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 September 30, 1999 Commission File No.0-18224
TotalAxcess.com, Inc. (formerly, Group V Corp.)
(Exact name of registrant as specified in its charter)
Delaware 95-4176781
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
201 Clay Street, Oakland, California 94103
(Address of principal executive offices) (Zip Code)
(510) 286-8700
(Registrant's telephone number, including area code)
N/A N/A
(Former Address, if changed (Former Zip Code,
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
September 30, 1999
Preferred Stock Series B $2.00 par value; 35,193 shares outstanding as of
September 30, 1999
Common Stock $.01 par value; 8,532,075 shares as of September 30, 1999
TOTALAXCESS.COM, INC.
(formerly, GROUP V CORPORATION)
INDEX
PAGE
PART I
Item 1. Financial Statements
Consolidated Condensed Balance Sheet as of September 30,1999
(unaudited)................................................... 1
Consolidated Condensed Statements of Operations for the Three Months
Ended
September 30, 1999 and 1998 (unaudited)........................ 2
Consolidated Condensed Statements of Cash Flows for the
Three Months Ended September 30, 1999 and 1998 (unaudited)..... 3
Notes to Consolidated Condensed Financial Statements............. 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................ 8
PART II
Item 1. Legal Proceedings................................................. 9
Item 2. Changes in Securities............................................. 10
Item 3. Defaults Upon Senior Securities................................... 10
Item 4. Submission of Matters to a Vote of Security Holders............... 10
Item 5. Other Information................................................. 10
Item 6. Exhibits and Reports on Form 8-K.................................. 10
Signatures................................................................ 11
TOTALAXCESS.COM, INC.
(formerly, GROUP V CORPORATION)
Consolidated Condensed Balance Sheet
As of September 30, 1999 (Unaudited)
September 30,
1999
(Restated-Note 2)
Current Assets:
Cash and cash equivalents ..................................$ 565,203
Marketable securities ...................................... 30,176
Accounts receivable......................................... 2,996,764
Inventories................................................. 30,453
Prepaid expenses ........................................... 119,622
Total Current Assets ................................ 3,742,218
Fixed assets:
Furniture and equipment ................................... 154,684
Less accumulated depreciation ............................. (63,981)
Total Fixed Assets, net .............................. 90,703
Other assets .................................................... 7,200
TOTAL ASSETS......................................................$ 3,840,121
Current Liabilities:
Current portion of capital lease obligations ...............$ 733,091
Accounts payable............................................ 5,474,549
Notes payable............................................... 1,065,717
Accrued expenses............................................ 1,938,390
Total Current Liabilities ............................ 9,211,747
Long Term Liabilities:
Long term capital lease obligations......................... 4,560
Total Long Term Liabilities................................. 4,560
Total Liabilities .................................... 9,216,307
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, issued and outstanding 35,193 shares
(aggregate liquidation of $300,000)......................... 70,386
Common stock - par value $.15; authorized 22,200,000 shares;
8,532,075 shares issued and outstanding..................... 1,301,611
Additional paid-in capital................................... 20,091,796
Accumulated other comprehensive loss.......................... (100,145)
Accumulated deficit..........................................(26,741,534)
Total Stockholders' Equity (Deficit)................... ( 5,376,186)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)..............$ 3,840,121
See accompanying notes to these consolidated condensed financial statements.
TOTALAXCESS.COM, INC.
(formerly, GROUP V CORPORATION)
Consolidated Condensed Statements of Operations
For the Three Month Period Ended September 30, 1999 and 1998 (Unaudited)
Three Months Ended
December 31
1999 1998
(Restated-
Note 2)
Revenues $3,746,394 $ 272,576
Costs and expenses:
Operating costs 5,607,336 287,025
General and administrative 588,886 675,060
Professional services 52,319 132,743
Depreciation and amortization 8,175 29,815
Interest expense, net - 24,000
Stock based compensation 327,120 -
Total costs and expenses $6,583,836 $1,148,643
Net (loss) $(2,837,442) $ (876,067)
Net (loss) applicable to
common stock $(2,843,392) $ (882,017)
Basic and diluted net (loss)
per common share $ (0.34) $ (0.26)
Weighted average common
shares outstanding 8,359,350 3,325,992
See accompanying notes to these consolidated condensed financial statements.
TOTALAXCESS.COM, INC.
(formerly, GROUP V CORPORATION)
Consolidated Condensed Statements of Cash Flows
For the Three Month Period Ended September 30, 1999 and 1998 (Unaudited)
Three Months Ended
September 30,
1999 1998
(Restated-
Note 2)
Operating activities:
Net loss $(2,837,442) $(876,067)
Adjustments to reconcile net loss to net cash
used by operating activities:
Stock based compensation 327,120 -
Depreciation and amortization 8,175 29,815
Increase (decrease) from changes in:
Marketable securities (39,301) 73,435
Accounts receivable (2,448,216) 127,194
Inventories (30,453) (2,961)
Prepaid expenses (57,828) (9,565)
Other assets - (7,461)
Accounts payable and accrued expenses 4,574,376 336,083
Deferred revenue - 40,305
Net cash used by operating activities (503,569) (289,222)
Investing activities:
Purchase of equipment (14,179) (51,974)
Net cash used by investing activities (14,179) (51,974)
Financing activities:
Proceeds from issuance of stock 510,000 -
Net cash provided by financing activities 510,000 -
Net (decrease) in cash (7,748) (341,196)
Cash and cash equivalents, beginning of period 572,951 62,408
Cash and cash equivalents, end of period $ 565,203 $ (278,788)
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Income taxes $ - $ -
Interest $ - $ -
See accompanying notes to these consolidated condensed financial
TOTALAXCESS.COM, INC.
(formerly, GROUP V CORPORATION)
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
three months ended September 30, 1999. 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.
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 September 30, 1999, marketable equity securities consist of 650,292
shares of common stock of NuOasis Resorts, Inc., a stockholder. 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 September 30, 1999. 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
yea's taxable income for federal and state income tax reporting purposes.
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 three months ended September 30, 1999.
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.
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
September 30, 1999, and for the three months then ended are summarized as
follows:
Increase in stock based compensation $ 327,120
Increase in general and administrative expenses 73,067
Increase in accounts receivable 359,780
Increase in accrued expenses 373,695
Increase in common stock and APIC 422,783
NOTE 3. SIGNIFICANT QUARTERLY TRANSACTIONS
Stock Transactions with Blackstone Calling Cards, Inc.
In September 1999, the Company sold 140,000 shares of restricted common stock
to Blackstone Calling Cards, Inc. ("Blackstone"), a significant customer, for
cash proceeds aggregating $510,000. Because the estimated fair market value
of the restricted common stock sold to Blackstone exceeded the cash purchase
price paid by Blackstone by the aggregate amount of $327,120, the Company
recognized a corresponding stock compensation charge during the quarter ended
September 30, 1999.
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 $565,203 as of September 30, 1999, and a working capital
deficit of $(5,469,529) as of September 30, 1999.
This Quarterly Report on Form 10-QSB for the quarter ended September 30, 1999
(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 September 30, 1999 (restated-note 2)
and 1998
The Company's revenues increased from $272,576 to $3,746,394 during the three
months ended September 30, 1999 compared to the three months ended September
30, 1998. This increase resulted primarily from additional contracts secured
by the Company during the current quarter, and is also the result of the
timing of when activated PIN's were actually used by end customers.
Quarterly operating costs also increased dramatically for the same reasons.
Total general and administrative expenses decreased by $86,174, or 13% during
the quarter ended September 30, 1999, compared to the same period last fiscal
year, as the Company centralized and streamlined certain administrative
functions. Professional services decreased by $80,424 during the September
30, 1999 quarter, compared to the same period last fiscal year, as the
Company achieved the settlement of certain litigious matters. The Company
also recognized stock compensation charges of $327,120 during the quarter
ended September 30, 1999, as the Company sold 140,000 shares of its
restricted common stock to Blackstone Calling Cards, Inc., a customer, for an
aggregates amount that was less than the estimated fair market value of the
related restricted common stock.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
On August 28, 1998, the Company was named in a lawsuit (San Francisco
Superior Court Case No. 997548) filed by Worldcom Network Services, Inc.
("Worldcom") to recover the sum of $2,208,362 allegedly due and owing as a
result of a debt that the Company allegedly guaranteed on behalf of UNSI.
Although the Company denies liability on the guarantee, the Company reached a
settlement with Worldcom in which the Company transferred 2,666,667 shares of
its restricted common stock to Worldcom. In exchange, Worldcom agreed to
release the Company from any and all liability, known and unknown up to the
date of the related settlement agreement, which was November 3, 1999.
On October 2, 1998, Pickett Communications, Inc. ("Pickett") filed a
complaint (San Francisco Superior Court Case No. 998281) for monetary damages
and challenged the Company's rights to use the HitLoTTo logo. In July 1999,
a settlement agreement was executed that requires the Company to release
218,036 shares of its restricted common stock to Pickett. This stock had
previously been issued to Pickett pursuant to a contract dated October 14,
1997 in which the Company agreed to pay Pickett for services it provided to
NPC. The Company previously refused to release the common stock, as NPC
disputed certain charges, which it believed were unauthorized.
On February 19, 1999, Accountempts and RHI Management Resources filed a
complaint (San Francisco Superior Court Case No. 301366) for breach of
contract to recover approximately $26,000 allegedly due and owing for
temporary employment services. On July 27, 1999, a settlement agreement was
executed in which the Company agreed to pay an aggregate amount of $24,000 at
the rate of $2,000 per month.
On August 30, 1999, the California Labor Commissioner awarded Joseph
Arton $34,426 in wages, interest and penalties based on claims that this
individual was an employee of the Company. As a result of the Company's
appeal filed on September 20, 1999, Joseph Arton filed a related complaint
(San Francisco Superior Court Case No. 306593). The Company contends that
Joseph Arton was not an employee of the Company, but was an independent
contractor. In December 1999, the Company settled this matter and issued
10,000 shares of its restricted stock.
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, Case No. 999131. The
suit alleges fraud and misrepresentation in the sale of securities, which
were not qualified for sale and professional malpractice against legal
counsel representing the Defendants in this transaction. On July 26, 1999,
NuOasis Resorts, Inc. and Nona Morelli's II, Inc. filed a cross complaint
against the Company alleging claims for breach of contract, fraud, material
misrepresentation in the purchase of securities and libel, and seeks
rescission of certain contracts and the imposition of a constructive trust
over certain securities. Also on July 26, 1999, Rocci Howe, Fred Luke, Jr.
and Steven Dong filed cross complaints against the Company alleging claims
for breach of contract, indemnity and libel. All counsel have stipulated to
a change in venue from San Francisco to Orange County Superior Court, and the
San Francisco Court has transferred the file to the Orange County Court. The
Court ordered that all claims the Company has against Richard Weed are to be
arbitrated and that this arbitration will not take place until after the
trial. Management plans to vigorously pursue its complaint and defend each
cross complaint, which it believes lack substantial merit. The trial date is
presently scheduled for March 2001.
PART II: OTHER INFORMATION (CONTINUED)
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 which have resulted in the Company's being sued by
Worldcom Network Services, Inc. (see above). 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. The action is to
be tried in 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. In response to
Eclipse's allegations, management has indicated that it will vigorously
contest the litigation, as it believes the case to be groundless and without
merit. Should Eclipse prevail in this matter, it may be in a position to
recover a significant portion of the stock at issue, or the value thereof,
plus 8% interest per annum from 1997 through trial. Although the Company has
been awarded a summary judgment, Eclipse has filed a notice of appeal.
M.H. Meyerson & Co. ("Meyerson") claims that it is entitled to 717,898
warrants to purchase common stock of the Company pursuant to a December 12,
1997 Investment Banking Agreement. The Company contends that Meyerson is not
entitled to the warrants because it failed to fulfill its obligations under
the Investment Banking Agreement. The Company settled this matter in
September 2000 and issued 20,000 shares of its restated common stock.
From time to time, the Company is involved in various lawsuits
generally incidental to its business operations, primarily consisting 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
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
EXHIBIT NO. DESCRIPTION
27 Financial Data Schedule
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.
TOTALAXCSS.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
