalf to Accesstel which together with
interest aggregated $88,380. These advances were used to fund general and
administrative expenses, consisting primarily of legal and accounting fees.
These were cancelled in connection with the merger.
The Company is also obligated for advances made by two shareholders totaling
$229,824. These obligations bear interest at 12% and are due on demand.
A former 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 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
asserted a material breach of contract in May 2004. On August 18, 2004, the
Company resolved the dispute which resulted in the settlement of certain debt
obligations of the Company and related claims that arose from the Euro-offline
reorganization rescission. This settlement required a $12,500 payment, which was
made on August 18, 2004, and the issuance of 500,000 shares of common stock for
the forgiveness of the recorded outstanding indebtedness. These shares are
protected against adjustment in the event of a reverse split for a period of
eighteen months.
The remaining amounts due to the shareholder regarding the Euro Offline, Inc.
reorganization were purchased by another shareholder in September 2004 and
converted to equity by the issuance of 5,038,840 shares of common stock.
On September 14, 2004, a shareholder of the Company, acting through an
affiliated entity, assumed the majority of the Company's outstanding debt in the
amount of $700,000 in return for 1,400,000 shares of common stock. In addition
this shareholder has placed 200,000 shares in escrow to be released at the
earlier of proof of settlement of such debts or one year from the date of the
agreement.
One of the shareholders of the Company is the general manager of two vendors,
which supply the Company with its principal products. During the years ended
December 31, 2004 and 2003, the Company purchased $1,699,758 and $3,028,144,
respectively, of product from one of these suppliers and $1,423,543 and
$968,155, respectively, from the other. At December 31, 2004, the Company had a
credit balance of $215,101 with one of these suppliers and a balance due of
$257,899 with the other supplier.
The Company is obligated to two shareholders for advances made by them (see Note
6 to Financial Statements).
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ITEM 13. EXHIBITS
Exhibits:
Exhibit No. Description of Exhibit
2.1 Asset Purchase Agreement, dated October 26, 1999, among AMCI
International, Inc. and OSCM-OneStop.com, Inc. (incorporated by
reference to Exhibit 2.1 to the Company's Current Report on Form
8-K, filed with the Commission on November 5, 1999).
2.2 Share Exchange Agreement, dated as of December 18, 2000, by and
among Shopps.com, Inc., Accesstel, Inc., and the shareholders of
Accesstel, Inc. (incorporated by reference to Exhibit 1.1 to the
Company's Current Report on Form 8-K, filed with the Commission
on January 3, 2001).
3.1 Articles of Incorporation, filed July 26, 1983 (incorporated by
reference to Exhibit 3.1).
3.2 By-Laws of the Company (incorporated by reference to Exhibit 3.2
to the Company's Registration Statement on Form 10-SB12G, filed
with the Commission on June 12, 1998).
3.3 Articles of Amendment to Articles of Incorporation, filed August
28, 1985 (incorporated by reference to Exhibit 3.3 to the
Company's Registration Statement on Form 10-SB12G, filed with the
Commission on June 12, 1998).
3.4 Articles of Amendment to Articles of Incorporation, filed
February 16, 2001 (incorporated by reference to Exhibit 3.1 to
the Company's Annual Report on Form 10-KSB, filed with the
Commission on May 15, 2002).
4.1 Stock Option Plan (incorporated by reference to Appendix B to the
Company's Preliminary Information Statement on Schedule 14C,
filed with the Commission on January 24, 2001).
4.2 Non-Employee Directors and Consultants Retainer Stock Plan for
the Year 2003 (incorporated by reference to Exhibit 4.1 to the
Company's Registration Form on Form S-8, filed with the
Commission on December 30, 2003).
10.1 Compromise and Settlement Agreement, dated April 9, 2004, by and
between the Company and Euro Offline (incorporated by reference
to Exhibit 10.1 to the Company's Annual Report on Form 10-KSB,
filed with the Commission on May 17, 2004).
10.2 Agreement, dated April 9, 2004, between Global Guarantee
Corporation and Euro Offline (incorporated by reference to
Exhibit 10.2 to the Company's Annual Report on Form 10-KSB, filed
with the Commission on May 17, 2004).
10.3 Indemnification Agreement, dated October 13, 2004, by and between
DAG Enterprises, Inc. and Douglas A. Glaser, and the Company
(incorporated by reference to Exhibit 10.3 to the Company's
Quarterly Report on Form 10-QSB, filed with the Commission on
November 19, 2004).
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31 Certification of Chief Executive Officer and Principal Financial
Officer Pursuant to Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002, filed herewith.
32 Certification of Chief Executive Officer and Principal Financial
Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
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
2004:
Fee category 2003 2004
------------ -------- --------
Audit fees $ 14,500 $ 18,750
Audit-related fees $ 0 $ 0
Tax fees $ 700 $ 800
All other fees $ 0 $ 0
-------- --------
Total fees $ 15,200 $ 19,550
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.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
has duly caused this amended report to be signed on its behalf by the
undersigned thereunto duly authorized.
ACCESSTEL, INC.
---------------
(Registrant)
Date: June 20, 2006 By: /s/ Ralph Sayad
---------------------------
Ralph Sayad, Sole Director,
Chief Executive Officer and
Principal Financial Officer
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