UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2004
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 No. 000-27277
ACS HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Nevada 88-0503197
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7658 Municipal Drive
Orlando, Florida 32819
(Address of principal executive offices, zip code)
(407) 226-6866
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (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 such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X] No [_]
As of June 30, 2004 there were 325,500,000 shares of the Registrant's common
stock, $0.001 par value per share, outstanding.
Transitional Small Business Disclosure Format (check one):
[_] Yes [X] No
ACS HOLDINGS, INC.
QUARTERLY REPORT ON FORM 10-QSB
FOR THE PERIOD ENDED JUNE 30, 2004
INDEX
PART I - FINANCIAL INFORMATION.................................................3
ITEM 1. Financial Statements.............................................3
BALANCE SHEETS...................................................3
STATEMENTS OF OPERATIONS.........................................4
STATEMENTS OF CASH FLOWS.........................................5
NOTES TO FINANCIAL STATEMENTS....................................6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................8
ITEM 3. Controls and Procedures..........................................10
PART II - OTHER INFORMATION...................................................10
ITEM 1. Legal Proceedings...............................................10
ITEM 2. Changes in Securities and Use of Proceeds.......................10
ITEM 3. Defaults Upon Senior Securities.................................10
ITEM 4. Submission of Matters to a Vote of Security Holders.............10
ITEM 5. Other Information...............................................11
ITEM 6. Exhibits and Reports on Form 8-K................................15
SIGNATURES....................................................................16
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
ACS Holdings, Inc., a Nevada corporation ("ACS" or the "Company") uses words
like "expects," "believes," "intends," "anticipates," "plans," "targets,"
"projects" or "estimates" in this Form 10-QSB. When used, these words and other,
similar words and phrases or statements that an event, action or result "will,"
"may," "could," or "should" occur, be taken or be achieved identify
"forward-looking" statements. Such forward-looking statements reflect our
current views with respect to future events and are subject to certain risks,
uncertainties and assumptions, including, the risks and uncertainties outlined
under the section titled "Management's Discussion and Analysis" in Item 2.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, believed, estimated or expected.
Our management has included projections and estimates in this Form 10-QSB, which
are based primarily on management's experience in the industry, assessments of
our results of operations, discussions and negotiations with third parties and a
review of information filed by our competitors with the Securities and Exchange
Commission or otherwise publicly available. We caution readers not to place
undue reliance on any such forward-looking statements, which speak only as of
the date made. We disclaim any obligation subsequently to revise any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ACS HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
June 30, 2004
JUNE 30, DECEMBER 31,
2004 2003
----------- -----------
ASSETS
Current Assets:
Cash and cash equivalents $ 68,451 $ 27,903
Restricted cash 5,000 5,000
Accounts receivable, net 7,365 500
Inventories 25,661 --
Prepaid expenses 825 6,079
----------- -----------
107,302 39,482
Property and Equipment, Net 56,043 57,313
Deposits 13,319 13,319
----------- -----------
Total Assets $ 176,664 $ 110,114
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 1,007,000 $ 427,000
Capital lease payable 20,220 16,804
Due to officers 70,084 77,939
Accounts payable 389,448 179,142
Accrued expenses 437,815 361,871
Customer deposit 17,400 17,400
Deferred revenue 101,843 110,855
----------- -----------
Total Current Liabilities 2,043,809 1,191,011
----------- -----------
Long-Term Liabilities:
Capital lease payable 21,593 29,755
Notes payable related parties 530,000 430,000
----------- -----------
551,593 459,755
----------- -----------
Total Liabiltiies 2,595,402 1,650,766
----------- -----------
Commitments and Contingencies
Stockholders' Equity (Deficit):
Preferred stock, $0.01 par value, 500,000
shares authorized no shares outstanding
Common stock, $0.001 par value, 5,000,000,000
shares authorized, 4,245,000,000 shares issued
and outstanding at June 30, 2004 4,245,000 13,261
Additional paid-in-capital (3,113,654) 712,200
Unamortized finance cost on notes payable -- (83,836)
Retained earnings (deficit) (3,550,084) (2,182,277)
----------- -----------
Total Stocholders' Equity (Deficit) (2,418,739) (1,540,652)
----------- -----------
Total Liabilities and Stockholders' Equity $ 176,664 $ 110,114
=========== ===========
3
ACS HOLDINGS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, 2004 JUNE 30,2004
---------------------------------- ----------------------------------
2004 2003 2004 2003
--------------- --------------- --------------- ---------------
Revenues $ 4,986 $ -- $ 32,016 $ 150
Cost of Sales 34,266 -- 38,403 --
--------------- --------------- --------------- ---------------
Gross Profit (29,280) -- (6,387) 150
--------------- --------------- --------------- ---------------
Costs and Expenses:
General and administrative 377,228 412,588 755,692 695,092
Depreciation expense 2,980 186 5,533 186
Stock-based compensation 463,018 -- 463,018 --
--------------- --------------- --------------- ---------------
Total Costs and Expenses 843,226 412,774 1,224,243 695,278
--------------- --------------- --------------- ---------------
Net Loss from Operations (872,506) (412,774) (1,230,630) (695,128)
--------------- --------------- --------------- ---------------
Other Revenue (Expense):
Interest income 4 15
Interest expense (80,606) (9,853) (137,190) (18,853)
--------------- --------------- --------------- ---------------
(80,602) (9,853) (137,175) (18,853)
--------------- --------------- --------------- ---------------
Net Loss before Provision for
Income Tax (953,108) (422,627) (1,367,805) (713,981)
Provision for Income Tax -- -- -- --
--------------- --------------- --------------- ---------------
Net Loss $ (953,108) $ (422,627) $ (1,367,805) $ (713,981)
=============== =============== =============== ===============
Loss per Share:
Basic and diluted loss per share $ (0.00) $ (0.01) $ (0.00) $ (0.01)
=============== =============== =============== ===============
Basic and diluted
common shares outstanding 2,804,348,571 82,761,065 1,452,097,995 68,707,141
=============== =============== =============== ===============
4
ACS HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS ENDED
JUNE 30,2004
--------------------------
2004 2003
----------- -----------
Cash Flows from Operating Activities:
Net Loss $(1,367,805) $ (930,119)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 5,533 186
Compensation costs of common stock issued to
consultants 463,018 162,429
Amortization expense of finance costs 36,667 --
Changes in assets and liabilities, net of
effect from:
(Increase) in accounts receivable (7,065) --
Increase in accounts receivable allowance 200 --
Decrease (increase) in prepaid expenses 5,254 (95,256)
(Increase) in inventory (25,661) --
(Increase) in deposits -- (13,319)
Increase in accounts payable
and accrued expenses 286,247 417,125
Increase in customer deposits -- 72,720
Increase (decrease) in deferred revenue (9,012) 318,250
----------- -----------
Net cash used in operating activities (612,624) (67,984)
----------- -----------
Cash flows from Investing Activities:
Cash proceeds from officer loan -- 13,483
Repayment of officer's loan (7,855) --
----------- -----------
Net cash provided by (used in)
investing activities (7,855) 13,483
----------- -----------
Cash Flows from Financing Activities:
Cash proceeds from notes payable related party 110,000 50,000
Principal payment on notes payable related party (10,000) --
Cash proceeds from notes payable 580,000 --
Payment of capital lease payable (9,009) (9,131)
Cost of common stock issuance (9,964) --
----------- -----------
Net cash provided by financing
activities 661,027 40,869
----------- -----------
Net increase (Decrease) in Cash and Cash
Equivalents 40,548 (13,632)
Cash and Cash Equivalents, beginning of period 27,903 29,483
----------- -----------
Cash and Cash Equivalents, end of period $ 68,451 $ 15,851
=========== ===========
Supplementary Disclosure of Cash Flow Information:
Cash paid during the period for:
Income taxes $ -- $ --
=========== ===========
Interest $ 27,583 $ --
=========== ===========
Supplemental Disclosures of Noncash Investing and
Financing Activities:
Common stock issued for services $ 463,018 $ 162,429
=========== ===========
Capital lease obligation for property and
equipment $ 4,263 $ 40,533
=========== ===========
5
ACS HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS
The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
and the rules and regulations of the United States Securities and Exchange
Commission for interim financial information. Accordingly, they do not include
all the information and footnotes necessary for a comprehensive presentation of
financial position and results of operations and should be read in conjunction
with the Company's Annual Report Form 10KSB for the year ended December 31, 2003
and in conjunction with the financial statements of American Card Services, Inc.
for the years ended December 31, 2003 and 2002 and the three months ended March
31, 3004, included in Form 8Ka dated September 7, 2004.
It is management's opinion, however, that all material adjustments (consisting
of normal recurring adjustments) have been made which are necessary for a fair
financial statement presentation. The results for the interim period are not
necessarily indicative of the results to be expected for the year.
NOTE 2 - ACQUISITION
On April 28, 2004 the Company (formerly maxxZone.com, Inc.) agreed to acquire
the assets, subject to certain liabilities of American Card Services, Inc. (ACS)
for 3,570,000,000, representing approximately 85% of the Company's stock. In
connection with this acquisition, the assets the assets and liabilities of
maxxZone were transferred to Global Capital Trust, a St. Kitts and Nevis Trust,
and holder of 84,000,000 shares of company stock. The assets and liabilities
acquired from ACS and resulting operations have been put into ACS Processing,
Inc., a wholly-owned subsidiary. The acquisition was completed on May 12, 2004,
after the Company increased authorized shares to a total sufficient to effect
the transaction.
NOTE 3 - STOCKHOLDERS' DEFICIENCY
Prior to the acquisition, maxxZone.com, Inc. issued 56,500,000 shares and
rescinded 1,350,000 shares at values of $0.014 per share. Shares were issued as
compensation for services to maxxZone.com, Inc., and did not affect operations
of the Company. In connection with the acquisition, the company issued a total
of 12,085,000 shares in the form of compensation for services. The value
assigned to this stock was $95,780. In addition, as part of the acquisition,
420,000,000 shares were issued at par value as a part of and for facilitating
the acquisition. Subsequent to the acquisition, the Company issued 45,000,000
shares with a value of $295,750. The stock issued was in the form of
compensation for services.
6
NOTE 4 - GOING CONCERN
As reflected in the accompanying financial statements, the Company has
accumulated losses of $3,940,084 since inception and has a deficiency in
stockholders' equity of $2,418,739. The Company has not developed sustainable
revenues and is relying on short-term borrowings to finance operations. The
ability of the Company to continue as a going concern is dependent upon the
Company's ability to implement its business plan, continue to raise capital and
generate revenues.
NOTE 5 - SUBSEQUENT EVENT
On August 25, 2004, the Board of Directors approved a 1 for 40 common stock
reverse split. The financial statements presented herein have not been modified
to reflect this change.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") is intended to assist the reader in better understanding and
evaluating the Company's business and activities. This information should be
read in conjunction with American Card Services, Inc.'s financial statements
related to the 8K filed May 11, 2004, as amended.
BUSINESS
ACS Holdings, Inc., formerly maxxZone.com, Inc., was incorporated in Nevada in
April 2002. The Company remained a development stage enterprise with no revenue
until May 2004. Effective May 12, the Company acquired substantially all the
assets subject to substantially all the liabilities of American Card Services,
Inc., a Delaware corporation (ACS Delaware), for 3,570,000,000 shares of the
Company's stock. Concurrently, the assets and liabilities of maxxZone.com, Inc.
were assumed by Global Capital Trust, a St. Kitts and Nevis trust, current
holder of 84,000,000 shares of Company stock.
The Company is beginning to penetrate the rapidly emerging stored-value debit
card market primarily among recent immigrants who do not have a banking
relationship. Stored value debit cards provide a viable alternative to cash and
traditional money transfers. The Company believes it offers one of the most
comprehensive and complete product and program packages in the market for
end-users and participating distributors, resellers and merchants. For a more
comprehensive discussion of the business, see "Changes to the business of ACS as
a result of the Asset Purchase Agreement and the appointments of Messrs. Roder
and Eison as directors and officers of ACS in Item 5.
MARKET
According to the U. S. Census Bureau, there are 50 million immigrants in the
United States who spent over $880 billion in 2000, primarily in "cash" as many
do not have access to checking accounts and other banking services. Hispanics,
with 40 million people, are the largest and fastest growing ethnic group in the
United States. They spend over $500 billion domestically and are responsible for
$50 billion in money transfers to Central and South America. The estimated
annual growth is 3%.
It is estimated that only half of Latin American immigrants have bank accounts.
Many of these individuals are undocumented, which makes them unbankable. This
group is where the Company's initial marketing and product offering is focused.
The Company has developed competitive products to meet the anticipated needs of
its target market. The user fees for remittances are competitive with money
orders in many cases and the fees for obtaining a card and using it to transfer
money to another person outside the country are significantly lower than
telegraphic wire transfers. The Company believes fee sharing and sales
incentives it has developed will be sufficient to attract merchants,
distributors and direct sellers. The Company also believes there will be a
sizeable market for private-label products.
The Company recently revised and refined its marketing strategies. Initially,
the Company believed that a limited number of well-placed distributors would
quickly get a substantial number of cards into the hands of end-users. However,
the distributors were not successful in creating substantial market demand and
retail usage. The Company more recently accelerated the development of a three
tiered marketing model.
1. The Company is developing a direct sales force, which will be the
primary sales focus. The direct sales force will concentrate on
signing up new merchants in the top 25 Hispanic markets. The Company
is putting in place a network of approximately 250 sales
representatives managed by 25 sales managers, 5 district managers and
a national manager. The company also will have a national/key accounts
manager. The Company already has negotiations and pilot programs with
several national retailers.
8
2. The Company will continue to develop additional distributorships among
those currently selling goods and services to the Hispanic marketplace
through retail merchants. The strategy is to leverage existing
warehouse and specialty distributors, jobbers, service providers and
regional and national chains that already serve the ethnic/Hispanic
markets, managed and supported through the Company's sales support
team. The company has five top distributors geographically situated in
major target markets.
3. The Company will continue to actively pursue companies interested in
creating private-label products. The Company will provide a
streamlined product development program, get bank issuer and
MasterCard approvals, manufacturing and commission distribution.
Customers interested in their own private label products will be
responsible for marketing and distribution of their products. The
Company has already developed three private label products which are
currently being marketed.
RESULTS OF OPERATIONS
The Company did not have substantial sales in the most recent quarter or the
year to date. The first half of 2004 has been devoted to refining its marketing
tools, revising marketing strategies and exploring strategic partnerships
intended to provide more rapid expansion. There was virtually no revenue in the
previous comparable period, as the Company was beginning to develop its product
lines and exploring market strategies in 2003.
The Company assembled key management personnel in 2002 and retained these
persons through 2003 and 2004. A substantial amount of the compensation for such
persons was deferred. Effective at the end of 2003, approximately 70 percent of
the deferred compensation was converted to stock in American Card Services, Inc.
Approximately $243,000 of deferred compensation remains as a liability. However,
this conversion had no direct impact on the periods presented or operations for
the six months ended June 30, 2004. ACS payroll and other compensation expenses
accounted for approximately $370,000 and $191,000 ($14,000 non-cash) for the
quarter and six months ended June 30, 2004 respectively, and $242,000 ($139,000
non-cash) and $447,000 ($379,000 non-cash) for the quarter and six months ended
June 30, 2003.
The Company made extensive use of legal and other consultants for corporate
matters, product development, capital formation and other purposes. For the
quarter and six months ended June 30, 2004 the company expensed $97,000 and
$152,000, respectively for legal and professional fees. For the quarter and six
months ended June 30 2003, the expenses were $71,000 and $121,000, respectively.
In addition, the Company incurred stock-based compensation expense of
approximately $463,000 in the most recent quarter.
The only other individually significant item of operations was interest expense.
For the quarter and six months ended June 30, 2004, interest expense totaled
approximately $53,000 and $100,000, respectively. Of these amounts approximately
$22,000 and $40,000, respectively were to related parties. For the quarter and
six months ended June 30, 2002, interest expense totaled approximately $10,000
and $19,000, respectively, nearly all of which was to related parties. All of
the related party interest remains unpaid. The year-to-year increases reflect
increasing amounts of debt financing at rates commensurate with the risks of a
developing business.
Further statistical analysis would not provide helpful information, as the level
of sales volume and associated costs and expenses have varied widely since the
inception of ACS on September 6, 2002 because the Company continues to be in a
ramp-up phase.
FINANCING ACTIVITIES
During the most recent quarter and six months, the Company continued to search
for operating and development capital. Since January, the Company obtained the
proceeds from several short-term notes totaling $230,000, and in connection with
the ACS Holdings acquisition, has received $300,000 of a $445,931 short-term
commitment for 7% convertible subordinated debentures. The Company also received
$160,000 of long-term financing from an affiliate of the CEO.
9
RISK FACTORS
The market for similar products and services is competitive and some of those
involved are retail banking establishments with substantial resources. Although
the company has a management team experienced in the banking industry, the
Company is essentially in the early ramp-up stages of operations and is new in
the stored-value card market. The Company's marketing plan has not been
sufficiently tested and may not produce a profitable revenue stream. The Company
has not achieved a sales volume or a sales trend that would indicate when or if
it will generate sufficient revenues and gross profits to cover operating costs
and expenses. The company has limited capital resources. Without further
infusions of capital, the company will not be able to sustain operations. There
is no assurance that the Company will acquire enough capital to achieve
profitability
ITEM 3. CONTROLS AND PROCEDURES.
Within 90 days prior to the filing of this report, the Company carried out an
evaluation, under the supervision and with the participation of its management,
including the Chief Executive Officer, of the design and operation of its
disclosure controls and procedures. Based on this evaluation, the Company's
Chief Executive Officer concluded that the Company's disclosure controls and
procedures are effective for the gathering, analyzing and disclosing the
information the Company is required to disclose in the reports it files under
the Securities Exchange Act of 1934, within the time periods specified in the
SEC's rules and forms. There have been no significant changes in the Company's
internal controls or in other factors that could significantly affect the
internal controls subsequent to the date of this evaluation.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not a party to any material legal proceedings and to our
knowledge, no such proceedings are threatened or contemplated.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
SHARES OF COMMON STOCK ISSUED IN PRIVATE PLACEMENTS
On May 27, 2004, pursuant to a Finder Agreement dated April 2004, ACS issued
336,000,000 shares of common stock to Bartholomew International Investments,
LLC, a New York limited liability company ("Bartholomew"), and 84,000,000 shares
of common stock to Global Capital Trust, a St. Kitts and Nevis trust ("Global
Captial Trust). ACS relied upon Section 4(2) of the Securities Act of 1933, as
amended (the "Securities Act") for the issuance to Bartholomew and Rule
903(b)(3) of Regulation S, promulgated pursuant to the Act, for the issuance to
Global Capital Trust.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At a special meeting of the stockholders of ACS on May, 20, 2004, the holders of
a majority of the voting securities of ACS, consisting of the holders of
approximately 88,314,000 share of common stock, voted to approve an amendment to
the Articles of Incorporation of ACS, to increase the number of shares of common
stock insurable thereunder from 200 million shares to 5 billion.
On June 2, 2004, the holders of a majority of the voting securities of ACS,
consisting of the holders of approximately 336,000,000 share of common stock,
consented to action in lieu of holding and voting at a special meeting of the
shareholders to change the name of the registrant from "maxxxZone.com, Inc." to
"ACS Holdings, Inc."
10
ITEM 5. OTHER INFORMATION.
NEWLY APPOINTED DIRECTORS AND OFFICERS
On May 27, 2004, (i) Walter Roder was appointed Chairman of the Board, Chief
Executive Officer and Secretary of ACS, and (ii) David Eison was appointed
director and Treasurer of ACS. Messrs. Roder and Eison are directors and
officers of American Card Services, a Delaware corporation, substantially all of
whose assets were purchased, and substantially all of whose liabilities were
assumed, by ACS pursuant to that certain Asset Purchase Agreement dated April
21, 2004, by and between ACS (the named "maxxZone.com") and American Card
Services, Inc., a Delaware corpoation (the "Asset Purchase Agreement").
In connection with the appointment of Messrs. Roder and Eison and the
consummation of the transactions contemplated by the Asset Purchase Agreement,
ACS has a new business, further described below in the Item 5.
The biographies of Messrs. Roder and Eison are as follows:
WALTER RODER, AGE 57, DIRECTOR, CHIEF EXECUTIVE OFFICER, PRESIDENT AND SECRETARY
Mr. Roder co-founded American Card Services, a Delaware corporation, in August
2002. From 1994 to 1997, Mr. Roder was the Founder, CEO and President of
American Auto Funding Corporation, which was a sub-prime auto lender startup
that was sold to GE Capital in 1997 for $350 million. Prior to AAFC, Mr. Roder
ran a leading consulting firm that focused on major co-branding and affinity
credit and debit card programs for clients including Citibank, JP Morgan Chase,
BankOne and MBNA. He was also the driving force behind the banking industry,
including Banco Popular, adopting debt suspension waivers as a more profitable
and efficient form of credit insurance. Other corporate experience includes
positions as Sr. Vice President, Credit/Debit MasterCard at Citibank, Chief
Marketing Officer and Sr. Vice President, BankAmericard Credit/Debit MasterCard
and Diners Club Card at Bank of America and Executive Vice President, Credit
Card Development at Providian Bancorp. Mr. Roder has a BS and MS from Ohio
University
DAVID EISON, AGE 57, DIRECTOR AND TREASURER
Mr. Eison joined American Card Services, a Delaware corporation, in September
2002. For the prior four years at Banco Popular, Mr. Eison was responsible for
the operational startup of the U.S. Credit Card Division. This included the
development of the required voice and data technology solutions and the build
out of the facility. He also designed and developed the voice and data systems
for the U.S. National Consumer Banking Call Center and the Mortgage Banking
Division. Other corporate experience includes Sears World Trade, Ideon Group and
the U.S. Marine Corps Exchange Service. Mr. Eison attended Kingsboro College and
Brooklyn College, Brooklyn, NY.
AMENDMENTS TO BYLAWS
On May 27, 2004, the board of directors of ACS unanimously resolved to
amend the Bylaws of ACS so that:
(i) Section 1 of Article I of the Bylaws of the Corporation was amended
to include the following sentence at the end of Section 1 of Article I:
"If elected, the Chairperson of the Board of Directors (the "Chairperson" or
"Chairperson of the Board") shall perform such duties as shall be assigned to
him or her by the Board of Directors from time to time, and shall preside over
meetings of the Board of Directors and stockholders unless another officer is
appointed or designated by the Board of Directors as Chairperson of such
meetings."; and
(ii) Section 5 of Article III of the Bylaws of the Corporation was
amended to include the following sentence at the end of Section 5 of Article
III:
"The Chairperson of the Board of Directors shall have the deciding vote in the
event of a tie vote of the members of the Board of Directors."; and
11
Section 6 of Article III of the Bylaws of the Corporation was amended
to include the following sentence at the end of Section 6 of Article III:
"The Chairperson of the Board of Directors shall have the deciding vote in the
event of a tie vote of the members of the Board of Directors."
CHANGES TO THE BUSINESS OF ACS AS A RESULT OF THE ASSET PURCHASE AGREEMENT
AND THE APPOINTMENTS OF
MESSRS. RODER AND EISON AS DIRECTORS AND OFFICERS OF ACS
ACS's principal offices and operations center in Orlando, Florida. ACS leases a
6000 sq. foot corporate facility from Sand Lake West, Inc.
ACS is in the rapidly emerging stored-value debit card market that provides
unbanked ethnic markets with a card-based product that is a viable alternative
to cash and traditional money transfers. ACS is a full-service company
providing: data processing, customer service, distributor and sales support,
card production, marketing and sales stored-value debit card products and
programs.
ACS's retail product, the Ultima Card(TM) Twin-Access Debit Card Pack(TM), is
the most comprehensive and complete product and program in the market for
end-users and participating distributors, resellers and merchants. All in one
package, cardholders receive a two-card ATM/POS debit card product with free
replacement Debit MasterCard cards and a reloadable long distance (LD) calling
card. In addition to loading their cards at merchants that sell card packs,
cardholders are able to load their cards across the U.S. at over 10,000 bank
branches nationwide. Loads can be made at Bank of America's 4,500 branches,
Wells Fargo's 3,000 branches, Wachovia's 2,600 branches and Banco Popular's 300
strategically located branches totaling over 10,000 locations. Using bank
branches as load centers provide cardholders with a convenient alternative to
load their cards when traveling outside their ethnic community where the card
pack was purchased.
ACS has a fully approved program from MasterCard International and Key Bank USA,
a leading MasterCard issuer.
The ACS revenue sharing program provides the distribution channel with revenue
sharing from specific cardholder fees and supports up to five levels of
distribution from the distributor through the merchant. The ability of the
merchant to use their existing credit card terminals to load cards eliminates
the need for reprogramming cash registers or proprietary terminals. Some
competitive products also require merchants to open new bank accounts to load
cards.
ACS has produced 160,000 card packs and sold product to distributors. End-users
are now purchasing and activating card packs. ACS has built the infrastructure
to support up to one million card packs per year without significant increases
in overhead. ACS's Orlando Operations Center supports sales, marketing, card
pack production, data processing, customer service, the company's customer and
distributor website, and distribution channel disbursements.
ACS entered into strategic partnership with Key Bank as its Debit Card Issuer.
Cleveland-based KeyCorp is one of the largest bank-based financial services
companies in the US. Key companies provide investment management, retail and
commercial banking, consumer finance, and investment banking products and
services to individuals and companies throughout the United States and, for
certain businesses, internationally.
ACS has entered into a strategic partnership with Symmetrex as its credit
transactions processor. Symmetrex is a financial payments transaction processing
company uniquely capable of helping their customers deliver innovative and cost
effective financial payments and prepaid solutions in their markets. Symmetrex
transaction processing coupled with the capabilities of their business partner,
M2 Systems, a proven leader in the development of transaction processing
platforms and applications, enables their customers to differentiate their
offerings in their markets from the myriad of cookie-cutter, one-size-fits-all,
financial payment and prepaid processors. Symmetrex's i24 Product Suite consists
of a set of high availability, scalable transaction-processing solutions
designed for financial institutions that include fraud and risk management. The
i24 Product Suite is based on the M2 Systems Platform, a J2EE web services
framework which provides the i24Bank with the foundation and platform
infrastructure necessary to provide high availability, robust, financial
applications.
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ACS has contracted with Lighthouse Software to develop proprietary payment
distribution including the following functionalities: Database optimization,
Card, User, Sales Information, Internal Applications for Support and Tools,
Accounting with ACH functionality, Commissions and Residuals Reporting, Web
interface for Data Entry, Web Interface for Reporting, Importing of Transaction
Files, Exporting of Statement Files, E-mail/Fax Interfaces. Established in
October, 1998, Lighthouse Software Development is a custom software development
house providing customized solutions for the financial, credit card, and debit
Card Industry.
TRADEMARKS, PATENTS, LICENSES, & COPYRIGHTS
o American Card Services(TM)-Filed September, 2002
o American Merchant Services(TM)-Filed September, 2002
o American Bank Holdings(TM)-Filed September, 2002
o Twin-Access Debit Card Pack (Trademark Pending)-Filed September, 2002
o Ultima Card (Trademark Pending)-Filed December, 2003
o "Prosper From Our Experience" (Trademark Pending)-Filed September, 2002
o Financial Distribution Channel Database & Commission Management Proprietary
Software (Lighthouse Software-Pending)
ADDITIONAL RISK FACTORS AND UNCERTAINTIES
Readers should carefully consider the risks and uncertainties described below
before deciding whether to invest in shares of our common stock.
Our failure to successfully address the risks and uncertainties described below
would have a material adverse effect on our business, financial condition and/or
results of operations, and the trading price of our common stock may decline and
investors may lose all or part of their investment. We cannot assure you that we
will successfully address these risks or other unknown risks that may affect our
business.
BECAUSE OF OUR HISTORICAL LOSSES AND EXPECTED LOSSES IN THE FUTURE, IT WILL BE
DIFFICULT TO FORECAST WHEN ACS CAN ACHIEVE PROFITABILITY.
ACS acquired its current business on May 27, 2004, subsequent to the purchase of
assets and assumption of liabilities pursuant to the Asset Purchase Agreement.
We expect to incur losses for the foreseeable future, including for the year
ending December 31, 2005.
We have recently increased our operating expenses and expect further increases
in operating expenses to facilitate the commercialization of our technology and
marketing of our products over the next twelve months. We plan to increase our
operating expenses to expand our sales and marketing operations, to broaden our
customer support capabilities, expand our distribution channels, fund research
and development, and to increase our administration resources. A relatively high
percentage of our expenses is typically fixed in the short term as our expense
levels are based, in part, on our expectations of future revenue. We may not be
able to significantly increase our revenue in the near future. To the extent
that such expenses precede or are not subsequently followed by increased
revenue, our losses would increase and our business, operating results and
financial condition would be materially adversely affected. We currently do not
have any revenues and will need significantly revenues to achieve profitability.
Even if we do achieve profitability, we may be unable to sustain profitability
on a quarterly or annual basis in the future. It is possible that our revenues
will grow more slowly than we anticipate or that our operating expenses will
exceed our expectations.
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WE BELIEVE THAT PERIOD-TO-PERIOD COMPARISONS OF OUR FINANCIAL RESULTS ARE NOT
MEANINGFUL AND SHOULD NOT BE RELIED UPON AS AN INDICATION OF FUTURE PERFORMANCE
BECAUSE WE RECENTLY CHANGED THE FOCUS OF OUR BUSINESS PLAN AFTER ACQUIRING NEW
ASSETS.
On April 27, 2004, we acquired substantially all of the assets, and assumed
substantially all of the liabilities, of American Card Service, Inc. a Delaware
corporation, pursuant to the terms of an Asset Purchase Agreement dated April
21, 2004. We, therefore, have only a limited operating history within our
existing plan of operation and our historical results of operations are not
necessarily indicative of our future revenue and income potential in the
stored-value debit card market.
OUR HISTORY OF OPERATING LOSSES AND OUR NEED TO RAISE ADDITIONAL WORKING CAPITAL
MAKES OUR ABILITY TO CONTINUE AS A GOING CONCERN DOUBTFUL.
Our independent public accountants included a "going concern" explanatory
paragraph in their audit report on our December 31, 2003 financial statements,
which were prepared assuming that we will continue as a going concern, which
contemplates, among other things, the realization of assets and satisfaction of
liabilities in the normal course of business. Our financial statements do not
reflect any adjustments to the carrying value of assets and liabilities, the
reported expenses or the balance sheet classifications used that would be
necessary if the going concern assumption were not appropriate. If we are unable
to successfully increase our revenues and cash flows from our operations or to
raise sufficient capital to fund our plan of operation, we may be unable to
continue as a going concern and the market value of our common shares would be
materially adversely affected.
WE MAY NOT REALIZE A RETURN ON THE INVESTMENT REQUIRED TO COMMERCIALIZE OUR
PRODUCTS.
We estimate that our expense levels are relatively fixed and are based, in part,
upon our expectation of future costs required to commercialize products. We
cannot predict with certainty market acceptance of our products or the timing of
orders, if any, for our related product. If revenue levels fall below our
expectations, our anticipated results of operations will be disproportionately
affected because of the relatively fixed nature of our expenses and the small
variance in our expenses compared to our revenue. In particular, we plan to
increase our operating expenses to expand our sales and marketing operations,
expand our distribution channels, fund greater levels of research and
development, broaden our customer support capabilities and increase our
administrative resources. We may not meet our revenue expectations as a result
of a delay in completing a contract, the inability to obtain new contracts, the
cancellation of an existing contract or otherwise. Based upon all of the
foregoing factors, we believe that our quarterly revenue, direct expenses and
operating results are likely to vary significantly in the future, that
period-to-period comparisons of the results of operations are not necessarily
meaningful and that such comparisons should not be relied upon as an indication
of future performance.
TRADING ON THE OTC BULLETIN BOARD MAY BE SPORADIC BECAUSE IT IS NOT A STOCK
EXCHANGE, AND STOCKHOLDERS MAY HAVE DIFFICULTY RESELLING THEIR SHARES.
Our common stock is quoted on the OTC Bulletin Board. Trading in stock quoted on
the OTC Bulletin Board is often thin and characterized by wide fluctuations in
trading prices, due to many factors that may have little to do with a company's
operations or business prospects. Moreover, the OTC Bulletin Board is not a
stock exchange, and trading of securities on the OTC Bulletin Board is often
more sporadic than the trading of securities listed on a quotation system like
Nasdaq or a stock exchange like AMEX. Accordingly, you may have difficulty
reselling any of the stock you purchase from the selling stockholders.
THE RIGHTS OF STOCKHOLDERS ARE SUBJECT TO, AND MAY ADVERSELY AFFECTED BY, THE
RIGHTS OF HOLDERS OF ANY PREFERRED STOCK THAT MAY BE ISSUED IN THE FUTURE.
The existence of "blank check" preferred stock in ACS's Articles of
Incorporation could be used by ACS as an anti-takeover device. The issuance
shares of preferred stock with superior voting rights to shares of common stock,
could delay or inhibit the removal of incumbent directors and could delay,
defer, make more difficult or prevent a merger, tender offer or proxy content,
or any change in control involving ACS, as well as the removal of management,
even if such events would be beneficial to the interests of ACS's shareholders,
and may limit the price certain investors may be willing to pay in the future
for shares of common stock.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
A list of exhibits required to be filed as part of this Quarterly Report is set
forth in the Index to Exhibits, which immediately precedes such exhibits and is
incorporated herein by reference.
(b) Reports on Form 8-K
On May 11, 2004, ACS filed a Current Report on Form 8-K, disclosing under Item
2, Acquisition of Disposition of Assets, that Certain Asset Purchase Agreement
dated April 21, 2004, by and between ACS (then maed maxxZone.com") and American
Card Services, Inc., a Delaware corporation, pursuant to which ACS acquired
substantially all of the assets, and all of the liabilities, of ACS.
Additionally, under Item 5, Other Events and Regulation FD Disclosure, ACS
disclosed the appointment of Stephen J. Careaga to the ACS Board of Directors.
On July 7, 2004, ACS filed a Current Report on Form 8-K, disclosing under Item
4, changes in ACS's certifying accountant.
On July 20, 2004, ACS filed a Current Report on Form 8-K/A, amending its
disclosure under Item 4, changes in ACS's certifying accountant, filed on its
Current Report on Form 8-K on June 7, 2004.
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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.
ACS Holdings, Inc.
(Name of Registrant)
Date: September 9, 2004 By: /s/ Walter H. Roder II
----------------------------
Walter H. Roder II
Chief Executive Officer
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EXHIBIT INDEX
EXHIBIT NUMBER
EXHIBIT NUMBER DESCRIPTION
- -------------- ------------------------------------------------------------
3.1.1 Articles of Incorporation (1)
3.1.2 Form of Certificate of Amendment to Articles of
Incorporation (2)
3.1.3 Form of Certificate of Amendment to Articles of
Incorporation (2)
3.1.3 Form of Certificate of Amendment to Articles of
Incorporation (filed herewith)
3.1.4 Form of Certificate of Amendment to Articles of
Incorporation (filed herewith)
3.2.1 Bylaws (2)
3.2.2 Amended Bylaws (3)
3.2.3 Amendments to Bylaws, effective May 27, 2004 (filed
herewith)
31.1 Certification of Chief Executive Officer of ACS Holdings,
Inc. required by Rule 13a-14(a) or Rule 15d-14(a) of the
Securities Exchange Act of 1934, as amended.
32.1 Certification of Chief Executive Officer and Chief Financial
Officer of ACS Holdings, Inc. required by Rule 13a-14(b) or
Rule 15d-14(b) of the Securities Exchange Act of 1934, as
amended, and 18 U.S.C. Section 1350.
(1) Incorporated by reference to the exhibits to the Company's registration
statement on Form 10-SB, file number 000-33465, filed on December 31, 2001.
(2) Incorporated by reference to the exhibits to the Company's Current Report on
Form 10-KSB, file number 000-33465, filed on March 29, 2004.
(3) Incorporated by reference to the exhibits to the Company's Current Report on
Form 8-K, filed on December 11, 2003.
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