U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PUSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003
OR
[ ] TRANSITION REPORT PUSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________________ TO ________________________
COMMISSION FILE NUMBER: 000-29217
ACCESSPOINT CORPORATION
----------------------------------------------
(Name of Small Business Issuer in its Charter)
Nevada 95-4721385
-------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
6171 W. Century Blvd.
Suite 200
Los Angeles, California 90045
---------------------------------------- ----------
(Address of Principle Executive Offices) (Zip Code)
(310) 846-2500
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
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
The number of the Company's shares of Common Stock outstanding as of June 30,
2003 was 24,163,965.
1
Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ]
Accesspoint Corporation
Form 10-QSB QUARTERLY Report
AS OF AND FOR THE QUARTER ENDED JUNE 30, 2002
TABLE OF CONTENTS
Forward-Looking Statements
PART I
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis or Plan of Operation
PART II
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-QSB contains forward-looking statements about the business,
financial condition and prospects of the Company that reflect assumptions made
by management and management's beliefs based on information currently available
to it. We can give no assurance that the expectations indicated by such
forward-looking statements will be realized. If any of management's assumptions
should prove incorrect, or if any of the risks and uncertainties underlying such
expectations should materialize, the Company's actual results may differ
materially from those indicated by the forward-looking statements.
The key factors that are not within the Company's control and that may have
a direct bearing on operating results include, but are not limited to, the
acceptance by customers of the Company's products and services, the Company's
ability to develop new products and services cost-effectively, the ability of
the Company to raise capital in the future, the development by competitors of
products or services using improved or alternative technology, the retention of
key employees and general economic conditions.
There may be other risks and circumstances that management is unable to
predict. When used in this Form 10-QSB, words such as, "believes," "expects,"
"intends," "plans," "anticipates" "estimates" and similar expressions are
intended to identify forward-looking statements, although there may be certain
forward-looking statements not accompanied by such expressions. All
forward-looking statements are intended to be covered by the safe harbor created
by Section 21E of the Securities Exchange Act of 1934.
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The reviewed consolidated financial statements for the periods ended June
30, 2003 and June 30, 2002 are filed herewith.
3
ACCESSPOINT CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
TABLE OF CONTENTS
Consolidated Balance Sheets 5
Consolidated Statements of Operations 7
Consolidated Statements of Cash Flow 8
Notes to Consolidated Financial Statements 9-19
4
ACCESSPOINT CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
------
June 30, December 31,
2003 2002
------------ -------------
(unaudited)
Current Assets
Cash $ 25,447 $ 35,961
Accounts receivable, net 425,614 348,708
Receivable from a related party 116,368 157,172
Prepaid expenses 0 1,488
------------ -------------
Total Current Assets 567,429 543,329
------------ -------------
Fixed Assets
Furniture and equipment (net) 73,856 178,139
------------ -------------
Total Fixed Assets 73,856 178,139
------------ -------------
Other Assets
Deferred financing costs (net) 1,009,819 1,266,764
Portfolio Purchase 154,667 154,667
Deposits 280,108 280,108
------------ -------------
Total Other Assets 1,444,594 1,701,539
------------ -------------
Total Assets $2,085,879 $2,423,007
============ =============
Refer to notes to the financial statements
5
ACCESSPOINT CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
June 30, December 31,
2003 2002
------------- -------------
(unaudited)
Current Liabilities
Accounts payable $ 1,363,163 $ 1,527,457
Accrued payroll taxes and penalties 1,338,330 1,412,432
Accrued liabilities 652,174 560,707
Merchant loss reserve 32,628 19,465
Lines of credit 1,404,419 1,364,761
Capitalized leases 411,461 419,460
Notes payable 565,000 565,000
------------- -------------
Total Current Liabilities 5,767,175 5,869,282
Total Liabilities 5,767,175 5,869,282
------------- -------------
Stockholders' Equity
Preferred Stock, $.001 par value, 5,000,000
shares authorized, 1,055,600 shares issued
and outstanding, respectively 1,056 1,056
Common stock, $.001 par value, 25,000,000
shares authorized, 24,163,965 issued and
outstanding, respectively 24,164 24,164
Additional paid in capital 15,114,004 15,114,004
Retained (deficit) (18,820,520) (18,585,499)
------------- -------------
Total Stockholders' (Deficit) (3,681,296) (3,446,275)
------------- -------------
Total liabilities and Stockholders'
Equity $ 2,085,879 $ 2,423,007
============= =============
Refer to notes to the financial statements
6
ACCESSPOINT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Six Months Ended
--------------------------------- -------------------------------
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
------------- ------------- ------------ ------------
Sales, net $ 3,389,904 $ 3,261,131 $ 6,780,179 $ 6,263,494
Cost of sales 2,530,974 2,837,491 5,147,265 5,072,264
------------- ------------- ------------ ------------
Gross profit 858,930 423,640 1,632,914 1,191,230
Selling expenses 0 4,522 4,624 4,946
General and administrative expenses 669,736 942,456 1,444,205 1,987,649
------------- ------------- ------------ ------------
Income (loss) from operations 189,194 (523,338) 184,085 (801,365)
------------- ------------- ------------ ------------
Other (Income) Expense
Interest income (553) (27,897) (2,496) (31,861)
Gain on sale of asset 0 (101,250) 0 (101,250)
Penalties 3,169 1,490 5,310 1,785
Amortization of deferred financing costs 128,472 316,319 256,945 632,638
Debt forgiveness 0 0 0 (221,477)
Bad Debt 28,088 38,350 65,000 145,922
Interest expense 44,368 82,530 94,347 129,064
------------- ------------- ------------ ------------
Total Other (Income) Expense 203,544 309,542 419,106 554,821
------------- ------------- ------------ ------------
Income (loss) before income taxes (14,350) (832,880) (235,021) (1,356,186)
Provision for income taxes 0 0 0 2,400
------------- ------------- ------------ ------------
Net income (loss) (14,350) (832,880) (235,021) (1,358,586)
============= ============= ============ ============
Net loss per share
Basic 0.00 ($0.03) ($0.01) ($0.06)
Weighted average number of shares
Basic 24,163,965 3,848,618 24,163,965 23,769,587
Refer to notes to the financial statements
7
ACCESSPOINT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended
---------------------------------
June 30, June 30,
2003 2002
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) ($235,021) (1,358,586)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization 256,945 632,638
Depreciation 104,283 139,998
Gain sale of asset 0 (101,250)
Decrease in deferred compensation 0 (221,477)
Decrease (Increase) in receivables (76,906) (118,074)
Decrease (Increase) in inventory 0 (48)
Decrease in other current assets 40,803 0
Decrease (increase) in prepaid expenses 1,488 (25,895)
Decrease in deposits 0 461
(Decrease) Increase in accounts payable and
accrued expenses (164,294) 271,797
Increase in accrued payroll taxes (74,101) (52,955)
Increase in merchants loss reserve 13,163 0
Increase in accrued liabilities 91,467 5,000
------------- -------------
Total adjustments 192,848 530,195
------------- -------------
Net cash contributed by (used in)
operations (42,173) (828,391)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of asset 0 75,000
Purchase of portfolio 0 (500,000)
Purchase of fixed assets 0 (114,329)
------------- -------------
Net cash (used in) investing activities 0 (539,329)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of notes payable 0 500,000
Payments on notes payable 0 (201,250)
Payments on capital leases (8,000) (38,336)
Sale of stock 0 56,510
Line of credit 36,658 1,168,542
Payments on line of credit 0 0
------------- -------------
Net cash provided by financing activities 31,658 1,485,466
------------- -------------
Net change in cash (10,514) 117,746
------------- -------------
Cash at beginning of period 35,961 78,229
------------- -------------
Cash at end of period $25,447 $195,975
============= =============
Refer to notes to the financial statements
8
ACCESSPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2003 AND 2002
Note A - NATURE OF OPERATIONS
--------------------
Accesspoint Corporation (subsequently referred to as "Accesspoint", the
"Company" or "We") was incorporated as Accesspoint Corporation in
Nevada in 1995 and is a provider of card- and web-based payment
processing services to businesses throughout the United States.
The Company enables merchants to accept credit cards as payment for
their products and services by providing card authorization, data
capture, settlement, risk management, fraud detection and chargeback
services. Our services also include transaction organization and
retrieval, ongoing merchant assistance and support in connection with
disputes with cardholders. We market and sell our services primarily
through independent sales organizations ("ISOs") and registered sales
agents ("RSAs").
Our payment processing services enable merchants to process both
traditional swipe transactions, as well as card-not-present
transactions. A card-not-present transaction occurs whenever a customer
does not physically present a payment card at the point-of-sale and may
occur over the Internet or by mail, fax or telephone. Our processing
services include evaluation and acceptance of card numbers, detection
of fraudulent transactions, receipt and settlement of funds and service
and support. By outsourcing some of these services to third parties,
including the evaluation and acceptance of card numbers and receipt and
settlement of funds, we maintain an efficient operating structure,
which allows us to easily expand our operations without significantly
increasing our fixed costs. We believe our experience and knowledge in
providing payment processing services to merchants of all sizes gives
us the ability to effectively identify, evaluate and manage the payment
processing needs and risks that are unique to businesses of varying
levels.
We market and sell our services primarily through our relationships
with ISOs and RSAs. ISOs and RSAs act as a non-employee, external sales
force in communities throughout the United States. By providing the
same high level of service and support to our ISOs and RSAs as we do to
our merchants, we maintain our access to an experienced sales force
of sales professionals who market our services, with minimal direct
investment in sales infrastructure and management. After an agent
refers a merchant to us and we execute a processing agreement with that
merchant, we pay the referring ISO or RSA a percentage of the revenues
generated by that merchant. Although our relationships with agents are
mutually non-exclusive, we believe that our understanding of the unique
payment processing needs of merchants of all sizes enables us to
develop compelling incentives for agents to continue to refer newly
identified merchants to us.
9
ACCESSPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2003 AND 2002
Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Unaudited Interim Financial Information
---------------------------------------
The accompanying financial statements have been prepared by Accesspoint
Corporation, ("Accesspoint", the "Company" or "We") pursuant to the
rules and regulations of the Securities and Exchange Commission (the
"SEC") Form 10-QSB and Item 310 of regulation S-B, and generally
accepted accounting principles for interim financial reporting. These
financial statements are unaudited and, in the opinion of management,
include all adjustments (consisting of normal recurring adjustments and
accruals) necessary for a fair presentation of the balance sheets,
operating results, and cash flows for the periods presented. Operating
results for the six months ended June 30, 2003 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 2003, or any future period, due to seasonal and other
factors. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting policies have been omitted in accordance with the rules and
regulations of the SEC. These financial statements should be read in
conjunction with the audited consolidated financial statements and
accompanying notes, included in the Company's Annual Report for the
year ended December 31, 2002.
Revenues, expenses, assets and liabilities can vary during each quarter
of the year. Therefore, the results and trends in these interim
consolidated financial statements may not be the same as those for the
full year.
Revenue Recognition
-------------------
The Company recognizes revenue from: settlement fees for electronic
payment processing, credit and debit card payment settlement, check
conversion and financial processing programs and transaction fees
related to the use of its software and credit card processing products,
licensing of its software products. Revenue from software and hardware
sales and services are recognized as products are shipped, downloaded,
or used.
The Company reports income and expenses on the accrual basis for both
financial and income tax reporting purposes.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of
Accesspoint Corporation, and its wholly owned subsidiaries Processing
Source International, Inc. (PSI) and Black Sun Graphics, Inc. (BSG),
collectively referred to within as the Company. All material
intercompany accounts, transactions and profits have been eliminated in
consolidation.
Risks and Uncertainties
-----------------------
The Company is subject to substantial risks from, among other things,
intense competition from the providers of financial electronic payment
processing, settlement services, software development and e-commerce
service companies specifically, and the technology industry in general,
other risks associated with the Internet services industry, financing,
liquidity requirements, rapidly changing customer requirements, limited
operating history, and the volatility of public markets.
10
ACCESSPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2003 AND 2002
Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------------------
Contingencies
-------------
Certain conditions may exist as of the date the financial statements
are issued, which may result in a loss to the Company but which will
only be resolved when one or more future events occur or fail to occur.
The Company's management and legal counsel assess such contingent
liabilities, and such assessment inherently involves an exercise of
judgment. In assessing loss contingencies related to legal proceedings
that are pending against the Company or unasserted claims that may
result in such proceedings, the Company's legal counsel evaluates the
perceived merits of any legal proceedings or unasserted claims as well
as the perceived merits of the amount of relief sought or expected to
be sought.
If the assessment of a contingency indicates that it is probable that a
material loss has been incurred and the amount of the liability can be
estimated, then the estimated liability would be accrued in the
Company's financial statements. If the assessment indicates that a
potential material loss contingency is not probable but is reasonably
possible, or is probable but cannot be estimated, then the nature of
the contingent liability, together with an estimate of the range of
possible loss if determinable and material would be disclosed.
Loss contingencies considered to be remote by management are generally
not disclosed unless they involve guarantees, in which case the
guarantee would be disclosed.
Reserve for Merchant Credit Losses
----------------------------------
The Company establishes reserves for merchant credit losses, which
arise as a result of, among other things, cardholder dissatisfaction
with merchandise quality or merchant services. Such disputes may not be
resolved in the merchant's favor. In these cases, the transaction is
"charged back" to the merchant and the purchase is refunded to the
customer by the merchant. If the merchant is unable to grant a refund,
the Company or, under limited circumstances, the Company and the
processing bank, must bear the credit risk for the full amount of the
transaction. The Company estimates its potential loss for chargebacks
based primarily on historical experience. Obtaining collateral from
merchants considered higher risk often mitigates the risk of loss. At
June 30, 2003 and June 30, 2002, the Company had aggregate collateral
classified as merchant loss reserves of $32,628 and $19,465,
respectively.
Estimates
---------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates. Significant estimates include
collectibility of accounts receivable, accounts payable, sales returns
and recoverability of long-term assets.
Allowance for Doubtful Accounts
-------------------------------
The Company has made an allowance for doubtful accounts for trade
receivables.
Fixed Assets
------------
Property and equipment are stated at cost less accumulated
depreciation. Expenditures for major additions and improvements are
capitalized, and minor replacements, maintenance and repairs are
charged to expense as incurred. Depreciation is provided on the
straight-line method over the estimated useful lives of the assets, or
the remaining term of the lease, as follows:
Furniture and Fixtures 5 years
Equipment 5 years
Hardware and Software 3 years
11
ACCESSPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2003 AND 2002
Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------------------
Leasehold Improvements
----------------------
Amortization of leasehold improvements is computed using the
straight-line method over the shorter of the remaining lease term or
the estimated useful lives of the improvements.
Capital Leases
--------------
Assets held under capital leases are recorded at the lower of the net
present value of the minimum lease payments or the fair value of the
leased asset at the inception of the lease. Depreciation is computed
using the straight-line method over the shorter of the estimated useful
lives of the assets or the period of the related lease.
Concentration of Credit Risk
----------------------------
Concentration of credit risk with respect to trade accounts receivable
is not diversified. As of June 30, 2003, 59% of the trade receivables
are from Chase Merchant Services, LLC. The loss of Chase Merchant
Services to our Company would be severely detrimental and could result
in the termination and liquidation of our Company. Our Company actively
evaluates the creditworthiness of Chase Merchant Services, LLC and is
confident that the failure of the firm is neither likely nor imminent.
Advertising
-----------
Advertising costs are expensed in the year incurred.
Earnings Per Share
------------------
Earnings per common share amounts are computed by dividing net income
amounts by weighted-average common stock and common stock equivalents
shares (when dilutive) outstanding during the period. Diluted earnings
per share were not presented because they were considered to be
anti-dilutive.
Stock-Based Compensation
------------------------
The Company accounts for stock-based employee compensation arrangements
in accordance with the provisions of Accounting Principles Board
Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees," and
complies with the disclosure provisions of Statement of Financial
Accounting Standards ("SFAS") 123, "Accounting for Stock-Based
Compensation." Under APB 25, compensation cost is recognized over the
vesting period based on the difference, if any, on the date of grant
between the fair value of the Company's stock and the amount an
employee must pay to acquire the stock.
12
ACCESSPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2003 AND 2002
Note C - STOCK AND STOCK WARRANTS
------------------------
The Company has two classes of capital stock: Preferred Stock and
Common Stock. Holders of common stock are entitled to one vote for each
share held. Preferred stock holders are not entitled to voting
privileges and are convertible into Common Stock under certain
circumstances on a share-for-share basis.
At June 30, 2003, the Company has 25,000,000 common shares authorized
and 24,163,965 shares issued and outstanding. The Company had 5,000,000
preferred shares authorized and 1,055,600 shares issued and
outstanding.
At June 30, 2003, the Company does not have enough common stock
reserved for the possible exercise of options and warrants which could
total:
Exercise of common stock warrants 482,223
Exercise of preferred stock 1,055,600
Exercise of employee stock options 1,776,445
---------
3,314,268
=========
The Company intends to increase the authorized number of shares by
proxy of its shareholders subsequent to June 30, 2003.
Note D - LOSS PER SHARE
--------------
Basic net loss per share is computed using the weighted average number
of common shares outstanding. The dilutive effect of earnings per share
were not presented because they were considered to be anti-dilutive.
The computations of basic net loss per share as of June 30, 2003 and
2002 are as follows:
2003 2002
------------- -------------
Net (loss) from operations $(235,021) ($1,358,586)
------------- -------------
Basic weighted average shares 24,163,965 23,769,587
Net (loss) per share from
continuing operations:
Basic ($0.01) ($0.06)
13
ACCESSPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2003 AND 2002
Note E - LITIGATION AND CONTINGENCIES
----------------------------
The Company is subject to various claims and legal proceedings covering
a wide range of matters that arise in the ordinary course of its
business activities. Listed below are only those matters considered to
be material to the Company by management and its counsel.
Citicorp - During 2001 the Company vacated office facilities it had
leased under an operating lease agreement in Chicago, Illinois. The
lessor subsequently filed suit against the Company for the remaining
amount of unpaid rent and other various expenses. A judgment was filed
against the Company in the amount of $95,000. As of June 30, 2003 the
Company has accrued for the liability in full on its Balance Sheet. No
payments have been made.
Roycap - As of June 30, 2003 the Company was in default on its loan
agreement with Roycap for repayment of a $450,000 loan, plus accrued
interest, which was due on October 16, 2001. In June 2002, Roycap filed
formal suit on its claim. The Company has recently entered into a
settlement agreement wherein it stipulated to a $730,000 judgment. The
entire settlement amount has been accrued.
Bentley Promissory Notes - Various family trusts related to James W.
Bentley, a former Director of the Company, have filed three related
actions seeking to collect in excess of $500,000 in promissory notes
allegedly due. The Company believes these claims were settled by the
June 26, 2002 Settlement and in any event, believes the sums due are
substantially less than claimed. The Company continues to fight these
actions vigorously.
Merchants Warehouse.com - This is a claim against PSI for breach of an
independent sales agent agreement. The claim is disputed. The matter
was submitted to arbitration and was heard by the arbitrator. The
arbitrator made an interim award of $296,720 and denied the Company's
counterclaim. The Company is directed to pay the agent residuals
according to the terms of the Company's agreement with the agent. The
Company has made all payments to the agent since the date of the award.
The amount of the award has been accrued.
Northwest Systems, LLC - Two inter-related claims, one lawsuit and one
arbitration claim arising out of a dispute over a contract whereby PSI
agreed to purchase certain merchant accounts from Northwest Systems,
LLC ("NWS"). The first case (lawsuit) seeks to recover damages of
$300,000 for alleged breach of the contact to purchase, while the
second case (arbitration) claims that NWS has not been paid all
residual payments due it under its agency contract with PSI. In May
2003, an award in the arbitration claim in the amount of $149,000 was
made for the benefit of the plaintiff. In mediation on July 2, 2003,
the registrant settled both claims, while not all terms of the
settlement can be disclosed, the registrant will record other income in
the form of a gain on the forgiveness of debt, in the amount of
$270,836 in the quarter ended September 30, 2003. The settlement also
calls for the conversion/transfer of all merchants accounts associated
with NWS effective, July 1, 2003. While no accurate forecast can be
made as to the amount and timing of the anticipated conversion, NWS
merchants accounted for approximately 10% of the Company's gross
processing revenue for the quarter ended March 31, 2003. The settlement
also calls for a mutual release on both parties of all and any current
or contemplated actions arising from their business relationship.
14
ACCESSPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2003 AND 2002
Note E - LITIGATION AND CONTINGENCIES (CONTINUED)
----------------------------------------
Moceri Leasing Co. - This is an action by an equipment lessor on a
defaulted lease. The Company is vigorously defending itself against
this claim. The total amount, estimated to be $25,000, of any potential
judgment for the value of the equipment, has been fully accrued.
CIT Communications Co. ("CIT") - CIT, an equipment lessor, claims that
we defaulted on an equipment lease. We are vigorously defending against
this claim. The total amount of any potential judgment for the value of
the equipment has been accrued.
Global Attorneys Network Co. - This is an action filed on behalf of an
equipment lessor on a defaulted lease. In April 2003 the matter was
settled for $16,900. This amount has been accrued. No payments have
been made.
Bas Mulder - This is a lawsuit filed by the former owner and employee
of Black Sun Graphics, Inc. ("BSG"), claiming damages in excess of
$430,000 related to the purchase of BSG by the Company. The Company
intends to vigorously defend this action. The Company has entered into
a verbal agreement to settle the action and has satisfied part of the
terms of the verbal agreement. No trial date has been set. An accrual
has been made for the potential of an adverse outcome.
Bentley v. William R. Barber, et al. - On March 22, 2002, James Bentley
("Plaintiff"), a shareholder of the Company, filed a shareholder
derivative lawsuit against the Company and several individual
defendants for breach of contract, breach of fiduciary duty,
misappropriation of trade secret, recovery of personal property,
imposition of a constructive trust, unfair competition in violation of
Business and Profession Code Section 17200, conversion, unfair business
practices, and usurpation of corporate opportunity. On several
occasions, Plaintiff also sought provisional remedies with the Court,
including multiple applications for preliminary injunction and the
appointment of a receiver. To date, none of Plaintiff's requests for
provisional relief have been granted. On June 26, 2002, the parties to
the action executed a Settlement Agreement. Plaintiff purported to
rescind the Settlement Agreement in early December 2002. Plaintiff
thereafter filed an ex parte application for temporary restraining
order, which the court denied on December 24, 2002. The Court set a
hearing for Plaintiff's application for preliminary injunction in late
January 2003. Plaintiff thereafter continued the hearing on the
application for preliminary injunction on several occasions.
Ultimately, after Defendant's opposition to the preliminary injunction
request was filed; Plaintiff took his application for preliminary
injunction off calendar completely. A number of depositions and law and
motion were conducted during January and February 2003. Trial has been
set for October 20, 2003. On July 3, 2003 in a special meeting of the
Board of Directors, the Directors received, reviewed and considered the
report of the findings of the Special Litigation Committee ("the
Committee").
15
ACCESSPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2003 AND 2002
Note E - LITIGATION AND CONTINGENCIES (CONTINUED)
----------------------------------------
Bentley v. William R. Barber, et al. (continued) - The Committee was
-------------------------------------------------
formed in January 2003 for the purpose of investigating the allegations
contained within the shareholder derivative action known as Bentley v.
Barber (" the Bentley matter"). Based on its investigation, which
included the review of thousands of pages of documents, 1,200 pages of
transcripts of depositions, reviews of the declarations of ten
witnesses, and interviews of the Plaintiff, and his representatives, as
well as of at least fifteen other witnesses, the Committee met on July
2, 2003 and unanimously agreed and found as follows:
1) The action was previously settled, after both the plaintiff and
the court in the Bentley matter concluded the settlement
agreement was in the best interests of the Company, so that the
Committee likewise concludes that the best interests of the
company are served by a dismissal of the action and the
enforcement of the settlement agreement previously approved by
the court:
2) That the allegations raised in the Bentley matter are without
merit;
3) That it is not in the Company's interests to pursue the
litigation, as the costs of prosecuting the litigation far exceed
any possible recovery to the Company, particularly given the
possible indemnity obligations of the Company;
4) The balance of the Company's corporate interests, including its
need to maintain its relationship with Chase, the need for and
ability to focus on obtaining new accounts, the need to apply the
Company's resources, management, and assets to the payment and
resolution of outstanding debts and the need to repair the
Company's reputation that has been damaged by this litigation,
warrants dismissal of the action, regardless of the merits of the
Bentley matter; and
5) The Company has new management and has carefully reviewed the
subject matter of the litigation and the accounting of the assets
of the Company and the handling of related party transactions.
Based on the findings of the Committee, the Directors determined it to
be in the best interests of the company to cause the Bentley matter to
be dismissed. On July 3, 2003, the company's attorneys filed a motion
for summary judgment with the Orange County Superior Court, the motion
contends that: there is no merit to the charges, the suit is not being
prosecuted for the benefit of the shareholders of the company, but is a
vendetta by a shareholder brought for its own purposes and that the
burdens of litigation are largely responsible for the fall in the
corporation's stock price since the case was filed. On July 3, 2003,
the Company's attorneys concurrently filed a motion for an indefinite
stay in discovery pending judgment on the motion for summary judgment.
On July 25, 2003, the court granted the Company's request for stay
pending ruling on the motion for summary judgment. The Company has
recorded no liability for the potential of an adverse outcome of the
action.
Note F - PAYROLL TAXES
-------------
The Company is currently in negotiations with the United States
Department of the Treasury, Internal Revenue Service ("IRS") in regards
to unpaid employment taxes for the period of January 1 - December 31,
2000. The IRS has made formal demand of amounts due and unpaid,
including interest and penalties, from the Company, and has
appropriately filed tax liens against all assets of the Company. The
Company has filed a request for an "Offer in Compromise" of all amounts
owed by the Company. The IRS has recorded the request and stayed any
other collection activity until it has had time to review the matter.
As of the date of this report the IRS has responded to the Company and
is reviewing the offer. The Company has recorded its liability in full
to the IRS, including penalties and interest, on its balance sheet. As
of June 30, 2003, the Company has accrued liability of approximately
$1,338,330 to the IRS.
16
ACCESSPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2003 AND 2002
Note G - COMMITMENTS
-----------
In October 2002, the Company entered into a Master Support Services
Agreement ("Agreement") with Merchants Billing Services ("MBS"). This
Agreement called for the payment of $180,000 per month for salaries,
office space & utilities, travel & entertainment, telecommunications,
professional services and a management fee, with a quarterly adjustment
of the payment based on actual expenses for the preceding three months
activity. The Agreement is for an initial period of one year. In March
2003, the Company received notification of MBS's intention to terminate
the agreement effective June 30, 2003. The termination was subsequently
amended to September 17, 2003 and includes a monthly reimbursement in
the amount of $130,000, due to a reduction in overhead costs. The
disinterested members of the Board have accepted this amendment. While
the Agreement remains in effect, the range of services provided by MBS
no longer includes payments to the Company's vendors. Effective July 1,
2003, the Company resumed payments to vendors. There are no future
minimum payments under the amended Agreement and the management fee has
been discontinued. For the six months ended June 30, 2003 the Company
made payments totaling $540,000 under the Agreement. As of June 30,
2003, the Company owed MBS $143,629 which is included in lines of
credit.
Associated with the Agreement was the assignment of that certain
Agreement of Sublease ("Sublease") dated as of August 2002 between
Veridian and the Company. Veridian and the landlord Carlsberg
Properties, Inc agreed upon the assignment of the Sublease.
Operating lease expense for the six months ended June 30, 2003 and 2002
was $49,000 and $166,472, respectively.
Note H - DEFERRED FINANCING COSTS
------------------------
In December 2001, the Company, in accordance with APB 21 and SAB 79 the
Company recorded a deferred financing cost asset of $6,326,381. This
amount is based on the number of shares that three shareholders
directly transferred to Net Integrated Systems, Inc. ("NIS") as an
inducement for NIS to enter into the Revolving Line of Credit
Agreement. In October 2002, the Revolving Line of Credit Agreement and
related Management Agreement with NIS, was terminated. This resulted in
the Company recording a write down on the deferred financing cost asset
of $3,756,927 in the year ended December 31, 2002.
The Company will amortize the remaining deferred financing cost over
the life of the line of credit, which is five years. For the six months
ended June 30, 2003 and June 30, 2002 the Company recorded amortization
expense of $256,945 and $632,638 respectively.
17
ACCESSPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2003 AND 2002
Note I - RELATED PARTY TRANSACTIONS
--------------------------
The Company has entered into a number of relationships that fit the
definition provided by Statement of Financial Accounting Standards No.
57, "Related Party Disclosures". An entity that can control or
significantly influence the management or operating policies of another
entity to the extent one of the entities may be prevented from pursuing
its own interests. As of June 30, 2003, the following related party
relationships existed between the Company, its shareholders, officers
and directors:
MBS, is jointly owned by Becky Takeda, President and Chief Executive
Officer of the Company and William R. Barber, ex President and ex Chief
Executive Officer and currently a Director of the Company, is also an
agent of the Company and sells the Company's products and services
through its own network of subagents and sales personnel. As of June
30, 2003, under the terms of the agency agreement with MBS, the Company
paid $252,288 in residuals. Refer to Note H - Commitments for further
discussion of the operating arrangement between the Company and MBS.
Note J - SUBSEQUENT EVENTS
-----------------
In July 2003, the board of directors resolved to postpone the annual
shareholder's meeting scheduled for September 17, 2003. The reasons
cited for the delay in the meeting are that the recent granting of the
motion to stay proceedings, pending ruling on summary judgment, filed
by the corporation in the Bentley versus Barber, et al, shareholder
derivative action pushes the discovery period of that same matter past
September 17, 2003. No new date for the shareholder's meeting has been
set.
Also in July, 2003, the registrant was served with a complaint for
declaratory relief filed by Access Holding Limited Partnership and Tom
Djokovich ("plaintiffs") against Accesspoint Corporation and Net
Integrated Systems, Limited ("defendants") seeking immediate delivery
to plaintiffs of those certain restricted common shares of the Company
which the plaintiffs transferred to Net Integrated Systems, Limited in
consideration for the extension of a Secured Revolving Line of Credit
to the Company. The Company believes the complaint has no basis in
fact, is without merit and intends to defend itself vigorously. The
Company has not filed a response. The filing of this lawsuit was also
cited as reason by the Board for the delay of the shareholders annual
meeting. Access Holdings Limited Partnership benefits Maryann and James
Bentley, former officers and directors of the Company. Tom Djokovich is
former President, Chief Executive Officer and director of the
registrant. William R. Barber, named defendant in the Bentley v. Barber
matter, is a shareholder in Net Integrated Systems, Limited and is the
former President and Chief Executive Officer of the Company. Mr. Barber
is a director of the Company.
18
ACCESSPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2003 AND 2002
Note K - GOING CONCERN
-------------
The accompanying financial statements, which have been prepared in
conformity with accounting principles generally accepted in the United
States of America, contemplates the continuation of the Company as a
going concern. However, the Company has sustained significant recurring
operating losses, has limited capital resources, is involved in several
pending lawsuits and has been assessed by the Internal Revenue Service
for unpaid payroll taxes. Continuation of the Company as a going
concern is contingent upon the ability of the Company to expand its
operations, generate increased revenues, secure additional sources of
financing and sell a portion of the merchant portfolio. However, there
is no assurance that the Company will realize the necessary capital
expansion.
19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the financial statements and related notes contained elsewhere in this document.
The discussion contained herein relates to the financial statements, which have
been prepared in accordance with GAAP.
THE DISCUSSION IN THIS SECTION AND OTHER PARTS OF THIS REGISTRATION STATEMENT
CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS SUCH AS STATEMENTS OF THE COMPANY'S
PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS. THESE STATEMENTS INVOLVE RISKS
AND UNCERTAINTIES. THEY ARE MADE AS OF THE DATE OF THIS REPORT, AND THE COMPANY
ASSUMES NO OBLIGATION TO UPDATE THEM.
A. PLAN OF OPERATION
Our primary software products consist of: Merchant Manager Enterprise, a
complete and secure fully-hosted e-commerce solution for small to midsize
businesses, which provides an on-line store, catalog and credit card processing
abilities; Transaction Manager, an on-line credit card and ACH processing
solution for small to midsize businesses; and Merchant Manager, a hosted
e-commerce solution providing a simple-to-learn and simple-to-use set of tools
derived from Merchant Manager Enterprise. We provide hosting services in
conjunction with the software products.
During the coming twelve months, we will not be able to satisfy the cash
requirements and have no financing alternatives to satisfy the obligations
except for the sale of a portion of the merchant portfolio. The plans for the
coming twelve months include the contemplation of a sale of the merchant
portfolio for the purpose of recapitalizing the company and paying down debt.
Should a portion of the merchant portfolio be sold, we will be forced to reduce
the staffing levels in line with the reduction in revenue realized. During the
coming twelve months, we will continue to pursue enhancements of the existing
Merchant Manager and Transaction Manager products to meet the demands of an
increasingly competitive marketplace. We do not anticipate the development of
any products during the coming twelve-month period and will not expend
significant resources on the research or development of new product lines.
20
B. RESULTS OF OPERATIONS
Six months Ended June 30, 2003 Compared With Six Months Ended June 30,
2002.
Revenues for the six months ended June 30, 2003 increased to $6,780,179
from $6,263,494 for the six months ended June 30, 2002. The increase of
$516,685, 9% is due primarily to the increased revenues associated with credit
card processing which resulted in an overall increase in sales.
Cost of sales for the six months ended June 30, 2003 increased to
$5,147,265 from $5,072,264 for the six months ended June 30, 2002. The increase
of $75,001, or 2%, resulted primarily from lowered agent residual expenses and
more attention focused on the profitability of each merchant's relationship.
Selling and marketing expenses for the six months ended June 30, 2003
decreased to $4,624 from $4,946 for the six months ended June 30, 2002. This
decrease of $322 resulted, from the termination of most outside marketing
efforts.
General and administrative expenses for the six months ended June 30, 2003
decreased to $1,444,205 from $1,987,649 for the six months ended June 30, 2002.
The decrease of $543,444, or (27%), resulted primarily from a decrease of
salaries and wages, occupancy costs, and other operating efficiencies realized
through the consolidation of three offices into one.
Interest expense, net, for the six months ended June 30, 2003 was $94,347,
as compared to $129,064 for the six months ended June 30, 2002. The decrease of
$34,717, or (27%), resulted primarily from the Company's lower level of
indebtedness and reduced borrowing costs.
Other (Income) Expense, net of Interest expense was $324,757 for the six
months ended June 30, 2003, as compared to $425,757 for the six months ended
June 30, 2002. These decrease of $100,998, or (24%) resulted primarily from the
lowered amortization expenses realized for the six months ended June 30, 2003,
as compared to the six months ended June 30, 2002.
Net losses for the six months ended June 30, 2003 were ($235,021), as
compared to ($1,358,586) for the six months ended June 30, 2002. The difference
in loss of $1,123,565, or (83%), was primarily related to increased revenues, a
reduction of salaries, operating efficiencies, lowered residual expenses,
increased transaction profitability and lowered amortization and depreciation
expenses.
C. Liquidity and Capital Resources
Cash and cash equivalents at June 30, 2003 were $25,447, compared to
$35,961 at December 31, 2002, a decrease of $10,514, which represented a decline
of (30%).
Net Cash used in operations decreased $786,218 for the six months ended
June 30, 2003 to a use of ($42,173) or (95%). This efficiency was primarily
accomplished by increased effectiveness in operations.
Net Cash used in investing activities increased from ($539,329) as of June
30, 2002 to $0 as of June 30, 2003. This decrease of $539,329, was due to the
lack of funds available for investment.
During the six months ended June 30, 2003, the Company generated net cash
of $31,658 from financing activities as compared to the generation of $1,485,466
for the six months ended June 30, 2002. The decrease of $1,453,808, or (98%)
resulted from the cessation of all private placement fundraising activities and
the associated payment of outstanding obligations.
We had, at June 30, 2003, negative working capital. We believe that cash
generated from operations will not be sufficient to fund the current and
anticipated cash requirements. The plans for the coming twelve months include
the contemplation of a sale of the merchant portfolio for the purpose of
recapitalizing the company and paying down debt. Should a portion of the
merchant portfolio be sold, we will be forced to reduce the staffing levels in
line with the reduction in revenue realized.
21
D. Net Operating Loss
For federal income tax purposes, we have net operating loss carryforwards
of approximately $18,585,499 as of June 30, 2003 and $10,760,000, as of June 30,
2002. These carryforwards will expire at various dates through the year 2015.
The use of such net operating loss carryforwards to be offset against future
taxable income, if achieved, may be subject to specified annual limitations.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are subject to various claims and legal proceedings covering a wide
range of matters that arise in the ordinary course of the business activities.
We describe below only those matters that we consider to be material.
Citicorp - During 2001 we vacated office facilities we had leased under
an operating lease agreement in Chicago, Illinois. The lessor subsequently filed
suit against us for the remaining amount of unpaid rent and other various
expenses. A judgment was filed against us in the amount of $95,000. As of June
30, 2003 we have accrued for the liability in full on the Balance Sheet. No
payments have been made.
Roycap - As of June 30, 2003 we were in default on the loan agreement
with Roycap for repayment of a $450,000 loan, plus accrued interest, which was
due on October 16, 2001. In June 2002, Roycap filed formal suit on its claim. We
have recently entered into a settlement agreement, stipulating to a $730,000
judgment. As of June 30, 2003 we have accrued for the liability in full on the
Balance Sheet. No payments have been made.
Bentley Promissory Notes - Various family trusts related to James W.
Bentley, a former director, have filed three related actions seeking to collect
in excess of $500,000 in promissory notes allegedly due. We believe these claims
were settled by the June 26, 2002 Settlement. Pursuant to the terms of that
Settlement, Net Integrated Systems, Inc. assumed the repayment of the Bentley
notes and contributed the total indebtedness to the Company as a capital
contribution in September 2002. We continue to fight these actions vigorously.
Merchants Warehouse.com ("MWC") - MWC filed a claim against PSI for
breach of an independent sales agent agreement. We dispute the claim. The matter
was submitted to arbitration and was heard by the arbitrator. The arbitrator
made in interim award of $296,720 in favor of MWC and denied the counterclaim.
The arbitrator directed us to pay the agent residuals according to the terms of
the agreement with the agent. We have made all payments to the agent since the
date of the award. The amount of the award has been accrued.
22
Northwest Systems, LLC ("NWS") - NWS filed two inter-related claims,
one lawsuit and one arbitration claim arising out of a dispute over a contract.
PSI had agreed to purchase certain merchant accounts from NWS. In the lawsuit,
NWS seeks to recover damages for alleged breach of the contact to purchase NWS.
In the arbitration, NWS claims that NWS has not been paid all residual payments
due it under its agency contract with PSI. We are vigorously defending against
these claims. In May 2003, an award in the arbitration claim in the amount of
$149,000 was made for the benefit of the plaintiff. In mediation on July 2,
2003, the Company settled both claims, while not all terms of the settlement can
be disclosed, the Company will record other income in the form of a gain on the
forgiveness of debt, in the amount of $270,836 in the quarter ended September
30, 2003. The settlement also calls for the conversion/transfer of all merchants
accounts associated with NWS effective, July 1, 2003. While no accurate forecast
can be made as to the amount and timing of the anticipated conversion, NWS
merchants accounted for approximately 10% of the registrant's gross processing
revenue for the quarter ended June 30, 2003. The settlement also calls for a
mutual release on both parties of all and any current or contemplated actions
arising from their business relationship.
Moceri Leasing Co. ("Moceri") - Moceri, an equipment lessor, claims
that we defaulted on an equipment lease. We are vigorously defending against
this claim. The total amount of any potential judgment for the value of the
equipment has been accrued in the amount of $25,000.
CIT Communications Co. ("CIT") - CIT, an equipment lessor, claims that
we defaulted on an equipment lease. We are vigorously defending against this
claim. The total amount of any potential judgment for the value of the equipment
has been accrued.
Global Attorneys Network Co. ("GAN") - GAN, an equipment lessor, claims
that we defaulted on an equipment lease. We are vigorously defending itself
against this claim. In April 2003, the matter was settled for $16,900. No
payments have been made. The total amount of any potential judgment for the
value of the equipment has been accrued.
Bas Mulder ("Mulder") - Mulder is the former owner and employee of
Black Sun Graphics, Inc. ("BSG"). Mulder claims damages in excess of $430,000
related to the purchase of BSG. We intend to vigorously defend this action. We
have entered into a verbal agreement to settle the action. We have satisfied
part of the terms of the verbal agreement. No trial date has been set. An
accrual has been made for the potential of an adverse outcome
Bentley v. William R. Barber, et al. - On March 22, 2002, James Bentley
("Plaintiff"), a shareholder of the Company, filed a shareholder derivative
lawsuit against the Company and several individual defendants for breach of
contract, breach of fiduciary duty, misappropriation of trade secret, recovery
of personal property, imposition of a constructive trust, unfair competition in
violation of Business and Profession Code Section 17200, conversion, unfair
business practices, and usurpation of corporate opportunity. On several
occasions, Plaintiff also sought provisional remedies with the Court, including
multiple applications for preliminary injunction and the appointment of a
receiver. To date, none of Plaintiff's requests for provisional relief have been
granted. On June 26, 2002, the parties to the action executed a Settlement
Agreement. Plaintiff purported to rescind the Settlement Agreement in early
December 2002. Plaintiff thereafter filed an ex parte application for temporary
restraining order, which the court denied on December 24, 2002. The Court set a
hearing for Plaintiff's application for preliminary injunction in late January
2003. Plaintiff thereafter continued the hearing on the application for
preliminary injunction on several occasions. Ultimately, after Defendant's;
opposition to the preliminary injunction request was filed; Plaintiff took his
application for preliminary injunction off calendar completely. A number of
depositions and law and motion were conducted during January and February 2003.
Trial has been set for October 20, 2003. On July 3, 2003 in a special meeting of
the Board of Directors, the Directors received, reviewed and considered the
report of the findings of the Special Litigation Committee ("the Committee").
The Committee was formed in January 2003 for the purpose of
investigating the allegations contained within the shareholder derivative action
known as Bentley v. Barber (" the Bentley matter").
Based on its investigation, which included the review of thousands of
pages of documents, 1,200 pages of transcripts of depositions, reviews of the
declarations of ten witnesses, and interviews of the Plaintiff, and his
representatives, as well as of at least fifteen other witnesses, the Committee
met on July 2, 2003 and unanimously agreed and found as follows:
1) The action was previously settled, after both the plaintiff and
the court in the Bentley matter concluded the settlement
agreement was in the best interests of the Company, so that the
Committee likewise concludes that the best interests of the
company are served by a dismissal of the action and the
enforcement of the settlement agreement previously approved by
the court:
23
2) That the allegations raised in the Bentley matter are without
merit;
3) That it is not in the Company's interests to pursue the
litigation, as the costs of prosecuting the litigation far exceed
any possible recovery to the Company, particularly given the
possible indemnity obligations of the Company;
4) The balance of the Company's corporate interests, including its
need to maintain its relationship with Chase, the need for and
ability to focus on obtaining new accounts, the need to apply the
Company's resources, management, and assets to the payment and
resolution of outstanding debts and the need to repair the
Company's reputation that has been damaged by this litigation,
warrants dismissal of the action, regardless of the merits of the
Bentley matter; and
5) The Company has new management and has taken appropriate
corrective or disciplinary action with regard to the subject
matter of the litigation and with regard to the alleged
misappropriation of assets of the Company and the entry of
related party transactions.
Based on the findings of the Committee, the Directors determined it to
be in the best interests of the company to cause the Bentley matter to be
dismissed. On July 3, 2003, the company's attorneys filed a motion for summary
judgment with the Orange County Superior Court, the motion contends that: there
is no merit to the charges, the suit is not being prosecuted for the benefit of
the shareholders or the company, but is a vendetta by the a shareholder brought
for its own purposes and that the burdens of litigation are largely responsible
for the fall in the corporation's stock price since the case was filed. On July
3, 2003, the Company's attorneys concurrently filed a motion for an indefinite
stay in discovery pending judgment on the motion for summary judgment. On July
25, 2003, the court granted the Company's request for stay pending ruling on the
motion for summary judgment. The Company has recorded no liability for the
potential of an adverse outcome of the action.
For a similar discussion of Legal Proceedings, please refer to Note F,
Litigation and Contingencies, attached as a part of the financial statements
filed herewith and incorporated hereby.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
24
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended June 30, 2003.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
The following Exhibits are incorporated herein by reference or are filed
with this report as indicated below.
Exhibit No. Description
----------- -----------
21.00 *List of Subsidiaries
* Incorporated by reference from the exhibit to the Annual Report on Form
10-KSB filed by us on April 16, 2001
B. REPORTS ON FORM 8-K
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Los Angeles, State
of California, on the 27th day of June, 2003.
Dated: August 13, 2003 ACCESSPOINT CORPORATION
By
/s/_Becky_Takeda__________________
Becky Takeda,
Chief Executive Officer, President
By
/s/_Lawrence_C._Early_____________
Lawrence C. Early
Controller
25
Pursuant to the requirements of the Securities Act of 1934, this report has
been signed by the following persons in the capacities and on the dates
indicated:
Signature Title Date
----------------------- ---------------------------------- ---------------
Chairman of the Board of Directors August 13, 2003
/s/_Gene_Valentine_____
Gene Valentine
Director August 13, 2003
/s/_Joe_Byers__________
Joe Byers
Director August 13, 2003
/s/_Mike_Savage________
Mike Savage
Director August 13, 2003
/s/_William_R._Barber__
William R. Barber
Director August 13, 2003
/s/_Becky_H._Takeda____
Becky H. Takeda
26
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES OXLEY ACT OF 2002
CERTIFICATIONS*
---------------
I, Becky Takeda, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Accesspoint
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: August 13, 2003
/s/_Becky_H._Takeda_______________
Becky H. Takeda
Chief Executive Officer, President
27
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES OXLEY ACT OF 2002
CERTIFICATIONS*
---------------
I, Lawrence Early, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Accesspoint
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: August 13, 2003
/s/_Lawrence_C._Early_
Lawrence C. Early
Controller
28