SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 1999
[_] Transition Report Under Section 13 or 15(d) of
The Exchange Act For the Transition Period
from _________________ to _________________
Commission File Number 000-____________
Access Power, Inc.
------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Florida 59-3420985
--------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10033 Sawgrass Dr., W, Ponte Vedra Beach, FL 32082
----------------------------------------------------------
(Address of principal executive office) (Zip Code)
Issuer's telephone number, including area code: (904) 273-2980
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 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 No X
--- ---
At May 8, 1999, there were issued and outstanding 30,550,408 shares of
Common Stock.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ACCESS POWER, INC.
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS March 31, December 31,
------ 1999 1998
----------- --------------
(unaudited)
<S> <C> <C>
Current assets:
Cash $ 9,009 $ 33,156
Accounts receivable 48,130 29,145
Notes receivable, stockholder 16,751 30,791
Prepaid expenses 192,500 -
Inventory 19,715 21,770
--------- ----------
Total current assets 286,105 114,862
--------- ----------
Property and equipment, net 1,034,136 1,131,471
Other assets 15,000 16,000
--------- ----------
Total assets $ 1,335,241 $ 1,262,333
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 1,622,212 $ 1,373,978
Notes payable 137,636 120,136
---------- ----------
Total current liabilities 1,759,848 1,494,114
---------- ----------
Stockholders' equity:
Common stock, $.001 par value, authorized 40,000,000 shares,
issued and outstanding 24,184,556 and 12,325,788 shares
in 1999 and 1998 24,185 12,326
Preferred stock, $.001 par value, authorized 10,000,000 shares,
issued and outstanding 275 and 1,050 shares in 1999 and 1998 - 1
Additional paid in capital 2,532,557 2,252,971
Deficit accumulated during the development stage (2,981,349) (2,497,079)
---------- ---------
Total stockholders' equity (424,607) (231,781)
---------- ---------
Total liabilities and stockholders' equity $ 1,335,241 $ 1,262,333
---------- ----------
</TABLE>
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended For the period
March 31, October 10, 1996
----------------------------- (date of inception)
1999 1998 through
(unaudited) March 31, 1999
----------------------------- -------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (484,270) $ (473,834) $ (2,974,905)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 81,405 9,239 430,224
Loss on disposal of property and equipment 6,880 - 33,341
Stock issued for services 210,000 52,188 210,000
Stock issued for interest 6,444 114,375 196,441
Change in operating assets and liabilities: -
Accounts receivable (18,985) (1,724) (48,130)
Accounts payable and accrued expenses 248,234 1,268 1,622,212
Other assets (192,500) (2,166) (215,666)
Inventory 2,055 - (19,715)
--------- --------- -----------
Net cash used in operating activities (140,737) (300,654) (766,198)
--------- --------- -----------
Cash flows from investing activities:
Proceeds from sale of property and equipment 10,050 - 50,320
Purchase of property and equipment - (12,862) (1,539,855)
Note receivable, stockholder 14,040 - (16,751)
--------- --------- -----------
Net cash used in investing activities 24,090 (12,862) (1,506,286)
--------- --------- -----------
Cash flows from financing activities:
Proceeds from issuance of stock 75,000 - 2,143,857
Proceeds from issuance of notes payable 25,000 300,000 155,025
Principal payments on notes payable (7,500) - (17,389)
--------- --------- -----------
Net cash provided by financing activities 92,500 300,000 2,281,493
--------- --------- -----------
Net change in cash (24,147) (13,516) 9,009
Cash, at beginning of period 33,156 54,086 -
--------- --------- -----------
Cash at end of period $ 9,009 $ 40,570 $ 9,009
========= ========= ===========
</TABLE>
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended For the period
March 31, October 10, 1996
----------------------------- (date of inception)
1999 1998 through
(unaudited) March 31, 1999
----------------------------- --------------------
<S> <C> <C> <C>
Revenue:
Product Sales $ 6,850 $ - $ 221,281
Services 7,700 3,095 61,219
------------ ----------- -----------
Total revenue 14,550 3,095 282,500
------------ ----------- -----------
Costs and expenses:
Cost of sales 2,055 - 163,705
Product development and marketing 227,339 115,958 996,495
General and administrative 261,294 244,894 1,971,267
------------ ----------- -----------
Total costs and expenses 490,688 360,852 3,131,467
------------ ----------- -----------
Other income (expense):
Other income - 35 2,295
Interest expense (8,132) (116,042) (134,677)
------------ ----------- -----------
Total other income (expense) (8,132) (116,077) (132,382)
------------ ----------- -----------
Net loss $ (484,270) $ (473,834) $ (2,981,349)
============ =========== ===========
Net loss per share (0.03) (0.04) (0.25)
============ =========== ===========
Weighted average number of shares 16,979,668 11,621,500 12,086,192
============ =========== ===========
</TABLE>
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
A. Basis of Presentation Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed and omitted
pursuant to such rules and regulations, although management believes the
disclosures are adequate to make the information presented not misleading.
These interim financial statements should be read in conjunction with the
Company's annual report and most recent financial statements included in its
report on Form 10-KSB for the year ended December 31, 1998 filed with the
Securities Exchange Commission. The interim financial information included
herein is unaudited; however, such information reflects all the adjustments
(consisting solely of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair statement of results of
operations and cash flows for the interim periods. The results of operations
for the three months ended March 31, 1999 are not necessarily indicative of
the results to be expected for the full year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND
NOTES APPEARING ELSEWHERE IN THIS REPORT.
PLAN OF OPERATION
Overview
Access Power, Inc. was formed in 1996 to offer Internet-based
communications products and services in the U.S. and international markets.
The Company is creating a network of Internet gateway servers to provide
voice and multimedia communications services, more commonly referred to as
Internet Protocol telephony or IP telephony. Access Power has deployed its
servers in ten major metropolitan service areas in the U.S., and it has
plans for continued expansion throughout 1999.
From its inception the Company has devoted most of its efforts to
technical analysis, development, procurement, implementation and testing,
and the establishment of the corporate and technical policies and procedures
necessary to support its business requirements. The Company is a
development stage operation.
Access Power's IP telephony gateway network allows the Company to offer
competitive call rates while providing premium communications features.
Access Power products and services are based on Personal Computer ("PC")-to-
PC, PC-to-Phone, and Phone-to-Phone communications. Customers anywhere in
the world can use their PC and software from the Company to place unlimited
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calls to telephones anywhere in the United States for $10 per month. In
addition, customers in one of the Company's service areas can make a call
with their telephone through the Company's service to another telephone
anywhere in the United States for 7 cents a minute and to most countries in
Central and South America for 50 cents a minute without the need for
personal Internet access. The Company charges $20 for account activation.
Similar, low-cost pricing models are being developed for other international
markets.
The Company is a reseller of third-party PC telephone software called
Internet Phone, and it is having a software product called "e-button"
developed for marketing to companies with Web sites. The e-button is an
icon residing on a Web site that connects a consumer browsing a Web page to
a Company's call center. This technology allows corporate customers to
voice-activate their Web site, connecting consumers directly with sales
departments, customer service or technical support.
While in its start-up and current development stages the Company tested
and preliminarily introduced certain products and services new to both the
Company and the communications industry. To date, the Company has not
realized revenues from sales of any products or services in amounts
necessary to support all of its cash operating needs. Without additional
outside funding, the Company will be unable to carry out any of its
expansion or marketing plans, and it may be unable to continue operations.
Expansion Plans
The Company believes it must expand its gateway network and its
customer base to achieve profitability. During the next twelve months, the
Company intends to add ten more gateway servers in the U.S. market,
expanding its presence to twenty cities. The Company purchased sufficient
equipment in June 1998 to bring those sites on line and pursue international
expansion. The Company still owes in excess of $1,000,000 for this
equipment. The new U.S. sites will increase the Company's U.S. capacity by
288 lines to 428 lines. It is anticipated that the additional capacity will
permit significant growth in the volume of traffic handled by the Company's
network, and a commensurate increase in revenues.
The Company intends to expand its network internationally through joint
ventures and other business relationships. Such expansion will increase the
Company's revenues without causing the Company to incur significant capital
expenditures. By selling the hardware and software necessary for creating
networks in other countries or regions to its business partners, and through
royalty or other fees from international traffic realized through the
international business expansion, the Company expects to derive significant
additional revenues over the next year from international operations.
Software Sales
To date, the Company has realized only small revenues from the resale
of software to its customers, and it does not expect such sales to become a
significant source of profit in the future. During the next year, however,
the Company does intend to begin marketing the e-button software, and it
expects to realize a fair amount of revenues from those sales.
3
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Marketing
The Company has not yet engaged in any significant effort to market its
products and services. Over the next twelve months, the Company intends to
implement a comprehensive public relations and marketing campaign along with
establishing arrangements with communications brokers or agents. Public
relations and certain marketing is expected to cost $50,000 and stock with a
present fair market value of $400,000 to $500,000. International
communications agents or brokers are delivering wholesale traffic to the
Company and will be compensated on a commission basis. Without the benefit
of significant marketing to date, the Company already has attracted over
2000 customers to its service just from the Company's Web site order
process, test market newspaper ads and word of mouth.
Raising Capital
The Company does not currently have the funds to remain in operation or
the capital to fund its current expansion and marketing plans for the next
twelve months. The Company anticipates that by the end of that period it
will be able to fund its operations from the recurring revenue generated
from network usage. To the extent such recurring revenues fall short of the
projected needs, the Company would have to seek additional sources of
outside funding.
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31,
1998
Revenues and Costs of Revenues. The Company realized no revenue from
the sale of software in the three months ended March 31, 1998 compared to
software sales of $6,850 in the three months ended March 31, 1999. The
revenue generated from sale of services increased $4,605 from $3,095 during
the three months ended March 31, 1998 to $7,700 during the three months
ended March 31, 1999. Cost of software sold during the three months ended
March 31, 1999 was $2,055.
Expenses. Product development and marketing expenses were $227,339 for
the three months ended March 31, 1999; an increase of $111,381, or almost
100%, over such expenses for the three months ended March 31, 1998. The
telephone and internet connection charges represent $27,710 of this increase
as the Company increased deployment of its network. In addition depreciation
and amortization expenses increased $71,075 from the three months ended
March 31, 1998 reflecting the increase in capital expenditures during the
last nine months of 1998. General and administrative expenses increased
nearly $10,000, or 4%, from $244,894 for the three months ended March 31,
1998. Payroll expense was the major portion of this increase as it totaled
$172,699, an increase of $41,586, or 31%, from the three months ended March
31, 1998 total of $131,113. The aforementioned increase was offset by a
decrease in travel expenses of $13,103 from $17,003 during the three months
ended March 31, 1998 and a decrease in outside temporary help of $7,150
from $7,599 during the three months ended March 31, 1998 as the Company
initiated its cost reduction policy.
4
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LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations through
the proceeds from the issuance of equity securities and loans from
stockholders. To date, the Company has raised approximately $2,150,000 from
the sale of common stock and preferred stock, and it has borrowed
approximately $310,000 from investors and stockholders. Funds from these
sources have been used as working capital to fund the build-out of the
Company's network and for internal operations, including the purchases of
capital equipment.
The Company generated negative cash flow from operating activities for
the period from inception (October 10, 1996) through March 31, 1999. The
Company realized lesser negative cash from operating activities for the
three months ended March 31, 1999 due to a slow down in paying expenses
including the deferring of executive payroll.
Investing activities for the period from inception through March 31,
1999 consisted primarily of equipment purchases to build out the initial
network. Investing activities in the three months ended March 31, 1999 and
the three months ended March 31, 1998 were minimal.
The timing and amount of the Company's capital requirements will depend
on a number of factors, including demand for the Company's products and
services and the availability of opportunities for international expansion
through joint ventures or other business relationships.
The Company expects to invest approximately $2,000,000 over the next
twelve months in capital equipment for network expansion, if it can raise at
least that amount through the sale of equity or debt securities. The
Company is performing ongoing cost benefit analysis to ensure that any
existing under utilized equipment is made available for re-deployment to
prolong the necessity to acquire new equipment.
The Company raised $75,000 in January 1999 from the sale of 75 shares
of Series A Preferred Stock for $1,000 per share and $150,000 in April from
the sale of 1,500,000 shares of common stock.
The Company has taken steps to reduce the monthly negative cash flow
("burn rate") and lessen the impact of the negative working capital
position. The main step has been the reduction of payroll expenditures, by
executives agreeing to defer pay until further financing is received, by not
filling a resigned position and by reducing hourly pay expenses. The
Company's relations with its vendors are positive and include a strong
credit history resulting in suppliers and vendors assisting the Company in
reducing short term costs and extending payments. Burn rate reduction is
also being achieved with the suspension of certain general activities and
expenses including but not limited to travel, training and public relations.
While the Company believes that its cash used in operating activities will
increase over the next year, near term cash flow reductions are being
considered particularly in the main expense items of salaries and network
management.
The Company's financing activities for the three months ended March 31,
1999 provided a net total of $92,500. Cash at the end of that period was
$9,009. As of April 27, 1999, the Company had cash of $63,000 and working
5
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capital of ($1,244,000). The Company is currently expending approximately
$125,000 per month, which amount includes monthly co-location costs or
network infrastructure, systems maintenance and development, payments for
equipment, general and administrative costs. The Company believes that its
cash used in operating activities will increase over the next year. The
Company needs to raise additional funds through public or private financing.
Any additional equity financing may be dilutive to the Company's existing
stockholders, and debt financing, if available, may involve pledging some or
all of the Company's assets and may contain restrictive covenants with
respect to raising future capital and other financial and operational
matters.
The timing and amount of the Company's capital requirements will depend
on a number of factors, including demand for the Company's products and
services and the availability of opportunities for international expansion
through joint ventures or other business relationships.
YEAR 2000
Since its inception and as a development stage Company the Company has
implemented solutions to the year 2000 problem as it has built its systems
solutions and developed its policies and procedures for both technical and
administrative purposes.
The Company believes it is in a high state of readiness regarding year
2000 and is at minimal risk. Costs associated with year 2000 solutions are
incorporated in all the Company's computer administrative information
systems and technical development.
As standard operating procedure the Company inquires as to the
readiness of any customers and suppliers in handling potential year 2000
problems.
The Company does not foresee substantial direct or indirect costs
associated with its implementation or any affiliate's implementation of year
2000 solutions.
There are no assurances that the Company and all of its key suppliers,
customers or third parties upon which it relies will completely address and
solve the potential problem and by not doing so could result in an adverse
material effect on the Company, its financial condition or results on
operations.
CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The statements contained in the section captioned Management's Discussion
and Analysis of Financial Condition and Results of Operations which are not
historical are "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking
statements represent the Company's present expectations or beliefs
concerning future events. The Company cautions that such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the
6
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Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among other things, the uncertainty as to the Company's
ability to obtain financing on acceptable terms to finance the Company's
operations and growth strategy, acceptance of the Company's technology and
services in the market place, telecommunications industry trends towards
solutions not addressed by the Company's business, increasing competition in
the information technology services market, the ability to hire, train and
retain sufficient qualified personnel, and the ability to develop and
implement operational and financial systems to manage the Company's growth.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In January 1999 the Company sold 50 shares of Series A Preferred Stock
at an offering price of $1000 per share to T. Wayne Davis. The Company
claims an exemption from registration under Section 4(2) of the 1933
Securities Act for this offer and sale. The securities were offered and
sold to one investor who the Company believed was an accredited investor.
In connection with this transaction and at the same time, the Company also
issued 28,846 shares of Common Stock to Robert Monsky, as payment of a
finder's fee. The Company believes that Mr. Robert Monsky is an accredited
investor, and the Company claims an exemption from registration under
Section 4(2) of the Act for this transaction. In each case the investor was
provided a copy of the Company's prospectus included in its current resale
registration statement on Form SB-2, as amended (Regis. No. 333-65069)
(the "Resale Prospectus").
In January 1999 the Company sold 25 shares of Series A Preferred Stock
at an offering price of $1000 per share to Robert Monsky. The Company
claims an exemption from registration under Section 4(2) of the Act for this
offer and sale. The securities were offered and sold to one investor who
the Company believed was an accredited investor. Mr. Monsky had just
recently been issued Common Stock as a finder's fee and had a copy of the
Resale Prospectus.
In April 1999 the Company sold 1,500,000 shares of common stock for
$150,000 to One Stop Communications, Inc. The Company claims an exemption
from registration under Section 4(2) of the Act for this offer and sale.
The investor had access to a copy of the Company's Resale Prospectus.
All of the foregoing investors agreed to acquire their securities for
investment and not with a view to the distribution thereof, and the
certificates representing the securities issued to each such participant
contained a legend to the effect that such securities were not registered
under the Act and could not be transferred except pursuant to a registration
statement which has become effective under the Act, or an exemption from
such registration requirement. The issuance of such securities was not
underwritten.
7
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule (for SEC use only)
(b) No Reports on Form 8-K were filed during this period
SIGNATURES
In accordance with the requirements of the Exchange Act, the Company
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ACCESS POWER, INC.
By: /s/ Glenn A. Smith Date: May 7, 1999
------------------------------------
Glenn A. Smith
President
/s/ Howard Kaskel Date: May 7, 1999
- ---------------------------------------
Howard Kaskel
Chief Financial Officer
(principal financial and accounting officer)
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 9,009
<SECURITIES> 0
<RECEIVABLES> 64,882
<ALLOWANCES> 0
<INVENTORY> 19,715
<CURRENT-ASSETS> 286,105
<PP&E> 1,523,650
<DEPRECIATION> 489,514
<TOTAL-ASSETS> 1,335,241
<CURRENT-LIABILITIES> 1,759,848
<BONDS> 0
0
0
<COMMON> 24,185
<OTHER-SE> (448,792)
<TOTAL-LIABILITY-AND-EQUITY> 1,335,241
<SALES> 14,550
<TOTAL-REVENUES> 14,550
<CGS> 2,055
<TOTAL-COSTS> 488,533
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,132
<INCOME-PRETAX> (484,270)
<INCOME-TAX> 0
<INCOME-CONTINUING> (484,270)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (484,270)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
