Registration No. 333-65069
As filed with the Securities and Exchange Commission on February 16, 1999
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
AMENDMENT NO. 3
________________
ACCESS POWER, INC.
(Name of small business issuer)
<TABLE>
<CAPTION>
<S> <S> <C>
Florida 4813 59-3420985
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(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
10033 Sawgrass Drive West
Suite 100
Ponte Vedra Beach, Florida, USA 32082
(904) 273-2980
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(Address and telephone number of principal executive offices)
____________________________________
Glenn A. Smith
10033 Sawgrass Drive West
Suite 100
Ponte Vedra Beach, Florida, USA 32082
(904) 273-2980
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(Name, address and telephone number of agent for service)
__________________
Copies to:
Dennis J. Stockwell
Kilpatrick Stockton LLP
1100 Peachtree Street, Suite 2800
Atlanta, Georgia 30309
(404) 815-6500
(404) 815-6555 (fax)
__________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes
effective.
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act of 1933,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for
the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to
Rule 434 check the following box. / /
__________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL
THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY
STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF
1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
10,000,000 Shares
[LOGO]
ACCESS POWER, INC.
Common Stock
____________
The shares of common stock, par value $.001 per share (the
"Common Stock"), of Access Power, Inc. (the "Company") offered hereby
(the "Offering") are being offered by stockholders of the Company (the
"Selling Stockholders"). The Company will not receive any proceeds
from the sale of shares by the Selling Stockholders. The Selling
Stockholders may sell their shares from time to time directly or
through underwriters, dealers or agents, in market transactions on the
OTC Bulletin Board, on any national securities exchange or automated
quotation system on which the Common Stock may be listed or traded,
including block trades or ordinary brokers transactions, or in
privately negotiated transactions. The price at which the Selling
Stockholders will sell their shares, and the commissions, if any, paid
in connection with any sale, may be privately negotiated, may be based
on then prevailing market prices and may vary from transaction to
transaction and as a result are not currently known. See "PLAN OF
DISTRIBUTION."
The Common Stock currently is traded over the counter ("OTC") ,
and bid and asked prices are quoted and the last sale is reported on
the OTC electronic bulletin board maintained by the National
Association of Securities Dealers (the "Bulletin Board") under the
symbol "ACCR." On January 29, 1999, the last bid price of the Common
Stock as reported on the Bulletin Board was $0.27.
The Selling Stockholders and any broker-dealers participating in
the distribution of the shares may be deemed to be "underwriters"
within the meaning of the 1933 Act, and any commissions or discounts
given to any such broker-dealer may be regarded as underwriting
commissions or discounts under the 1933 Act. The shares have not been
registered for sale by the Selling Stockholders under the securities
laws of any state as of the date of this Prospectus. Brokers or
dealers effecting transactions in the shares should confirm the
registration thereof under the securities laws of the states in which
transactions occur or the existence of any exemption from
registration.
The Company will pay certain of the legal and other expenses of
this offering (estimated to be $40,000), except that the Selling
Stockholders will bear the cost of any brokerage commissions or
discounts or other selling expenses incurred by the Selling
Stockholders in connection with the sale of their shares.
No dealer, salesperson or other person has been authorized to
give any information or to make any representations not contained, or
incorporated by reference, in this Prospectus and, if given or made,
such information or representation must not be relied upon as having
been authorized by the Company or the Selling Stockholders. This
Prospectus does not constitute an offer to sell or the solicitation of
any offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer
in such jurisdiction. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any
implication that the information herein is correct as of any time
subsequent to the date hereof or that there has been no change in the
affairs of the Company since such date.
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. (SEE "RISK
FACTORS" BEGINNING ON PAGE 5.)
_____________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_____________
The date of this Prospectus is February __, 1999
SUMMARY
The following summary is qualified in its entirety by the more
detailed information, including "Risk Factors" and financial
statements, including the notes thereto, appearing elsewhere in this
Prospectus. Unless otherwise indicated, the information contained in
this Prospectus assumes that all shares of Series A Convertible
Preferred Stock ("Preferred Stock") have been converted to Common
Stock.
Access Power, Inc. was formed to offer Internet-based
communications products and services in the U.S. and international
markets. The Company is one of the first companies to offer a means
for voice and multi-media communications over the Internet, a service
which is commonly referred to as Internet Protocol telephony or IP
telephony. The Company is in the development stage.
The Company's voice-over-IP service (known as Access Power
Advanced Communications(TM) (APAC)) integrates traditional functions with
advanced Internet-based communications technology. APAC enables users
to connect long distance over the Internet from a multi-media personal
computer (PC) to a regular telephone or from a regular telephone to
another regular telephone with a significant reduction in costs over
that of traditional long distance telephony. Through this service, a
long distance telephone call can be placed from over the Internet to
telephones in any area where Access Power provides gateway service
without the use of traditional long distance lines. Currently, the
Company has such service available for calls to telephones in ten
metropolitan cities in the states of Arizona, Florida, Texas and Utah.
Calls to other locations may be made through the Company's services,
but regular long-distance services will be necessary to complete the
call from the location of one of the Company's gateway servers, and
the cost to the user is slightly higher. At this time, telephone-to-
telephone calls may only be originated at locations near one of the
Company's gateways through a local call to the server.
In addition to the cost savings associated with Internet
telephony, the Company's customers will have available to them
services that are not available through traditional long distance
networks, such as interactive document and data sharing and multi-
media data transmissions (including video).
In connection with the telephony services, the Company will be
reselling to the customer a Netspeak Corporation PC telephone software
package called WebPhone. The Company also will be developing and
marketing e-button software, which provides a convenient means for
someone viewing a company's Website to be immediately connected by
telephone with the company's call center.
The Company has entered into an agreement with a Texas company to
provide international Internet telephone services between the U.S.
and Manila in the Phillipines. The Company intends to pursue other
international expansion via joint venture and other business arrangements
throughout South America, Europe, Africa and the Pacific Rim.
The Company's strategy to become one of the world's leading
providers of international IP telephony products and services
includes: continued expansion of its international IP telephony
gateway network through joint venture partnerships and other business
relationships in the targeted regions; leveraging of the network and
its inherent low operating costs to provide discount retail and
wholesale international calling services; exploitation of new
technology; and the continued development of enhanced products and
services to complement the Company's international IP telephony
gateway server network.
2
<PAGE>
The Company was incorporated in Florida in October 1996. The
Company's principal executive offices are located at 10033 Sawgrass
Drive West, Suite 100, Ponte Vedra Beach, Florida, USA 32082, and its
telephone number is (904) 273-2980.
The Offering
Common Stock offered by Selling 10,000,000 shares <F1>
Stockholders
Common Stock to be outstanding 20,939,567 shares <F1><F2>
after the Offering
OTC Bulletin Board symbol "ACCR"
___________________
[FN]
<F1> The offered shares include (i) 7,874,016 shares of Common Stock
that may be acquired by holders of the Preferred Stock upon
conversion thereof, based on a five-day average market price of
$0.254 per share, for the period ended January 29, 1999, but subject
to adjustment for the applicable average market price at the time of
conversion under the conversion formula (see "Description of Capital
Stock - Preferred Stock"); (ii) 587,950 shares of Common Stock that
may be acquired pursuant to the exercise of an outstanding warrant;
and (iii) 844,433 shares which are currently issued and outstanding.
<F2> Does not include outstanding options to purchase 2,218,000 shares of
Common Stock (having a weighted average exercise price of $0.4495 per
share). Shares to be outstanding as presented here assumes the maximum
of 10,000,000 shares are sold by the Selling Stockholders. Applying the
conversion formula for the Preferred Stock as described in this
prospectus, the outstanding amount after this offering would be
20,365,399 shares. The actual number of shares issuable upon
conversion of the Preferred Stock may vary as described in footnote
#1 above, but no more than 10,000,000 shares (conversion shares and
previously held shares) may be resold under this prospectus.
Henceforth in this prospectus the maximum number of shares that
could be acquired through conversion of Preferred Stock and
resold under this prospectus will be presented as determined in
footnote #1 above.
</FN>
3<PAGE>
SUMMARY FINANCIAL DATA
The summary financial data of the Company set forth below for the
year ended December 31, 1997 is derived from the audited Financial
Statements of the Company for that period included elsewhere in this
Prospectus. The summary financial data for the nine months ended
September 30, 1997 and 1998 and as of September 30, 1998 are derived
from unaudited financial statements included elsewhere in this
Prospectus, which, in the opinion of the Company reflect all
adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial condition and
results of operations. These historical results are not necessarily
indicative of the results that may be expected in the future. The
summary financial data are qualified by reference to and should be
read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the Financial
Statements and Notes thereto and other financial data included
elsewhere in this Prospectus.
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<CAPTION>
Year Ended Nine Months Ended September 30,
December 31,
1997 1997 1998
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<S> <C> <C> <C>
Statement of Operations Data
Revenues
Product Sales . . . . . . . . . . - - $ 212,092
Services . . . . . . . . . . . . . - - 42,089
---------- --------- ------------
Total revenues . . . . . . . . . - - 254,181
Cost of revenues
Product Sales . . . . . . . . . . - - 152,920
Services . . . . . . . . . . . . . - - -
---------- --------- ------------
Total cost of revenues . . . . . - - 152,920
Gross margin . . . . . . . . . . - - 101,261
Total operating expenses . . . . . . 426,156 238,583 1,578,707
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Income (loss) from operations . . . . (426,156) (238,583) (1,477,446)
Interest expense, net . . . . . . . . 282 170 117,302
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Income (loss) before income taxes . . (426,438) (238,753) (1,594,748)
Income tax expense . . . . . . . . . - - -
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Net income (loss) . . . . . . . . . $ (426,438) $(238,753) $ (1,594,748)
========== ========= ============
Income (loss) per share . . . . . . . $ (0.04) $ (0.03) $ (0.14)
========== ========= ============
Weighted average shares outstanding . 9,742,000 8,000,000 11,706,220
</TABLE>
<PAGE>
September 30, 1998
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(Unaudited)
BALANCE SHEET DATA
Cash and cash equivalents........................... $ 28,904
Working capital..................................... (1,221,060)
Total assets........................................ 1,416,772
Long-term debt, less current portion................ 100,000
Stockholders' equity (deficit) ..................... 81,970
________________
Access Power Advanced CommunicationsTM is a trademark of the
Company. All other trademarks and trade names referred to in this
Prospectus are the property of their respective owners.
4
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY
INVOLVES A DEGREE OF RISK. IN ADDITION TO THE OTHER INFORMATION IN
THIS PROSPECTUS, THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED
CAREFULLY IN EVALUATING AN INVESTMENT IN THE COMMON STOCK. THIS
PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS (AS SUCH TERM
IS DEFINED IN THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT")) CONCERNING THE COMPANY, INCLUDING, IN PARTICULAR, THE
LIKELIHOOD OF THE COMPANY'S SUCCESS IN DEVELOPING AND EXPANDING ITS
BUSINESS. THESE STATEMENTS ARE BASED UPON A NUMBER OF ASSUMPTIONS AND
ESTIMATES WHICH ARE INHERENTLY SUBJECT TO SIGNIFICANT UNCERTAINTIES,
MANY OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY. ACTUAL RESULTS
MAY DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-
LOOKING STATEMENTS. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY INCLUDE, BUT ARE NOT LIMITED TO, THOSE SET FORTH BELOW.
DEVELOPMENT STAGE COMPANY; SHORT OPERATING HISTORY.
The Company was formed in October of 1996 and is in the
development stage. To date, the Company has had minimal revenue. The
Company has limited operating history upon which investors may base an
evaluation of its likely performance. The Company's prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in an early stage of development,
particularly companies in new and rapidly evolving industries. To
address these risks and achieve profitability and increased sales
levels, the Company must, among other things, establish and increase
market acceptance of its technology, products and services, expand the
deployment of its network, increase its customer base substantially,
and successfully market and support its products and services. There
can be no assurance that the Company will achieve or sustain
significant sales or profitability in the future.
UNCERTAINTY OF PRODUCT ACCEPTANCE; NEW PRODUCT DEVELOPMENT RISKS.
The markets for the Company's technology, products and services
have only recently begun to develop and are rapidly evolving. In
addition, the Company's products and services are new and based on
emerging technologies. As is typical in the case of new and rapidly
evolving industries, demand and market acceptance for recently
introduced technology and products are subject to a high level of
uncertainty. Broad acceptance of the Company's technology, products
and services is critical to the Company's success and ability to
generate revenues. There can be no assurance that the Company will be
successful in obtaining market acceptance of its technology, products
and services. Relative lower quality of voice transmissions through
the Company's network compared to traditional long-distance services
will be a factor in the early acceptance of the Company's services.
RISKS OF RAPID TECHNOLOGICAL CHANGE.
The introduction of products and systems which offer applications
incorporating new technologies could render the Company's products and
services less marketable or subject to downward price pressures.
Further, the markets for the Company's products and services,
including the market for voice transmission over packetized data
networks, are characterized by evolving industry standards and
specifications. As new standards or specifications are adopted, the
Company may be required to devote substantial time and expense in
order to adapt its technology, products and services. The Company's
ability to anticipate changes in technology and industry standards and
successfully develop and introduce enhanced products and services as
well as new products and services, in each case in a cost effective
and timely manner, will be a critical factor in the Company's ability<PAGE>
to grow and be competitive. There can be no assurance that the Company
will successfully develop enhanced or new products and services, that
any enhanced or new products and services will achieve market
acceptance, that the Company will be able to adapt its products and
services to comply with new standards or specifications, or that the
introduction of new products or services by others will not render the
Company's technology, products and services obsolete.
PRICING PRESSURES.
As a result of existing excess international transmission capacity,
the marginal cost of carrying an additional international call is often
very low for certain traditional long distance carriers. Industry observers
have predicted that these low marginal costs may result in significant
pricing pressures and that, within a few years after the end of
5<PAGE>
this century, there may be no charges based on the distance a call is
carried. If this type of pricing were to become prevalent in the markets
on which the Company focuses, it would likely have a material adverse
effect on the Company's prospects, financial condition and results of
operations.
LIMITED MARKETING EFFORTS; RELIANCE ON STRATEGIC PARTNERS.
The Company's marketing efforts primarily involve the development
of strategic alliances with partners in the United States and outside
of the United States and, to a lesser extent, in-house marketing. The
Company's performance is substantially dependent on its ability to
develop strategic alliances with marketing partners which will promote
the Company's technology, products and services. To date, the Company
has established a significant business relationship with only one
entity outside the U.S. There can be no assurance that the Company
will be successful in consummating any future strategic alliances. In
countries where the Company seeks to establish strategic alliances, it
must, among other things, recruit, hire and train personnel, establish
offices, obtain regulatory authorization, lease transmission lines
from, and obtain interconnection agreements with, telecommunications
carriers that own intra-national transmission lines and install
hardware and software. The Company has limited experience dealing with
these problems outside the U.S.
NEED FOR ADDITIONAL FINANCING.
The Company currently has almost no funding and no commitment for
funding. The Company's ability to expand its Internet telephony
network and to develop new products and services will depend on its
ability to obtain additional debt or equity funding. The Company may
need to seek additional capital regardless of market conditions if the
Company identifies desirable infrastructure investment, if the Company
experiences unanticipated costs or competitive pressures or if the net
proceeds from any capital-raising efforts prove to be insufficient for
the Company's operating needs. There can be no assurance that the
Company will be successful in securing any additional financing.
Factors which could affect the Company's access to the capital
markets, or the costs of such capital, include changes in interest
rates, general economic conditions and the perception in the capital
markets of the Company's business, results of operations, leverage,
financial condition and business prospects. Each of these factors is
to a large extent subject to economic, financial, competitive and
other factors beyond the Company's control. Additional funding, from
public or private debt or equity financing or from strategic alliances
may not be available at all, may not be available when needed or may
not be available on terms acceptable to the Company. Additional
equity financings may result in dilution to existing stockholders.
The Company has no policy involving the incurrence or maintenance of
any particular level of indebtedness, and its organizational documents
do not limit the amount of indebtedness that it may incur. The
Company may seek to borrow needed funds, rather than further diluting
its existing stockholders, if it were to have an opportunity to do so
deemed reasonable by management. If the Company were to incur
additional indebtedness, it would be subject to the risks normally
associated with debt financing, including the risk that the Company's
cash flow would be insufficient to meet required payments of principal
and interest, and to the extent that it cannot, the risk that the
Company would lose all or some of its assets or be forced to seek
protection from creditors, including protection under bankruptcy laws.
In addition, the Company may become subject to additional or more
restrictive financial covenants. Failure to secure additional
financing, if and when needed, may have a material adverse effect on
the Company's business, financial condition, and results of
operations. The failure to obtain additional funds may cause the<PAGE>
Company to cease or curtail operations and result in a complete loss
of any value of the Company's securities.
The Company will be seeking a new round of financing within the
next 12 months. The Company has made no determination as to whether
that round of financing, or any other financings over the next 12
months, would likely be in the form of equity, debt, or convertible
debt. The Company currently has no agreements or understandings with
any person with respect to the sale or issuance of any additional
securities during that period.
NO INTENTION TO PAY DIVIDENDS.
The Company presently intends to retain its earnings to finance
its growth and expansion and for general corporate purposes. In the
future, the declaration and payment of dividends on the Common Stock,
if any, will depend upon the earnings and financial condition of the
Company, liquidity and capital requirements, the general economic and
regulatory climate, the Company's ability to service any equity or
debt obligations senior to the Common Stock
6<PAGE>
and other factors deemed relevant by the Company's Board of Directors.
Holders of the Company's Preferred Stock have the right to dividends
declared with respect to the Common Stock on an as-converted basis.
LACK OF EXPERIENCE IN DOMESTIC TARGET MARKET.
The Company will seek to market its products to the "SOHO" (small
office / home office) market and to institutions throughout the United
States. Although the Company's principals have had substantial
experience in other endeavors, there can be no assurance that the
Company will be successful in establishing this one.
DEPENDENCE ON ONE EQUIPMENT SUPPLIER.
The Company purchases all of its Internet telephony hardware,
software, firmware, including gateway servers, and network management
servers and client software from NetSpeak Corporation, which has
granted the Company volume discounts and also provides financing for,
and maintenance of, this equipment. NetSpeak provides twelve months
of maintenance and support services for the sum of eight percent (8%)
of the total purchase price of the NetSpeak products. For that Net
Speak provides all enhancements, upgrades and sufficient releases
for both hardware and software. NetSpeak offers extended maintenance
and support for an additional charge. Although the Company has not
experienced any significant problems with NetSpeak Corporation, there
can be no assurance that such relationship will continue or that, in
the event of a termination of the relationships with NetSpeak, the
Company would be able to obtain alternative sources of supply without
a material disruption in its ability to provide products and services
to its clients. Although replacement hardware and software may be
obtained from several alternative suppliers, the failure of the
Company to acquire compatible hardware and software from an
alternative source on a timely basis and of comparable quality and
price, could result in delays, operational problems or increased
expenses, which could have a material adverse effect on the Company's
business, results of operations and financial condition.
RISKS OF GROWTH AND EXPANSION.
Growth of the Company will require the Company to recruit and
hire new managerial, technical, sales and marketing personnel, as well
as people qualified in administration and finance. The Company's
inability to recruit and hire the necessary personnel or the emergence
of unexpected expansion difficulties could adversely affect the
Company's business plan.
COMPETITION.
The telecommunications business is highly competitive, and the
profitability of the Company depends principally upon the Company's
ability to compete in its target market areas. The Company expects
competition to persist, intensify and increase in the future. Many of
the Company's current and potential competitors have longer operating
histories, greater name recognition, larger customer bases and
significantly greater financial, technical and marketing resources
than the Company. Certain of these competitors may be existing or
potential strategic partners with others. There can be no assurance
that the Company will be able to compete effectively against its
competitors.
Prices for long distance calls have decreased substantially over
the last few years in most of the markets in which the Company does
business, and prices are expected to decline substantially over the
next several years in all of the markets where the Company does<PAGE>
business or expects to do business. In addition, many of the Company's
markets and expected future markets have deregulated or are in the
process of deregulating telephone services. Customers in many of these
markets are not familiar with the Company's technology, products and
services and may be reluctant to use new telecommunications providers,
such as the Company. In particular, the Company's target customers,
small and medium-sized businesses, may be reluctant to entrust their
telecommunications needs to new and unproven operators or may switch
to other service providers as a result of price competition.
Competition for customers in the target market is primarily on
the basis of price, the type and quality of services offered and
customer service. The Company attempts to price its services at a
discount to the prices charged by traditional long distance carriers
in each of its markets. The Company has no control over the prices set
by its competitors, and some of the Company's larger competitors may
be able to use their substantial financial resources to cause severe
price competition in the markets in which the Company intends to
operate. There can be no assurance
7<PAGE>
that severe price competition will not occur. Any significant price
competition could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, certain of the
Company's competitors will provide potential customers with a broader range
of services than the Company currently offers or can offer due to regulatory
restrictions.
CONCENTRATION OF OWNERSHIP.
After the offering, the directors and officers of the Company, in
the aggregate and including stock options will own beneficially
5,088,700 shares of Common Stock, or 21.8% of the outstanding shares
of the Company. Accordingly, these persons will have substantial
influence over the business, policies and affairs of the Company,
including the ability potentially to control or significantly
influence the election of directors and other matters requiring
stockholder approval by simple majority vote.
DILUTIVE AND OTHER POSSIBLE ADVERSE EFFECTS OF OUTSTANDING OPTIONS AND
OTHER RIGHTS TO ACQUIRE COMMON STOCK.
The Company has outstanding rights to acquire a substantial and
indeterminate number of shares of Common Stock in the form of
conversion rights under its Series A Preferred Stock and a floating 5%
warrant. Common Stock underlying those rights is being registered for
resale in the Registration Statement of which this Prospectus is a
part. A substantial number of additional rights in the form of
options have been granted to the Company's employees or affiliates,
under the Company's Stock Option Plan or otherwise, and are
exercisable at prices which are less than the market price for the
Common Stock at January 29, 1999. Under the terms of such rights,
the holders thereof are given an opportunity to profit from a rise in
the market price of the Common Stock with a resulting dilution in the
interests of other stockholders. The terms on which the Company may
obtain additional financing may be adversely affected by the
existence of such rights. For example, the holders of these rights
could exercise them at a time when the Company was attempting to
obtain additional capital through a new offering of securities on
terms more favorable than those provided by the rights. Additionally,
stockholders could suffer substantial dilution if the holders of
Series A Preferred Stock exercised their conversion right immediately
after a significant decrease in the market price of the Common Stock,
because the conversion rate is inversely proportional to the recent
average market price.
LIMITED TRADING MARKET.
The Company's securities trade over the counter with quotes on
the NASD OTC "bulletin board." Nonetheless, there can be no assurance
that an active public market will exist at any time or can be
sustained or that investors in the Common Stock will be able to resell
their shares. Making a market involves maintaining bid and asked
quotations for the Common Stock and being available as principal to
effect transactions in reasonable quantities at those quoted prices,
subject to various securities laws and other regulatory requirements.
A public trading market having the desired characteristics of depth,
liquidity and orderliness depends upon the presence in the marketplace
of willing buyers and sellers of the Common Stock at any given time,
which presence is dependent upon the individual decisions of investors
over which neither the Company, nor any market maker has any control.
Accordingly, an investor may be unable to sell his Common Stock when
he wishes to do so, if at all. In addition, the free transferability
of the Common Stock will depend on the securities laws of the various
states in which it is proposed that a sale of the Common Stock be
made.
POSSIBLE VOLATILITY OF STOCK PRICE.
The market price of the Company's Common Stock is likely to be
highly volatile and could be subject to wide fluctuations in response
to quarterly variations in operating results, losses of significant
customers, announcements of technological innovations or new products
by the Company or its competitors, changes in financial estimates by
securities analysts, or other events or factors, including the risk
factors described herein. In addition, the stock market has experienced
significant price and volume fluctuations that have particularly affected
the market prices of equity securities of many high technology companies
and that often have been unrelated to the operating performance of such
companies. In the past, following periods of volatility in the market
price of a company's securities, securities class action litigation
has often been instituted against such a company.
8<PAGE>
Such litigation, if instituted against the Company, could result in
substantial costs and a diversion of management's attention and resources,
which could have a material adverse effect on the Company's business,
operating results and financial condition.
PENNY STOCK REGULATION.
The Commission has adopted rules that regulate broker-dealer
practices in connection with transactions in "penny stocks." Penny
stocks generally are equity securities with a price of less than $5.00
(other than securities registered on certain national securities
exchanges or quoted on the NASDAQ system, provided that current price
and volume information with respect to transactions in such securities
is provided by the exchange or system). The penny stock rules require
a broker-dealer, prior to a transaction in a penny stock not otherwise
exempt from the rules, to deliver a standardized risk disclosure
document prepared by the Commission that provides information about
penny stocks and the nature and level of risks in the penny stock
market. The broker-dealer also must provide the customer with current
bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction and monthly
account statements showing the market value of each penny stock held
in the customer's account. The bid and compensation information, must
be given to the customer orally or in writing before or with the
customer's confirmation. In addition, the penny stock rules require
that prior to a transaction in a penny stock not otherwise exempt from
such rules the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and
receive the purchaser's written agreement to the transaction. These
disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that is subject
to the penny stock rules. Because the Company's Common Stock
initially is subject to the penny stock rules, purchasers of shares
under this prospectus may find it difficult to sell their Common
Stock.
DIRECTORS' LIABILITY LIMITED.
Under the Company's By-Laws, directors of the Company cannot be
held liable to the Company or its stockholders for monetary damages
for any act or omission unless it involves, among other things, (i)
the director's duty of loyalty to the Company or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) unlawful dividends or
stock purchases or redemptions by the Company, (iv) a transaction from
which the director derived an improper personal benefit, or (v) acts
or omissions for which liability of a director is expressly provided
by an applicable statute. This provision does not affect the
liability of any director under federal or state securities laws.
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS.
Significant annual and quarterly fluctuations in the Company's
results of operations may be caused by, among other factors, the
volume of revenues generated by the Company's strategic partners from
sales of products and services incorporating the Company's technology
or products, the mix of distribution channels used by the Company, the
timing of new product announcements and releases by the Company and
its competitors and general economic conditions. There can be no
assurance that the level of revenues and profits, if any, achieved by
the Company in any particular fiscal period will not be significantly
lower than in other, including comparable, fiscal periods. The
Company's expense levels are based, in part, on its expectations as to
future revenues. As a result, if future revenues are below<PAGE>
expectations, net income or loss may be disproportionately affected by
a reduction in revenues as any corresponding reduction in expenses may
not be proportionate to the reduction in revenues. As a result, the
Company believes that period-to-period comparisons of its results of
operations may not necessarily be meaningful and should not be relied
upon as indications of future performance. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
GOVERNMENTAL REGULATIONS.
One of the risks associated with the business of Internet
telephony involves the possible intervention of the government through
legislative action. Conventional telephone companies are challenging
the popularity of the Internet by pushing for legislative tariffs that
would impact the usage of the products and services such as those
9
<PAGE>
offered through the use of the Company's technology. At present,
there are few laws or regulations that specifically address access to
or commerce on the Internet. The increasing popularity and use of the
Internet, however, enhance the risk that the governments of the United
States and other countries in which the Company sells or expects to
sell its products and services will seek to regulate computer
telephony and the Internet with respect to, among other things, user
privacy, pricing, and the characteristics and quality of products and
services. The Company is unable to predict the impact, if any, that
future legislation, legal decisions or regulations concerning the
Internet may have on its business, financial condition or results of
operations. In the United States, the FCC has advised Congress that
it may, in the future, regulate IP telephony services as basic
telecommunications services. The regulation of the Company's
activities may have a material adverse effect on its financial
condition and results of operations.
In March 1996, the America's Carriers Telecommunication
Association (the "ACTA"), a group of telecommunications common
carriers, filed a petition (the "ACTA Petition") with the Federal
Communications Commission (the "FCC") arguing that providers (such as
the Company) of computer software products that enable voice
transmission over the Internet are operating as common carriers
without complying with various regulatory requirements and without
paying certain charges required by law. The ACTA petition argues that
the FCC has the authority to regulate both the Internet and the
providers of Internet "telephone" services and requests that the FCC
declare its authority over interstate and international
telecommunications services using the Internet, initiate rule-making
proceedings to consider rules governing the use of the Internet for
the provision of telecommunications services, and order providers of
Internet "telephone" software to immediately cease the sale of such
software. The FCC has thus far not granted relief sought under the
ACTA Petition, however, any action taken by the FCC to grant the
relief sought by ACTA or otherwise to regulate use of the Internet as
a medium of communication, including any action to permit local
exchange carriers to impose additional charges for connections used
for Internet access, likely would have a material adverse effect on
the Company's business, financial condition and results of operations.
QUALITY OF INTERNET SERVICE.
A significant risk involves the stability of the Internet itself.
Many networks through which Internet traffic moves are able to provide
more than five times the current level of traffic. However, many other
network providers do not have this capability, and as a result, the
Internet as a whole may suffer from poor service availability. If this
occurs, the viability of Internet telephony will be negatively
impacted.
DEPENDENCE UPON KEY PERSONNEL.
The continued success of the Company is substantially dependent
upon the efforts of the directors and executive officers of the
Company, in particular Glenn A. Smith, the Chief Executive Officer.
With the exception of an agreement with Howard Kaskel, the Company's
Chief Financial Officer, the Company has no employment agreements
with its officers or other key employees nor any understanding that
employment agreements will be entered into in the foreseeable future.
The Company currently has key man life insurance on Mr. Smith, but it
does not have such insurance on any other employee. The loss of the
services of any of its executive officers or other key employees could
have a material adverse effect on the Company's business, financial
condition and results of operations. The Company's future success also
depends on its continuing ability to attract and retain additional<PAGE>
highly qualified technical personnel. Competition for qualified
personnel is intense, and there can be no assurance that the Company
will be able to attract or retain qualified personnel in the future.
The inability to attract and retain the necessary technical and other
personnel could have a material adverse effect upon the Company's
business, operating results and financial condition.
SHARES ELIGIBLE FOR FUTURE SALE.
Sales of a substantial number of shares of Common Stock in the
public market following the Offering could adversely affect the market
price for the Common Stock. As of January 29, 1999, the Company had
a total of 20,365,399 shares of Common Stock outstanding (assuming the
conversion of all outstanding shares of Preferred Stock as described
in this Prospectus and the exercise of outstanding warrants to
purchase Common Stock). Shares in the amount of up to the 10,000,000
offered hereby will be freely tradable without restrictions under the
Securities Act. An additional 3,578,000 shares were sold under an
exemption from registration provided by Rule 504
10<PAGE>
promulgated under the Securities Act and are freely tradable. All of
the remaining shares are "restricted securities" as that term is defined
by Rule 144 promulgated under the Securities Act and will be eligible for
sale in compliance with Rule 144 after they have been held two years by
non-affiliates. There can be no assurance that an active trading
market for the Common Stock will develop or be sustained after the
Offering. Following the Offering, sales of substantial amounts of
Common Stock in the public market, pursuant to Rule 144, the
Registration, or otherwise, or even the potential of such sales, could
adversely affect the prevailing market price of the Common Stock and
impair the Company's ability to raise additional capital through sales
of equity securities. See "Shares Eligible for Future Sale."
As of the date of this Prospectus, options to purchase 2,218,000
shares of common stock and a warrant to purchase 587,950 shares of
Common Stock are issued and outstanding. Option exercise prices range
from $0.10 to $1.00, and all are currently exercisable. The warrant
exercise price is $0.01 per share.
INABILITY TO PREDICT TRAFFIC VOLUME.
The Company may enter into long-term agreements for leased
capacity in anticipation of traffic volumes which do not reach
expected levels and, therefore, may be obligated to pay for
transmission capacity without adequate corresponding revenues.
Conversely, the Company may underestimate its need for leased capacity
and, therefore, be required to obtain transmission capacity through
more expensive means. If the Company is unable to accurately project
its needs for leased capacity in the future, such inability may have a
material adverse effect on the Company's business and profitability.
DEPENDENCE ON OTHER CARRIERS.
The Company does not own any local exchange transmission
facilities or intra-national transmission facilities in the countries
in which it intends to provide services (and does not intend to
construct or acquire any of its own local exchange transmission
facilities). Consequently, the Company must continue to rely on
providers of intra-national and local exchange transmission
facilities. All of the telephone calls made by the Company's customers
are and will continue to be connected through transmission facilities
that the Company leases. To the extent that the Company leases local
exchange facilities in the U.S. and other countries, there is
currently some uncertainty involving the prices and nature of such
facilities.
The Company generally leases lines on a short-term basis. These
include leases on a per-minute basis (some with minimum volume
commitments) and, where the Company anticipates higher volumes of
traffic, leases of transmission capacity for point-to-point circuits
on a monthly or longer-term fixed cost basis. The negotiation of lease
agreements involves estimates regarding future supply and demand for
transmission capacity as well as estimates of the calling patterns and
traffic levels of the Company's existing and future customers. When
excess transmission capacity is present, as was the case for many
years in the United States, lease rates have declined and short term
leases have been advantageous. Recently, capacity has been somewhat
constrained in the United States and the decline in lease rates has
slowed. As a result, longer term leases may become more attractive.
Should the Company fail to meet its minimum volume commitments
pursuant to long-term leases, it will be obligated to pay 'under-
utilization' charges. See "Inability to Predict Traffic Volume." For
these reasons, the Company would suffer competitive disadvantages if
it entered into leases with inappropriate durations or leases based on
per-minute charges for high volume routes (or leases with fixed<PAGE>
monthly rates for low volume routes), or if it failed to meet its
minimum volume requirements. The Company is also vulnerable to service
interruptions and poor transmission quality from leased lines. The
deterioration or termination of the Company's relationships with one
or more of its carrier vendors could have a material adverse effect
upon the Company's business, financial condition and results of
operations.
DEPENDENCE ON EFFECTIVE INFORMATION SYSTEMS; YEAR 2000 TECHNOLOGY
RISKS.
Sophisticated information systems are vital to the Company's
growth and its ability to monitor costs, bill and receive payments
from customers, reduce credit exposure, effect least cost routing and
achieve operating efficiencies. A failure of any of the Company's
current systems, the failure of the Company to implement or
11<PAGE>
integrate new systems without difficulty, if at all, the failure of any
new systems or the failure to upgrade systems as necessary could have a
material adverse effect on the Company, its financial condition and
the results of operations.
The Company is in the process of reviewing its computer systems
and operations to identify and determine the extent to which any
systems will be vulnerable to potential errors and failures as a
result of the "Year 2000" problem. The Year 2000 problem is the result
of the use by computer programs of two digits, rather than four
digits, to define the applicable year. Any of the Company's programs
that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a major
system failure or miscalculations.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS INCLUDED IN THIS
PROSPECTUS.
This Prospectus contains certain forward-looking statements
regarding the plans and objectives of management for future
operations, including plans and objectives relating to the development
of the Company's business. The forward-looking statements included
herein are based on current expectations that involve numerous risks
and uncertainties. The Company's plans and objectives are based on a
successful execution of the Company's business strategy and
assumptions that the Company will be profitable, that the market for
packetized voice transmission will not change materially or adversely,
and that there will be no unanticipated material adverse change in the
Company's operations or business. Assumptions relating to the
foregoing involve judgments with respect to, among other things,
future economic, competitive and market conditions and future business
decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company.
Although the Company believes that its assumptions underlying the
forward-looking statements are reasonable, any of the assumptions
could prove inaccurate and, therefore, there can be no assurance that
the forward-looking statements included in this Prospectus will prove
to be accurate. In light of the significant uncertainties inherent in
the forward-looking statements included herein, the inclusion of such
information should not be regarded as a representation by the Company
or any other person that the objectives and plans of the Company will
be achieved.
DIVIDEND POLICY
The Company has not declared or paid any cash dividend on its
Common Stock, and the Board of Directors intends to continue a policy
of retaining future earnings to finance the Company's growth and for
general corporate purposes, and, therefore, it does not anticipate
paying any cash dividends on Common Stock in the foreseeable future.
12
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt, long-term
debt and capitalization of the Company as of September 30, 1998, and
pro forma as adjusted to reflect (1) the issuance subsequent to
September 30, 1998 of 200 additional shares of the Company's Series A
Convertible Preferred Stock, (2) the conversion subsequent to
September 30, 1998 of the Company's Series A Convertible Preferred
Stock at a conversion rate based on a $0.254 market price for the
Common Stock (averaged over a five-day period) into 7,874,016 shares
of Common Stock, (3) the exercise of a warrant to purchase 587,950
shares of Common Stock at an exercise price of $0.01 per share, and
(4) the issuance of 119,433 shares of Common Stock subsequent to
September 30, 1998. This table should be read in conjunction with
the Financial Statements of the Company and the related Notes thereto
contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>
September 30, 1998
----------------------------------
Actual Pro Forma
As Adjusted
----------- -------------
<S> <C> <C>
Current portion of long-term debt and capital lease
obligations<F1> . . . . . . . . . . . . . . . . . . . $ 10,136 $ 10,136
---------- ----------
Long-term obligations, less current portion<F1> . . . . . 100,000 100,000
Stockholders' equity:
Preferred Stock, par value $0.001 per share,
10,000,000 shares authorized; 1000 shares issued
and outstanding, no shares issued and outstanding as 1 ---
adjusted . . . . . . . . . . . . . . . . . . . . . . .
Common Stock, par value $0.001 per share,
40,000,000 shares authorized; 11,784,000 shares
issued and outstanding; 20,365,399 shares issued
and outstanding, as adjusted . . . . . . . . . . . . 11,784 20,365
Additional paid-in capital . . . . . . . . . . . . . 2,097,072 2,145,144
Retained earnings (deficit) . . . . . . . . . . . . . (2,026,887) (2,018,243)
---------- ----------
Total stockholders' equity (deficiency) . . . . . . . 81,970 147,266
---------- ----------
Total capitalization . . . . . . . . . . . . . . . . $ 192,106 $ 257,402
========== ==========
</TABLE>
_______________________
[FN]
<F1> See Note 3 of Notes to Interim Financial Statements for
additional information relating to the Company's debt.
</FN>
13<PAGE>
CERTAIN MARKET INFORMATION
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded over-the-counter and quoted
on the Bulletin Board under the symbol "ACCR" on a limited and
sometimes sporadic basis. Quoting began in December 1997. The
reported high and low bid prices for the Common Stock are shown below
for the period through September 30, 1998. The prices presented are bid
prices which represent prices between broker-dealers and do not include
retail mark-ups and mark-downs or any commission to the broker-dealer.
The prices do not necessarily reflect actual transactions. As of
February 2, 1999 there were approximately 250 stockholders of record of
the Common Stock.
<TABLE>
<CAPTION>
BID
--------------------
LOW HIGH
------ -------
<S> <C> <C>
1998
First Quarter . . . . . . . . . . . . $0.81 $1.38
Second Quarter . . . . . . . . . . . $1.38 $4.06
Third Quarter . . . . . . . . . . . . $0.53 $2.19
</TABLE>
BUSINESS
Access Power, Inc. was formed to offer Internet-based
communications products and services to the global marketplace. The
Company is one of the first companies to offer a means for voice and
multi-media communications over the Internet, a service which is
commonly referred to as Internet Protocol telephony or IP telephony.
The Company believes that from its early start in this field it is a
leader in the U.S. in the deployment of IP telephony gateways and in
the offering of associated enhanced communications services. Access
Power currently has deployed its IP telephony servers in ten major
metropolitan service areas in the U.S., and it plans continued
expansion in the U.S. and abroad in 1999 to the extent it is
financially able to do so. See "Management's Discussion and
Analysis." Additional international expansion will be pursued via
joint venture and other business arrangements throughout South
America, Europe, Africa and the Pacific Rim.
INDUSTRY BACKGROUND
Long distance telephone services have historically been offered
through public switched telephone networks (PSTN) mainly utilizing
lines established for that purpose. Although those systems are well
established in the US and many other parts of the world and the
service provided is usually of good quality, voice and message traffic
through those systems is subject to tariffs, and the technology
driving those systems does not have nearly the capability for the
innovative features potentially available through IP telephony. With
the advent of the Internet and its increasing popularity, however, the
stage is being set to permit the commercial development of an
alternative means of telecommunication using the connectivity of the
Internet to provide a new and cheaper pathway. With the development
of Internet Telephony software for the personal computer and the
gateway servers the industry now has a viable means to provide
workable products in this field.
The emergence of the World Wide Web and the commercialization of
the Internet defined the potential for and has led to ever increasing
developments in the convergence of technologies involving computers
and telephones. The convergence that formed computer telephony
integration (CTI) in the 1980's has led to a new sector in the
14
<PAGE>
communications industry, and is generally referred to as computer
telephony (CT) or Internet Telephony (IT). The global marketplace is
quickly becoming familiar with the Internet and its value as a
communications mechanism, to date mainly with text graphics. Service
providers are expanding the Internet and users are demanding enhanced
services including voice, audio and video transmissions.
In the early 1990's applications allowing standard commercial
transmission of voice and audio using Internet protocols became
available enabling multi-media PC users to converse over the Internet.
This decade many companies have invested millions of dollars to
continue developing the applications that have improved the service
quality and lowered the implementation costs. The result has been the
emergence of a new communications sector, the Internet Telephony
Services Provider (ITSP), of which the Company was an early entrant.
THE ACCESS POWER SOLUTION
The Company is developing its Internet-based telephony service,
Access Power Advanced Communications(TM) ("APAC"), to provide a domestic
and international communications network allowing customers to place
calls through the Internet using traditional terminal equipment.
Unlike traditional long-distance telephone systems which use switch
based systems, the Company uses the Internet as the backbone to
complete the long distance connection. This eliminates the fees
associated with long distance carriers. The service allows users to
place long distance calls from their PC to an enabled PC for free, or
from their PC to a regular telephone at a significantly reduced cost
when compared to traditional long distance services. APAC customers
can take advantage of the cost savings associated with the Internet-
based telephony service even without a PC by placing a regular
telephone to regular telephone call through the Company's network of
gateway servers.
In addition to the cost savings associated with Internet
telephony, the Company's customers have the ability to use services
that are not available using the traditional public switched telephone
network. Such services include interactive document and data sharing
and multi-media data transmissions including video capability.
Accordingly, regional and multinational corporations can utilize a
single network integrating voice and data transmissions and realize
low cost interoffice communication through IP telephony.
The Company is committed to establishing a worldwide network of
gateway servers to provide for its alternative long distance service.
The gateway servers deployed by the Company at strategic locations
will serve as a bridge for communications traffic to or from customers
in those geographic locations between the public switched telephone
network or a private branch exchange (PBX) and the Internet. The
gateway server converts voice transmission to data packets, using less
bandwidth and eliminating separate voice network costs.
Communications traffic from or to standard telephone equipment (such
as in phone-to-phone and PC to phone calling) involves local telephone
pathways and, for those destinations not currently served by a local
gateway server, traditional long distance lines (usually through a
wholesale arrangement) at each end with the Internet as the pathway in
between.
STRATEGY
The Company believes a significant commercial opportunity is
emerging from the application of Internet-based products and services
to the transmission of voice, video and facsimile through the use of
packetized Internet Protocol (IP) networks and corporate intranets.
The Company's objective is to be one of the world's leading providers
of international IP telephony products and services. The Company's
strategy to achieve that objective includes the expansion of its
international IP telephony gateway network through joint venture
partnerships and other business relationships in the targeted regions;
the leveraging of the network and its inherent low operating costs to
provide discount retail and wholesale international calling services;
the exploitation of new technology including e-button to penetrate
the international corporate market; and the continued development of
enhanced products and services that utilize the Company's
international IP telephony gateway server network.
15<PAGE>
Expansion of International IP Telephony Gateway Network
- -------------------------------------------------------
In August 1998, the Company entered into nonexclusive
distributorship agreements with an independent distributor in Denmark
and China to market and sell the Company's products and services in
those countries. The agreements extend for one year with automatic
one-year renewals. They may be terminated upon 30 days notice after
the first year. The products and services offered consist of the PC
Client Dialer Product, gateway access at a per minute amount and
additional programming services on an hourly basis.
In October 1998, the Company entered into a non-exclusive agreement
with a Florida corporation, LDT Net Com Inc. LDT Net Com was appointed
as an independent agent to distribute the Company's services internationally
for a period of five years with automatic one-year renewals. To date LDT
Net Com has focused on establishing relationships required to do business
in South America and the Pacific Rim.
In November 1998, the Company entered into an agreement with a Texas
corporation, Access Universal, Inc., to provide that business with Internet
telephone services through December 31, 2001. The Company and Access
Universal anticipate that their business relationship will begin to become
active in 1999, at which time they intend to commence developing a business
to process Internet Protocol communications traffic between the U.S. and the
Pacific Rim.
Leverage the Low Operating Costs of the Company's Network
- ---------------------------------------------------------
IP telephony calls are treated as data communications and are not
subject to expensive access fees like standard long-distance calls.
This is especially significant when it comes to international calls,
where extra fees can be a significant addition to the cost of a call.
The Company's technology will enable it to offer international calling
at reduced costs to customers. The Company anticipates that joint
ventures and other business relationships it intends to create
overseas will focus on marketing and selling the Company's services in
the international market.
The Company feels that the future of telecommunications is in the
value of the enhanced services a provider offers and that long-
distance telephony as we know it today will become a low-priced
commodity. This is the very premise that the Company feels will
propel IP telephony into the mainstream of communications. IP
telephony by definition operates within computers, a medium which
allows for the development of sophisticated user applications that
will differentiate IP telephony from traditional telephony systems.
This cost structure of the Company's IP telephony network also
allows the Company to offer wholesale rates at prices below standard
telephony carriers. Targeted clients of Access Power wholesale
carrier services are international telephone companies wishing to
terminate calls in the United States and domestic and foreign prepaid
services companies. The domestic prepaid market is one of the fastest
growing markets of the telecommunications industry and is served by
over 400 providers. The Company believes that a majority of these
providers are small to mid-sized resellers without telephony
infrastructure, which, therefore, are likely to be incurring high
network costs. Access Power believes it is well positioned to offer
low cost carrier services to such providers.
EXPLOIT E-BUTTON AND CONTINUE DEVELOPING ENHANCED SERVICES THAT
UTILIZE THE COMPANY'S NETWORK<PAGE>
The Company is a re-seller of certain third-party software which
it markets to its customers under the product name "e-button." The
Company believes this product is the best of its kind available in the
marketplace today. Its size (300KB) is small and thus quick to
download and install and easy to use. See " Products and Services; e-
button."
PRODUCTS AND SERVICES
In 1997 the Company became one of the first Internet Telephony
Service Providers (ITSP) in the world. It determined that network
expansion would best be accomplished by the Company's own deployment
of server hardware and through international joint venture or other
business arrangements aimed at expanding the Company's network.
16<PAGE>
The Company placed the first Access Power Internet telephony
gateway server on the market in August 1997. A gateway connects data
networks such as the Internet and corporate intranets to the public
telephone networks. The server has the capacity for twenty four lines
and can handle over 300,000 minutes of talk time per month. The
Company currently has ten such gateway servers, or 240 lines of
capacity, deployed, and it anticipates increasing the number of lines
installed in the near future by it or future business partners in the
United States and other international markets.
The Company's voice-over-IP service (known as Access Power
Advanced Communications (TM) (APAC)) integrates traditional functions
with advanced Internet-based communications technology. APAC enables
users to connect over the Internet from a personal computer to a regular
telephone or from a regular telephone to another regular telephone
with a significant reduction in costs over that of traditional
telephony. Through this service, a user anywhere in the world can
place long distance telephone calls from its personal computer over
the Internet to telephones in any area where Access Power provides
gateway service. Currently, the Company has such service available
for calls to telephones in ten metropolitan cities in the states of
Arizona, Florida, Texas and Utah. Calls to other locations may be
made through the Company's services, but regular long-distance
services will be necessary to complete the call from the location of
one of the Company's gateway servers, and the cost to the user is
slightly higher. At this time, telephone to telephone calls may only
be originated at locations near to one of the Company's gateways
through a local call to the server.
Voice-over-IP service is a significant development in the highly
attractive and growing Internet industry. New applications are being
developed every day. The cost of computer processing is decreasing
and customer demand is increasing. IP systems are more economical,
have more features and may become more reliable than traditional
mechanisms. They will allow companies to act faster and close the gap
between themselves and their customers, employees and vendors.
To complement its service, the Company intends to offer its
customers two third-party software products: WebPhone and net.caller (TM).
Either software package will enable customers to complete long
distance communications using their personal computers (multi-media
configured, with a microphone and sound system). The Company is a
reseller of the multi-featured WebPhone software. Net.caller, a more
basic calling utility, when available, may be downloaded without
additional charge.
Phone-to-phone
--------------
The Company offers domestic long distance from its ten service
areas covering a population of over 10 million people to a regular
telephone anywhere in the United States. The Company plans to broaden
its services geographically in the United States as well as add
international calling destinations over time. Customers can register
for the service on the Company's Web site or call the Company office
and provide the required credit information. Customers pay a one-time
activation fee and are assigned a password. To use the service from
within one of the Company's service areas, the customer simply dials
the gateway from a telephone (a local call number), enters the
password, and then dials in the long distance number in the usual way.
Customers are not required to own computer equipment of any kind nor
do they need their own Internet access to use Access Power's phone-to-
phone service. The Company's phone-to-phone rates currently are 7
cents per minute to destinations anywhere in the United States.
Billing is performed at the end of each month by charging the
customer's credit card.
PC-to-phone
-----------
The Company's PC-to-phone service offers customers the ability to
call a regular telephone utilizing software installed on their multi-
media personal computer. To initiate the service, a customer
registers on the Company's Web site and downloads either net.caller or
WebPhone software.
WebPhone
--------
WebPhone functions just like a traditional telephone, but uses software
as the dialing mechanism. The software installation is simple and once
completed enables users to engage in long distance voice communications
17<PAGE>
between multi-media personal computers anywhere in the world for only the
cost of the software plus the user's standard Internet access fee. More
importantly, the software also enables users to place calls from their PCs
to any regular telephone (PC-to-phone).
Upon installation of WebPhone software, the PC user may simply dial
up his or her local Internet Service Provider (ISP), WebPhone is
displayed on the monitor, and the user may proceed to join PC-to-PC
community chat rooms, create private rooms, dial directly to another
PC, or call a regular telephone using the APAC network. For some
customers, WebPhone could pay for itself within the first month of
usage through the avoidance of traditional long distance charges.
There are currently no access or tariff charges other than the monthly
charge from an Internet Service Provider (ISP). WebPhone and the
power of the gateway allow customers to do many things that simply
cannot be accomplished using PSTN.
WebPhone has the following features:
* Allows customers to communicate with users of traditional
telephone equipment through the APAC network;
* Call waiting, muting, holding, blocking, identification, and
screening;
* Full-duplex capabilities that enable real-time, two-way
conversations with WebPhone users worldwide;
* Voice Mail;
* Conference calling. Up to four simultaneous WebPhone users
may join a PC-to-PC multipoint conference;
* Direct calling allows the option of bypassing chat rooms to speak
directly with an individual; and
* Automatic Voice Activation that optimizes voice transmission
quality automatically.
WebPhone also includes a video component that allows users to
communicate face-to-face.
WebPhone is sold in English, Spanish and Portuguese. The current
users of WebPhone (estimated to be 600,000) will be solicited real-
time to activate an Access Power account in order to begin calling PC-
to-phone to anywhere in the United States for only 9 cents per minute
from anywhere in the world.
net.caller(TM)
--------------
Net.caller is a software product that is being built as a
modified or simpler WebPhone by NetSpeak Corporation, the owner and
developer of both software programs. It is designed for the Company's
customers who only need the basic PC-to-phone use. The Company is
planning to provide this product free of charge to encourage customers
to activate and use the Company's gateway service.
e-button(TM)
------------
The application of e-button software may differentiate Access
Power from many communications companies. Having e-button on their
Web site offers tremendous electronic commerce benefits to any company
with a traditional call-center. This technology allows consumers
using their multi-media PC to view a company's Web site to click the
e-button icon which (once installed on the consumer's PC) instantly
dials a designated representative of that company, usually someone
providing sales or support services. Access Power believes e-button
is the most advanced product of its kind. Its size (300KB) is small
and thus able to be quickly installed and easy to use. It is<PAGE>
downloaded and installed upon the first attempt to use it.
CUSTOMER SERVICE
The Company believes customer service is one of the Company's
greatest strengths. The customer service organization's leadership
team consists of proven professionals who have managed customer care
for some of the most demanding companies in the world. The Company's
sophisticated database and account tracking allows true "one-to-one"
service fulfillment and customer communication.
18<PAGE>
The Company has contracted with NetSpeak to provide technical
support for the WebPhone. The Company's operations and customer
service includes a call center and e-mail response, as well as the
mailing of correspondence.
In its customer service operations the Company has employed a
service representative who operates from a remote location to assist
with customer service inquiries. The call handling customer support
systems are being developed to reside on the Company's Web site. All
that a trained representative needs to deliver customer support is a
PC Internet connection and password. Calls to a 1-800 number will be
sent to the appropriate customer service representatives. The
representative and the customer may jointly access the Company home
page for information on topics of interest. The Company believes it
can reduce its costs through the use of such off-site representations.
Access Power has simplified the traditional telephone billing
process. Customers are not charged normal business services or
monthly fees. They are billed only when they use the service to place
calls, and then only for the minutes they have accumulated throughout
the month. Itemized billing or usage statements are available to
customers via the Company's Web site, and written invoices are
available upon request.
CUSTOMERS
While in its technical development and deployment stage, the
Company has done minimal marketing. It has acquired approximately
2,000 customers mostly through the Company's Web site. The Company
intends to focus its marketing efforts in the future on wholesale
customers.
COMPETITION
The Company has nearly two years of experience building and fine-
tuning one of the largest IP telephony networks in the United States.
Because of the experience it has gained to date, the Company believes
it has the ability to deploy its technology at a faster rate and with
less missteps than new entrants. The Company has basic billing
capabilities in place and has already begun to develop more
sophisticated billing capabilities to accommodate the more complex
commercial transactions in which it intends to engage. It also
already has in place, network management tools and a secure Web site
capable of taking new account orders in real-time.
The Company believes its competitive strength will lie in being
first to market with IP telephony services. It also believes it is
likely to move faster than a giant telephone company. The opportunity
to fully develop the market and establish momentum to capture market
share means, however, that the Company has to aggressively build its
customer base now. The Company's network must be expanded in order to
handle higher volumes of traffic. Dependency on traditional long
distance telephone lines to complete calls must be reduced to protect
margins. Customer acquisition programs need to be further developed
to grow the customer base.
Competition for the Company may be direct, such as other
companies that offer IP telephony services, or indirect, such as
companies that offer traditional or other alternative long distance
telephony services.
<PAGE>
DIRECT COMPETITION
Most companies currently offering IP telephony to their customers
are either small start-up companies, or Internet Service Providers (ISP)
looking for enhanced services primarily designed to help customer retention
in support of their core business.
The Company believes that today the most developed Internet Telephony
Service Providers are IDT Corporation's Net2Phone (www.net2phone.com) and RSL
Communications, Ltd.'s Delta Three (www.deltathree.com). Both IDT and RSL
are current long distance companies who have committed to IP telephony as an
important element of their future business. IDT is also a domestic ISP.
Neither company has the U.S. presence of Access Power, appearing to focus
rather on the near-term international long distance profit opportunity. The
Company believes that both companies are generating the bulk of their IP
revenues from the PC-to-phone market
19<PAGE>
with minimal networks built to support the same. Both companies seem to rely
heavily on their traditional PSTN long distance business to make the limited
PC-to-phone market viable.
The rest of the direct competition appears not nearly as
developed, but ITXC Corp. (www.itxc.com) is a competitor worthy of
mention.
The ITXC business model is to become a clearinghouse for ITSPs
all over the world that wish to become a global provider without
having to build out their own worldwide network. This means that ITXC
accepts calls originating from one ITSP, performs the routing, and
terminates the call on another participating ITSP network. ITXC's
business model has up to three different companies splitting consumer
revenue: the originating ITSP, the terminating ITSP and ITXC itself.
Access Power deems it more important to develop its own global
network, rather than join the ITXC program, so it can protect its
margins and maintain the assets of the network.
INDIRECT COMPETITION
All companies delivering long distance telephony through
traditional or other means are indirect competitors of Access Power,
at least for phone-to-phone and PC-to-phone services. Traditional
long distance telephone companies have the embedded customer base that
Access Power does not yet have, and they have the global network or
other arrangements for global access, and currently are in a better
position than Access Power for offering and delivering phone-to-phone
service. They may have difficulty competing on price with traditional
systems where Access Power service is available, however, and they
cannot in their traditional long distance service offer the full array
of enhanced services that Access Power can offer. Over time, they may
be unable to compete from a price standpoint, because IP telephony is
a cheaper technology and can support commodity pricing. More and more
indirect competitors will become direct competitors once they have
deployed IP telephony. This is the trend, and it is projected to
continue as long distance prices are forced down and IP telephony
becomes more fully developed.
The list of potential indirect competitors is immense, with
thousands of long distance companies, including resellers and calling
card distributors.
FUTURE COMPETITION
The most substantial competitors of Access Power are those
looming on the horizon. AT&T, the world's largest long distance
company has recently announced IP telephony trials in three U.S.
markets: Atlanta, San Francisco and Boston. They offer the service
at 8.5 cents per minutes to anywhere in the U.S. from any one of the
trial cities. If this trial is successful, AT&T will likely build out
their IP network and expand.
WorldCom, Inc. is a global business telecommunications company
and a potentially large provider of IP telephony. Operating in more
than 50 countries, the company is a provider of facilities-based and
fully integrated local, long distance, international and Internet
services. WorldCom would appear to have the total solution available
at its fingertips with ownership of MCI Telecommunications, Inc. and
UUNET Technologies. They have the network and they have the
customers.
All of the U.S. RBOCs (Regional Bell Operating Companies) have
either announced IP telephony testing or the Company expects they will
do so soon. IP telephony is a way to become a long distance carrier<PAGE>
without having to face FCC regulations. RBOCs also have the embedded
customer base, albeit regional in many cases, and generally have the
network to support IP telephony.
Qwest Communications International, Inc. (www.quest.com) is a
global communications company building a high-capacity, fiber optic,
Internet Protocol-based network designed to deliver the new generation
of multi-media, data and voice communications services and
applications. Slated for completion in the second quarter of 1999,
the Qwest domestic network will span 18,449 miles in 130 cities.
Internationally, Qwest is extending its network 1,400 miles into
Mexico, and has secured a significant amount of transatlantic capacity
enabling data and voice transmission between North America and Europe.
20<PAGE>
Qwest is a looming competitor. Currently offering high-speed
Internet access to 15 U.S. cities, and a stated future direction to
provide video conferencing, whiteboarding, multicasting, as well as
dedicated and virtual network applications, this company is in position
to be a dominant force in IP telephony and enhanced IP services.
SALES AND MARKETING
Access Power's market includes residential and business users of
advanced communications products and services. The services include
phone-to-phone communications, personal computer (PC) to phone
communications and PC-to-PC calling. For phone-to-phone and PC-to-
phone service, customers pay an activation fee and a per minute
charge. Access Power's current pricing for service is very
competitive and the Company is poised to balance new product
introductions with consumer demands and expectations. After a small
start up cost, the Company's long distance customers currently pay 9
cents per minute for PC-to-phone calling and 7 cents per minute
for phone-to-phone calling. For PC-to-PC calling, customers initially
purchase software from the Company but experience no additional costs
associated with long distance communications.
The Company's marketing strategy involves promoting advanced
Internet-based telecommunications products and services to both
businesses and consumers using market-specific sales methods developed
by the Company. The primary target market for these products and
services are the millions of consumers and business owners, from small
businesses to corporations, using the Internet.
Marketing will be accomplished through print advertising and
standard publicity methods as well as through Internet web sites.
Direct selling may be performed by direct mail campaigns, including e-
mail distributions. The Company may work with high technology
marketing firms to acquire customers through direct selling to
corporations, through trade show participation and through special
promotions.
The extent to which the Company is able to offer low
communication transmission rates affords the Company the opportunity
to enter the wholesale arena as well as the retail market. The
Company can offer telecommunications resellers bulk traffic rates at
highly competitive prices. By building partnerships and affiliations
with international resident partners, the Company will be able to
control its own network while benefiting from the regional awareness
and marketing of its partners.
ACCESS POWER MARKETING STRATEGY
The Company targets each of its products to a specific market.
The e-button will be sold to the business market that has a Web
site and call center. According to Internet research of which the
Company is aware, as of June 30, 1998 there were over 346,000
businesses worldwide who have a Web site. Many of these businesses
also have a call center for customer service, sales, or technical
support. The Company aims to capture a significant portion of this
business market for sales of the e-button product.
The target market for the Company's PC-to-phone and phone-to-
phone service is the small office and home office market. According
to the Bureau of Labor Statistics (BLS), there were more than 21 million
persons who did some work at home as part of their primary job as of May
1997. Nearly 9 out of 10 of these workers are in "white-collar"
occupations and 60% used a computer for the work they did at home. The
Company believes these are the early adopters of the Company's technology,<PAGE>
and they will be the primary target of marketing campaigns. An ancillary
market for Access Power phone-to-phone service is the large, long-distance
telephony consumer market.
ELECTRONIC COMMERCE (E-COMMERCE) AND INTERNET TELEPHONY
One of the key indicators for the Company's growth may be the
development of the Internet and Internet commerce. The Company believes
that by most measurements the Internet has grown at a rapid pace over the
last several years, and the Company believes commercial transactions on
the Web have steadily increased as well over that time period.
21<PAGE>
E-button will create new options for the way Internet users
conduct commerce, i.e., by providing less costly, more sophisticated
communications support. The Company has established a Web site for
its own e-commerce. Customers simply provide credit card information
to order products and services.
Using the World Wide Web maximizes the Company's ability to sell
its products and services 24 hours a day, 365 days a year, while
minimizing the need for direct sales contact. Currently, the
Company's customers come to the Company's Web site through Internet
search engines and Internet hyperlinks. Transactions transpire and
payment is procured online, which in the end reduces the ultimate cost
of the sale. With the Web site as a storefront, overall sales
expenses of the Company are decreased.
END USER MARKET
The personal computer user is generally higher than average in
income and education, younger, white collar, and considered
"independent" and a "trendsetter." The most sought-after segment in
this group is the "digital citizen," that is, those "super connected"
with a PC, Internet access, and at least one other personal
telecommunications device (e.g., pager, cellular telephone, laptop,
etc.). The Company believes based on its research that this is a group
committed to communicating on the Internet, Of the 40 million people that
have ready access to the Internet, according to International
Telecommunications Union's WORLD TELECOMMUNICATIONS DEVELOPMENT REPORT 1997,
the Company believes over 15 million are these digital citizens.
The Small Office/Home Office Market
- -----------------------------------
The Company believes the Small Office/Home Office (SOHO) market segment
accounts for a significant portion of new company formations. The Company also
believes that the evolution of "work life" will continue to grow the SOHO market
as corporations attempt to reduce operating costs and improve productivity with
telecommuting and "virtual offices." The Company feels self-employment will
continue to grow as a result of downsizing and outsourcing and as
individuals become less dependent on traditional career paths. The
changing workplace demands rapid telecommunications advancement with
the SOHO segment believed to be currently using the Internet in large
numbers.
INTERNATIONAL MARKETS
International opportunities are especially attractive for Access
Power. International growth of the Internet is believed to have
surpassed that of the United States, and by the year 2001, it is
projected that the international market will comprise a majority of
Internet telephony usage. Internet telephony's cost savings through
the avoidance of "settlement fees" will fuel this rapid expansion.
(Settlement fees are tariffs that foreign telephone companies charge
for access to their domestic networks.) The Company believes that the
biggest near-term revenue opportunities exist in the international
markets. A June 22, 1998 report, issued by Datamonitor, a global
strategic market analysis company, indicates that the international
voice market in particular presents a huge opportunity for Internet
telephony service providers. Profit margins are high for these
services. The report also indicates that IP telephony will account for
over 10 percent of international telephony traffic in Europe and the
U.S. by the year 2002.
<PAGE>
FACILITIES
The Company headquarters, executive offices and customer service
center are located in facilities consisting of approximately 1,800
square feet in a 13,500 square foot office building in Ponte Vedra
Beach Florida. The three-year lease on the space started September
1997 and includes two successive extension options and first right of
refusal on 2,000 square feet of vacant contiguous space. The Company
will pay approximately $3000 per month rent under this lease during 1999.
The Company believes the office space is adequate for its current needs and
could easily be replaced with other suitable accommodations.
The Company maintains its server hardware through co-location
arrangements with local exchange carriers at locations where the Company desires
to maintain a gateway. These facilities must be climate controlled and offer
22
<PAGE>
the necessary telephone and electrical power services, but the Company
believes such facilities are generally available from more than one source.
EMPLOYEES
As of February 2, 1999 the Company retained ten full time
employees.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS
OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND NOTES THERETO AND THE OTHER FINANCIAL INFORMATION
INCLUDED ELSEWHERE IN THIS PROSPECTUS.
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 a call to a telephone anywhere in the United States
for 9 cents per minute. 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 without the need for personal Internet access. The Company
charges $20 for account activation. Similar, low-cost pricing models
are being developed for the international markets.
The Company is a reseller of third-party PC telephone software
called WebPhone, 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<PAGE>
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.
23
<PAGE>
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.
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. Additional marketing may be
provided by a firm specializing in communications customer acquisition
and payment made on a per acquisition basis determined by the size of
the customer. 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.
<PAGE>
RESULTS OF OPERATIONS
Unaudited
Management Estimate
For the year For the year
Ended ended
December 31, 1998 December 31, 1997
------------------- -----------------
Revenues $268,100 $0
========== =========
Expenses $2,378,200 ($426,438)
========== =========
Net (loss) $2,110,100 ($426,438)
========== =========
Net (loss) per share ($0.18) ($0.04)
========== =========
Weighted average number of shares 11,656,647 9,742,000
========== =========
The results of operations presented above for the year ended December 31, 1998
are unaudited but reflect all adjustments (consisting only of normal recurring
adjustments) which management considers necessary for a fair presentation
of operating results.
TWELVE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO PRIOR PERIODS
REVENUES AND COSTS OF REVENUES. The Company realized no revenues from its
inception through the end of fiscal year 1997. Through the twelve months
ended December 31, 1998, revenues increased by $268,100 due to the initial
fees received related to the Company's Canadian venture ($24,000), the sale
of equipment to that venture ($188,092), and other sales and services ($56,008).
The Canadian venture has since been terminated by mutual agreement of the
parties.
EXPENSES. Product development and marketing expenses were $868,895 for the
twelve months ended December 31, 1998; an increase of more than 2,500% over
such expenses for the twelve months ended December 31, 1997. General and
administrative expenses increased $842,866 or 215% from $391,250 for the
twelve months ended December 31, 1997, as the administrative structure was
developed to serve customers being solicited. Payroll expense was the major
portion of this increase as it totaled $525,471, an increase of $351,471 or
200%, from the twelve months ended December 31, 1997 total of $174,000.
Professional fees increased $175,616 from $59,023 for the twelve months
ended December 31, 1997 to $232,639 for the twelve months ended December 31,
1998 primarily due to increased fees relating to equity financing.
Nine Months Ended September 30, 1998 Compared to Prior Periods
- --------------------------------------------------------------
Because the Company was organizing and not operating during the
first nine months ended September 30, 1997, the Company believes a
comparison to the results from that period are of no informative
value.
REVENUES AND COST OF REVENUES. The Company realized no revenues
from its inception through the end of fiscal year 1997. Through the<PAGE>
nine months ended September 30, 1998, revenues increased by $254,181
due to the initial fees received related to the Company's Canadian
venture ($24,000), the sale of equipment to that venture
24
<PAGE>
($188,092), and other sales and services ($42,089). The Canadian venture
has since been terminated by mutual agreement of the parties. The cost
of revenues increased for the nine months to $152,920 (or 60% of total
revenues), which represented the cost of equipment sold.
OPERATING EXPENSES. Product development and marketing expenses were
$710,533 for the nine months ended September 30, 1998, an increase of
more than 2000% over such expenses for the twelve months ended
December 31, 1997. This was due primarily to the development of the
Company's gateways in ten major metropolitan areas in the U.S. There
were also marketing efforts to develop a franchise effort in the U.S.
and internationally. General and administrative expenses increased
100% for the nine months ended September 30, 1998 to $868,174 as
compared to $391,520 in the twelve months ended December 31, 1997 as
the administrative structure was developed to serve customers being
solicited. Payroll expense was the major portion of this increase as
it totaled $338,483, an increase of $164,483, or 95%, from the twelve
months ended December 31, 1997 total of $174,000. Professional fees
increased $130,787 from $59,023 for the twelve months ended December 31,
1997 to $189,810 for the nine months ended September 30, 1998 primarily
due to increased corporate legal fees relating to equity financing.
Rent expenses increased $19,941 from $15,183 for the twelve months ended
December 31, 1997 to $35,064 in the nine months ended September 30, 1998
due primarily to the start of the office lease rental commencing in the
last half of 1997. Insurance expense increased $15,926 from $6,444 for
the twelve months ended December 31, 1997 to $22,370 in the nine months
ended September 30, 1998 due to increased health insurance for the
increased headcount and property insurance coverage on the computer
hardware employed.
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
$1,800,000 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
December 31, 1997. The Company realized lesser negative cash from
operating activities for the nine months ended September 30, 1998 and
twelve months ended December 31,1998 due to the sale of the franchise
and equipment to APC.
Investing activities for the period from inception through
December 31, 1997 consisted primarily of equipment purchases to build
out the initial network. Investing activities in the first nine
months of 1998 increased by 260% over the entire period ended December 31,
1997 due to the replacement of the network infrastructure with new
technology. The Company currently has no commitment for capital
expenditures, but a significant amount would be expended if the
Company were to pursue its expansion plans.
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<PAGE>
securities. The Company has no commitments for such financing and
there can be no assurance that it will be able to raise that amount or
any part of it during that time period. Other methods of meeting the
anticipated capital equipment program needs include obtaining
available equipment vendor lease programs and leveraging private
placement financing by securing subsequent financing from institutions
including commercial banks and equipment leasing companies. The
Company has begun discussions with several such firms. The Company is
also performing cost benefit analysis to ensure that any existing
under utilized equipment is made available for redeployment to prolong
the necessity to acquire new equipment.
The Company raised $100,000 in November 1998 from the sale of 100
shares of Series A Preferred Stock for $1,000 per share. In connection
with this sale the Company also issued 60,587 shares of common stock as
a finder's fee and recognized expense of $19,878 and an increase in capital
stock of a like amount. The Company secured the services of an investment
banker during December 1998. In order to retain the services and conserve
cash the Company issued 30,000 shares of stock and recognized an expense of
$10,000 and an increase to capital stock of the same amount.
The Company raised $25,000 in December 1998 from the sale of 25 shares
of Series A Preferred Stock for $1,000 per share. In connection with this
sale the Company also paid a professional services fee of $2,000 in cash.
Financial commitments from accredited investors have not been
formalized yet, although extensive negotiations have occurred with
numerous individuals who have expressed interest in financing the Company
to varying degrees. These interested parties include some previous
investors in the Company as well as others. Sources for additional
capital have been generated by the Company, its current investors and
as part of the professional services provided by its legal and financial
services firms. Part of this effort has included retaining the investment
banking services of First Florida Capital Corporation in December 1998.
First Florida Capital has since secured $100,000 in financing through three
private placements and the sale of the Company's Series A preferred shares.
This will allow the Company to continue its operations for the next 30-45
days. During this 30-45 day period the Company expects to raise an
additional $40,000 through the results of operations and the sale of
capital equipment that is no longer in use, allowing the Company to
continue operations through March. During this two-month period the
Company expects to secure financing as mentioned above including the
sale of equity or debt securities through private placements; while
increasing sales and reducing or maintaining its current cash flow,
resulting in the Company continuing its operations through 1999, at
which time it anticipates being in a positive working cash flow
position.
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.
<PAGE>
The Company's financing activities for the nine-month period
ended September 30, 1998 provided $1,125,000. For the year ended
December 31, 1998 financing activities provided a net total of
$1,260,000. Cash at the end of that period was $28,904. As of
January 31, 1999 the Company had cash of $79,330 and working capital
of ($1,230,302). During the month of January 1999 financing activities
provided $75,000. The Company is currently expending approximately
$150,000 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. The Company has no commitments for any additional
financing, and there can be no assurance that additional financing will
be available as needed or, if available, will be on terms acceptable to
the Company. 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.
25<PAGE>
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 is bearing the cost of this offering (other than any
commissions payable by the Selling Stockholders) in an amount
estimated to be $40,000. The Company will pay the costs out of its
available funds.
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 affiliates 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.
MANAGEMENT
Executive Officers and Directors
The executive officers and directors of the Company and their ages as
of September 25, 1998 are as follows:
Name Age Position
---- --- --------
Glenn A. Smith 43 President, Chief Executive Officer
and Director
Tod R. Smith 37 Chief Technology Officer, General
Counsel and Director
Maurice J. Matovich 39 Chief Operations Officer and
Director
Howard Kaskel 52 Chief Financial Officer
GLENN A. SMITH has served as the President, Chief Executive Officer
and a director of Access Power, Inc. since the Company's formation in
1996. He has over twenty years experience in developing interactive
systems and Internet-based businesses and services. From 1992 to 1996
Mr. Smith was self-employed as a developer of advanced computer
telephony systems and services.
26
<PAGE>
TOD R. SMITH has served as Chief Technology Officer, General Counsel
since 1998 and a director of the Company since 1997. Mr. Smith worked
at AT&T as a Technical Staff member specializing in computer
consulting and the development of software from 1988 to 1998.
MAURICE MATOVICH has served as Chief Operating Officer since 1998 and
a director for Access Power since 1997. Mr. Matovich served as a
manager at AT&T where he specialized in high-tech operations
management, client relations and stockholder relations from 1984-1997.
HOWARD KASKEL has served as the Chief Financial Officer for Access
Power since 1998. Mr. Kaskel also is currently a limited partner with
Tatum CFO Partners, LLP, a partnership of career chief financial
officers. Mr. Kaskel has been devoting his full time to the Company.
Mr. Kaskel served as the Chief Financial Officer of DeFalco
Advertising from 1996 to 1997 and as the Chief Financial Officer of
Pinnacle Site Development Inc. in 1998. He was a partner at Kaskel,
Solwiel & Associates, a financial consulting firm, from 1993 to 1996,
where he advised companies regarding acquisitions, divestitures and
business planning.
Executive Compensation
The following table sets forth certain information regarding the
annual compensation for services in all capacities to the Company for
the year ended December 31, 1997 with respect to the Chief Executive
Officers:
Long-Term
Compensation
Awards
Securities
Name and Annual Compensation Underlying
Principal Position Salary Options(#)
------------------ ------------------- -----------
Glenn A. Smith, Chief
Executive Officer $96,000 100,000
STOCK OPTIONS
The following table summarizes certain information regarding
options to purchase Common Stock granted to the Chief Executive
Officer during the year ended December 31, 1997. The Company did not
grant any stock appreciation rights in 1997.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
Number Of Percent Of
Securities Total Options/
Underlying SARs Granted Exercise Or
Options/SARs To Employees Base Price
Name Granted (#) In Fiscal Year ($/Sh) Expiration Date
---- -------------- -------------- ----------- ---------------
<S> <C> <C> <C> <C>
Glenn A. Smith 100,000 13% $0.11 6/16/02
</TABLE>
The following table summarizes the number and value of
unexercised options held by the Chief Executive Officer as of December 31,
1997. The Chief Executive Officer did not exercise any options in
the year December 31, 1997.
27
<PAGE>
FISCAL YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
Number Of Securities
Underlying Unexercised Value of Unexercised
Options/SARs At In-The-Money Options/
FY-End (#) SARs At FY-End ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------------------- -------------------------
<S> <C> <C>
Glenn A. Smith 100,000 /0 $118,000/0 <F1>
- --------------------------
<FN>
<F1> This value has been calculated based on the average of the last bid
and asked price of the Common Stock as quoted on the Bulletin Board on
December 31, 1997.
</FN>
</TABLE>
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Howard
Kaskel in July 1998. The agreement provides that Mr. Kaskel will serve
as Chief Financial Officer of the Company on a part-time basis (three days
per week) for a base salary of $6,000 per month. Additional days are
paid at the rate of $500 per day. There is no cap on the additional salary
that could be payable. The average maximum salary per month under the
agreement (including the base salary and additional days) would be
approximately $14,700. The agreement is terminable by the Company
upon thirty (30) days written notice with all payments required
pursuant to the agreement to be paid on or before the termination
date. The Company does not have employment agreements with any
other of its executive officers.
DIRECTORS COMPENSATION
The directors have not received compensation for their duties as
such, and the Company has no current plans to compensate directors for
serving on the Board in the future.
STOCK INCENTIVE PLAN
In June, 1997, the Company adopted its Stock Incentive Plan (the
"Plan") to provide selected employees and affiliates providing
services to the Company or its affiliates an opportunity to purchase
Common Stock of the Company. The Plan promotes the success and
enhances the value of the Company by linking the personal interests of
participants to those of the Company's stockholders, and by providing
participants with an incentive for outstanding performance. Awards
under the Plan may be structured as "incentive stock options" (ISOs)
as defined in Section 422 of the Internal Revenue Code of 1986, as
amended ("IRC"), for employees or as non-qualified stock options for
any participant.
The Plan, as amended, provides that the aggregate number of
shares of Common Stock with respect to which options may be granted
pursuant to the Plan shall not exceed 2,500,000 shares.
ISOs are subject to certain limitations prescribed by the IRC,
including the requirement that such options be granted with an
exercise price no less than the fair market value of the Common Stock
at the date of grant and that the value of stock with respect to which
ISOs are exercisable by a participant for the first time in any year
under the terms of the Plan (and any other incentive stock option
plans of the Company and its subsidiaries) may not exceed $100,000,
based on the fair market value of the stock at the date of grant. In
addition, ISOs may not be granted to employees who own more than 10%
of the combined voting power of all classes of voting stock of the
Company, unless the option price is at least 110% of the fair market
value of the Common Stock subject to the option and unless the option
is exercisable for no more than five years from the grant date.
28<PAGE>
The compensation committee of the Board of Directors of the
Company has discretion to set the terms and conditions of options,
including the term, exercise price and vesting conditions, if any, to
determine whether the option is an ISO or a non-qualified stock
option, to select the persons who receive such grants and to interpret
and administer the Plan.
As of the date of this Prospectus, options to purchase an
aggregate of 1,288,500 shares of Common Stock have been granted under
the Plan and were outstanding, including options for 400,000 shares of
Common Stock issued to Glenn A. Smith. Mr. Smith's options have an
exercise price of $0.11 per share for 100,000 shares, $1.00 per
share for 100,000 shares and $0.22 per share for 200,000 shares.
PRINCIPAL AND SELLING STOCKHOLDERS
The table below sets forth certain information regarding the
beneficial ownership of the Common Stock, as of January 31, 1999 by
(i) each person known to the Company to be the beneficial owner of
more than 5% of the outstanding shares of Common Stock, (ii) each
director of the Company and the Chief Executive Officer, (iii) all
directors and executive officers of the Company as a group, and (iv)
the Selling Stockholders. Unless otherwise indicated, each of the
stockholders listed below has sole voting and investment power with
respect to the shares beneficially owned.
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior to the Owned
Offering After the Offering
-------------------- ---------------------
Number
of Shares
Beneficial Owner Number Percent to be Sold Number Percent
- ---------------------------------------- --------- ------- ---------- --------- -------
<S> <C> <C> <C> <C> <C>
Glenn A. Smith<F1> 3,182,200 15.3 200,000 2,982,200 14.4%
Mike Pitts<F2><F3> 2,002,800 9.8 150,000 1,852,800 9.1
Tod R. Smith<F4> 1,090,000 5.2 -- 1,090,000 5.2
Maurice Matovich<F4> 829,000 4.0 -- 829,000 4.0
Edwards Capital Corporation<F5> 333,131 1.6 333,131 -- --
Jimmy Dean Dowda<F5> 166,565 * 166,565 -- --
Olympus Capital, Inc.<F6><F7> 2,506,920 12.3 2,506,920 -- --
Hyman & Ethel Schwartz<F7> 1,518,113 7.5 1,518,113 -- --
Frederick Lenz<F5> 166,565 * 166,565 -- --
Arnold Zousmer<F5> 1,998,789 9.8 1,998,789 -- --
John T. Mitchell<F5> 166,565 * 166,565 -- --
Bruce R. Knox<F5> 166,565 * 166,565 -- --
Subramanian Sundaresan 50,000 * 50,000 -- --
Inman Company<F8><F9> 612,950 2.9 612,950 -- --
Chesterfield Capital Resources Ltd.<F5> 605,693 3.0 605,693
John Monsky 188,536 * 188,536 -- --
Harold Berliner 15,000 * 15,000 -- --
T. Wayne Davis 302,847 1.5 302,847 -- --
Robert Monsky 195,269 * 195,269 -- --
All directors and executive officers as a
group (4 persons)<F10> 5,288,700 24.2 200,000 5,088,700 23.3
</TABLE>
____________________
*Less than 1%.
[FN]
<F1> Includes 30,400 shares of Common Stock held for a minor child and
415,000 shares subject to presently exercisable options.
<F2> Mr. Pitts is the former Chief Financial Officer of the Company.
He no longer has any day-to-day involvement with the Company.
29<PAGE>
<F3> Includes 20,000 shares of Common Stock held in a custodial
account for a minor child and 200,000 shares subject to presently
exercisable options.
<F4> Includes 450,000 shares subject to presently exercisable options.
<F5> Shares of Common Stock issuable upon conversion of all shares of
Preferred Stock held by such stockholder based upon a five-day
average share price of $0.254. The number of shares to be sold
is subject to adjustment to reflect the effect of the market
price of the Common Stock at the time of conversion on the
conversion rate under a formula. See "Description of Capital
Stock Preferred Stock."
<F6> Olympus Capital, Inc. is an investment banking firm that has
assisted the Company in the past in its raising of capital. None
of the Company's officers, directors or affiliates is affiliated
with Olympus Capital, Inc. or its owner, James W. Spratt, III.
<F7> Includes shares of Common Stock issuable upon conversion of all
shares of Preferred Stock held by such stockholder based upon a
five-day average share price of $0.254. The number of shares to
be sold is subject to adjustment to reflect the effect of the
market price of the Common Stock at the time of conversion on the
conversion rate under a formula. See "Description of Capital
Stock Preferred Stock."
<F8> Inman Company is an investment banking and business advisory firm
that has assisted the Company in the past on organization and
personnel matters. None of the Company's officers, directors or
affiliates is affiliated with Inman Company.
<F9> Includes 587,950 shares of Common Stock issuable upon exercise of
a warrant.
<F10>Includes an aggregate of 1,502,500 shares of Common Stock subject
to presently exercisable options.
PLAN OF DISTRIBUTION
The Selling Stockholders have advised the Company that, prior to
the date of this Prospectus, they have not made any agreement or
arrangement with any underwriters, brokers or dealers regarding the
distribution and resale of the Shares. If the Company is notified by
a Selling Stockholder that any material arrangement has been entered
into with an underwriter for the sale of the Shares, then, to the
extent required under the Securities Act or the rules of the
Commission, a supplemental prospectus will be filed to disclose such
of the following information as the Company believes appropriate: (i)
the name of the participating underwriter; (ii) the number of the
Shares involved; (iii) the price at which such Shares are sold, the
commissions paid or discounts or concessions allowed to such
underwriter; and (iv) other facts material to the transaction.
The shares have not been registered for sale by the Selling
Stockholders under the securities laws of any state as of the date
of this Prospectus. Brokers or dealers effecting transactions in the
shares should confirm the registration thereof under the securities
laws of the states in which transactions occur or the existence of
any exemption from registration.
The Company expects that the Selling Stockholders will sell their
Shares covered by this Prospectus through customary brokerage
channels, either through broker-dealers acting as agents or brokers
for the seller, or through broker-dealers acting as principals, who
may then resell the Shares in the over-the-counter market, or at
private sale or otherwise, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at
negotiated prices. The Selling Stockholders may effect such
transactions by selling the Shares to or through broker-dealers, and
such broker-dealers may receive compensation in the form of<PAGE>
concessions or commissions from the Selling Stockholders and/or the
purchasers of the Shares for whom they may act as agent (which
compensation may be in excess of customary commissions). The Selling
Stockholders and any broker-dealers that participate with the Selling
Stockholders in the distribution of Shares may be deemed to be
underwriters and commissions received by them and any profit on the
resale of Shares positioned by them might be deemed to be underwriting
discounts and commissions under the Securities Act. There can be no
assurance that any of the Selling Stockholders will sell any or all of
the Shares offered by them hereunder.
Sales of the Shares on the OTC Bulletin Board or other trading system may
be by means of one or more of the following: (i) a block trade in which a broker
or dealer will attempt to sell the Shares as agent, but may position and resell
a portion of the block as principal to facilitate the transaction; (ii)
purchases by a dealer as principal and resale by such dealer for its account
pursuant to this Prospectus; and (iii) ordinary brokerage transactions and
30
<PAGE>
transactions in which the broker solicits purchasers. In effecting sales,
brokers or dealers engaged by the Selling Stockholders may arrange for other
brokers or dealers to participate.
The Selling Stockholders are not restricted as to the price or
prices at which they may sell their Shares. Sales of such Shares at
less than market prices may depress the market price of the Company's
Common Stock. Moreover, the Selling Stockholders are not restricted
as to the number of Shares which may be sold at any one time.
The Company has advised the Selling Stockholders that the anti-
manipulative rules under the Exchange Act, including Regulation M, may
apply to sales in the market of the Shares offered hereby. The
Company has also advised the Selling Stockholders of the requirement
for the delivery of this Prospectus in connection with resales of the
Shares offered hereby.
SHARES ELIGIBLE FOR FUTURE SALE
Through the date of this Prospectus, there has been only limited
over-the-counter trading of the Common Stock of the Company by certain
market makers who have registered to enter on the Common Stock on the
Bulletin Board. The Company has no plans to list the Common Stock on
NASDAQ or on any securities exchange. Sales of substantial amounts of
shares of the Company's Common Stock in the public market following
the offering, or the perception that such sales could occur, could
adversely affect the market price of the Common Stock prevailing from
time to time and could impair the Company's ability to raise capital
in the future through sales of its equity securities.
Assuming conversion of the Series A Preferred Stock and the
exercise of all outstanding warrants, the Company will have a total of
20,365,399 shares of Common Stock outstanding at the time of this
offering.<F1> Shares in the amount of up to 10,000,000 registered for
sale by the Selling Stockholders, if sold under this registration, and
3,578,000 shares of Common Stock previously sold by the Company
pursuant to an exemption under Regulation 504 will, after the
offering, be freely tradable without restriction or further
registration under the Securities Act, except that any shares
purchased by "Affiliates" of the Company, as that term is defined in
Rule 144 ("Rule 144") under the Securities Act ("Affiliates"), may
generally only be sold in compliance with Rule 144 described below.
The remaining shares of Common Stock are "Restricted Securities" as
defined in Rule 144. Restricted Securities may be sold in the public
market only if registered or if they qualify for an exemption from
registration under the Securities Act, such as under Rule 701 or
pursuant to Rule 144, which rules are summarized below.
___________
[FN]
<F1> Assumes the conversion of all outstanding shares of Preferred Stock into
7,874,016 shares of Common Stock based on a conversion rate, as set forth in
the formula described in "Preferred Stock" below and an average market price of
Common Stock at $0.254. Also assumes exercise of the warrant to purchase
587,950 shares of Common Stock.
</FN>
SALES OF RESTRICTED SECURITIES
In general, under Rule 144 as currently in affect, a person who
has beneficially owned Restricted Securities for at least one year,
including a person who may be deemed an Affiliate of the Company, is
entitled to sell, within a three-month period, a number of shares of
Common Stock of the Company that does not exceed the greater of one<PAGE>
percent of the then-outstanding shares of Common Stock (approximately
203,654 shares on a diluted basis) and the average weekly reported
trading volume of the Company's Common Stock during the four calendar
weeks preceding such sale. Sales under Rule 144 are subject to
certain restrictions relating to manner of sale, notice and
availability of current public information about the Company. In
addition, under Rule 144(k), a person who is not an Affiliate and has
not been an Affiliate at any time during the ninety days preceding a
sale, and who has beneficially owned shares for at least two years,
would be entitled to sell such shares immediately following the
offering, without regard to the volume limitations, manner of sale
provisions or notice or other requirements of Rule 144. In meeting
the one-and two-year holding periods described above, the holder of
Restricted Securities can include the holding periods of a prior owner
who is not an Affiliate. The one-and two-year holding periods
described above do not begin to run until the full purchase price or
other consideration is paid by the person acquiring the Restricted
Securities from the issuer or/an Affiliate.
31
<PAGE>
Rule 701 under the Securities Act provides that shares of Common
Stock acquired on the exercise of outstanding options may be resold by
persons other than Affiliates, subject only to the manner of sale
provisions of Rule 144, and by Affiliates under Rule 144 without
compliance with its one-year minimum holding period, subject to
certain limitations.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of
40,000,000 shares of Common Stock, $0.001 par value and 10,000,000
shares of preferred stock, $0.001 par value, of which 1,200 shares has
been designated as Series A Convertible Preferred Stock.
The following summary of the Company's capital stock does not
purport to be complete and is qualified in its entirety by reference
to the Articles of Incorporation, as amended and restated, and Bylaws,
as amended and restated, of the Company that are included as exhibits
to the Registration Statement of which this Prospectus forms a part,
and the applicable provisions of the Florida Business Corporation Act.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on any
issue submitted to a vote of the stockholders and do not have
cumulative voting rights in the election of directors. Accordingly,
the holders of a majority of the outstanding shares of Common Stock
voting in an election of directors can elect all of the directors then
standing for election, if they choose to do so. Subject to any
outstanding shares of Preferred Stock, all shares of Common Stock are
entitled to share equally in such dividends as the Board of Directors
of the Company may, in its discretion, declare out of sources legally
available therefor. See "Dividend Policy." Upon dissolution,
liquidation, or winding up of the Company, holders of Common Stock are
entitled to receive on a ratable basis, after payment or provision for
payment of all debts and liabilities of the Company and any
preferential amount due with respect to outstanding shares of
Preferred Stock, if any, all assets of the Company available for
distribution, in cash or in kind. Holders of shares of Common Stock
do not have preemptive or other subscription rights, conversion or
redemption rights, or any rights to share in any sinking fund. All
currently outstanding shares of Common Stock are fully paid and
nonassessable.
PREFERRED STOCK
The Company has designated one series of preferred stock
consisting of 1,200 shares of Series A Convertible Preferred Stock
(the "Preferred Stock"). In the event of any liquidation, dissolution
or winding up of the Company, whether voluntary or involuntary, the
Preferred Stockholders shall be entitled to receive an amount equal to
One Thousand Five Hundred ($1,500.00) Dollars per share of Preferred
Stock. In the event the assets of the Company available for
distribution to its stockholders are insufficient to pay the full
preferential liquidation amount per share required to be paid to the
Company's Preferred Stockholders, the entire amount of assets of the
Company available for distribution to stockholders shall be paid up to
their respective full liquidation amounts first to the Preferred
Stockholders, all of which amounts shall be distributed ratably among
holders of Preferred Stock, and the Common Stock shall receive
nothing. Each share of Preferred Stock shall be convertible into a
number of shares of Common Stock of the Company equal to the quotient
obtained by dividing $1,000 by the lower of (i) Sixty-five (65%) of
the average market price of the Common Stock for the five trading days<PAGE>
immediately prior to the conversion date, subject to an additional 10%
discount under certain circumstances, which are applicable to 1000 of
the shares (e.g., a division by 55% of the average market price) or
(ii) $3.00, increased proportionately for any reverse stock split and
decreased proportionately for any forward stock split or stock
dividend. The market price shall be the average of the closing bid
prices of the Common Stock, as quoted on the Bulletin Board over the
five trading days prior to the date of conversion.
32
<PAGE>
CERTAIN PROVISIONS OF THE ARTICLES AND BYLAWS
The Company's Amended and Restated Bylaws ("Bylaws") contain
certain provisions, described below, that could delay, defer or
prevent a change in control of the Company if the Board determines
that such a change in control is not in the best interests of the
Company and its stockholders, and could have the effect of making it
more difficult to acquire the Company or remove incumbent management.
CLASSIFIED BOARD. Under the Company's Bylaws, the Board of
Directors of the Company is divided into three classes, with staggered
terms of three years each. Each year the term of one class expires.
The Bylaws provide that any director may be removed from office, but
only for cause by an affirmative vote of at least two-thirds of the
outstanding capital stock entitled to vote in the election of
directors. The Bylaws also provide that any vacancies on the Board of
Directors shall be filled only by the affirmative vote of a majority
of the directors then in office, even if less than a quorum.
SPECIAL VOTING REQUIREMENTS. The Company's Bylaws provide that
all actions taken by the stockholders must be taken at an annual or
special meeting of the stockholders or by unanimous written consent.
The Bylaws provide that special meetings of the stockholders may be
called by only a majority of the members of the Board of Directors.
Under the Company's Bylaws, stockholders will be required to comply
with advance notice provisions with respect to any proposal submitted
for stockholder vote, including nominations for elections to the Board
of Directors. The Bylaws of the Company contain provisions requiring
the affirmative vote of the holders of at least two-thirds of the
outstanding shares of each class and series, if any, of capital stock
of the Corporation entitled to vote in the election of directors cast
at a meeting of the stockholders for that purpose.
INDEMNIFICATION AND LIMITATION OF LIABILITY. The Florida
Business Corporations Act (the "Florida Act") authorizes Florida
corporations to indemnify any person who was or is a party to any
proceeding (other than an action by, or in the right of, the
corporation), by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation or other entity, against
liability incurred in connection with such proceeding, including any
appeal thereof, if he or she acted in good faith and in a manner he or
she reasonably believed to be in, or not opposed to, the best
interests of the corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct
was unlawful. In the case of an action by or on behalf of a
corporation, indemnification may not be made if the person seeking
indemnification is adjudged liable, unless the court in which such
action was brought determines such person is fairly and reasonably
entitled to indemnification. The indemnification provisions of the
Florida Act require indemnification if a director or officer has been
successful on the merits or otherwise in defense of any action, suit
or proceeding to which he or she was a party by reason of the fact
that he or she is or was a director or officer of the corporation.
The indemnification authorized under Florida law is not exclusive, and
is in addition to any other rights granted to officers and directors
under the Articles of Incorporation or Bylaws of the corporation or
any agreement between officers and directors and the corporation. A
corporation may purchase and maintain insurance or furnish similar
protection on behalf of any officer or director against any liability
asserted against the officer or director and incurred by the officer
or director in such capacity, or arising out of the status, as an
officer or director, whether or not the corporation would have the
power to indemnify him or her against such liability under the Florida
Act. The Company's Bylaws provide for the indemnification of<PAGE>
directors and executive officers of the Company to the maximum extent
permitted by Florida law and for the advancement of expenses incurred
in connection with the defense of any action, suit or proceeding that
the director or executive officer was a party to by reason of the fact
that he or she is or was a director or executive officer of the
Company upon the receipt of an undertaking to repay such amount,
unless it is ultimately determined that such person is not entitled to
indemnification. Under the Florida Act, a director is not personally
liable for monetary damages to the Company or any other person for
acts or omissions in his or her capacity as a director except in
certain limited circumstances such as certain violations of criminal
law and transactions in which the director derived an improper person
benefit. As a result, stockholders may be unable to recover monetary
damages against directors for actions taken by them which constitute
negligence or gross negligence or which are in violation of their
fiduciary duties, although injunctive or other equitable relief may be
available. The foregoing provisions of the Florida Act and the Bylaws
could have the effect of preventing or delaying a person from
acquiring or seeking to acquire a substantial equity interest in, or
control of, the Company.
33
<PAGE>
Such indemnification may be available for liabilities arising in
connection with this Offering. Insofar as indemnification for
liabilities under the Securities Act may be permitted to directors,
officers or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that, in the opinion of the
Commission, such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.
AMENDMENTS OF THE ARTICLES AND BYLAWS. Certain provision of the
Articles and Bylaws, including those pertaining to a classified board,
special meetings of stockholders, removal of directors and director
liability and indemnification, may be amended only by the affirmative
vote of two-thirds of the shares of the capital stock of the Company
entitled to vote in the election of directors.
CERTAIN STATUTORY PROVISIONS
The Florida Act provides for special voting requirements to
approve affiliated transactions unless the transaction falls under one
or more enumerated exceptions.
REGISTRATION RIGHTS
The Company granted shares of the Preferred Stock certain
registration rights. Such registration rights grant the holders
thereof the right to have the Company file a registration statement
covering the resale of shares of Common Stock received upon conversion
of the Preferred Stock.
TRANSFER AGENT
The Transfer Agent and Registrar for the Common Stock is Atlas
Stock Transfer & Trust Company, Salt Lake City, Utah.
LEGAL MATTERS
The validity of the Common Stock being offered hereby is being
passed upon for the Company by L. Van Stillman, Boca Raton, Florida.
EXPERTS
The financial statements of the Company at December 31, 1997 and
for the year ended December 31, 1997 and the period from the Company's
inception appearing in this Prospectus and the Registration Statement
have been audited by Parks, Tschopp, Whitcomb & Orr, independent
auditors, as indicated in their report thereon appearing herein and in
the Registration Statement, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting
and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration
Statement on Form SB-2 under the Securities Act with respect to the
Common Stock offered hereby. As used herein, the term "Registration
Statement" means the initial Registration Statement and any and all
amendments thereto. This Prospectus, which is a part of the
Registration Statement, does not contain all of the information set
forth in the Registration Statement and the exhibits thereto. For
further information with respect to the Company and the Common Stock,
reference is made to the Registration Statement, including the
exhibits and schedules thereto. Statements contained in this
Prospectus concerning the contents of any contract or any other
document are not necessarily complete and such instance reference is<PAGE>
made to such contract or other document filed with the Commission as
an exhibit to the Registration Statement. Each such statement is
qualified in its entirety by such reference.
34<PAGE>
A copy of the Registration Statement, including the exhibits
thereto, may be inspected without charge at the Public Reference
section of the commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the following regional
offices of the Commission: New York Regional Office, Seven World
Trade Center, 13th Floor, New York, New York 10048; and Chicago
Regional Office, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of the Registration Statement and the
exhibits and schedules thereto can be obtained from the Public
Reference Section of the Commission upon payment of prescribed fees,
or at the Commission's web site at http://www.sec.gov.
Prior to filing the Registration Statement of which this
Prospectus is a part, the Company was not subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Upon effectiveness of the
Registration Statement, the Company will become subject to the
informational and periodic reporting requirements of the Exchange Act,
and in accordance therewith, for a period of up to one year will file
periodic reports, proxy statements, and other information with the
Commission. Such periodic reports, proxy statements, and other
information will be available for inspection and copying at the public
reference facilities and other regional offices referred to above.
35
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Accountants ..................................... F-2
Financial Statements:
Year Ended December 31, 1997 (Audited)
Balance Sheet at December 31, 1997 .................................... F-3
Statements of Operations For the year ended December 31, 1997
and the (date of inception) through December 31, 1996;
October 10, 1996 (date of inception) through
December 31, 1997 ................................................... F-4
Statements of Stockholders' Equity For the year ended
December 31, 1997 and the period from October 10, 1996
(date of inception) through December 31, 1997 ...................... F-5
Statements of Cash Flows For the year ended December 31, 1997
and the period from October 10, 1996 (date of inception)
through December 31, 1996 and the cumulative period from
October 10, 1996 (date of inception) through
December 31, 1997 .................................................. F-6
Notes to Financial Statements from October 10, 1996
(date of inception) to December 31, 1997 ........................... F-7
Quarter Ended September 30, 1998 (Unaudited):
Balance Sheet (September 30, 1998 - Unaudited)
and December 31, 1997 ............................................. F-10
Statement of Operations For the nine months ended
September 30, 1998 (unaudited) and the year ended
December 31, 1997 and the cumulative period from October 10, 1996
(date of inception) through September 30, 1998...................... F-11
Statement of Stockholder's Equity For the nine months
ended September 30, 1998 (unaudited) and the year ended
December 31, 1997 and the cumulative period from October 10,
1996 (date of inception) through September 30, 1998................. F-12
Statement of Cash Flows For the nine months ended September 30, 1998
(unaudited) and the year ended December 31, 1997 and the
cumulative period from October 10, 1996 (date of inception)
through September 30, 1998.......................................... F-13
Notes to Interim Financial Statements ................................. F-14
F-1
<PAGE>
PARKS, TSCHOPP,
WHITCOMB & ORR, P.A.
Certified Public Accountants
2600 Maitland Center Parkway
Suite 330
Maitland, Florida 32751
Independent Auditors' Report
The Board of Directors
Access Power, Inc.:
We have audited the accompanying balance sheet of Access Power, Inc.
(a development stage company) as of December 31, 1997, and the related
statements of operations, stockholders' equity, and cash flows for the
year then ended, the period from October 10, 1996 (date of inception)
through December 31, 1996 and the cumulative period from October 10,
1996 (date of inception) through December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Access
Power, Inc. (a development stage company) as of December 31, 1997, and
the results of its operations and its cash flows for the year ended,
the period from October 10, 1996 (date of inception) through December
31,1996 and the cumulative period from October 10, 1996 (date of
inception) through December 31, 1997, in conformity with generally
accepted accounting principles.
Parks, Tschopp, Whitcomb & Orr, P.A.
April 1, 1998
Maitland, Florida
F-2
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
Balance Sheet
December 31, 1997
<TABLE>
<CAPTION>
Assets
------
<S> <C>
Current assets:
Cash $ 54,086
Accounts receivable 9,596
Note receivable, stockholder 24,096
-----------
Total current assets 87,778
-----------
Property and equipment, net (note 2) 392,592
Other assets 16,834
-----------
Total assets $ 497,204
===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 350
Notes payable, stockholders (note 3) 10,136
-----------
Total current liabilities 10,486
-----------
Stockholders' Equity:
Common stock, $.001 par value, authorized 40,000,000 shares, issued
and outstanding 11,484,000 shares. 11,484
Additional paid in capital 907,373
Preferred stock, $.001 par value, authorized 10,000,000 shares, no
shares issued -
Deficit accumulated during the development stage (432,139)
-----------
Total stockholders' equity 486,718
-----------
Commitments (notes 3 and 4)
Total liabilities and stockholders' equity $ 497,204
==========
</TABLE>
See accompanying notes to financial statements.
F-3<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
<TABLE>
<CAPTION>
Statements of Operations
For the year ended December 31, 1997 and the period from October 10, 1996
(date of inception) through December 31, 1996 and the cumulative period from
October 10, 1996 (date of inception) through December 31, 1997
For the period For the period
October 10, 1996 October 10, 1996
For year ended through through
December 31, 1997 December 31, 1996 December 31, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenues - - -
Costs and expenses:
Product development and marketing $ 34,636 $ 2,848 $ 37,484
General and administrative 391,520 2,853 394,373
------------ ----------- ------------
Total costs and expenses 426,156 5,701 431,857
------------ ----------- ------------
Other income (expense)
Interest income 1,888 - 1,888
Interest expense (2,170) - (2,170)
------------ ----------- ------------
Total other income (expense) (282) - (282)
------------ ----------- ------------
Net loss $ (426,438) $ (5,701) $ (432,139)
============ =========== ============
Net loss per share $ (0.04) $ - $ (0.05)
============ =========== ============
Weighted average number of
shares 9,742,000 8,000,000 8,000,000
============ =========== ============
</TABLE>
See accompanying notes to financial statements.
F-4<PAGE>
<TABLE>
<CAPTION>
ACCESS POWER, INC.
(A Development Stage Company)
Statement of Stockholders' Equity
For the year ended December 31, 1997 and the period from October 10, 1996
(date of inception) through December 31, 1997
Additional Total
Common Stock Paid in Accumulated Stockholders'
Date Shares Amount Capital Deficit Equity
---- ------ ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Common stock issued to founding directors 8,000,000 $ 8,000 $ (7,200) $ - $ 800
Net loss - - - (5,701) (5,701)
---------- -------- --------- --------- --------
Balances at December 31, 1996 8,000,000 8,000 (7,200) (5,701) (4,901)
Common stock issued for cash 5/23/97 750,000 750 35,000 - 35,000
Common stock issued for cash 6/30/97 1,000,000 1,000 100,000 - 100,000
Common stock issued for cash 7/97-10/97 1,734,000 1,734 854,573 - 854,573
Stock issuance cost - - (75,000) - (75,000)
Net loss - - - (426,438) (426,438)
---------- -------- --------- --------- --------
Balances at December 31, 1997 11,484,000 $ 11,484 $ 907,373 $(432,139) $483,234
========== ======== ========= ========= ========
</TABLE>
See accompanying notes to financial statements.
F-5<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
<TABLE>
<CAPTION>
Statements of Cash Flows
For the year ended December 31, 1997 and the period from October 10, 1996
(date of inception) through December 31, 1996 and the cumulative period from October 10, 1996
(date of inception) through December 31, 1997
For the period from For the period
October 10, 1996 October 10, 1996
For the year ended through through
December 31, 1997 December 31, 1996 December 31, 1997
------------------ ------------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (426,438) $ (5,701) $ (432,139)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 26,757 256 27,013
Change in operating assets and liabilities:
Accounts receivable (9,596) - (9,596)
Accounts payable 350 - 350
Other assets (20,000) - (20,000)
----------- --------- ----------
Net cash used in operating activities (428,927) (5,445) (434,372)
----------- --------- ----------
Cash flows from investing activities:
Purchase of property and equipment (406,154) (10,285) (416,439)
Note receivable (19,001) (5,095) (24,096)
----------- --------- ----------
Net cash used in investing activities (425,155) (15,380) (440,535)
----------- --------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock 918,057 800 918,857
Proceeds from issuance of notes payable - 20,025 20,025
Principal payments on notes payable (9,889) - (9,889)
----------- --------- ----------
Net cash provided by financing activities 908,168 20,825 928,993
----------- --------- ----------
Net increase in cash 54,086 - 54,086
Cash, at beginning of period - - -
----------- --------- ----------
Cash at end of period $ 54,086 $ - $ 54,086
=========== ========= ==========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
Notes to Financial Statements
Period from October 10, 1996 (date of inception) to December 31, 1997
(1) Summary of Significant Accounting Policies
(a) Nature of development stage operations
--------------------------------------
Access Power, Inc., (API or the Company) was formed on October 10,
1996. The Company offers Internet Telephony (IT) which will
provide advanced computer telephony solutions to the global
consumer market place, with an emphasis on marketing to the small
office and home office worker.
Operations of the Company through the date of these financial
statements have been devoted primarily to product development and
marketing, raising capital, and administrative activities.
(b) Property and equipment
----------------------
Property and equipment are recorded at cost and depreciated over
the estimated useful lives of the assets which range from three to
five years, using the straight-line method.
(c) Intangible assets
-----------------
Organization costs are amortized over a five-year period using the
straight-line method.
(d) Income taxes
------------
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and
tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. Changes in tax rates are
recognized in the period that includes the enactment date.
Development stage operations for the period ended December 31, 1997
resulted in a net operating loss. It is uncertain whether any tax
benefit of net operating loss will be realized in future periods.
Accordingly, no income tax provision has been recognized in the
accompanying financial statements. At December 31, 1997, the
Company has net operating loss carryforwards of approximately
$432,000, which will expire in years beginning in 2011. A
valuation allowance equal to the tax benefit of the net operating
loss has been established, since it is uncertain that future
taxable income will be realized during the carryforward period.
Accordingly, no income tax provision has been recognized in the
accompanying financial statements.
(e) Financial Instruments Fair Value, Concentration of Business and Credit
----------------------------------------------------------------------
Risks
-----
The carrying amount reported in the balance sheet for cash,
accounts and notes receivable, accounts payable and accrued
expenses approximates fair value because of the immediate or short-
term maturity of these financial instruments. The carrying amount
reported in the accompanying balance sheet for notes payable
approximates fair value because the actual interest rates do not
significantly differ from current rates offered for instruments
with similar characteristics. Financial instruments, which
potentially subject the Company to concentrations of credit risk,
consist principally of accounts and note receivable which amounts
to approximately $30,000. The Company performs periodic credit
evaluations of its trade customers and generally does not require
collateral. Currently, all of the Company's hardware and software
is purchased from one supplier, however, management believes there
are other alternatives to this supplier.
F-7
<PAGE>
(Continued)
ACCESS POWER, INC.
(A Development Stage Company)
Notes to Financial Statements
Period from October 10, 1996 (date of inception) to December 31, 1997
(1), Continued
(f) Use of Estimates
----------------
Management of the Company has made certain estimates and
assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities to prepare
these financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those
estimates.
(g) Cash Flows
----------
For purposes of cash flows, the Company considers all highly liquid
debt instruments with original maturities of three months or less
to be cash equivalents.
(h) Prepaid Offering Costs
----------------------
Prepaid offering costs represent direct costs and expenses incurred
in connection with the offering of securities. Upon completion of
the offering, such amounts are offset against the proceeds from the
offering, in the event of an offering of equity securities, and
capitalized and amortized using the interest method in the event of
an offering of debt securities.
(i) Revenue Recognition
-------------------
The principal sources of revenues are expected to be internet
telephone charges, which will be recognized as incurred. The
Company is presently operating in this one business segment and
only in the United States.
(j) Loss Per Common Share
---------------------
Earnings per common share have been computed based upon the weighted
average number of common shares outstanding during the years
presented. Common stock equivalents resulting from the issuance of
the stock options have not been included in the per share calculations
because such inclusion would not have a material effect on earnings
per common share.
(k) Software and Development Costs
------------------------------
The Company capitalizes purchased software which is ready for
service and software development costs incurred from the time
technological feasibility of the software is established until the
software is ready for use to provide services to customers.
Research and development costs and other computer software
maintenance costs related to software development are expensed as
incurred.<PAGE>
The carrying value of a software and development asset is regularly
reviewed by the Company, and a loss is recognized when the net
realizable value falls below the unamortized cost.
(l) Stock-Based Compensation
------------------------
During 1997, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation".
This pronouncement establishes financial accounting and reporting
standards for stock-based compensation. It encourages, but does not
require, companies to recognize compensation expense for grants of
stock, stock options and other equity instruments to employees based
on new fair value accounting rules. Such treatment is required for
non-employee stock-based compensation. The Company has chosen to
continue to account for employee stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees".
Accordingly, compensation expense for employee stock options or
warrants is measured as the difference between the quoted market
price of the Company's stock at the date of grant and the amount
the employee must pay to require the stock. SFAS 123 requires
companies electing to continue using the intrinsic value method
to make certain pro forma disclosures (see Note 5).
F-8
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
Notes to Financial Statements
Period from October 10, 1996 (date of inception) to December 31, 1997
(2) Property and Equipment
----------------------
<TABLE>
<CAPTION>
Property and equipment consist of the following at December 31, 1997:
<S> <C>
Office furniture and equipment $ 52,842
Computer hardware 131,811
Computer software 231,786
-------------
416,439
Less accumulated depreciation and amortization 23,847
-------------
$ 392,592
=============
(3) Notes Payable
-------------
Notes payable consist of the following at December 31, 1997:
Promissory notes to individuals bearing interest at 6% payable upon the
closing of an initial public offering. Unsecured. $ 10,136
-----------
$ 10,136
===========
</TABLE>
(4) Commitments
-----------
The Company leases its office space under a non-cancelable
operating lease with a remaining term of three years. Future
minimum payments under this lease are as follows:
Year Amount
---- ------
1998 35,200
1999 36,270
2000 21,500
Rent expense for the year ended December 31, 1997 amounted to $15,183.
(5) Stock Options
-------------
In 1997, the Company established an incentive stock option plan
(the Plan) to provide an incentive to key employees of the Company
who are in a position to contribute materially to expanding and
improving the Company's profits, to aid in attracting and retaining
employees of outstanding ability and to encourage ownership of shares
by employees. As of December 31, 1997, 641,000 options had been
granted at an average price of $.25.
<PAGE>
Subsequent to year end, the Plan was amended in March, 1998 to
increase the number of shares available for issuance thereunder
from 1,000,000 to 2,500,000 shares. The Plan is designed to serve as
an incentive for retaining qualified and competent employees. The
Company's Board of Directors, or a committee thereof, administers
and interprets the Plan and is authorized, in its discretion, to
grant options thereunder to all eligible employees of the Company,
including officers and directors (whether or not employees) of the
Company. The per share exercise price of options granted under the
Plan will not be less than the fair market value of the common stock
on the date of grant. Options granted under the Plan will be
exercisable after the period or periods specified in the option
agreement. The Board may, in its sole discretion, accelerate the
date on which any option may be exercised. Options granted under the
Plan are not exercisable after the expiration of ten years from the
date of grant and are nontransferable other than by will or by the laws
of descent and distribution. The Company recognizes compensation
expense for options granted under the Plans based on the difference
between the quoted market price of the Company's stock at the date
of grant and the amount the employee must pay to acquire the
stock. No compensation cost has been recognized for employee stock
options which had been granted to date. Had compensation cost for the
Plans been determined based on the fair value at the date of grant
for awards under those Plans, consistent with the method prescribed
by SFAS 123, the Company's net loss per share would have been
increased to the pro forma amounts indicated below:
For the period
October 10, 1996
Year ended through
December 31, 1997 December 31, 1997
----------------- -----------------
Pro forma net loss:
As reported $ (426,436) (432,139)
Pro forma (432,950) (438,651)
Pro forma net loss per share:
As reported (0.04) (0.05)
Pro forma (0.04) (0.05)
The fair value of each option granted under the Plans is estimated
on the date of grant using the Black-Scholes option-pricing model with
the following weighted average assumptions used for grants in 1997, no
dividend yield; expected volatility of the underlying stock of 0%;
risk-free interest rates ranging from 5.16% to 5.45% covering the
related option period; and expected lives of the options of 10 years
based on the related option period.
F-9<PAGE>
<TABLE>
<CAPTION>
Access Power, Inc
(A Development Stage Company)
Balance Sheet
September 30,1998
(Unaudited) December 31, 1997
----------- -----------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 28,904 $ 54,086
Inventory 30,000 -
Accounts receivable 27,743 9,596
Due from stockholders 25,095 24,096
Employee receivables 2,000 -
------------ ----------
Total current assets 113,742 87,778
------------ ----------
Property, plant & equipment - net 1,292,707 392,592
Other assets 10,323 16,834
------------ ----------
Total assets $ 1,416,772 $ 497,204
============ ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 1,191,790 $ 350
Notes payable 100,000 -
Due to stockholders 10,136 10,136
Payroll taxes payable 32,875 -
------------ ----------
Total current liabilities 1,334,802 10,486
------------ ----------
Stockholder's Equity:
Common stock, $.001 par value, authorized
40,000,000 shares, issued
and outstanding 11,784,000 shares and 11,484,000 11,784 11,484
respectively
Preferred stock, $.001 par value, authorized
10,000,000 shares, issued
and outstanding 1,000 shares and none respectively 1 -
Additional paid in capital 2,097,072 907,373
Retained earnings (deficit) (2,026,887) (432,139)
------------ ----------
Total stockholders' equity 81,970 486,718
------------ ----------
Total liabilities and stockholders' equity $ 1,416,772 $ 497,204
============ ==========
</TABLE>
F-10<PAGE>
<TABLE>
<CAPTION>
Access Power, Inc
(A Development Stage Company)
Statement of Operations
For the nine months ended September 30, 1998 (unaudited) and
the year ended December 31, 1997 and the cumulative period from
October 10, 1996 ( date of inception) through September 30, 1998
For the period
October 10, 1996
For the nine months For the year ended through
ended September 30, 1998 December 31, 1997 September 30, 1998
------------------------ ------------------ ----------------
<S> <C> <C> <C>
Revenues:
Product sales $ 212,092 $ - $ 212,092
Services 42,089 - 42,089
------------------- ---------------- ---------------
Total revenue 254,181 - 254,181
------------------- ---------------- ---------------
Costs and expenses:
Cost of sales 152,920 - 152,920
Product development and marketing 710,533 34,636 748,017
General and administrative 868,174 391,520 1,262,547
------------------- ---------------- ---------------
Total costs and expenses 1,731,627 426,156 2,163,484
------------------- ---------------- ---------------
Other income (expense):
Interest income 407 1,888 2,295
Interest expense (117,708) (2,170) (119,878)
------------------- ---------------- ---------------
Total other income (expense) (117,302) (282) (117,584)
------------------- ---------------- ---------------
Net loss $ (1,594,748) $ (426,438) $ (2,026,887)
=================== =============== ===============
Net loss per share $ (0.14) $ (0.04) $ (0.25)
=================== =============== ===============
Weighted average number of shares 11,706,220 9,742,000 8,000,000
=================== =============== ===============
</TABLE>
F-11
<PAGE>
<TABLE>
<CAPTION>
Access Power, Inc
(A Development Stage Company)
Statement of Stockholders' Equity
For the nine months ended September 30, 1998 (unaudited) and
the year ended December 31, 1997 and the cumulative period from October 10, 1996
(date of inception) through September 30, 1998
Additional Total
Common Stock Preferred Stock Paid in Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Equity
------ ------ ------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Common stock issued to founding directors 8,000,000 $ 8,000 -- -- $ (7,200) $ -- $ 800
Net loss -- -- -- -- -- (5,701) (5,701)
----------- -------- ------ ------ -------- ------- --------
Balances at December 31, 1996 8,000,000 8,000 -- -- (7,200) (5,701) (4,901)
Common Stock issued for cash 5/23/97 750,000 750 -- -- 35,000 -- 35,000
Common Stock issued for cash 6/30/97 1,000,000 1,000 -- -- 100,000 -- 100,000
Common Stock issued for cash 7/97-10/97 1,734,000 1,734 -- -- 854,573 -- 854,573
Stock issuance cost -- -- -- -- (75,000) -- (75,000)
Net loss -- -- -- -- -- (426,438) (426,438)
----------- -------- ------ ------ -------- ------- ---------
Balances at December 31, 1997 11,484,000 11,484 -- -- 907,373 (432,139) 486,718
----------- -------- ------ ------ -------- ------- ---------
Preferred Stock issued for cash 5/98 -- -- 1,000 $ 1 999,999 -- 1,000,000
Common Stock issued as additional
interest 2/2/98 50,000 50 -- -- 29,950 -- 30,000
Common Stock issued as additional
interest 2/19/98 125,000 125 -- -- 84,250 -- 84,375
Common Stock issued as finder's fee 2/19/98 75,000 75 -- -- 24,950 -- 25,000
Common Stock issued for cash 9/24/98 50,000 50 -- -- 24,950 -- 25,000
Net loss -- -- -- -- -- (1,594,748) (1,594,748)
----------- -------- ------ ------ ---------- ----------- ----------
Balances at September 30, 1998 11,784,000 $ 11,784 1,000 $ 1 $2,097,072 $(2,026,887) $ 81,970
============ ======== ====== ====== ========== ============ ==========
</TABLE>
F-12<PAGE>
<TABLE>
<CAPTION>
Access Power, Inc
(A Development Stage Company)
Statement of Cash Flows
For the nine months ended September 30, 1998 (unaudited) and
the year ended December 31, 1997 and the cumulative period from
October 10, 1996 (date of inception) through September 30, 1998
For the period
October 10, 1996
For the nine months For the year through
ended September 30, 1998 December 31, 1997 September 30, 1998
------------------------ ----------------- ------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (1,594,748) $ (426,438) $ (2,026,887)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 210,287 26,757 237,300
Interest paid in Common Stock 114,375 114,375
Consulting fees paid in Common Stock 50,625 50,625
Change in operating assets and liabilities:
Accounts receivable (20,147) (9,596) (29,743)
Inventory (30,000) - (30,000)
Accounts payable 1,224,316 350 1,224,666
Other assets - (20,000) (20,000)
--------------- ----------- -------------
Net cash provided by operating activities (45,292) (428,927) (479,664)
--------------- ----------- -------------
Cash flows from investing activities:
Purchase of property and equipment (1,103,891) (406,154) (1,520,330)
Note receivable (999) (19,001) (25,095)
--------------- ----------- -------------
Net cash used in investing activities (1,104,890) (425,155) (1,545,425)
--------------- ----------- -------------
Cash flows from financing activities:
Proceeds from issuance of stock 1,025,000 918,057 1,943,857
Proceeds from issuance of notes payable 300,000 - 320,025
Principal payments on notes payable (200,000) (9,889) (209,889)
--------------- ----------- -------------
Net cash provided by financing activities 1,125,000 908,168 2,053,993
--------------- ----------- -------------
Net increase in cash (25,182) 54,086 28,904
Cash, at beginning of period 54,086 - -
--------------- ----------- -------------
Cash at end of period $ 28,904 $ 54,086 $ 28,904
=============== =========== =============
</TABLE>
F-13
<PAGE>
Notes to Interim Financial
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
(a) Nature of development stage operations
--------------------------------------
Access Power, Inc., (API or the Company) was formed on October 10,
1996. The Company offers Internet Telephony (IT) which
will provide advanced computer telephony solutions to the
global consumer market place, with an emphasis on marketing to
the small office and home office worker.
Operations of the Company through the date of these financial
statements have been devoted primarily to product development
and marketing, raising capital, and administrative activities.
(b) Property and equipment
----------------------
Property and equipment are recorded at cost and depreciated
over the estimated useful lives of the assets which range from
three to five years, using the straight-line method.
(c) Intangible assets
-----------------
Organization costs are amortized over a five-year period using
the straight-line method.
(d) Income taxes
------------
Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to temporary differences
between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. Changes in tax rates are recognized in the period
that includes the enactment date.
Development stage operations for the nine months ended
September 30, 1998 resulted in a net operating loss. It is
uncertain whether any tax benefit of net operating loss will
be realized in future periods. Accordingly, no income tax
provision has been recognized in the accompanying financial
statements. At September 30, 1998, the Company has net
operating loss carryforwards of approximately $432,000, which
will expire in years beginning in 2011. A valuation allowance
equal to the tax benefit of the net operating loss has been
established, since it is uncertain that future taxable income
will be realized during the carryforward period. Accordingly,
no income tax provision has been recognized in the
accompanying financial statements.
<PAGE>
(e) Financial Instruments Fair Value, Concentration of Business and
---------------------------------------------------------------
Credit Risks
------------
The carrying amount reported in the balance sheet for cash,
accounts and notes receivable, accounts payable and accrued
expenses approximates fair value because of the immediate or
short-term maturity of these financial instruments. The
carrying amount reported in the accompanying balance sheet for
notes payable approximates fair value because the actual
interest rates do not significantly differ from current rates
offered for instruments with similar characteristics.
Financial instruments, which potentially subject the Company
to concentrations of credit risk, consist principally of
accounts and note receivable which amounts to approximately
$21,000. The Company performs periodic credit evaluations of
its trade customers and generally does not require collateral.
Currently, all of the Company's hardware and software is
purchased from one supplier, however, management believes
there are other alternatives to this supplier.
(f) Use of Estimates
----------------
Management of the Company has made certain estimates and
assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent assets and
liabilities to prepare these financial statements in
conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
(g) Cash Flows
----------
F-14
<PAGE>
For purposes of cash flows, the Company considers all highly
liquid debt instruments with original maturities of three
months or less to be cash equivalents.
(h) Prepaid Offering Costs
----------------------
Prepaid offering costs represent direct costs and expenses
incurred in connection with the offering of securities. Upon
completion of the offering, such amounts are offset against
the proceeds from the offering, in the event of an offering of
equity securities, and capitalized and amortized using the
interest method in the event of an offering of debt
securities.
(i) Revenue Recognition
-------------------
The principal sources of revenues are expected to be internet
telephone charges, which will be recognized as incurred. The
Company is presently operating in this one business segment and
only in the United States of America.
(j) Loss Per Common Share
---------------------
Earnings per common share have been computed based upon the weighted
average number of common shares outstanding during the years
presented. Common stock equivalents resulting from the issuance of
the stock options have not been included in the per share calculations
because such inclusion would not have a material effect on earnings per
common share.
(k) Software and Development Costs
------------------------------
The Company capitalizes purchased software which is ready for
service and software development costs incurred from the time
technological feasibility of the software is established until
the software is ready for use to provide services to
customers. Research and development costs and other computer
software maintenance costs related to software development are
expensed as incurred.
The carrying value of a software and development asset is
regularly reviewed by the Company, and a loss is recognized
when the net realizable value falls below the unamortized
cost.
(l) Interim Financial Information
-----------------------------
In the opinion of management, the interim financial statements have
been prepared on the same basis as the annual financial statements
and include all adjustments (consisting only of normal recurring
adjustments) necessary to state fairly the financial information set
forth herein, in accordance with generally accepted accounting
principles.
The results of operations for the nine months ended September 30, 1998
are not necessarily indicative of results to be expected for the full
fiscal year.
<PAGE>
(m) During 1997 the Company adopted Statement of Financial Accounting
Standards ("SFAS") No.123,"Accounting for Stock-Based Compensation".
This pronouncement establishes financial accounting and reporting
standards for stock-based compensation. It encourages, but does not
require, companies to recognize compensation expense for grants of
stock, stock options and other equity instruments to employees based
on new fair value accounting rules. Such treatment is required
for non-employee stock-based compensation. The Company has chosen
to continue to account for employee stock-based compensation using
the intrinsic value method prescribed in Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees".
Accordingly, compensation expense for employee stock options or
warrants is measured as the difference between the quoted market
price of the Company's stock at the date of grant and the amount
the employee must pay to acquire the stock. SFAS 123 requires
companies electing to continue using the intrinsic value method
to make certain pro forma disclosures (see Note 5).
<PAGE>
(2) PROPERTY AND EQUIPMENT
----------------------
Property and equipment consist of the following at September 30,
1998 and December 31, 1997:
<TABLE>
<CAPTION>
9/30/98 12/31/97
------- --------
<S> <C> <C>
Office furniture and equipment $ 58,909 $ 52,842
Computer hardware 1,203,515 131,811
Computer software 257,906 231,786
----------- --------
1,520,330 416,439
Less accumulated depreciation and amortization 227,623 23,847
----------- --------
$ 1,292,707 $392,592
=========== ========
(3) NOTES PAYABLE
-------------
Notes payable consist of the following at September 30, 1998 and
December 31, 1997:
9/30/98 12/31/97
------- --------
Promissory notes to individuals bearing interest at 6% payable
upon the closing of an initial public offering. Unsecured $ 10,136 $ 10,136
Bridge loans at various interest rates from 10% to 12% 100,000 -
----------- ------------
$ 110,136 $ 10,136
=========== =============
</TABLE>
(4) PREFERRED STOCK
---------------
In 1998, Access Power issued 1,125 shares of convertible preferred
stock (Preferred Series A). Preferred stockholders have preference
over common stockholders in dividends and liquidation rights. Each
preferred share is convertible into common shares equal to $1000
divided by 65% (which percentage may drop, and has dropped with
respect to 1000 shares of Preferred Series A stock, to 55% because
of certain penalties related to the timing of the Company's
registration of the underlying shares for resale) of the preceding
five day average closing market bid price of the common stock.
F-15<PAGE>
(5) STOCK OPTIONS
-------------
Employee Stock-Based Compensation: The Company has a Stock Option
Plan (the "Stock Option Plan"). The Plan was amended in March, 1998
to increase the number of shares available for issuance thereunder
from 1,000,000 to 2,500,000 shares. The Plan is designed to serve
as an incentive for retaining qualified and competent employees.
The Company's Board of Directors, or a committee thereof, administers
and interprets the Stock Option Plan and is authorized, in its
discretion, to grant options thereunder to all eligible employees of
the Company, including officers and directors (whether or not employees)
of the Company. The per share exercise price of options granted under
the Plan will not be less than the fair market value of the common stock
on the date of grant. Options granted under the Stock Option Plan will
be exercisable after the period or periods specified in the option
agreement. The Committee may in its sole discretion accelerate the
date on which any option may be exercised. Options granted under
the Plan are not exercisable after the expiration of ten years
from the date of grant and are nontransferable other than by will or
by the laws of descent and distribution. The Company recognizes
compensation expense for options granted under the Plans based on
the difference between the quoted market price of the Company's stock
at the date of grant and the amount the employee must pay to acquire
the stock. No compensation cost has been recognized for employee
stock options. Had compensation cost for the Plans been determined
based on the fair value at the date of grant for awards under those
Plans, consistent with the method prescribed by SFAS 123, the
Company's net loss and net loss per share would have been increased
to the proforma amounts indicated below:
<TABLE>
<CAPTION>
For the period
Nine Months October 10, 1996
Ended Year Ended through
September 30, 1998 December 31, 1997 September 30, 1998
------------------ ----------------- ------------------
<S> <C> <C>
Pro forma net loss:
As reported ($1,594,748) ($426,438) ($2,026,887)
Pro forma ( 1,662,520) ( 432,950) ( 2,101,170)
Pro forma net loss per share:
As reported ($0.14) ($0.04) ($0.25)
Pro forma ($0.14) ($0.04) ($0.26)
</TABLE>
The fair value of each option grant under the Plans is estimated on
the date of grant using the Black-Scholes option-pricing model with
the following weighted average assumptions used for grants in 1998 and
1997, respectively: no dividend yield for both years; expected
volatility of the underlying stock of 90% and 0% respectively; risk-
free interest rates ranging from 5.16% to 5.59% covering the related
option periods; and expected lives of the options of 10 years based
on the related option periods.
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Total Subsequent to
December 31, 1998 December 31, 1997 December 31, 1996
-------------------- ------------------- ------------------
Number of Average Number of Average Number of Average
shares price shares price shares price
-------------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Options granted 647,500 $1.00 641,000 $0.25 1,288,500 $ 0.63
Options exercised 0 -- 0 -- 0 --
Options forfeited 200,000 -- 0 -- 200,000 --
</TABLE>
F-16
<PAGE>
<TABLE>
<CAPTION>
======================================================== ===================================================
<S> <C>
No dealer, salesperson or other person has been 10,000,000 Shares
authorized to give any information or to make any
representations other than those contained in this
Prospectus in connection with the offer made by this
Prospectus and, if given or made, such information or
representations must not be relied upon as having been
authorized by Access Power, Inc. Neither the delivery
of this Prospectus nor any sale made hereunder shall ACCESS POWER, INC.
under any circumstances create an implication that
there has been no change in the affairs of Access LOGO
Power, Inc. since the date hereof or that the
information herein is correct as of any time subsequent
to the date of this Prospectus. This Prospectus does
not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby by
anyone in any jurisdiction in which such offer or
solicitation is not authorized or in which the person
making such offer or solicitation is not qualified to COMMON STOCK
do so or to anyone to whom it is unlawful to make such
offer or solicitation.
TABLE OF CONTENTS
Item Page __________________
Summary . . . . . . . . . . . . . . . . . . . . . 2
Summary Financial Data . . . . . . . . . . . . . 4 PROSPECTUS
Risk Factors . . . . . . . . . . . . . . . . . . 5 __________________
Dividend Policy . . . . . . . . . . . . . . . . . 12
Capitalization . . . . . . . . . . . . . . . . . 13
Certain Market Information . . . . . . . . . . . 14
Business . . . . . . . . . . . . . . . . . . . . 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . 23
Management . . . . . . . . . . . . . . . . . . . 26
Principal and Selling Stockholders . . . . . . . 29
Plan of Distribution . . . . . . . . . . . . . . 30
Shares Eligible for Future Sale . . . . . . . . . 31
Description of Capital Stock . . . . . . . . . . 32
Legal Matters . . . . . . . . . . . . . . . . . . 34
Experts . . . . . . . . . . . . . . . . . . . . . 34
Additional Information . . . . . . . . . . . . . 34
Index to Financial Statements . . . . . . . . . . F-1
February ___, 1999
======================================================== ===================================================
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The following provides information of all sales of outstanding
stock which were not registered under the Securities Act of 1933 (the
"Act").
In connection with the Registrant's organizational activities,
8,000,000 shares of common stock were issued to founders and officers,
Glenn A. Smith, Michael L. Pitts, Tod R. Smith and Maurice J. Matovich
on April 25, 1997 in connection with the organization of the Company.
The founders provided nominal consideration for these shares and the shares
had little, if any, value at the time of organization. Exemption from
registration is claimed under Section 4(2) of the Act.
On May 23, 1997 the Company undertook a private offering and sold
750,000 shares of common stock for $35,000. Exemption from
registration is claimed under Rule 504 of Regulation D, which does not
require investors to be accredited or sophisticated. The Company sold
the shares through officers and directors and did not use the services
of a selling agent.
From June 6, 1997 to June 30, 1997 the Company undertook a
private offering and sold 1,000,000 shares of common stock for
$100,000. Exemption from registration is claimed under Rule 504 of
Regulation D, which does not require investors to be accredited or
sophisticated. The Company sold the shares through officers and
directors and did not use the services of a selling agent.
From July 1, 1997 to October 1, 1997 the Company undertook a
private offering and sold 1,728,000 shares of common stock for
$864,000. Exemption from registration is claimed under Rule 504 of
Regulation D, which does not require investors to be accredited or
sophisticated. The Company sold the shares through officers and
directors and did not use the services of a selling agent.
On August 4, 1997 the Company borrowed $200,000 from Olympus Capital,
Inc., an investor the Company believed to be accredited, and issued thereto
a note for the principal amount at an interest rate of 12% percent per annum,
payable monthly. In partial consideration for making such loan, the Company
also issued 100,000 shares of common stock to the lender. The note was paid
off in October 1997. Exemption from registration for this sale is claimed<PAGE>
under Section 4(2) of the Act. The Company sold the shares through officers
and directors and did not use the services of a selling agent.
On February 2, 1998 the Company borrowed $100,000 from Subramanian
Sundaresan, an investor the Company believed to be accredited, and issued
thereto a note for the principal amount at an interest rate of 1 percent per
month simple interest. The note is due upon the Company closing a financing
of at least $3 million. In partial consideration for making such loan, the
Company also issued 50,000 shares of common stock to the lender. Exemption
II-1<PAGE>
from registration for this sale is claimed under Section 4(2) of the Act.
The Company sold the shares through officers and directors and did not use
the services of a selling agent.
On February 19, 1998 the Company borrowed $200,000 from Ethel and Hyman
Schwartz, accredited investors, and issued thereto a note for the principal
amount at an interest rate of 10% percent per annum, payable monthly.
In partial consideration for making such loan, the Company also issued
125,000 shares of common stock to the lenders. The note was paid off
in May 1998. Exemption from registration for this sale is claimed under
Section 4(2) of the Act. Olympus Capital, Inc. acted as the exclusive
placement agent in connection with the financing and received a finder's
fee in the amount of 75,000 shares of common stock in connection with
such sale. The Company believes Olympus Capital, Inc. was an accredited
investor.
On March 23, 1998 the Inman Company was issued 25,000 shares of
common stock in consideration for providing financial consulting
services to the Company. The Company believes the Inman Company was
an accredited investor. The services provided by the Inman Company
included writing a private placement memorandum for future offerings,
so the investor had become fully informed about the Company. Exemption
from registration for this sale is claimed under Section 4(2) of the Act.
In a private placement which commenced in May, 1998 and concluded
the same month, the Company sold 1,000 shares of its Series A Convertible
Preferred Stock, (the "Series A Preferred Stock"), at an offering price of
$1,000 per share. Exemption from registration for this sale is claimed under
Rule 506 of Regulation D because of the limited number of participants in
the transaction and the relationship of such participants to the Company.
In November 1998 the Company sold 100 shares of Series A Preferred Stock
at an offering price of $1000 per share to Chesterfield Capital Resources
Ltd. 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 believes is an accredited investor. In
connection with this transaction and at the same time, the Company also
issued 60,587 shares of Common Stock to Ethel Schwartz, an existing
stockholder of the Company, as payment of a finder's fee. The Company
believes that stockholder is an accredited investor, and the Company
claims an exemption from registration under Section 4(2) of the Act
for this transaction.
On December 1, 1998 First Florida Capital Corporation was issued
15,000 shares of common stock and Harold Berliner was issued 15,000
shares of common stock, in consideration for their combined efforts
providing financial consulting services to the Company. Services
provided by the parties included writing materials for the Company for
future offerings so both investors became fully informed about the
Company. The Company believes both First Florida Capital Corporation
and Mr. Berliner are accredited investors, and the Company claims an
exemption from registration under Section 4(2) of the Act in
connection with these transactions.
II-2
<PAGE>
In December 1998 the Company sold 25 shares of Series A Preferred
Stock at an offering price of $1000 per share to John Monsky. The
securities were offered and sold to one investor who the Company believes
is an accredited investor. In connection with this transaction and at
the same time, the Company paid $2,000 to Robert Monsky, as payment of
a finder's fee. The Company believes Mr. John Monsky is an accredited
investor, and the Company claims an exemption from registration under
Section 4(2) of the Act for this transaction. The investor was
provided a copy of this registration statement, as amended.
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 Act for this offer and sale. The securities were offered and sold
to one investor who the Company believes is 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 this registration
statement, as amended.
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 believes is an accredited investor.
Mr. Monsky had just recently been issued Common Stock as a finder's fee
and had a copy of this registration statement, as amended.
Sales of securities in all of the above offerings for which an exemption
under Section 4(2) of Rule 506 of Regulation D is claimed were made only to
persons who were "accredited investors" within the meaning of Rule 501
promulgated under the Act. In addition, all such participants 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
are not registered under the Act and may 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.
II-3
<PAGE>
Item 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
<C> <C>
3.1 Amended and Restated Articles of Incorporation of the
Registrant*
3.1.1 Amendment to the Articles of Incorporation filed on
November 23, 1998*
3.2 Bylaws of the Registrant*
4.1 Form of Common Stock Certificate of the Registrant*
5.1 Opinion of L. Van Stillman with respect to the legality
of the securities being registered*
10.1 International Master Franchise Agreement Between Access
Power, Inc. and Access Power Canada, Inc.*
10.2 Access Power, Inc. Stock Option Plan*
10.3 Amendment No. 1 to Stock Option Plan*
10.4 Purchase and Sale Agreement between Access Power, Inc.
and Netspeak Corporation dated as of June 17, 1998*
10.5 Employment Agreement with Howard Kaskel dated
July 1, 1998*
10.6 Agreement to terminate Master Franchise Agreement
between Access Power, Inc. and Access Power Canada,
Inc. dated December 11, 1998*
10.7 Internet Telephony Services Agreement dated December 14,
1998, between Access Power, Inc. and Access
Universal Inc. *#
10.8 Internet Telephony Services Agreement dated October 2, 1998
between Access Power, Inc. and Ldt Net Com, Inc. *#
10.9 Office Lease Agreement between Douglas Partnerships II, Ltd.
and Access Power, Inc. dated August 1, 1997 *
23.1 Consent of Independent Auditors
23.2 Consent of L. Van Stillman (included in opinion filed
as Exhibit 5.1)*
24.1 Power of Attorney*
27.1 Amended and Restated Financial Data Schedule (for SEC use only)*
</TABLE>
_________________________
* Previously filed.
# Certain portions of this exhibit have been omitted pursuant to
confidential treatment request under Rule 406 of the Commission.
II-4<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of
1933, the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form SB-2
and authorized this amendment to Registration Statement to be signed
on its behalf by the undersigned, in the city of Ponte Vedra, State of
Florida, on the 12th day of February, 1999.
ACCESS POWER, INC.
By:/s/ Glenn Smith
Glenn Smith
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
amendment to Registration Statement has been signed by the following
persons on the 12th day of February, 1999, in the capacities
indicated.
Signature Position
--------- --------
/s/ Glenn A. Smith President and Chief Executive
Glenn A. Smith Officer and Director
(Principal Executive Officer)
/s/ Howard Kaskel Chief Financial Officer
Howard Kaskel (Principal Financial and
Accounting Officer)
_________________________ Director
Tod R. Smith
/s/ Maurice J. Matovich Director
Maurice J. Matovich
II-4
PARKS, TSCHOPP,
WHITCOMB & ORR, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Access Power, Inc.:
We consent to the use of our report dated April 1, 1998 in the
Registration Statement on Form SB-2 and related Prospectus of
Access Power, Inc. for the registration of 10,000,000 shares of
its common stock and to the reference to our firm under the heading
"Experts" therein.
PARKS, TSCHOPP, WHITCOMB & ORR, P.A.
/s/ PARKS, TSCHOPP, WHITCOMB & ORR, P.A.
Maitland, Florida
February 12, 1999
