U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the QUARTERLY PERIOD ended SEPTEMBER 30, 2003
OR
[ ] TRANSITION REPORT PURSUANT 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
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(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)
310 546 2500
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(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 September
30, 2003 was 24,163,965.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ]
-1-
Accesspoint Corporation
Form 10-QSB QUARTERLY Report
AS OF AND FOR THE QUARTER ENDED SEPTEMBER 30, 2003
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
ACCESSPOINT CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
TABLE OF CONTENTS
Consolidated Balance Sheets 4
Consolidated Statements of Operations 6
Consolidated Statements of Cash Flow 7
Notes to Consolidated Financial Statements 8-17
-3-
ACCESSPOINT CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
------
September 30, December 31,
2003 2002
----------- -----------
(unaudited)
Current Assets
Cash $ 0 $ 35,961
Accounts receivable, net 489,726 348,708
Receivable from a related party 92,055 157,172
Prepaid expenses 2,834 1,488
----------- -----------
Total Current Assets 584,615 543,329
----------- -----------
Fixed Assets
Furniture and equipment (net) 21,704 178,139
----------- -----------
Total Fixed Assets 21,704 178,139
----------- -----------
Other Assets
Deferred financing costs (net) 881,346 1,266,764
Portfolio Purchase 109,744 154,667
Deposits 285,108 280,108
----------- -----------
Total Other Assets 1,276,198 1,701,539
----------- -----------
Total Assets $1,882,517 $2,423,007
=========== ===========
Refer to notes to the financial statements
-4-
ACCESSPOINT CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
September 30, December 31,
2003 2002
------------- -------------
(unaudited)
Current Liabilities
Accounts payable $ 910,112 $ 1,527,457
Bank overdraft 14,179 0
Accrued payroll taxes and penalties 1,328,139 1,412,432
Accrued liabilities 890,449 560,707
Merchant loss reserve 2,778 19,465
Lines of credit 1,360,365 1,364,761
Capitalized leases 600,388 419,460
Notes payable 565,000 565,000
------------- -------------
Total Current Liabilities 5,671,410 5,869,282
Total Liabilities 5,671,410 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) (18,928,117) (18,585,499)
------------- -------------
Total Stockholders' (Deficit) (3,788,893) (3,446,275)
------------- -------------
Total liabilities and
Stockholders' Equity $ 1,882,517 $ 2,423,007
============= =============
Refer to notes to the financial statements
-5-
ACCESSPOINT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended
------------------ -----------------
September September September September
30,2003 30,2002 30,2003 30,2002
------------- ------------- ------------- -------------
Sales, net $ 3,207,014 $ 4,025,465 $ 9,987,193 $ 10,436,498
Cost of sales 2,534,496 3,377,684 7,681,761 8,431,244
------------- ------------- ------------- -------------
Gross profit 672,518 647,781 2,305,432 2,005,254
Selling expenses 5,063 14,563 9,687 9,518
General and administrative expenses 600,583 985,074 2,109,788 2,919,083
------------- ------------- ------------- -------------
Income (loss) from operations 66,872 (351,856) 185,957 (923,347)
------------- ------------- ------------- -------------
Other (Income) Expense
Interest income (4,693) 0 (7,189) (13,254)
Gain on sale of asset 0 0 0 (100,000)
Penalties 2,095 0 7,405 0
Impairment loss 0 45,333 0 45,333
Miscellaneous (1,842) (4,955) (1,842) (2,343)
Litigation expense 0 (195,069) 0 (133,515)
Amortization of deferred financing
costs 128,473 316,319 385,418 948,957
Debt forgiveness (63,157) 0 (63,157) (221,477)
Bad Debt 0 215,876 0 528,041
Interest expense 113,593 43,579 207,940 154,036
------------- ------------- ------------- -------------
Total Other (Income) Expense 174,469 421,083 528,575 1,205,778
------------- ------------- ------------- -------------
Income (loss) before income
taxes (107,597) (772,939) (342,618) (2,129,125)
Provision for income taxes 0 0 0 2,400
------------- ------------- ------------- -------------
Net income (loss) ($ 107,597) ($ 772,939) ($ 342,618) ($ 2,131,525)
============= ============= ============= =============
Net loss per share
Basic ($ 0.00) ($ 0.03) ($ 0.01) ($ 0.09)
Weighted average number of shares
Basic 24,163,965 24,163,965 24,163,965 23,690,815
Refer to notes to the financial statements
-6-
ACCESSPOINT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
-----------------
September 30, September 30,
2003 2002
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) ($ 342,618) ($2,131,525)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization 385,418 948,957
Depreciation 159,685 169,675
Impairment loss 0 45,333
Decrease in deferred compensation 0 (221,477)
Increase in receivables (141,018) (188,510)
Decrease (Increase) in inventory 0 6,366
Decrease in other current assets 65,117 (359,578)
Increase in prepaid expenses (1,346) (6,013)
Decrease (Increase) in deposits (5,000) 461
(Decrease) Increase in accounts
payable and accrued expenses (123,363) 662,465
Increase in bank overdraft 14,179 140,237
Increase in clearing account (109,744) 0
Decrease in accrued payroll taxes (84,293) (54,991)
Increase in merchants loss reserve 0 (80,000)
Increase in accrued liabilities 0 (180,200)
------------ ------------
Total adjustments 159,635 882,725
------------ ------------
Net cash contributed by
(used in) operations (182,983) (1,248,800)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
(Purchase) reduction of portfolio 154,667 (200,000)
Purchase of fixed assets 0 (166,167)
------------ ------------
Net cash (used in) investing
activities 154,667 (366,167)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on capital leases (3,249) (32,281)
Sale of stock 0 149,424
Line of credit 0 1,419,595
Payments on line of credit (4,396) 0
------------ ------------
Net cash provided by
financing activities (7,645) 1,536,738
------------ ------------
Net change in cash (35,961) (78,229)
------------ ------------
Cash at beginning of period 35,961 78,229
------------ ------------
Cash at end of period $ 0 $ 0
============ ============
Refer to notes to the financial statements
-7-
ACCESSPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 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 small 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
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 RSAs 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.
-8-
ACCESSPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 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,
operations results, and cash flows for the periods presented. Operating
results for the nine months ended September 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.
-9-
ACCESSPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 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
September 30, 2003 and September 30, 2002, the Company had aggregate
collateral classified as merchant loss reserves of $2,778 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
-10-
ACCESSPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 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 September 30, 2003 87% 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.
-11-
ACCESSPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 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 September 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 September 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 September 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 September 30, 2003
and 2002 are as follows:
2003 2002
---- ----
Net (loss) from operations $ (342,618) $(2,131,525)
------------ ------------
Basic weighted average shares 24,163,965 23,690,815
Net (loss) per share from
continuing operations:
Basic ($0.01) ($0.09)
-12-
ACCESSPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 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 September 30, 2003
the Company has accrued for the liability in full on its Balance Sheet.
No payments have been made.
ROYCAP - As of September 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. These cases have been consolidated with the case of
Bentley v. Barber, et al (see below) and are scheduled to go to trial
on March 15, 2004
MERCHANTSWAREHOUSE.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.
On November 7, 2003, Merchantswarehouse.com obtained a judgment
consistent with the arbitrator's award. The Company is presently
assessing the advisability of an appeal. 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) sought to recover damages of
$300,000 for alleged breach of the contact to purchase, while the
second case (arbitration) claimed that NWS had 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. The settlement calls for the
Company to allow the conversion/transfer of all merchants accounts
associated with NWS effective, July 1, 2003, and to pay $40,000 for
attorney costs, which have now been paid. 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.
-13-
ACCESSPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 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. . In August 2003 the Company entered into a structured
settlement agreement for a total payout of $30,000 payable in 20
installments through April of 2005.
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 has
entered into a structured settlement agreement calling for payments
totaling $45,000 payable over 20 months and has begun making these
payments.
FOSTER TEPPER - This is an action recently brought by a former attorney
for the Company for approximately $63,000 in legal fees, which are
allegedly due and payable.
ACCESS HOLDINGS LIMITED PARTNERSHIP - This is a lawsuit brought on
behalf of two holders of Company stock who claim the Company has
violated a prior settlement agreement and that they are therefore
entitled to the return of approximately 4.1 million shares of Company
stock, which they had previously surrendered, to the Company per that
agreement. The Company denies both that it has breached the prior
settlement agreement and that the plaintiffs are entitled to the relief
they seek. Plaintiffs are not seeking monetary damages from the
Company, though they are seeking court costs and attorney fees. The
Company is fighting this action vigorously. No trial date has been set.
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. 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").
-14-
ACCESSPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 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 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. On September 18,
2003, the Court denied the summary judgment motion, finding that there
were triable issues of material fact as to the Committee's
investigation. As of this writing, the Court has not entered a formal
order on this motion. The Company believes the Court's ruling is
incorrect and plans to seek further review once the written order is
issued. The Court's ruling also ended the stay of proceedings which had
been in effect since July 25, and the case - along with the Bentley
Promissory Note cases (see above), with which it has been consolidated
- is now set for trial on March 15, 2004. The Company continues to
fight this action vigorously. The Company has recorded no liability for
the potential of an adverse outcome of the action.
NOTE F - PAYROLL TAXES
-------------
The IRS has made formal demand of amounts due and unpaid for the period
of January 1 - December 31, 2000, including interest and penalties,
from the Company, and has appropriately filed tax liens against all
assets of the Company. The Company filed requests for an "Offer in
Compromise" for all amounts owed by the Company and its subsidiaries,
Processing Source International and Black Sun Graphics, all of which
are Awaiting a response from the IRS. The Company has recorded its
liability in full to the IRS, including penalties and interest, on its
balance sheet. As of September 30, 2003, the Company has accrued
liability of approximately $1,310,000 to the IRS.
-15-
ACCESSPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 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.
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 nine months ended September 30, 2003
was $63,776.
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 nine
months ended September 30, 2003 and 2002 the Company recorded
amortization expense of $385,418 and $948,957 respectively.
-16-
ACCESSPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 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 September 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
September 30, 2003, under the terms of the agency agreement with MBS,
the Company paid $423,016 in residuals. Refer to Note H - Commitments
for further discussion of the operating arrangement between the Company
and MBS.
NOTE J - 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.
-17-
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.
-18-
B. RESULTS OF OPERATIONS
Nine Months Ended September 30, 2003 Compared With Nine Months Ended
September 30, 2002.
Revenues for the nine months ended September 30, 2003 decreased to
$9,987,193 from $10,436,498 for the nine months ended September 30, 2002. The
decrease of $449,306, 4% is due primarily to the decreased revenues associated
with credit card processing which resulted in an overall decrease in sales.
Cost of sales for the nine months ended September 30, 2003 decreased to
$7,681,761 from $8,431,244 for the nine months ended September 30, 2002. The
decrease of $749,483 or 9%, 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 nine months ended September 30, 2003
$9,687 remained about the same as the $9,518 for the nine months ended September
30, 2002.
General and administrative expenses for the nine months ended September 30,
2003 decreased to $2,109,788 from $2,919,083 for the nine months ended September
30, 2002. The decrease of $809,295, or (28%), 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 nine months ended September 30, 2003 was
$207,940, as compared to $154,036 for the nine months ended September 30, 2002.
The increase resulted primarily from the Company's continued interest charges on
indebtedness and borrowing costs.
Other (Income) Expense, net of Interest expense was $320,635 for the nine
months ended September 30, 2003, as compared to $1,051,742 for the nine months
ended September 30, 2002. The decrease of $731,107 resulted primarily from the
lowered amortization expenses and reduced bad debt write offs, off set by a
reduced gain on the sale of an asset, realized for the nine months ended
September 30, 2003, as compared to the nine months ended September 30, 2002.
Net losses for the nine months ended September 30, 2003 were ($342,618), as
compared to ($2,131,525) for the nine months ended September 30, 2002. The
difference in loss of $1,788,907 is due to a reduction of salaries, operating
efficiencies, lowered residual expenses, increased transaction profitability and
lowered amortization and bad debt expenses.
C. Liquidity and Capital Resources
The Company had an overdraft of $14,179 at September 30, 2003, as compared
to cash of $35,961 at December 31, 2002.
The Company had negative working capital at September 30, 2003. 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.
-19-
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 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 September 30, 2003
the Company has accrued for the liability in full on its Balance Sheet.
No payments have been made.
ROYCAP - As of September 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. These cases have been consolidated with the case of
Bentley v. Barber, et al (see below) and are scheduled to go to trial
on March 15, 2004
MERCHANTSWAREHOUSE.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.
On November 7, 2003, Merchantswarehouse.com obtained a judgment
consistent with the arbitrator's award. The Company is presently
assessing the advisability of an appeal. 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) sought to recover damages of
$300,000 for alleged breach of the contact to purchase, while the
second case (arbitration) claimed that NWS had 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. The settlement calls for the
Company to allow the conversion/transfer of all merchants accounts
associated with NWS effective, July 1, 2003, and to pay $40,000 for
attorney costs, which have now been paid. 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.
-20-
ACCESSPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 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. . In August 2003 the Company entered into a structured
settlement agreement for a total payout of $30,000 payable in 20
installments through April of 2005.
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 has
entered into a structured settlement agreement calling for payments
totaling $45,000 payable over 20 months and has begun making these
payments.
FOSTER TEPPER - This is an action recently brought by a former attorney
for the Company for approximately $63,000 in legal fees, which are
allegedly due and payable.
ACCESS HOLDINGS LIMITED PARTNERSHIP - This is a lawsuit brought on
behalf of two holders of Company stock who claim the Company has
violated a prior settlement agreement and that they are therefore
entitled to the return of approximately 4.1 million shares of Company
stock, which they had previously surrendered, to the Company per that
agreement. The Company denies both that it has breached the prior
settlement agreement and that the plaintiffs are entitled to the relief
they seek. Plaintiffs are not seeking monetary damages from the
Company, though they are seeking court costs and attorney fees. The
Company is fighting this action vigorously. No trial date has been set.
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. 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").
-21-
ACCESSPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 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;
6) 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
7) 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 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. On September 18,
2003, the Court denied the summary judgment motion, finding that there
were triable issues of material fact as to the Committee's
investigation. As of this writing, the Court has not entered a formal
order on this motion. The Company believes the Court's ruling is
incorrect and plans to seek further review once the written order is
issued. The Court's ruling also ended the stay of proceedings which had
been in effect since July 25, and the case - along with the Bentley
Promissory Note cases (see above), with which it has been consolidated
- is now set for trial on March 15, 2004. The Company continues to
fight this action vigorously. 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.
-22-
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
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 September 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.
-23-
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: December 8, 2003 ACCESSPOINT CORPORATION
By /S/ WILLIAM R. BARBER
------------------------------
William R. Barber,
Chief Executive Officer, President
-24-
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
--------------------------- ----------------------------------- -----------------------
/S/ GENE VALENTINE Chairman of the Board of Directors December 8, 2003
-----------------------
Gene Valentine
/S/ JOE BYERS Director December 8, 2003
-----------------------
Joe Byers
/S/ MIKE SAVAGE Director December 8, 2003
-----------------------
Mike Savage
/S/ WILLIAM R. BARBER Director December 8, 2003
-----------------------
William R. Barber
/S/ BECKY H. TAKEDA Director December 8, 2003
-----------------------
Becky H. Takeda
-25-
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES OXLEY ACT OF 2002
CERTIFICATIONS*
---------------
I, William R. Barber, 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: December 8, 2003
/S/WILLIAM R. BARBER
------------------
William R. Barber
Chief Executive Officer, President
-26-