SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For The Quarter Ended March 31, 2000 Commission File No.0-18224
TotalAxcess.com,Inc. (formerly, Group V Corp.)
(Exact name of registrant as specified in its charter)
Delaware 95-4176781
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
201 Clay Street, Oakland, California 94103
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(Address of principal executive offices) (Zip Code)
(510) 286-8700
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(Registrant's telephone number, including area code)
N/A N/A
--- ---
(Former Address, if changed (Former Zip Code, if changed
since last report) since last report)
N/A
---
(Former telephone number, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
capital stock, as of the latest practicable date.
Preferred Stock $.01 par value; 170,000 shares outstanding as of March 31, 2000
Preferred Stock Ser B $2.00 par value; 0 shares outstanding as of March 31, 2000
Common Stock $.15 par value; 12,423,834 shares as of March 31, 2000
<PAGE>
TOTALAXCESS.COM, INC.
(formerly, GROUP V CORPORATION)
INDEX
PAGE
PART I
Item 1. Financial Statements
Consolidated Condensed Balance Sheet as of March 31, 2000 (unaudited)...... 1
Consolidated Condensed Statements of Operations for the Three and Nine Months
Ended March 31, 2000 and 1999 (unaudited)................................ 2
Consolidated Condensed Statements of Cash Flows for the
Nine Months Ended March 31, 2000 and 1999 (unaudited)..................... 3
Notes to Consolidated Condensed Financial Statements....................... 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................... 9
PART II
Item 1. Legal Proceedings.................................................. 11
Item 2. Changes in Securities.............................................. 13
Item 3. Defaults Upon Senior Securities.................................... 13
Item 4. Submission of Matters to a Vote of Security Holders................ 13
Item 5. Other Information.................................................. 16
Item 6. Exhibits and Reports on Form 8-K................................... 16
Signatures ................................................................ 17
1
<PAGE>
TOTALAXCESS.COM, INC.
(formerly, GROUP V CORPORATION)
Consolidated Condensed Balance Sheet
As of March 31, 2000 (Unaudited)
March 31,
2000
(Restated-Note 2)
Current Assets:
Cash and cash equivalents .................................$ 328,439
Marketable securities ..................................... 30,176
Inventories................................................ 27,929
Prepaid expenses and other assets.......................... 165,813
Total current assets ............................... 552,357
Fixed assets:
Furniture and equipment ................................... 348,277
Less accumulated depreciation ............................. (80,331)
Total fixed assets, net ............................ 267,946
Other assets ...................................................... 7,570
TOTAL ASSETS.......................................................$ 827,873
Current Liabilities:
Capital lease obligations .................................$ 9,160
Accounts payable........................................... 1,458,471
Common stock payable....................................... 4,557,320
Accrued expenses........................................... 317,818
Total current liabilities .......................... 6,342,769
Commitments and Contingencies
Stockholders' Equity (Deficit):
Preferred stock - par value $.01; authorized 1,000,000 shares;
14% cumulative convertible; issued and outstanding 170,000
shares (aggregate liquidation of $170,000)........................ 1,700
Preferred Stock Series B - par value $2.00; authorized, no
shares issued and outstanding .................................... -
Common stock - par value $.15; authorized 22,200,000 shares;
12,423,834 shares issued and outstanding.......................... 1,855,882
Additional paid-in capital......................................... 31,236,094
Common stock receivable............................................ (250,000)
Accumulated other comprehensive loss............................... (100,145)
Accumulated deficit................................................ (38,258,427)
Total Stockholders' Equity (Deficit)....................... (5,514,896)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)...............$ 827,873
See accompanying notes to these consolidated condensed financial statements.
<PAGE>
TOTALAXCESS.COM, INC.
(formerly, GROUP V CORPORATION)
Consolidated Condensed Statements of Operations
For the Three and Nine Month Period Ended March 31, 2000 and 1999 (Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
(Restated- (Restated-
Note 2) Note 2)
Revenues $ 130,760 $ 238,855 $ 2,123,224 $ 703,305
Costs and expenses:
Operating Costs 144,455 88,543 3,404,052 560,658
General and Administrative 439,674 370,062 1,512,868 1,414,806
Professional Services 156,719 28,574 338,538 242,354
Depreciation & amortization 8,175 29,815 24,525 89,445
Stock-based compensation 198,141 - 3,877,338 -
Interest expense, net 7,669,197 24,000 8,084,799 48,000
--------- ------ --------- ------
Total costs and expenses 8,616,361 540,994 17,242,120 2,355,263
--------- ------- ---------- ---------
Net (loss) before
extraordinary items (8,485,601) (302,139) (15,118,896) (1,651,958)
Extraordinary items:
Gain on debt relief - - 769,394 -
-------
Net (loss) $(8,485,601) $(302,139) $(14,349,502)$(1,651,958)
Net (loss) applicable to
common stock $(8,491,551) $(308,089) $(14,355,452)$(1,657,908)
Basic and diluted net(loss)
per common share $ (0.71) $ (0.09) $ (1.47)$ (0.50)
Weighted average common
shares outstanding 11,933,630 3,325,992 9,774,677 3,325,992
<PAGE>
TOTALAXCESS.COM, INC.
(formerly, GROUP V CORPORATION)
Consolidated Condensed Statements of Cash Flows
For the Nine Month Period Ended March 31, 2000 and 1999 (Unaudited)
Nine Months Ended
March 31,
2000 1999
---- ----
(Restated-
note 2)
Operating activities:
Net Loss $ (14,349,502) $ (290,735)
Adjustments to reconcile net loss to
net cash used in operating activities:
Interest expense 8,084,799 -
Stock-based compensation 3,877,338 -
Gain on debt relief (769,394) -
Depreciation and amortization 24,525 29,815
Increase (decrease) from changes in:
Accounts receivable 548,548 (29,512)
Inventories (27,929) -
Prepaid expenses (104,019) 5,533
Accounts payable and accrued expenses 593,967 (425,099)
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Net cash used by operating activities (2,121,667) (709,998)
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Investing activities:
Proceeds from sale of securities - 1,003,119
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Purchase of equipment (211,172) (58,214)
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Net cash (used) provided by investing activities (211,172) (58,214)
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Financing activities:
Proceeds from issuance of stock 2,088,327 -
---------
Net cash provided by financing 2,088,327 -
---------
Net (decrease) increase in cash (244,512) 234,907
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Cash and cash equivalents, beginning of period 572,951 7,795
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Cash and cash equivalents, end of period 328,439 242,701
======= =======
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Income Taxes $ 4,891 $ -
Interest - -
Non-cash investing and financing activities:
Note payable converted to common stock $1,065,717 $ -
Stock payable in connection with note payable $4,557,320 $ -
Accrued litigation costs settled for common stock $ 876,798 $ -
Preferred Stock Series B converted to common stock $ 70,386 $ -
<PAGE>
TOTALAXCESS.COM, INC.
(formerly, GROUP V CORPORATION)
Notes to Consolidated Condensed Financial Statements
4
NOTE 1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business
TotalAxcess.com, Inc. (formerly, Group V Corporation) (the "Company") was
originally incorporated in the State of Delaware in 1987 as NuOasis Gaming, Inc.
During the fiscal year ended June 30, 1997, and through May 1999, the Company's
name was Group V Corporation. During the year ended June 30, 1998, the Company
entered the one-plus long distance and pre-paid telecommunications industry as
its main focus of operations. Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
TotalAxcess.com, Inc., National Pools Corporation ("NPC"), Lottery Publications
Corporation, Academy Network Services, Inc., and Premier Plus, Inc., and
Signature Communications Network, Inc.
As used herein, the above is collectively referred to as the "Company,"
unless the context indicates otherwise. All intercompany accounts and
transactions have been eliminated in consolidation.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for the
interim financial information and the instructions to Form 10-QSB. Accordingly,
they do not include all the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, the interim financial statements include all adjustments
considered necessary for a fair presentation of the Company's financial
position, results of operations and cash flows for the nine months ended March
31, 2000. These statements are not necessarily indicative of the results to be
expected for the full fiscal year. These statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's annual report on Form 10-KSB for the fiscal year ended June 30, 1999
as filed with the U.S. Securities and Exchange Commission.
Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities 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.
<PAGE>
NOTE 1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition
The Company's telecommunication services provide personal identification
numbers ("PIN") numbers for its customers, who are primarily distributors of
pre-paid phone cards. The PIN numbers are pre-numbered code combinations that
are imprinted on these cards by the customers/distributors. This allows for the
proper routing and time recording of minutes used on the calling cards. The
Company contracts with a provider of switching equipment that processes the
phone card calls when the end consumer ultimately uses them or utilizes its own
switching equipment in a similar manner. When cards are ready for distribution
to end consumers, customers/distributors authorize the Company to activate a
specific sequence of PIN's. The Company then notifies its switching equipment
contractor or switch room personnel to activate the related PIN's.
The Company recognizes revenue when the risks and rewards of the activated
PIN's are transferred to the customer, and when no right of return exists.
Typically, this occurs upon the first use of the related pre-paid card. However,
it may occur earlier when the Company has a contractual right to bill the
customer within sixty days after PIN activation regardless of when the related
card is used.
Cash Equivalents
Cash equivalents are highly liquid investments with maturities of three
months or less when acquired.
Fair Value of Marketable Securities
As of March 31, 2000, marketable equity securities consist of 650,292
shares of common stock of NuOasis Resorts, Inc., a stockholder (Note 2). The
Company has classified these equity securities as available-for-sale and,
accordingly, they are presented in the accompanying consolidated balance sheet
at their estimated fair market value based on quoted market prices as of March
31, 2000. Additionally, unrealized gains and losses on these securities are
presented as a component of other comprehensive loss in the accompanying
consolidated statements of operations and comprehensive loss.
Equipment
Equipment is recorded at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the related assets,
which are five to ten years. Maintenance and repairs are charged to operations
as incurred.
Income Taxes
The Company uses the "liability method" of accounting for income taxes.
Accordingly, deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax bases of assets and
liabilities, using enacted tax rates in effect for the year in which the
differences are expected to reverse. Current income taxes are based on the
year's taxable income for federal and state income tax reporting purposes.
<PAGE>
NOTE 1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Reverse Stock Split
In February 2000, the Company effected a 1-for-15 reverse split of its
common stock. Accordingly, the authorized number of shares was reduced from
333,000,000 to 22,200,000. Related common stock share and per share amounts have
been retroactively adjusted in the accompanying consolidated financial
statements for this reverse stock split.
Accounting For Employee Stock Options
In October 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123, "Accounting for Stock-Based Compensation." In conformity with the
provisions of SFAS No. 123, the Company has determined that it will not change
to the fair value method prescribed by SFAS No. 123 and will continue to follow
Accounting Principles Board Opinion No. 25 for measurement and recognition of
employee stock-based transactions. There were no stock options granted to
employees during the year ended June 30, 1999, and during the six months ended
December 31, 1999. However, during the three months ended March 31, 2000, the
Company's Chief Executive Officer vested in 83,333 stock options. Such options
are exercisable at $1.56 per share and expire five years from the last day of
the executive's employment. The Company recognized a related stock compensation
charge of $198,141 during the quarter ended March 31, 2000.
Issuance of Stock for Services
Shares of the Company's common stock issued for services are recorded in
accordance with SFAS No. 123 at the fair market value of the stock issued or the
fair market value of the services provided whichever value is more reliably
measurable.
Loss Per Common Share
Loss per common share is computed based on the net loss for each period, as
adjusted for dividends required on preferred stock ($23,800 per annum) and the
weighted average number of common shares outstanding. Common stock equivalents
were not considered in the loss per share calculations, as the effect would have
been anti-dilutive.
<PAGE>
NOTE 2. RESTATEMENT OF AMOUNTS PREVIOUSLY REPORTED
During the course of the audit of the financial statements for the year
ended June 30, 2000, there were several transactions identified which required
adjustment to the consolidated financial statements. Certain of these
adjustments had a significant impact on previously reported quarterly financial
statements. Accordingly, the Company's quarterly consolidated financial
statements have been restated. The significant impact of such adjustments on the
Company's consolidated financial statements as of March 31, 2000, and for the
nine months then ended are summarized as follows:
Reduction in accounts receivable and revenues $10,074,459
Reduction in accounts payable and accrued expenses 12,211,188
Increase in interest expenses 8,084,799
Increase in stock based compensation 3,877,338
Increase in extraordinary gains 769,394
Increase in common stock payable 4,557,320
Reduction in notes payable 1,065,717
Reduction in preferred stock 70,386
Increase in common stock and APIC 10,059,455
Increase in common stock receivable 250,000
Reduction in capital lease obligations 656,544
NOTE 3. QUARTERLY DEVELOPMENTS
Conversion of Notes Payable
In January 2000, the Company and each respective note payable holder agreed
to convert the outstanding principal balance of the notes payable, and all
accrued interest thereon, into an aggregate of 3,374,159 shares of the Company's
restricted common stock. An aggregate of 1,740,535 shares were issued in
February 2000, and the remaining 1,633,624 shares are payable in February 2001.
As a result, the Company has recorded a common stock payable aggregating
$4,557,320 as of March 31, 2000 for the portion of the stock to be released in
February 2001. In connection with this note payable conversion, the Company
recognized a related effective interest charge in the aggregate amount of
$7,669,197. Such charge was determined as the amount by which the estimated fair
market value of the restricted common stock issued exceeded the outstanding
amount of the notes payable and accrued interest.
<PAGE>
NOTE 3. QUARTERLY DEVELOPMENTS (CONTINUED)
Employment Agreement
Effective January 1, 2000, the Company and Mr. Monterosso entered into and
Executive Employment Agreement for Mr. Monterosso to serve a three-year term as
the Company's Chief Executive Officer. The agreement may be extended for two
additional years by mutual written consent of Mr. Monterosso and the Company.
The agreement provides for annual compensation of $250,000 with annual increases
of $25,000. Additionally, Mr. Monterosso will earn annual bonuses ranging from
$100,000 to $150,000 if the Company achieves certain pre-determined revenue
targets. During the first year of the agreement, Mr. Monterosso may convert
accrued salary to shares of the Company's common stock at a rate of $3.75 per
share. During the second and third years, accrued salary may be converted to
shares of the Company's common stock at a rate equal to 50% of the stock's fair
market value averaged over the preceding 15 day period. In addition, Mr.
Monterosso was granted stock options in the amount of 333,333 shares in the
first year and 200,000 shares in each of the second and third years. Such
options are exercisable at $1.56 per share, vest in equal monthly installments,
and expire five years from the last day of Mr. Monterosso's employment. None of
the vested options have been exercised by Mr. Monterosso.
2000 Incentive and Non-qualified Stock Option Plan
Effective January 31, 2000, the Company's Board of Directors approved the
Company's 2000 Stock Option Plan (the "2000 Plan"), which provides for the
granting of both incentive stock options and non-qualified stock options. The
2000 Plan covers 2,000,000 shares of the Company's common stock. Options granted
pursuant to the 2000 Plan will generally have terms no longer than 10 years, and
the related option exercise price will be determined by the Company's Board of
Directors. No options have yet been granted under the 2000 Plan.
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Registrant incurred net losses and negative cash flows from operating
activities since its inception in 1987. The Registrant had cash and cash
equivalents of $328,439 as of March 31, 2000, and a working capital deficit of
$(5,790,412) as of March 31, 2000.
This Quarterly Report on Form 10-QSB for the quarter ended March 31, 2000
(the "Form 10-QSB") contains certain "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Forward-looking statements are statements other
than historical information or statements of current condition and relate to
future events or the future financial performance of the Company. Some
forward-looking statements may be identified by use of such terms as "expects,"
"anticipates," "intends," "estimates," "believes" and words of similar import.
These forward-looking statements relate to plans, objectives and expectations
for future operations. In light of the risks and uncertainties inherent in all
such projected operation matters, the inclusion of forward-looking statements in
this Form 10-QSB should not be regarded as a representation by the Company or
any other person that the objectives or plans of the Company will be achieved or
that any of the Company's operating expectations will be realized. Revenues and
results of operations are difficult to forecast and could differ materially from
those projected in the forward-looking statements contained in this Form 10-QSB.
The Company expects to increase revenues and cash flow through the
wholesale distribution and sale of pre-paid calling cards by expanding its
in-house sales force and adding more independent distributors to its network.
The Company's One Plus long distance service, which the Company is revamping to
provide more competitive rates, and additional services will be included as a
product for this sales force to market.
RESULTS OF OPERATIONS
Comparison of the Three Months Ended March 31, 2000 (restated - Note 2) and 1999
The Company's revenues decreased from $238,855 to $130,760 between the
three months ended March 31, 1999 and 2000, respectively. This represents a
decrease of 45% that resulted primarily from the timing of when activated PIN's
were actually used by end customers.
Total general and administrative expenses increased by $69,612 or 19%
during the quarter ended March 31, 2000, compared to the same period last fiscal
year, as the Company expanded its operations, staffing and facilities to support
its continuing growth. Professional services increased by $128,145 during the
quarter ended March 31, 2000, compared to the same period last fiscal year, as
the Company retained the services of telecommunication business and engineering
consultants. Furthermore, the Company expended approximately $113,000 in
connection with the preparing, filing, printing, mailing, processing and holding
the annual shareholders' meeting in January 2000. The Company also recognized
stock compensation charges of $198,141 during the quarter ended March 31, 2000
as the Company's Chief Executive Officer vested in 83,333 stock options.
Additionally, the Company recognized an effective interest charge aggregating
$7,669,197 upon the conversion of $1,100,717 of notes payable, and related
accrued interest, into shares of the Company's restricted common stock. The
effective interest charge is equal to the amount by which the estimated fair
market value of the restricted common stock issued upon conversion exceeded the
carrying amount of the related notes payable and accrued interest.
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
Comparison of the Nine Months Ended March 31, 2000 (restated - Note 2) and 1999
The Company's revenues increased from $703,305 to $2,123,224 between the
nine months ended March 31, 1999 and 2000, respectively. This represents an
increase of 202% in revenues. This increase occurred primarily as the result of
on-going and new telecommunication services contracts secured by the Company in
fiscal 1999 and 2000. Further, the Company increased its internal sales force
and independent distributor network during the nine months ended March 31, 2000.
Total general and administrative expenses increased by $98,062 or 7% during
the nine months ended March 31, 2000, compared to the same period last fiscal
year, as the Company expanded its operations, staffing and facilities to support
its continuing growth. As a result, salaries, payroll taxes and occupancy costs
increased from the same period in the prior year. Professional services
increased by $96,184, or 40%, during the nine months ended March 31, 2000,
compared to the same period last fiscal year, as the Company retained the
services of telecommunication business and engineering consultants. Furthermore,
the Company expended approximately $113,000 in connection with the preparing,
filing, printing, mailing, processing and holding the annual shareholders'
meeting in January 2000. Legal expenditures decreased in the fiscal year 2000
period as the Company settled numerous legal actions that it was involved in.
Stock based compensation charges aggregated $3,877,338 during the nine months
ended March 31, 2000, and such amounts related to the following: $1,134,000
related to an officer's conversion of accrued salaries and expenses into
restricted common stock, $863,347 related to a consultant's conversion of
accrued fees and expenses into restricted common stock, $1,100,000 related to
shares of restricted common stock issued to an officer for the pledging of his
personal assets and personal guarantee, and $581,850 related to the sale of
restricted common stock. The Company also recognized stock compensation charges
of $198,141 during the nine months ended March 31, 2000 as the Company's Chief
Executive Officer vested in 166,668 stock options. Interest expense increased
significantly relative to the prior year, primarily because of an effective
interest charge aggregating $7,669,197 related to the conversion of $1,100,717
of notes payable, and related accrued interest, into shares of the Company's
restricted common stock. The effective interest charge is equal to the amount by
which the estimated fair market value of the restricted common stock issued upon
conversion exceeded the carrying amount of the related notes payable and accrued
interest.
<PAGE>
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
On November 10, 1998, the Company filed legal action (TotalAxcess, Inc. v.
NuOasis Resorts, Inc; Nona Morelli's II, Inc.; NuOasis International, Inc.; Fred
Luke, Jr.; Rocci Howe; Steven H. Dong; John D. Desbrow; Archer & Weed; Richard
Weed) in San Francisco Superior Court. The suit alleges fraud and
misrepresentation in the sale of securities, which were not qualified for sale
and professional malpractice against legal counsel. On July 26, 1999, NuOasis
Resorts, Inc. and Nona Morelli's II, Inc., and Howe, Fred Luke, Jr. and Dong
filed a cross complaint against the Company alleging claims for, inter alia
breach of contract, fraud, material misrepresentation in the purchase of
securities and libel, rescission of certain contracts and the imposition of a
constructive trust over certain securities. The case was subsequently
transferred to the Superior Court for the County of Orange. The case is
currently in the discovery phase. The trial date is now set for March 2001; all
claims the Company has against Richard Weed are to be arbitrated after the
trial. Management plans to vigorously pursue its complaint and defend each cross
complaint, which it believes lack substantial merit.
On January 6, 1999, the Company filed a lawsuit (TotalAxcess.com, Inc. v.
Dennis Houston, Orange County Superior Court Case No. 809248). This complaint
alleges breach of fiduciary duty by Mr. Houston as one of the Company's
directors for failing to disclose material facts in the Ark-Tel Asset Purchase
Agreement that management believes resulted in the Worldcom suit against the
Company (since settled as per 1999 10-KSB). On June 29, 1999, Mr. Houston filed
a cross complaint alleging claims for breach of contract, breach of the implied
covenant of good faith and fair dealing, misrepresentation, fraud and
embezzlement. The Company is vigorously pursuing the matter against Mr. Houston
and plans to vigorously defend the cross complaint. Trial is scheduled for
October 2000.
On June 26, 1997, the Company filed a lawsuit (TotalAxcess.com, Inc. v.
Network Long Distance, Inc.) filed in the District Court, City and County of
Denver, Case No. 97 CV 4131, Division 7. The complaint was filed against Network
Long Distance, Inc. and their transfer agent to compel them to release shares of
Network Long Distance, Inc.'s common stock (the"Shares") that was received by
the Company in connection with a release of liability granted to NuOasis
Resorts, Inc. Once the Shares were properly transferred to the Company, the
Company dismissed its claims as moot. However, Network Long Distance, Inc.
(currently known as Eclipse Communications, Inc. or "Eclipse") continues to
pursue the Shares through its counterclaims. Eclipse is claiming that it owns
some or all of the Shares and is seeking damages and an injunction prohibiting
the transfer of the Shares. The Company took a judgment in the case; and Eclipse
has taken an appeal. Management believes that it is fairly likely the lower
court ruling will be upheld. A final disposition of the case is expected in late
2000 or early 2001.
In November 1999 the Company was served with Summons and Complaint in an
action filed by Republic Leasing Co., Inc. Case No. 816455 in the Superior Court
in and for the County of Orange, California. The action arose out of facts
related to the ArkTel and Dennis Houston matter discussed above and concerned an
equipment lease. Plaintiff sought approximately $29,000 plus prejudgment
interest and attorney fees and costs. In order to avoid the uncertainties of
arbitration and the inherent legal fees and costs attendant thereto, a
settlement agreement was reached in May 2000 whereby the Company agreed to pay
the aggregate amount of $31,000 in two installments commencing June 1, 2000.
Upon its receipt of the final payment, Republic Leasing caused the action
against the Company to be dismissed. The settlement amount is an element of the
damages sought by the Company in its pending action against Dennis Houston in
the Orange County Superior court action discussed above.
<PAGE>
PART II: OTHER INFORMATION (continued)
Item 1. Legal Proceedings (continued)
In February 2000, in the Superior Court in and for the County of Alameda,
Waterview Resolution Corporation filed and served a complaint against National
Pools Corporation for Money owed in the amount of $59,673. The action arose out
of a guarantee on leased equipment assumed by the Company on behalf of Ark-Tel
Incorporated and Dennis Houston. In order to avoid the uncertainties of trial
and the inherent legal fees and costs attendant thereto, a settlement agreement
was reached in May 2000 whereby the Company agreed to pay the aggregate amount
of $40,000 to Waterview in four equal monthly installments commencing June 1,
2000. Upon its receipt of the fourth and final payment on or about October 1,
2000, Waterview dismissed the case in its entirety. The settlement amount is an
element of the damages sought by the Company in its pending action against
Dennis Houston in the Orange County Superior court action discussed above.
On or about December 20, 1999 in the Superior Court in and for the County
of San Francisco, California, Comms People, Inc. ("CPI") filed and served a
complaint for Breach of Contract and several Common Counts against the Company,
alleging damages in the amount of $17,050. The claim arose out of a personal
services contract. The matter was referred by the court to non-binding judicial
arbitration to be heard in August 2000. In order to avoid the uncertainties of
arbitration and subsequent trial, and the inherent legal fees and costs
attendant thereto, a settlement agreement was reached in August 2000, whereby
the Company agreed to pay the aggregate amount of $14,000 to CPI, in three
monthly installments commencing September 1, 2000. In consideration thereof, CPI
agreed to release all claims it might have against the Company, which might
arise out of the personal service contract.
M.H. Meyerson & Co. ("Meyerson") claimed that it was entitled to 717,898
warrants to purchase common stock of the Company pursuant to a December 12, 1997
Investment Banking Agreement. The Company contended that Meyerson is not
entitled to the warrants because it failed to fulfill its obligations under the
Investment Banking Agreement. In order to avoid the uncertainties of arbitration
and the inherent legal fees and costs attendant thereto, a settlement agreement
was reached in September 2000, whereby the Company issued 20,000 restricted
shares of common stock to be issued to Meyerson in full and final settlement of
all claims arising from the Investment Banking Agreement.
On October 27, 1999 in the Superior Court in and for the County of Los
Angeles, California, Cross Communications ("CCI") filed and served a complaint
for Breach of Contract and several Common Counts against the Company. CCI claims
it entered into a valid oral agreement with the Company whereby it would provide
telecommunications services using its switch for routing the Company's pre-paid
calling cards. It claimed approximately $655,000 in damages on unpaid invoices
for its services. The Company filed a cross-complaint against CCI seeking
unspecified damages arising from the inability of CCI equipment to adequately
support and route the volume of traffic delivered by pre-paid calling cards. In
order to avoid the uncertainties of trial and the potential enforcement of a
judgment, as well as the inherent legal fees and costs attendant thereto, a
settlement agreement was reached in September 2000, whereby CCI and the Company
will enter into a mutual release in full and final settlement of any and all
claims that might arise out of their relationship. No other consideration is
involved in the settlement agreement.
<PAGE>
PART II: OTHER INFORMATION (continued)
Item 1. Legal Proceedings (continued)
The Company is from time to time, involved in various lawsuits generally
incidental to its business operations, consisting primarily of collection
actions and vendor disputes. The Company does not believe that such claims and
lawsuits, either individually or in the aggregate, will have an adverse effect
on its operations or financial condition.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to A Vote of Security Holders
On January 28, 2000 the Company held its Annual Meeting of Shareholders for
the following purposes:
1. To elect two directors, each to hold office until the next Annual Meeting
of Shareholders and until their successors are elected and qualified;
2. To approve an amendment to the Company's Certificate of Incorporation to
amend the voting rights granted to Stockholders of Series B Convertible
Preferred Stock to be consistent with the proposed share consolidation;
3. To approve an amendment to the Company's Certificate of Incorporation to
adopt a one-for-fifteen share consolidation of the outstanding Common Stock
and decrease the authorized number of shares of Commons Stock from
333,000,000 to 22,200,000; and
4. To adopt the TotalAxcess.com, Inc. 2000 Stock Option Plan; and
5. To transact such other business as may properly come before the meeting or
any adjournments thereof.
The slate of nominees elected for director consisted of the following
individuals:
Joseph Monterosso, age 53
Russell F. McCann, age 44
Mr. Monterosso received 111,427,291 votes "for" his election to
director; the number of votes cast "against" was 1,376,860; and the total
number of "abstentions" was 4,206,543.
Mr. McCann received 112,948,874 votes "for" his election to director;
the number of votes cast "against" was 4,040,573; and the total number of
"abstentions" was 21,247.
<PAGE>
PART II: OTHER INFORMATION (continued)
Item 4. Submission of Matters to A Vote of Security Holders (continued)
The total number of votes cast was 117,010,694. This represents 72.60%
of the outstanding number of shares, which were 161,171,448 at the time of
the meeting
The second proposal to be acted upon pertained to the following:
Although the Certificate of Determination for Series B Convertible
Preferred Stock provides for the adjustment of the conversion ratio to
Common Stock in the event of a stock split or reverse stock split, it
inadvertently did not provide for the adjustment of the voting rights. The
Company has 1,200 shares of Series B Convertible Preferred Stock issued and
outstanding as of January 2000. Under the terms of the Series B Convertible
Preferred Stock, the holders of Series B Convertible Preferred stock shall
have seventy-eight (78) votes per share. Therefore, in the event of a
one-for-fifteen share consolidation as proposed in Proposal Three, the
holders of Series B Convertible Preferred Stock will still be entitled to
seventy-eight (78) votes per share after the effective date of a
one-for-fifteen share consolidation. That was not the intent of the Company
or the holders of Series B Preferred Stock.
The Company believes that adoption of Proposal Two, which will amend
the voting rights of the Series B Convertible Preferred Stock will maintain
the rights, preference, privileges, and rights as originally intended by
the Company and the holders of Series B Convertible Preferred Stock. After
discussions, the holders of the majority of the outstanding shares of
Series B Convertible Preferred Stock have consented to the amendment and
intend to vote for the amendment to the Company's Certificate of
Incorporation to amend the voting rights granted to the Series B
Convertible Preferred Stock.
The total number of votes cast "for" the proposal was 111,847,663; the
number of votes cast "against" was 4,841,763; and the total number of
"abstentions" was 321,268. The total number of votes cast was 117,010,694.
This represents 72.60% of the outstanding number of shares, which were
161,171,448 at the time of the meeting.
The third proposal to be acted upon pertained to the following:
The Board of the Company adopted a resolution approving and
recommending to the holders of Common Stock, Series B Convertible Preferred
Stock, and 14% Preferred Stock that they approve an amendment to the
Company's Certificate of Amendment to one-for-fifteen share and
consolidation of outstanding Common Stock and to decrease the authorized
number of shares of Common Stock from 333,000,000 to 22,200,000, all of
which shall be considered as one proposal to be submitted to a vote of
holders of Common Stock, Series B Convertible Preferred Stock, and 14%
Preferred Stock. The vote will be taken "FOR" or "AGAINST" this Proposal
Three so that all two elements are considered in one vote. Proposal Three
was adopted by the Board of Directors and is subject to approval by a
majority of votes cast by the holders of the Common Stock, Series B
Convertible Preferred Stock, and 14% Preferred Stock, voting as a class, as
determined on the record date, represented in person or by proxy constitute
a quorum for the Meeting.
<PAGE>
PART II: OTHER INFORMATION (continued)
Item 4. Submission of Matters to A Vote of Security Holders (continued)
If approved by the stockholders and implemented by the Board of
Directors, other than (i) decreasing the authorized number of shares of
Common Stock from 333,000,000 to 22,200,000, (ii) adjusting the par value
of the Common Stock from $.01 to $.15, and (iii) adjusting the total number
of shares of Common Stock issued prior to the adoption of the
one-for-fifteen share consolidation will result in no other material
changes to ownership of the stock. Each stockholder will hold the same
percentage of Common Stock, Series B Convertible Preferred Stock, and 14%
Preferred Stock outstanding immediately following the one-for-fifteen share
consolidation as each stockholder did immediately prior to the
one-for-fifteen share consolidation, except that the consolidation may
result in an immaterial adjustment due to the purchase of any fractional
shares of Common Stock that result from the consolidation.
If Proposal Three is approved by the stockholders of the Company, the
amendment will be filed unless the Board of Directors of the Company
determines that filing such amendment would not be in the best interest of
the Company and its stockholders. If the Board of Directors makes such
determination, it may elect not to file or elect to delay the filing of the
amendment to implement Proposal Three. The actual timing of such filing
(and whether such filing is made) will be determined by the Board of
Directors based upon their evaluation as to when such action will be most
advantageous to the Company and its stockholders. In addition, the Board of
Directors may make any and all changes to the one-for-fifteen share
consolidation amendment that it deems necessary to give effect to the
intent and purpose of the one-for-fifteen share consolidation.
The following table illustrates the principal effects of the proposed
one-for-fifteen share consolidation on the authorized number of shares:
Number of Share of
Common Stock Prior to Proposal Three After Proposal Three
------------ ----------------------- --------------------
Authorized: 333,000,000 22,200,000
Outstanding: 159,161,506 10,610,767(1)
Available for Future Issuance: 173,838,494 11,589,233(1)
Number of Share of
Preferred Stock Prior to Proposal Three After Proposal Three
------------ ----------------------- --------------------
Authorized: 1,000,000 1,000,000
Outstanding Series B: 23,589 23,589
Ouststanding 14% Preferred 170,000 170,000
(1)Subject to minor adjustment due to rounding of fractional shares.
<PAGE>
PART II: OTHER INFORMATION (continued)
Item 4. Submission of Matters to A Vote of Security Holders (continued)
The total number of votes cast "for" the proposal was 106,101,453; the
number of votes cast "against" was 10,606,963; and the total number of
"abstentions" was 68,642. The total number of votes cast was 117,010,694.
This represents 72.60% of the outstanding number of shares, which were
161,171,448 at the time of the meeting.
The fourth proposal to be acted upon pertained to the following:
Effective January 31, 2000, and subject to stockholder approval,
the Board of Directors approved adoption of the Company's 2000
Stock Option Plan (the "2000 Plan") to serve as a vehicle to
attract and retain the services of employees, officers,
directors, and consultants. The 2000 Plan is a "dual plan" which
provides for the grant of both Incentive Stock Options and
Non-qualified Stock Options.
The 2000 Plan covers 30,000,000 (pre-one-for-fifteen share
consolidation as discussed in Proposal Three) shares of the
Company's Common Stock, which shares will be reserved upon
confirmation of the 2000 Plan. If Proposals Three and Four are
approved, the 30,000,000 shares of Common Stock reserved for the
2000 Plan shall be adjusted to 2,000,000 shares of Common Stock
following the proposed one-for-fifteen share consolidation.
The total number of votes cast "for" the proposal was 107,060161; the
number of votes cast "against" was 9,708,618; and the total number of
"abstentions" was 241,915. The total number of votes cast was 117,010,694.
This represents 72.60% of the outstanding number of shares, which were
161,171,448 at the time of the meeting.
There was no other business conducted at the Annual Meeting of
Shareholders.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
EXHIBIT NO. DESCRIPTION
27 Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by
the undersigned thereunto duly authorized.
TOTALAXCESS.COM, INC. (formerly, GROUP V CORPORATION.)
Date: October 23, 2000 By: /s/ Joseph Monterosso
-------------------------
Joseph Monterosso,
Chief Executive Officer
& Director
Date: October 23, 2000 By:/s/ Russell F. McCann, Jr.
-----------------------------
Russell F. McCann, Jr., Director
