As filed with the Securities and Exchange Commission on December 20, 2000
Registration No. 333-51836
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
Pre-Effective Amendment Number One to
FORM SB-2
Registration Statement Under the Securities Act of 1933
----------------
ACCESS POWER, INC.
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FLORIDA 4813 59-342098
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(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
Copies to:
10033 SAWGRASS DRIVE WEST GLENN A. SMITH JAN M. DAVIDSON
SUITE 100 10033 SAWGRASS DRIVE WEST, SUITE 100 KILPATRICK STOCKTON LLP
PONTE VEDRA BEACH, FLORIDA 32082 PONTE VEDRA BEACH, FLORIDA 32082 1100 PEACHTREE STREET, SUITE 2800
(904) 273-2980 (904) 273-2980 ATLANTA, GEORGIA 30309
(ADDRESS AND TELEPHONE NUMBER OF (NAME, ADDRESS, AND TELEPHONE NUMBER OF (404) 815-6500
PRINCIPAL EXECUTIVE OFFICES AGENT FOR SERVICE) (404) 815-6555 (FACSIMILE)
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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. / /
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========================================== ====================== ======================= ======================= ==================
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION FEE
SHARE PRICE
------------------------------------------ ---------------------- ----------------------- ----------------------- ------------------
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Common Stock, $.001 par value 38,473,089<F1><F2> $0.1375<F3> $5,290,049.74 <F6>
------------------------------------------ ---------------------- ----------------------- ----------------------- ------------------
Common Stock, $.001 par value Up to 6,482,590<F2><F3> $0.1375<F3><F4> $ 891,356.13 <F6>
------------------------------------------ ---------------------- ----------------------- ----------------------- ------------------
Warrants to Purchase Common Stock 1,000,000 --<F5> --<F5> $ 0.00
========================================== ====================== ======================= ======================= ==================
<FN>
<F1> Includes in sum 1,907,460 shares issuable upon conversion of
outstanding 6% Convertible Debentures of the registrant and 22,000,000 shares
issuable upon the conversion of additional 6% Convertible Debentures and
1,000,000 shares underlying warrants, which additional debentures and warrants
are themselves issuable upon exercise of a special warrant, and 1,400,000 shares
issuable upon exercise of outstanding warrants. The number of shares registered
for issuance upon conversion of the debentures is an estimate based upon the
conversion formula applied as of a recent date. Also includes 864,481 shares to
be sold by certain selling shareholders, 225,000 shares of common stock
underlying presently exercisable warrants held by an investor with an exercise
price of $0.192 per share, 1,620,648 shares of common stock underlying presently
exercisable warrants held by the same investor with an exercise price of $0.125
per share, and 9,455,500 shares of common stock issuable upon the exercise of
presently exercisable options held by certain selling shareholders with exercise
prices ranging between $0.11 and $1.00.
<F2> An indeterminate number of additional shares of common stock are
registered hereunder in accordance with Rule 416 under the Securities Act that
may be issued as provided in the 6% Convertible Debentures and warrants in the
event that the provisions against dilution in such instruments become operative.
<F3> Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933 and based on the average
of the high and low price per share of Access Power, Inc. common stock as quoted
on the OTC electronic bulletin board on December 8, 2000.
<F4> Although we have used the average of the high and low price per share of
Access Power, Inc. common stock as quoted on the OTC electronic bulletin board
on December 8, 2000 as required by Rule 457(c) of the Securities Act of 1933,
the actual price per share of the common stock to be issued to Grandview will
vary based on the volume-weighted average daily price of our common stock during
the request periods provided for in the investment agreement described in this
registration statement. The purchase price will be equal to 90% to 93% of the
volume-weighted average daily price for each trading day within such request
periods. This agreement allows for requests to be made every 11 trading days
over the 18-month period of the investment agreement for amounts up to
$5,000,000 per request for an aggregate of up to $30,000,000.
<F5> The offering price of the warrants cannot be determined as their
exercise price ($2.20 per share) is above current bid and asked prices for the
common stock.
<F6> Previously paid in connection with the initial filing of this registration
statement on Form SB-2.
</FN>
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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 SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
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44,955,679 SHARES OF COMMON STOCK
1,000,000 WARRANTS TO PURCHASE COMMON STOCK
ACCESS POWER, INC.
-------------------------
Certain of Access Power, Inc.'s shareholders are offering for sale the
shares of common stock, par value $0.001 per share, and warrants to purchase
shares of common stock of Access Power being offered under this prospectus.
The registration statement of which this prospectus forms a part
registers for resale an aggregate of 8,328,238 shares of our common stock that
may be issued through an investment agreement that we entered into with
Grandview Court, LLC as further described in this prospectus. The 8,328,238
shares registered pursuant to the registration statement of which this
prospectus forms a part would constitute 15% of our issued and outstanding
common stock as of December 1, 2000. The shares we are registering pursuant to
the registration statement of which this prospectus forms a part do not
constitute all the shares that may be registered pursuant to the investment
agreement. Depending upon how much money we request from Grandview and the price
of our common stock in the future, we may issue substantially more shares to
Grandview pursuant to the investment agreement. The issuance of additional
shares of our common stock to Grandview would result in the dilution of our
outstanding shares.
We will receive the sale price of any common stock that we may sell
through the investment agreement, and Grandview may resell those shares pursuant
to this prospectus. We will also receive $43,200 if outstanding warrants to
purchase 225,000 shares of common stock held by Grandview are exercised. This
amount does not include additional warrants that we are required to issue to
Grandview pursuant to the investment agreement, as further described in this
prospectus. We will not receive any proceeds from Grandview's resale of our
common stock.
The remaining 36,627,441 shares and 1,000,000 warrants to purchase
common stock are being offered for sale by certain of our shareholders. Access
Power will not receive any of the proceeds from the sale of the shares of common
stock or warrants. We will, however, receive $4,568,000 if all outstanding
warrants and options to purchase common stock, other than those held by
Grandview, are exercised.
We will pay certain of the legal and other expenses of this offering,
estimated to be $15,000. The selling shareholders will bear the cost of any
brokerage commissions or discounts or other selling expenses incurred in
connection with the sale of their shares or warrants. The price 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.
Bid and asked prices for our common stock are quoted, and the last sale
is reported, on the over-the-counter electronic bulletin board maintained by the
National Association of Securities Dealers under the symbol "ACCR." On December
1, 2000 the last bid price of the common stock as reported was $0.125. As of
December 1, 2000, there were 52,601,617 shares of our common stock outstanding,
2,625,000 shares of common stock issuable upon the exercise of issued and
outstanding warrants, and approximately 24,500,000 shares of common stock
issuable upon conversion of certain debentures, $250,000 of which debentures are
currently outstanding and $2,200,000 of which may be purchased pursuant to an
outstanding warrant to purchase such debentures.
The selling shareholders and any participating broker-dealers may be
deemed to be "underwriters" within the meaning of the Securities Act of 1933,
and any commissions or discounts given to any such broker-dealer may be regarded
as underwriting commissions or discounts under the Securities Act of 1933. We
have not registered the shares or warrants for sale by the selling shareholders
under the securities laws of any state as of the date of this prospectus.
Brokers or dealers effecting transactions in the shares or warrants should
confirm the registration of these securities under the securities laws of the
states in which transactions occur or the existence of an exemption from
registration.
AN INVESTMENT IN SHARES OF OUR COMMON STOCK OR WARRANTS INVOLVES
SIGNIFICANT RISK. WE URGE YOU TO CAREFULLY CONSIDER THE RISK FACTORS BEGINNING
ON PAGE 7, ALONG WITH THE REST OF THIS PROSPECTUS, BEFORE YOU MAKE YOUR
INVESTMENT DECISION. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY
STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-------------
The date of this prospectus is December 14, 2000
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SUMMARY
YOU SHOULD CAREFULLY READ THIS ENTIRE PROSPECTUS BEFORE INVESTING IN
OUR COMMON STOCK.
GENERAL
Access Power, Inc. was incorporated to offer Internet-based
communications products and services in the United States and international
markets. We were one of the first companies to offer a way to transmit voice and
multi-media communications over the Internet, a service that is commonly
referred to as Internet protocol telephony.
PRODUCTS AND SERVICES
Our voice-over-Internet service integrates traditional telephone
functions with advanced Internet-based communications technology. Our customers
are able to communicate long distance over the Internet, a less costly
alternative to traditional long distance telephone lines. Our customers can use
our technology to make calls in three ways:
(1) from a telephone to another telephone;
(2) from a personal computer (PC) to another PC; and
(3) from a PC to a telephone.
In addition to cost savings, Internet telephony permits services that are not
available through traditional long distance networks, such as interactive
document and data sharing and multi-media data transmissions.
On April 12, 1999, we began selling a flat-rate, unlimited usage
PC-to-telephone service under the tradename Net.Caller(TM) PC-to-Phone.
Net.Caller PC-to-Phone customers download free software from our website to
their PC, which allows them to use their PC to call from anywhere in the world
to a telephone in the United States, Canada, Puerto Rico, and twelve European
countries.
On September 1, 1999, we began selling a flat-rate, unlimited usage
telephone-to-telephone service under the tradename Net.Caller Phone-to-Phone.
Net.Caller Phone-to-Phone customers place calls using traditional telephone
equipment. Under the flat-rate plan, calls may be placed from certain cities in
Florida and Texas to anywhere in the continental United States. Calls made to
areas outside of the continental United States are billed on a per minute usage
basis.
On December 2, 1999, we released our e-button(TM) software, a
third-party browser plug-in that is automatically downloaded and installed upon
the customer's first attempt to use it. Using e-button, consumers viewing a
company's web site can instantly dial up a designated representative of that
company, usually someone providing sales or support services, by clicking on the
e-button icon. Our e-button software could provide electronic commerce benefits
to any company with a traditional call center.
We launched FreeWebCall.com(TM) on August 1, 2000, which provides
customers with free PC-to-phone calling and will soon allow free PC-to-PC
calling. The network supports PC-to-phone calls from anywhere in the world to a
telephone in the United States, Canada, or the United Kingdom. PC-to-PC calling,
when offered, will be global. We earn revenue through FreeWebCall.com by selling
advertisements and displaying them to our customers while they are logged in to
the network and using the FreeWebCall service for their long distance calling.
3
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Additionally, we began selling a PC telephone software package called
Internet Phone for Access Power through our website in 1997. Internet Phone is
made by VocalTec Communications Inc. and can be used in two ways. First,
customers use the software to obtain PC-to-PC communication service for free.
Second, customers can combine the software with Net.Caller PC-to-Phone service,
a less expensive communication alternative to traditional long distance
telecommunication. Through the Internet Phone, our customers are able to take
advantage of the interactive document and data sharing and multi-media data
transmission capabilities of Internet protocol telephony.
We have entered into agreements with companies to expand our products
and services into Europe and Africa. We intend to pursue additional
international expansion via joint ventures and other business arrangements
throughout South America, Africa, and the Pacific Rim.
Access Power Advanced Communications(R), e-button(TM),
FreeWebCall.com(TM), and Net.Caller(TM) are our trAdemarks. All other trademarks
and trade names referred to in this prospectus are the property of their
respective owners.
BUSINESS GOAL AND STRATEGIES
Our goal is to become one of the world's leading providers of
international Internet telephony products and services. To achieve this goal, we
plan to expand our Internet telephony network by using new technology as it is
developed and integrating those developments with our own technology. We plan to
expand our customer base by providing free Internet telephony products and
services through FreeWebCall.com. We will also continue to provide discount and
enhanced international calling services.
MARKET
Our market includes residential and commercial users of advanced
communications products and services throughout the world. Our ability to offer
low communication transmission rates and new Internet protocol telephony-based
services provides us an opportunity to enter the wholesale arena as well as the
retail market.
EXECUTIVE OFFICES
Our principal executive offices are located at 10033 Sawgrass Drive
West, Suite 100, Ponte Vedra Beach, Florida, 32082, and our telephone number is
(904) 273-2980.
THE OFFERING
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Common stock offered by selling shareholders.............. 44,955,679 shares
Warrants to purchase common stock offered by selling
shareholders.............................................. 1,000,000 warrants (1)
Common stock to be outstanding after the offering......... 98,737,336 shares (1), (2)
OTC Bulletin Board symbol................................. "ACCR"
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(1) 1,000,000 warrants give the holder the right to purchase from us one
share of our common stock for $2.20.
(2) Assumes the exercise of all outstanding warrants and options, and the
conversion of all outstanding debentures and the sale of 8,328,238
shares of common stock under the investment agreement (including
certain warrants issued to Grandview pursuant to the investment
agreement). This number does not include shares issuable to Grandview
under the investment agreement as penalties or all the shares issuable
to Grandview under the investment agreement.
4
<PAGE>
We signed an investment agreement with Grandview Court, LLC, a Cayman
Islands limited liability company, on November 13, 2000, for the future issuance
and purchase of shares of our common stock. The investment agreement establishes
what is sometimes referred to as an equity line of credit.
Under the equity line of credit, we can request up to $30 million from
Grandview over an 18-month period in return for shares of our common stock. Once
every 11 trading days, we may request between $100,000 and $5,000,000 in cash
from Grandview. The maximum amount that we can actually request at any one time
will be determined by a discount to the volume-weighted average daily price of
our common stock for the 30 days prior to our request and certain conditions and
limitations. We are under no obligation to make a request from Grandview,
although we may have to pay certain penalties in cash if we do not request
certain amounts in certain time frames.
To determine the number of shares issuable to Grandview, we will use
the formulas based on our market price that are described on page 38. On
December 1, 2000, the closing bid price for our common stock was $0.125, and the
average daily trading volume for the last 30 trading days ended December 1, 2000
was $0.168. If this market price and average trading volume remained constant
over the 18-month period of the investment agreement, each request would be
capped at $100,000. Under this example, assuming we request the total amount
allowable in each request period during the term of the equity line, we would
issue 32,000,000 shares to Grandview at $0.1125 per share; provided that we do
not exceed the limit contained in the investment agreement or Grandview's total
beneficial ownership of common stock described below, and we have enough
authorized shares. We currently have 47,398,383 shares authorized but unissued,
and we plan to ask our shareholders to approve the authorization of additional
shares at a special meeting of our shareholders, which we expect to hold in
February of 2001.
We have registered 44,955,679 shares of common stock pursuant to the
registration statement of which this prospectus forms a part, a large portion of
which is owned by shareholders other than Grandview. Included in that amount is
8,328,238 shares of common stock we have registered for sale by Grandview. The
number of shares we can issue to Grandview is limited by a provision in the
investment agreement that prevents us from issuing shares to Grandview to the
extent that Grandview would own more than 4.99% of our outstanding common stock.
Resales of our common stock by Grandview pursuant to this prospectus would
reduce the number of shares beneficially owned by Grandview and, thus, may allow
us to issue additional shares to Grandview without violating the investment
agreement.
The per share price Grandview pays for our common stock includes a
discount of seven percent to ten percent based on the average of the lowest
three closing bid prices over a ten day period. We will receive the amount we
request minus an escrow agent fee per request ranging between $500 and $2,000,
depending upon the amount of the request. In addition, we will issue
approximately 194,481 shares of common stock to Continental Capital and Equity
Corporation, the placement agent who introduced Grandview to us, in connection
with the investment agreement. The 194,481 shares registered for issuance to
Continental under the registration statement of which this prospectus forms a
part are issuable pursuant to our agreement with Continental which provides that
we will issue to Continental shares of our common stock equal to 3% of the
shares of common stock issued to Grandview pursuant to each request for cash
under the investment agreement. Depending upon the amount of money we request
from Grandview and the price of our common stock, the number of shares we are
required to issue to Continental could be substantially more than the 194,481
shares we are currently registering. These shares are in addition to the 620,000
shares already owned by Continental that we issued in return for investor
relations services provided by Continental to us. All 814,481 shares owned by
and to be issued to Continental are being registered pursuant to the
registration statement of which this prospectus forms a part.
5
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CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus under the captions SUMMARY,
RISK FACTORS, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, BUSINESS, and elsewhere in this prospectus are
"forward-looking statements." Forward-looking statements include, among other
things, statements about the competitiveness of the telecommunications industry,
our plans and objectives for future operations, the likelihood of our success in
developing and expanding our business, potential regulatory obligations, and
other statements that are not historical facts. The forward-looking statements
included herein are based upon a number of assumptions and estimates, which are
inherently subject to significant uncertainties, many of which are beyond our
control. When used in this prospectus, the words "anticipate," "believe,"
"estimate," or similar expressions generally identify forward-looking
statements. Because forward-looking statements involve risks and uncertainties,
there are important factors that could cause actual results to differ materially
from those expressed or implied by the forward-looking statements. These factors
include, among other things, the risks set forth in the RISK FACTORS section.
6
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SUMMARY FINANCIAL DATA
The summary financial data set forth in the table below is derived from
our audited financial statements for the year ended December 31, 1999 and 1998
and our unaudited statements for the nine months ended September 30, 2000 and
1999. The financial statements are included in this prospectus at page F-1. This
financial data represents historical information that is not necessarily
indicative of future results. We urge you to read carefully MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS and the
financial statements and notes thereto, and other financial data included
elsewhere in this prospectus.
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FOR THE NINE MONTHS ENDED FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
2000 1999 1999 1998
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(unaudited)
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Revenue:
Product sales -- 9,450 9,450 214,431
Services 320,876 69,999 170,601 53,519
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Total revenue $ 320,876 $ 79,449 $ 180,051 $ 267,950
============ ============ ============ ============
Cost and expenses:
Cost of sales -- 2,955 2,955 161,650
Product development and marketing 2,311,000 851,037 1,015,737 731,672
General and administrative 1,542,634 $ 938,142 1,642,134 1,315,600
------------ ------------ ------------ ------------
Total costs and expenses: 3,853,634 1,792,134 2,660,826 2,208,922
============ ============ ============ ============
Loss from operations 3,721,670 1,741,747 (2,480,775) (1,940,972)
Total other income (expense) - Net (94,456) (14,531) (23,170) (124,375)
Net loss (3,627,214) (1,727,216) (2,503,945) (2,065,347)
Net loss per share $ (0.09) $ (0.07) $ (0.10) $ (0.18)
Weighted average number of shares 39,749,871 24,126,030 25,174,029 11,776,511
</TABLE>
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<CAPTION>
BALANCE SHEET DATA SEPTEMBER 30, 2000 DECEMBER 31, 1999
--------------------------------- -----------------------------------
(unaudited)
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Cash and cash equivalents $ 185,830 $ 213,885
Working capital 255,503 282,766
Total assets 2,113,551 1,586,389
Long-term debt, less current portion -- 207,484
Shareholders' equity (deficit) $ 313,161 $ (223,062)
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7
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RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A SIGNIFICANT DEGREE OF
RISK. YOU SHOULD NOT INVEST IN OUR COMMON STOCK UNLESS YOU CAN AFFORD TO LOSE
YOUR ENTIRE INVESTMENT. YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS
AND OTHER INFORMATION IN THIS PROSPECTUS BEFORE DECIDING TO INVEST IN OUR COMMON
STOCK.
WE HAVE ONLY LIMITED OPERATING HISTORY UPON WHICH YOU CAN ANALYZE OUR POTENTIAL
PROFITABILITY.
We have limited operating history upon which you can judge our
potential for success. We have existed for a relatively short period of time,
and we have had minimal revenue in the past. Our 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.
WE ARE NOT PROFITABLE, AND WE DO NOT EXPECT TO BECOME PROFITABLE IN THE NEAR
FUTURE.
We have incurred net losses in every fiscal period since our
inception in October of 1996. We anticipate that we will experience net losses
for each quarterly period of operation in the next year.
As of September 30, 2000, we had an accumulated deficit of
approximately ($8,628,238). We incurred net losses of ($3,627,214) for the nine
months ended September 30, 2000, and net losses of ($2,503,945) for the year
ended December 31, 1999. Net losses have increased for each fiscal year since
1996 and this trend may continue. We may not become profitable. If we do achieve
profitability, we may not be able to sustain or increase profitability on a
quarterly or annual basis. We expect to increase our advertising costs as a
result of our marketing efforts for FreeWebCall.com, for which we will need to
generate additional revenues. See MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
YOU MAY NOT RECOVER ALL OR ANY PART OF YOUR INVESTMENT IF WE DO NOT BECOME
PROFITABLE.
If we are ultimately unsuccessful, you may not recover all or any part
of your investment in our common stock. Our profitability will depend on our
ability, among other things, to substantially increase our customer base by
establishing and increasing market acceptance of our technology, products, and
services. Our profitability will also depend upon expanding the deployment of
our network and successfully marketing and supporting our products and services.
There can be no assurance that we will be able to achieve or sustain significant
sales or profitability in the future. See MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
IF CONSUMERS DO NOT ACCEPT OUR PRODUCTS, OR ANY PRODUCT DEVELOPED BY US IN THE
FUTURE, AS A LESS EXPENSIVE, QUALITY ALTERNATIVE TO TRADITIONAL TELEPHONE
SERVICE, WE MAY NOT BECOME PROFITABLE.
Broad acceptance of our technology, products, and services is critical
to our success and ability to generate revenue. The markets for our technology,
products, and services have only recently begun to develop and are rapidly
evolving because our products and services are new and based on emerging
technologies. Typically, demand and market acceptance for recently introduced
technology and products are subject to a high level of uncertainty. There can be
no assurance that we will be successful in obtaining market acceptance of our
technology, products, and services. If consumers perceive our network to offer
lower quality voice transmissions compared to traditional long-distance
services, our services may not be accepted by consumers. See BUSINESS.
8
<PAGE>
IF CONSUMERS DO NOT ACCEPT VIEWING BANNER ADVERTISEMENTS AS AN ALTERNATIVE TO
PAYING A FEE FOR INTERNET-BASED TELECOMMUNICATIONS, WE MAY NOT GAIN SUFFICIENT
SUBSCRIBERS TO FREEWEBCALL.COM TO BECOME PROFITABLE.
Consumer acceptance of our revenue model is critical to our ability to
become profitable. If consumers do not agree to view banner ads in lieu of
paying a fee to use telecommunications services, we may not be able to generate
profits. Additionally, because a portion of our projected profits is based upon
the consumer "clicking" upon an advertisement that scrolls across the screen
while using our FreeWebCall.com service, we may not become profitable if
consumers do not view our advertising affiliates as desirable.
IF WE CANNOT DEVELOP STRATEGIC ALLIANCES WITH MARKETING PARTNERS, WE MAY NOT BE
ABLE TO DEVELOP A SUFFICIENT CUSTOMER BASE FOR OUR NET.CALLER SERVICES.
Our marketing strategy for our Net.Caller Services depends on our
ability to develop strategic alliances with marketing partners and, to a lesser
extent, on in-house marketing. We may not be able to develop these alliances
and, if we are able to develop them, the partners may not be able to effectively
promote our Net.Caller products and services. We have established business
relationships with two entities outside the United States. We may not be
successful in developing any future strategic alliances. We have limited
experience in obtaining the necessary personnel, offices, regulatory
authorization, and leases and agreements with the intranational
telecommunications carriers in the countries where we seek to establish
strategic alliances.
THE INTRODUCTION OF MORE TECHNOLOGICALLY ADVANCED PRODUCTS AND SERVICES BY OUR
COMPETITORS COULD DECREASE OUR PROFITABILITY.
The introduction of technologically superior products and services by
our competitors may make our products and services less marketable or subject to
downward price pressures, which may decrease our profitability. The Internet and
telecommunications markets, including the market for voice transmission over
packetized data networks, are characterized by evolving industry standards and
specifications. We may have to expend substantial time and money to adapt our
technology, products, and services to this rapid technological change. A
critical factor in our growth and competitiveness will be our ability to
anticipate changes in technology and industry standards, including the
successful development of products and services in a cost effective and timely
manner. There can be no assurance that we will successfully develop enhanced or
new products and services, that any enhanced or new products and services will
achieve market acceptance, that we will be able to adapt our products and
services to comply with new standards or specifications, or that the
introduction of new products or services by others will not render our
technology, products, and services obsolete. See BUSINESS.
THE TELECOMMUNICATIONS BUSINESS IS HIGHLY COMPETITIVE, AND WE MAY NOT BE ABLE TO
COMPETE SUCCESSFULLY.
Our profitability will depend on our ability to compete successfully in
the highly competitive telecommunications business. We expect this competition
to persist, intensify, and increase in the future. Many of our current and
potential competitors have longer operating histories, greater name recognition,
larger customer bases, more services and products, and significantly greater
financial, technical, and marketing resources than we do. These competitors may
be existing or potential strategic partners with other competitors. We will
compete with Internet telecommunications providers as well as traditional long
distance telephone carriers for our customer base. Many companies offer products
and services like ours, and many of these companies have a substantial presence
in this market. These products may allow telecommunication over the Internet
between parties using a PC and a telephone and between parties using telephones.
Some of our competitors route voice traffic worldwide over the Internet. In
addition, major long distance providers and other companies have entered or plan
to enter the market for Internet
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telephony. These companies are larger than we are and have substantially greater
financial, distribution, and marketing resources than we do. We may not be able
to compete successfully in this market.
Prices for long distance calls have decreased substantially over the
last few years, and this decline is expected to continue in all of the markets
where we do business or expect to do business. In addition, many of our 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 our technology, products, or services and may be reluctant to use
new telecommunications providers. Our target customers may be reluctant to
entrust their telecommunications needs to new and unproved operators or may
switch to other service providers as a result of price competition. See CHANGES
IN PRICING STANDARDS... below.
Competition for FreeWebCall.com, Net.Caller, and e-button customers is
primarily based on the type and quality of services offered, customer services,
and brand recognition. We price our services at a discount to the prices charged
by traditional long distance carriers. We have no control over the prices set by
the traditional carriers or our other competitors. There is no assurance that
some of our larger competitors will not use their substantial financial
resources to cause severe price competition. Any significant price competition
could decrease or eliminate our ability to compete successfully and our
profitability. In addition, our competitors may be able to provide potential
customers with a broader range of services than we can due to regulatory
restrictions. See BUSINESS -- COMPETITION and SUPERVISION AND REGULATION.
DEPARTURES OF OUR KEY PERSONNEL OR DIRECTORS MAY HARM OUR ABILITY TO OPERATE
SUCCESSFULLY.
If we lose the services of our Board of Directors or executive
officers, we may not be able to grow or operate profitably. Our continued
success is substantially dependent upon the efforts of our directors and
executive officers, in particular Glenn A. Smith, our Chief Executive Officer.
We have no employment agreements in effect, with the exception of an agreement
with Howard L. Kaskel, our Chief Financial Officer, and we have no plans to
enter into any additional employment agreements in the future. Our future
success depends on our ability to attract and retain highly qualified technical
personnel. Competition for qualified personnel is intense, and there can be no
assurance that we will be able to attract or retain qualified personnel in the
future.
OUR SERVICE QUALITY WILL BE HARMED IF OUR SYSTEM CANNOT HANDLE A LARGE VOLUME OF
SIMULTANEOUS CALLS.
Our inability to handle a large number of simultaneous calls could
cause our service quality to suffer which could result in customer losses. A key
component of our profitability will be the addition and retention of customers.
A byproduct of this component will be increased call volume on our network. It
is crucial to our ability to provide quality services for our system to handle a
large volume of calls. If we cannot effectively manage our customers' use of our
systems, customers may not perceive our service as a high-quality alternative to
traditional long-distance telephone service. This potential inability to handle
growth effectively may decrease our profitability.
POOR INTERNET SERVICE QUALITY COULD PREVENT CUSTOMER ACCEPTANCE AND USE OF OUR
PRODUCTS AND SERVICE AS WELL AS THE ABILITY OF OUR PRODUCTS TO FUNCTION
PROPERLY.
Inferior Internet service quality and availability may cause our
services and products to fail or may result in poor customer perception of our
products and services, either of which would inhibit our ability to build or
maintain a sufficient customer base to stay profitable. Some Internet service
providers do not have the capability to handle more than the current level of
Internet traffic, and a sudden increase in traffic volume may result in poor
service availability. If customers cannot reach the Internet, or it takes an
unreasonable amount of time to reach the Internet, they may decide it is more
convenient to use traditional telecommunication technology or the Internet
technology of one of our better serviced competitors.
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OUR INABILITY TO PREDICT TRAFFIC VOLUME ON THE INTERNET MAY ADD EXTRA EXPENSE TO
OUR BUSINESS OPERATIONS.
Large fluctuations in Internet traffic volume may obligate us to pay
additional contractual charges for our Internet service. A decrease in Internet
traffic volume may obligate us to pay for leased Internet service capacity
without adequate corresponding revenues. An unexpected increase in traffic
volume may require us to obtain transmission capacity through more expensive
means. If we are unable to accurately project our needs for leased capacity in
the future, such inability may increase our operating costs and, therefore,
decrease our profitability.
OUR DEPENDENCE ON OTHER COMMUNICATIONS CARRIERS MAY ADD EXTRA EXPENSE TO OUR
BUSINESS OPERATIONS.
Our dependence on other communications carriers, and our inability to
control their price structure or ability to provide quality service, may cause
us to pay higher prices than expected for access to the transmission facilities
through which we provide our services. We do not own any intranational or local
exchange transmission facilities in the areas where we provide services. We do
not intend to construct or acquire any local exchange transmission facilities in
the future. Consequently, we lease intranational and local exchange transmission
facilities to connect all of the telephone calls made by our customers, and
there is no assurance that the prices and nature of such facilities will not
fluctuate. Furthermore, we may not be able to meet the minimum volume
commitments on some of our leases, especially those that are long-term, which
may result in "under-utilization" charges. See OUR INABILITY TO PREDICT TRAFFIC
VOLUME . . . above. We are also vulnerable to service interruptions and poor
transmission quality from leased lines. The deterioration or termination of our
relationship with one or more of our carrier vendors could have a material
adverse effect upon our business, financial condition, and results of
operations.
Our dependence on international carriers makes us vulnerable to
additional costs. In some countries, the intranational exchange transmission
facility is owned by the national telephone company. If the lack of competitive
alternatives forces us to enter into contracts with the national provider, we
may have to pay much higher rates for use of the transmission facilities, if we
are allowed to lease them at all.
CHANGES IN PRICING STANDARDS WOULD DECREASE THE PROFITABILITY OF OUR NET.CALLER
SERVICES.
If the telecommunications industry changes its standard pricing
structure to eliminate charges based on the distance a call is carried, our
profitability may be decreased. The advantage of Internet telephony is that it
is less expensive than traditional long distance telephone service in many
markets. Currently, the price for long distance service has been declining. If
this decline continues, we may lose our competitive advantage over traditional
telephone service. Additionally, excess international transmission capacity has
kept the marginal cost of carrying an additional international call 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 the next few years, there may be no charges based on the distance a
call is carried. If this type of pricing were to become prevalent in our service
markets, it would likely decrease the profitability of our Net.Caller Services.
IF THIRD PARTIES USE OUR INTELLECTUAL PROPERTY WITHOUT AUTHORIZATION, OUR
PRODUCTS AND SERVICES MAY BE DAMAGED.
Third parties may obtain and use our intellectual property without
authorization and, as a result, may damage our products and services. Our
intellectual property, including copyrights, service marks, trademarks, trade
secrets, and other intellectual property, is critical to our success. We rely on
trademark and copyright law, trade secret protection, and confidentiality
agreements with our employees, customers, partners, and others to protect our
intellectual property rights. These precautions may be
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ineffective, or the validity, enforceability, and scope of protection of
intellectual property in Internet-related industries may not be adequate to
protect our interests. Furthermore, the laws of some foreign countries are
uncertain, evolving, or do not protect intellectual property rights to the same
extent as do the laws of the United States. See BUSINESS -- INTELLECTUAL
PROPERTY.
DEFENDING AGAINST INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS COULD BE EXPENSIVE
AND COULD DISRUPT OUR BUSINESS.
If third parties file lawsuits against us for allegedly infringing upon
their intellectual property rights, our business could be disrupted and we could
incur substantial legal fees. We cannot be certain that our products do not or
will not infringe upon valid patents, trademarks, copyrights, or other
intellectual property rights held by third parties. Defending against
third-party infringement claims, regardless of their merit, could be expensive
and time consuming. Successful infringement claims against us may result in
substantial monetary liability or may materially disrupt the conduct of our
business. See BUSINESS -- INTELLECTUAL PROPERTY.
OUR STOCK PRICE MAY BE HIGHLY VOLATILE AND SUBJECT TO WIDE FLUCTUATIONS DUE TO
MANY FACTORS, INCLUDING A SUBSTANTIAL MARKET OVERHANG.
The market price of our common stock may be highly volatile and subject
to wide fluctuations in response to quarterly variations in operating results,
losses of significant customers, announcements of technological innovations,
services, or affiliations or new products by us or our competitors, changes in
financial estimates by securities analysts, lack of market acceptance of our
products and services, or other events or factors, including the risk factors
described herein. In addition, the stock market in general, and the technology
stocks in particular, experience significant price and volume fluctuations that
are often unrelated to a company's operating performance. As with any public
company, we may be subject to securities class action litigation following
periods of volatility in the market price of our securities which could result
in substantial costs and a diversion of management's attention and resources.
Additionally, the sale of a substantial number of shares of common
stock, or even the potential of sales, in the public market following this
offering could deflate the market price for the common stock and make it more
difficult for us to raise additional capital through the sale of our common
stock. Assuming conversion of the outstanding 6% convertible debentures and the
exercise of stock options, we will have a total of 98,737,336 shares of common
stock outstanding at the time of this offering, giving effect to the shares
offered hereby. Under our investment agreement with Grandview, we are required
to issue warrants to Grandview equal to 25% of each request for cash under the
equity line. If we do not make requests resulting in an aggregate purchase price
of at least $500,000 by August 10, 2001, we are obligated to pay Grandview an
amount equal to ten percent of the difference between $500,000 and the amount
that we have actually requested. Moreover, if we fail to issue the warrants and
pay any cash owed to Grandview, we must pay $3,000 to Grandview plus compounded
annual interest.
Shares in the amount of up to the 44,955,679 offered hereby will be
freely tradable without restrictions under the federal securities laws. An
additional 3,578,000 shares sold under an exemption from registration provided
by Rule 504 promulgated under the Securities Act of 1933 and 35,122,148 shares
that have been sold or may be sold under previous registrations by selling
shareholders are freely tradable. All of the remaining shares are "restricted
securities" as that term is defined by Rule 144 promulgated under the Securities
Act of 1933, and will be eligible for sale in compliance with Rule 144 after
they have been held for one year. There can be no assurance that an active
trading market for the common stock will be sustained after this offering. See
SHARES ELIGIBLE FOR FUTURE SALE.
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OUR DIRECTORS AND OFFICERS MAY BE ABLE TO CONTROL OR SIGNIFICANTLY INFLUENCE US
DUE TO THEIR CONCENTRATED STOCK OWNERSHIP.
Our directors and officers may be able to use their stockholdings to
influence our business, policies, and affairs, including the ability to
significantly influence the election of directors and other matters requiring
shareholder approval by simple majority vote. As of November 30, 2000, our
directors and officers, in the aggregate and including exercisable stock
options, own beneficially 13,096,650 shares of common stock.
IF OUR EMPLOYEES AND AFFILIATES EXERCISE THEIR STOCK OPTIONS AND OTHER RIGHTS TO
ACQUIRE COMMON STOCK, YOUR PROPORTIONATE INTEREST WILL BE DILUTED AND WE MAY NOT
BE ABLE TO RAISE ADDITIONAL CAPITAL ON THE MOST FAVORABLE TERMS.
Our directors, officers, employees, or affiliates may exercise stock
options or conversion rights to purchase common stock which would result in the
dilution of your proportionate interest in us. Our directors, officers,
employees, and affiliates will have the opportunity to profit from any rise in
the market value of the common stock or any increase in our net worth. Holders
of our convertible debentures and warrants have rights to acquire a substantial
and indeterminable number of shares of common stock, and the common stock
underlying certain of those rights is being registered for resale to the public
under federal law. Additionally, if the holders of the convertible debentures
exercise their conversion rights immediately after a significant decrease in the
market price of the common stock, shareholders could suffer substantial
dilution, because the conversion rate is inversely proportional to the recent
average market price.
The exercise of the options or conversion rights also could adversely
affect the terms on which we can obtain additional capital. For example, the
holders of stock options or conversion rights could exercise them when we could
obtain capital by offering additional securities on terms more favorable to us
than those provided for by the rights. The stock options or conversion rights
may be exercisable at prices below the market price for the common stock on
November 30, 2000. See EXECUTIVE COMPENSATION.
In addition, we currently anticipate that our available cash
resources from the investment agreement with Grandview Court, LLC will be
sufficient to meet our anticipated working capital and capital expenditure
requirements for at least the next 18 months. If our capital expenditure
requirements are greater than the financing available under the investment
agreement, we may need to raise additional capital. The investment agreement
restricts us from raising investment capital from third parties at a discount to
market price during the term of the investment agreement. If we need capital,
but are unable to make a request under the investment agreement for any reason,
we will need to separately negotiate with Grandview to lift those restrictions
so we can obtain the capital from other sources.
We may not be able to obtain additional financing on terms favorable
to us, if at all. If adequate funds are not available or are not available on
terms favorable to us, we may not be able to effectively execute our business
plan.
YOUR INVESTMENT MAY HAVE LIMITED LIQUIDITY IF AN ACTIVE TRADING MARKET DOES NOT
DEVELOP OR CONTINUE.
Your purchase of our common stock may not be a liquid investment
because our securities trade over the counter with quotes on the OTC electronic
bulletin board. You should consider carefully the limited liquidity of your
investment before purchasing any shares of our common stock. We have no
obligation and no plans to apply for quotation of our common stock on The NASDAQ
Stock Market or for listing of our common stock on any national securities
exchange. Factors such as our limited earnings history, the absence of a
reasonable expectation of dividends in the near future, and the fact that our
common stock will not be listed mean that there can be no assurance that an
active and liquid market for
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our common stock will exist at any time, that a market can be sustained, or that
investors in the common stock will be able to resell their shares. 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.
WE DO NOT PLAN TO PAY DIVIDENDS.
We will not be able to pay dividends until we recover any losses that
we may have incurred and we become profitable. We intend to retain our earnings
to finance growth and expansion and for general corporate purposes. Any future
declaration and payment of dividends on the common stock will depend upon our
earnings and financial condition, liquidity and capital requirements, the
general economic and regulatory climate, our ability to service any equity or
debt obligations senior to the common stock, and other factors deemed relevant
by our Board of Directors. Holders of our preferred stock have the right to
dividends declared with respect to the common stock on an as-converted basis.
GOVERNMENT REGULATION MAY IMPAIR OUR PROFITABILITY AND RESTRICT OUR GROWTH.
State and federal telecommunications and penny stock regulations could
limit our ability to achieve profitability and to grow. These changes may be
retroactively applied and are not within our control. Telecommunications
companies are subject to regulation by the Federal Communications Commission.
Conventional telephone companies are currently pushing the FCC to regulate
providers of computer software products that enable voice transmission over the
Internet, arguing that these companies are operating as common carriers. If this
argument is successful, we will be subject to various regulatory requirements
and fees. The FCC has advised Congress that it may, in the future, regulate
Internet protocol telephony services as basic telecommunications services.
Conventional telephone companies are also lobbying Congress to impose tariffs
that would impact customer use of our products and services. In addition,
several states are studying the imposition of access charges for Internet
telephony providers.
In addition to telecommunications regulation, the growing popularity
and use of the Internet has led to increased regulation of communication and
commerce over the Internet. The United States and other countries have enacted
laws to regulate user privacy, pricing, and the characteristics and quality of
Internet products and services. We are unable to predict the impact, if any,
that future legislation, legal decisions, or regulations concerning the Internet
may have on our business, financial condition, or results of operations.
We are subject to additional regulation by the Securities and Exchange
Commission under its rules regulating broker-dealer practices in connection with
transactions in "penny stocks." This type of regulation may reduce the level of
trading activity or your ability to sell the common stock. Penny stocks
generally are equity securities with a price of less than $5.00 that are not
registered on certain national securities exchanges or quoted on the NASDAQ
system. The penny stock rules require a broker-dealer, prior to a transaction in
a regulated penny stock, to deliver a standardized risk disclosure document that
provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer must also provide information concerning
his compensation for the penny stock purchase, current prices of the penny
stock, and a special written determination that the penny stock is a suitable
investment for the purchaser. See BUSINESS -- REGULATION.
YOU SHOULD NOT RELY ON HISTORICAL RESULTS OF OPERATIONS AS INDICATIONS OF OUR
FUTURE PERFORMANCE.
Our historical results of operations are not accurate indications of
our future performance. Our annual and quarterly results of operations fluctuate
significantly due to, among other factors, the volume of revenues generated by
our strategic partners from sales of products and services incorporating our
technology or products, the mix of distribution channels used by us, the timing
of new product announcements and releases by us and our competitors, and general
economic conditions. There can be
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no assurance that our future revenues and profits will exceed our past
performance. See MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
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CAPITALIZATION
The following table shows our short-term debt, long-term debt, and
capitalization as of September 30, 2000, and pro forma as adjusted to reflect:
(1) conversion subsequent to September 30, 2000 of $250,000 of
outstanding debentures to purchase common stock and $2,500,000
in principal amount of debentures to purchase common stock
issued subsequent to that date at a conversion rate based on a
$0.125 per share market price of the common stock (average of
the lowest three bid prices during the twenty-two business
days before conversion);
(2) the conversion subsequent to September 30, 2000 of $375,000 of
outstanding debentures to purchase common stock at a
conversion rate based upon various per share prices;
(3) the exercise of 10,713,000 common stock options at various per
share prices ranging from $0.11 to $1.00;
(4) the issuance to a consultant of 50,000 shares of common stock;
(5) the exercise of warrants to purchase 2,400,00 shares of common
stock by an investor at per share prices ranging between $0.42
and $2.20;
(6) the issuance to another investor under the equity line of
6,482,590 shares of common stock for $730,000 at a rate based
on a $0.125 per shares market price;
(7) the issuance to and exercise of warrants to purchase common
stock to the same investor for 1,620,648 shares at a per share
price of $0.15;
(8) the issuance to and exercise of warrants to purchase common
stock to the same investor for 225,000 shares at a per share
price of $0.192; and
(9) the issuance of 194,481 shares as a finders fee.
For purposes of the pro forma capitalization table, we have assumed
that items (1), (3), (5), (6), (7), (8), and (9) have occurred because each must
occur if the underlying shares are to be sold by the selling shareholder. See
PRINCIPAL AND SELLING SHAREHOLDERS. We have no control over the conversion and
exercise of these debentures, options, and warrants and are unable to determine
how many shares and warrants will be issued under the equity line. This table
should be read in conjunction with our financial statements and the related
notes thereto contained elsewhere in this prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000
------------------------------------------------
PRO FORMA
ACTUAL AS ADJUSTED
----------------------- --------------------
<S> <C> <C>
Long-term obligations................................................ $ 625,000 $ -
Shareholders' equity:
Preferred Stock, par value $0.001 per share, 10,000,000
shares authorized; no shares issued and outstanding and
no shares of stock issued and outstanding as adjusted......... - -
Common stock, par value $0.001 per share, 100,000,000
shares authorized; 49,827,647 shares issued and
outstanding; 98,737,336 sharesissued and outstanding, as
adjusted...................................................... 49,816 98,737
Additional paid-in capital........................................... 8,891,583 19,817,088
Retained earnings (deficit) (8,628,238) (8,660,048)
---------- ----------
Total shareholders' equity (deficiency).......................... 313,361 11,255,777
---------- ----------
Total capitalization........................................ $ 938,161 $11,255,777
=========== ===========
</TABLE>
DIVIDEND POLICY
We have not declared or paid any cash dividend on our common stock in
the past, and the board of directors intends to continue a policy of retaining
future earnings to finance our growth and for general corporate purposes.
Therefore, we do not anticipate paying any cash dividends on our common stock in
the future.
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BUSINESS
We were incorporated in 1996 to offer Internet-based communications
products and services in the United States and international markets. We were
one of the first companies to offer a way to transmit voice and multi-media
communications over the Internet, a service commonly referred to as Internet
protocol telephony. Our voice-over-Internet service integrates traditional
telephone functions with advanced Internet-based communications technology.
INDUSTRY BACKGROUND
Historically, long distance telephone services have been offered
through public switched telephone networks using traditional telephone lines, a
well-established and quality service. In recent years, however, the Internet's
developing technologies, unprecedented popularity, and commercialization have
accelerated the integration of technologies involving computers and telephones.
This commercial integration has led to a new sector in the communications
industry, generally referred to as computer telephony or Internet telephony,
that has developed a less expensive and more workable method of
telecommunication over the Internet. Companies that offer Internet telephony
services and products are generally referred to as Internet telephony service
providers. Because the global marketplace is becoming familiar with the Internet
and its value as a communications mechanism, companies have invested millions of
dollars to develop new and enhanced applications to improve the service quality
and lower implementation costs of Internet telephony.
Internet telephony is superior to traditional long distance telephone
services in several ways. First, voice and message traffic through Internet
telephony systems is less expensive than traditional telephone systems because
Internet telephony services are not subject to the tariffs affecting traditional
telephone services. Also, the Internet protocol telephony network routes
transmissions using packetized switching that is less expensive to deploy and
allows for more efficient use of the capacity that exists in the communications
infrastructure. Second, Internet protocol telephony has superior capability than
traditional telecommunications technology for innovative features such as
interactive document and data sharing and multi-media data transmissions.
New applications of voice-over-Internet services are being developed
every day. The cost of computer processing is decreasing and customer demand is
increasing. Internet protocol systems are more economical, have more features,
and may become more reliable than traditional telephone services, and may allow
companies to communicate better with their customers, employees, and vendors.
THE ACCESS POWER SOLUTION
We are developing our Internet-based telephony network, Access Power
Advanced Communications(R), and services, FreeWebCall.com(TM), Net.Caller(TM),
and e-button(TM), to provide a domestic and international communications network
that allows customers to place calls through the Internet using traditional
telephones and PCs. Unlike traditional switch-based telephone systems, we use
the Internet as the backbone to complete the long distance connection, thereby
eliminating the tariff fees associated with long distance carriers and providing
a less costly alternative to traditional long distance telephone lines. Our
system allows customers to make calls in three ways:
(1) from a telephone to another telephone;
(2) from a personal computer (PC) to another PC; and
(3) from a PC to a telephone.
These services are described in detail below.
In addition to the cost savings associated with Internet telephony, our
customers have the ability to use services that are not available from
traditional public circuit switched telephone networks. Such
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services include voice-enabled websites, interactive document and data sharing,
and multi-media data transmissions, including video capability.
We are committed to establishing an international network to provide
alternative long distance service and new Internet protocol telephony-based
services. Our network, which is deployed at strategic geographic locations,
serves as a bridge for communications traffic between the public switched
telephone network and the Internet. The gateway server portion of the network
converts voice transmission to data packets, using less bandwidth
(infrastructure capacity) 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.
PRODUCTS AND SERVICES
Access Power Advanced Communications integrates traditional telephone
functions with advanced Internet-based communications technology. This service
enables users to communicate over the Internet from a PC to a telephone or from
a telephone to another telephone with a significant reduction in costs over
traditional telephony. Through this service, a user can place long distance
telephone calls from a PC anywhere in the world over the Internet to telephones
in any area where Access Power terminates calls. Currently, we have such service
available for calls to telephones in the United States, Canada, Puerto Rico, and
fifteen European countries. At this time, telephone-to-telephone calls may be
originated from the cities of Miami, Orlando, and Jacksonville, Florida, and
Dallas-Fort Worth, Texas, and can be terminated anywhere in North America and
over fifty foreign countries.
Our FreeWebCall.com customers' experience is supported by a standards
based solution featuring Microsoft's NetMeeting software, Cisco Systems
hardware, and state of the art network services from Sprint. To complement our
other consumer services, we offer our customers two third-party software
products: Internet Phone for Access Power and Net.Caller. Either software
package will enable customers to complete long distance communications using PCs
that are multi-media configured, with a microphone and sound system. The
Internet Phone for Access Power is a multi-featured software package and
Net.Caller is a more basic calling utility that can be downloaded free of charge
from our web site.
FREEWEBCALL.COM(TM)
FreeWebCall.com was launched August 1, 2000. It is a sponsor-subsidized
Internet Protocol telephony service whose subscribers enjoy unlimited, free
calling from their Windows-based PC to any telephone in the United States,
Canada, and the United Kingdom. We are developing additional features to enable
our subscribers to make free PC-to-PC calls and to participate in video
conferencing, text chat, file sharing, program sharing, and whiteboard
collaboration, which we hope to implement this year. FreeWebCall.com customers
register for service and log-in to use the service at the FreeWebCall.com
Website.
NET.CALLER(TM)
The Net.Caller service is primarily being marketed from our website and
through a relationship with Lycos-Bertelsmann GmbH whereby Lycos-Bertelsmann
promotes Net.Caller on all of their European portals. We recently furthered the
relationship by expanding the distribution channel to include Lycos
Bertelsmann's free European Internet service provider, Comundo. We also manage
an aggregated marketing strategy by providing banner advertisements to other web
sites through the Net.Caller Affiliate Program. Companies with web sites join
the program and we provide them with a banner ad exhibiting the Net.Caller
service to people who are viewing the particular Website. When the person
viewing the banner clicks on the ad, he or she is provided information and an
opportunity to order
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the service. When we acquire a customer as a direct result of the affiliate web
site banner ad, we pay the affiliate a commission.
PC-TO-PHONE
In April 1999, we introduced our Net.Caller PC-to-Phone telephony
service. To use the Net.Caller service, customers can use the Internet Phone for
Access Power software, VocalTec's Internet Phone 5 software, or our free
Net.Caller software, which can be downloaded from our website from anywhere in
the world. It is designed for our customers who only need the basic PC-to-phone
use. Customers need a multi media personal computer and Internet connection to
use the service.
Net.Caller customers pay a flat rate of $10 per month for unlimited
calls to the United States, Canada, and Puerto Rico or a flat rate of $20 per
month for unlimited calls to the United States, Canada, Puerto Rico, the United
Kingdom, France, Germany, Italy, Spain, Belgium, Denmark, Switzerland, the
Netherlands, Sweden, Ireland, Norway, Austria, Finland, and Luxembourg.
Customers submit an order form to us including payment or credit card
information for billing. When the order is processed, we e-mail or mail a
confirmation letter including activation codes for the customer to enter into
the Net.Caller software that they downloaded from our web site. To initiate the
Net.Caller service, a customer registers on our web site and downloads either
Net.Caller or Internet Phone for Access Power software.
PHONE-TO-PHONE
On September 1, 1999, we began selling a flat-rate unlimited usage
telephone-to-telephone service under the tradename Net.Caller Phone-to-Phone. We
offer long distance service from Miami, Orlando, Jacksonville, and Dallas/Fort
Worth to a telephone anywhere in North America and over 50 foreign countries.
Customers can register for the service on our web site or call our office and
provide the required credit information, after which they are assigned a
password. To use the service from within one of our service areas, the customer
simply dials the gateway from a telephone (a local call number), enters the
password, and then dials 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 our Phone-to-Phone service. Billing is performed at
the beginning of each month by charging the customer's credit card. We charge
our Net.Caller Phone-to-Phone customers a flat rate of $49.00 per month for
unlimited usage for calls made to anywhere in the continental United States. Our
customers pay a per-minute fee for calls made to other areas.
INTERNET PHONE FOR ACCESS POWER
The Internet Phone for Access Power functions like a traditional
telephone, but uses software as the dialing mechanism. The software installation
is simple and enables users to engage in long distance voice communications
between multi-media PCs anywhere in the world. The only cost to the user is 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 telephone.
The software is simple to use. The customer dials his local Internet
service provider and, upon connecting to the Internet, the software will cause
an icon to appear on the monitor. The user may double click on the icon to join
PC-to-PC community chat rooms, create private rooms, dial directly to another
PC, or call a telephone using the Advanced Communications network. There are
currently no access or tariff charges other than the monthly charge from the
user's Internet service provider.
The Internet Phone for Access Power has the following features:
o allows customers to communicate with users of traditional telephone
equipment through the Advanced Communications network;
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<PAGE>
o call waiting, muting, holding, identification, and screening;
o full-duplex capabilities that enable real-time, two-way
conversations with Internet Phone users worldwide;
o voice mail;
o conference calling;
o direct calling allows the option of bypassing chat rooms to speak
directly with an individual;
o live motion video (no additional hardware is required to receive
video); and
o data and document sharing capabilities.
E-BUTTON(TM)
The e-button software provides electronic commerce benefits to any company with
a traditional call-center. This technology allows consumers viewing a company's
web site to click the e-button icon, which will instantly dial a designated
representative of that company, usually someone providing sales or support
services. This technology allows corporate customers to voice-activate their
Website, providing faster and more effective sales, customer service, or
technical support. The software is a browser plug-in that is quickly and
automatically downloaded and installed upon the first attempt to use it.
STRATEGY
We believe 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
networks. Access Power's objective is to be one of the world's leading providers
of international Internet protocol telephony products and services. Our strategy
to achieve that objective includes the provision of free Internet telephony
products and services through FreeWebCall.com, the expansion of our
international Internet protocol telephony network through business relationships
in targeted regions, the exploitation of new technology including Net.Caller,
FreeWebCall.com, and e-button; and the continued development of enhanced
products and services that utilize our international Internet protocol telephony
network. We intend to capitalize on our officers' and principal employees'
extensive backgrounds to develop unique services that differentiate us from our
competitors and that enhance our customers' communications experience.
ENHANCE FREEWEBCALL.COM(TM)
The launch of FreeWebCall.com expands our service offering and provides
free long distance service to our consumers. FreeWebCall.com is paid for by
advertising revenue. Subscribers call from their Windows-based PCs to any
telephone in the United States, Canada, and the United Kingdom. Additionally, we
plan to develop technology that will allow customers to make free PC-to-PC calls
and participate in video conferencing, text chat, file sharing, program sharing,
and whiteboard collaboration.
EXPAND NET.CALLER(TM) SERVICE TO INTERNATIONAL MARKETS
Our agreement with Lycos-Bertelsmann designates us as a premier partner
of Lycos. Lycos-Bertlesmann promotes the sale of Net.Caller to its Pan-European
customer base through the strategic placement of banner ads, promotional
buttons, text links, and other hyperlinks on Lycos-Bertelsmann web pages.
Lycos-Bertelsmann's free Internet service provider, Comundo, currently
has over 1.2 million subscribers. The initial promotion offers Comundo
subscribers thirty minutes of free long distance calling monthly with our
service that allows calls to the United States, Canada, or fifteen European
countries.
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<PAGE>
LEVERAGE THE LOW OPERATING COSTS OF OUR NETWORK
Internet protocol telephony calls are treated as data communications
and are not subject to the expensive access fees to which standard long-distance
calls are subjected. This is especially significant when it comes to
international calls, where extra fees can be a significant addition to the cost
of a call. Our technology enables us to offer international calling at reduced
costs to customers. We anticipate that new business relationships we intend to
create overseas will focus on marketing and selling our services in the
international market.
We believe 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. We believe that this premise will
propel Internet telephony into the mainstream of communications. Internet
telephony by definition operates within computers, a medium that allows for the
development of sophisticated user applications that will differentiate Internet
protocol telephony from traditional telephony systems.
Some providers are now offering free long distance calling and are
supporting that business with revenues from sponsors and advertisers. We have
entered that sector of the market with FreeWebCall.com.
The cost structure of our Internet telephony network also allows us to
offer wholesale rates at prices below standard telephony carriers. Targeted
clients of our wholesale carrier services are Web-based communications portals
and other communications providers, such as Internet service providers. We
believe we are well-positioned to offer low cost carrier services to such
providers.
EXPLOIT NET.CALLER(TM) AND THE E-BUTTON(TM)
Subscribers to our PC-to-Phone service can originate calls from a
multi-media PC from anywhere in the world to the United States, Canada, Puerto
Rico, or any of fifteen European countries. We intend to extend the areas to
which customers using the Net.Caller service can place calls.
Our strategy includes re-selling certain third-party software that we
intend to market to our customers under the trademarked "e-button" name. We
believe this product is the best of its kind available in the marketplace today.
Its small size makes it quick to download, and the software installs
automatically.
CUSTOMER SERVICE
We believe customer service is one of our greatest strengths. Our
customer service organization's leadership team consists of professionals who
have managed customer care for demanding companies. Our sophisticated database
and account tracking allows true "one-to-one" service fulfillment and customer
communication.
Access Power's operations and customer service includes a call center
and e-mail response as well as the mailing of correspondence. The call handling
customer support systems have been developed in-house and reside on our Website,
allowing customers to access individual usage details and frequently asked
questions and answers. The representative and the customer may jointly access
our home page for information on topics of interest.
We have simplified the traditional telephone billing process. Our
customers are primarily charged a flat rate for unlimited usage. Itemized
billing or usage statements are available to customers via our Website, and
written invoices are available upon request.
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<PAGE>
COMPETITION
We face direct competition from other companies that offer Internet
protocol telephony services and indirect competition from companies that offer
traditional or other alternative long distance telephony services, many of which
are larger that we are and have greater resources than we do. Most companies
currently offering Internet protocol telephony to their customers are either
small start-up companies or Internet service providers looking for enhanced
services primarily designed to maximize customer retention in support of their
core business. We believe that the most developed Internet telephony service
providers in today's market are Net2Phone, Inc. (www.net2phone.com) and Delta
Three (www.deltathree.com). Net2Phone and Delta Three were spawned from
established long distance companies who were committed to Internet protocol
telephony as an important element of their future business. Both companies seem
to rely heavily on their ties to the traditional long distance business to make
the personal computer-to-phone market viable.
Additional direct competitors in the sponsor-based space, and which
compete with FreeWebCall.com, are DialPad.com and PhoneFree.Com. Both companies
are private, relatively new, and seem to be establishing e-commerce retail
Websites around communications services offerings.
SALES AND MARKETING
Our market includes consumer and commercial users of advanced
communications products and services and users of the Internet. The services
include Phone-to-Phone, PC-to-Phone, and PC-to-PC communications. We believe
that Access Power's current pricing for service is very competitive.
Our current sales initiative is directed toward Net.Caller PC-to-Phone
service customers. Our Net.Caller marketing efforts focus on business and
marketing partnerships, such as with Internet service providers, and aggregating
a strong community of affiliates who display one of the Net.Caller banner ads on
their Website to solicit the viewer to order Net.Caller. We pay the affiliate a
commission based on customers who order Net.Caller from the affiliate's Website.
The extent to which we are able to offer low communication transmission
rates affords us the opportunity to enter the wholesale arena as well as the
retail market. By building partnerships and affiliations with international
partners, we will be able to control our own network while benefiting from the
regional awareness and marketing of our partners.
The target market for our PC-to-Phone service is the worldwide Internet
user base. Nua Ltd. estimates that the number of worldwide users on-line will
increase from approximately 98 million in 1997 to approximately 350 million by
2005. Neilsen Net Ratings measurements found that approximately 144 million
people surfed the Web from home in July 2000, 35% more than the same period in
1999. The same study showed that from July 1999 to July 2000 the time people
spent on the Internet increased by 26%. The broader ancillary target for the
Phone-to-Phone service is traditional phone users.
e-button is sold to businesses that have a Website and call center.
According to Yahoo!, as of September 6, 2000, there were over 575,000
business-oriented Websites worldwide. Some of these businesses also have a call
center for customer service, sales, or technical support. We aim to capture a
significant portion of this business market for sales of the e-button(TM)
product.
FACILITIES
Our 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. We entered into a
three-year lease in September of 1997 which was recently extended for two years,
including one successive extension option and a right of first refusal on
additional vacant
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<PAGE>
contiguous space. We pay approximately $4,200 per month rent under this lease.
We believe the office space is adequate for our current needs and could easily
be replaced with other suitable accommodations.
We maintain our server hardware through co-location arrangements with
local exchange carriers at locations where we desire to maintain equipment.
These facilities must be climate controlled and offer the necessary telephone
and electrical power services, but we believe such facilities are generally
available from more than one source.
EMPLOYEES
As of December 1, 2000, we engaged fifteen full time and seven
part-time employees.
LITIGATION
We are not currently involved in any litigation, nor do we know of any
threatened litigation against us that would have a material effect on our
financial condition.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF OUR 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. We
are creating an Internet telephony network to provide voice and multimedia
communications services, more commonly referred to as Internet protocol
telephony. From our inception, we have devoted most of our efforts to technical
analysis, development, procurement, implementation, testing, and the
establishment of the corporate and technical policies and procedures necessary
to support our business requirements. We are a development stage operation.
Our Internet protocol telephony gateway network allows us to offer
competitive call rates while providing premium communications features. Access
Power products and services are based on PC-to-PC, PC-to-Phone, and
Phone-to-Phone communications. We are a reseller of third party PC telephone
software called Internet Phone and the e-button.
While in our start-up and current development stages, we tested and
preliminarily introduced certain products and services, new to both the
communications industry and us. To date, we have not realized revenues from
sales of any products or services in amounts necessary to support all of our
cash operating needs.
EXPANSION PLANS
We believe we must expand our network capacity and our customer base to
achieve profitability. We intend to expand our network and customer base
internationally through affiliates and other business relationships, such as the
relationship defined by the Lycos-Bertelsmann agreement.
The launch of FreeWebCall.com in August of 2000 is expected to be the
start of a significant development and expansion for us. The Web-based
application will be part of our Advanced Communications network with support
being provided by some of the leaders in the world of communications and the
Internet. We plan to initiate an advertising campaign in 2001 to increase brand
recognition of FreeWebCall.com.
SOFTWARE SALES
To date, we have realized only small revenues from the resale of
software to our customers, and we do not expect such sales to become a
significant source of profit in the future. During the next year, however, we
intend to continue marketing the e-button software, and we expect to realize
revenues from those sales.
MARKETING
We have recently begun our effort to market our products and services.
We have implemented a public relations and marketing campaign along with
establishing arrangements with Web-based communications portals.
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<PAGE>
RAISING CAPITAL
We have recently sold 6% convertible debentures in the face amount of
$2,500,000 to an investor. In addition, the investor purchased a warrant to
purchase an additional $2,500,000 of debentures on the same terms.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999
REVENUES AND COSTS OF REVENUES
Revenues increased $15,060 from $51,649 to $66,709 in the three months
ended September 30, 2000 compared to the same period in 1999. Revenues increased
$241,427 to $320,876 from $79,449 in the nine months ended September 30, 2000
compared to the prior year. These increases were the result of sales of our
Net.Caller service, which we began to offer April of 1999. Software sales
decreased from $1,050 to zero and $9,450 to zero in the three and nine months
periods ended September 30, 2000 compared to the prior year because we
concentrated on providing our Net.Caller service instead of reselling software.
EXPENSES
Product development and marketing expenses were $904,129 for the three
months ended September 30, 2000, an increase of $698,685, or 340%, from $205,444
for the same three months of the prior year. Telephone and gateway charges
represented $573,460 of this increase and advertising and public/investor
relations represented $115,235 of this increase. For the nine months ended
September 30,2000, product development and marketing increased $1,459,963 or
172%, to $2,311,000. Telephone charges represented $1,073,783 and marketing and
public/investor relations represented $361,913 of this increase. These increases
were the result of the Net.Caller service that we began to market in April 1999.
General and administrative expenses decreased $1,474, to $390,385 in the three
months ended September 30, 2000 from $391,859 for the same period in the prior
year. Payroll and outside staffing services increased $45,502, legal fees
increased $43,192 offset by a $100,000 decrease in finders fees. For the nine
months ended September 30,2000, general and administrative expenses increased
$604,492, or 64%, to $1,542,634. Payroll and outside staffing represented
$277,245 of this increase and finder's fees on the capital raises accounted for
$250,000 of the increase.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998
REVENUES AND COSTS OF REVENUES
We realized no revenue from the sale of hardware and software in the
three months ended September 30, 1998 compared to software sales of $1,050 in
the three months ended September 30, 1999 and $9,450 during the nine months
ended September 30, 1999 compared to $212,092 during the previous year. The
revenue generated from sale of services increased $21,294 from $29,305 during
the three months ended September 30, 1998 to $50,599 during the three months
ended September 30, 1999. The revenue generated from sale of services increased
$ 27,910 from $42,089 during the nine months ended September 30, 1998 to $69,999
during the nine months ended September 30, 1999.
EXPENSES
Product development and marketing expenses were $205,444 for the three
months ended September 30, 1999; a decrease of $133,215, or over 39% of such
expenses, from the three months ended September 30, 1998. Depreciation and
amortization expense decreased $39,100, professional fees decreased $30,000,
travel decreased $8,245 and advertising decreased $7,671. For the nine months
ended September 30, 1999 product development and marketing expenses increased
$141,504 or almost 20%.
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<PAGE>
Professional fees for public relations accounted for $155,000 of this increase.
General and administrative expenses increased $41,194, or 12%, from $350,665 for
the three months ended September 30, 1998. Legal and professional fees increased
$20,000. Finder's fees increased $100,000. Payroll expense decreased $86,082.
During the nine months ended September 30, 1999 general and administrative
expenses increased $68,968 or 8% to $938,142 of which finder's fees increased
$81,444.
TWELVE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO TWELVE MONTHS ENDED DECEMBER
31, 1998
REVENUES AND COSTS OF REVENUES
Total revenues for the twelve months ended December 31, 1999 decreased
$87,899 or 32.8%. Revenues from services provided increased 218.7% from $53,519
to $170,601 due to increased marketing of our new flat rate services. Product
sales decreased 95.6% from $214,431 to $9,450 due to the initial fees received
related to our Canadian venture ($24,000) and the sale of equipment to that
venture ($188,092) in 1998, compared to sales of solely software and service in
1999. The Canadian venture has since been terminated by mutual agreement of the
parties.
EXPENSES
Product development and marketing expenses were $1,015,737 in 1999
compared to $731,672 in 1998, an increase of $284,065 or 38.8%. Telephone
network costs increased 386.9% or $306,502 from $79,228 in 1998 to $385,086 in
1999. Gateway services expense increased $35,827 or 13% from $275,613 in 1998 to
$311,440 in 1999. These expense increases were the result of expanding our
network coverage and customer base. Lower depreciation and amortization of
$117,402 from $321,806 in 1998 to $204,323 in 1999 or 36.5% offset some of these
increases. General and administrative expenses increased $435,929 or 33.1%.
Professional fees for marketing and equity financing increased $701,666 from
$206,680 to $908,348 or 339.5%. These expenses were slightly offset by decreased
payroll of $88,775, decreased travel of $37,258, and decreased temporary help of
$13,506 in 1999 compared to 1998.
TWELVE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO PRIOR PERIODS
REVENUES AND COSTS OF REVENUES
We realized no revenues from our inception through the end of fiscal
year 1997. Through the twelve months ended December 31, 1998, revenues increased
by $267,950 due to the initial fees received related to our Canadian venture
($24,000), the sale of equipment to that venture ($188,092), and other sales and
services ($55,858). The Canadian venture has since been terminated by mutual
agreement of the parties.
EXPENSES
Product development and marketing expenses were $731,672 in 1998.
Telephone network costs were $79,228, and gateway services expense was $275,613.
Depreciation and amortization was $321,806 in 1998. Professional fees for
marketing and equity financing were $206,680.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations through the
proceeds from the issuance of equity and debt securities and loans from
shareholders and others. To date, we have raised approximately $5,872,274 from
the sale of common stock and preferred stock, and have borrowed approximately
$5,005,025 from investors and shareholders. Funds from these sources have been
used as
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<PAGE>
working capital to fund the build-out of our network and for internal
operations, including the purchases of capital equipment.
We generated negative cash flow from operating activities for the
period from inception (October 10, 1996) thought June 30, 2000. We realized
negative cash flow from operating activities for the six months ended June 30,
2000, of ($2,529,229) compared to negative cash from operating activities of
($265,235), primarily due to higher net loss and faster payments to vendors than
previously. Investing activities for the period from inception through June 30,
2000 consisted primarily of equipment purchases to build out the network.
Investing activities in equipment in the six months ended June 30, 2000 were
$249,441 and were negligible in the same period ended June 30, 1999.
The timing and amount of our capital requirements will depend on a
number of factors, including demand for our products and services and the
availability of opportunities for international expansion through affiliations
and other business relationships. We are performing ongoing cost benefit
analysis to ensure that any existing under-utilized equipment is made available
for redeployment to prolong the necessity to acquire new equipment.
We 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 we
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. We secured
the services of an investment banker during December 1998. To retain the
services and conserve cash, we issued 30,000 shares of stock and recognized an
expense of $10,000 and an increase to capital stock of the same amount.
We 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, we also
paid a professional service fee of $2,000 in cash.
We raised $75,000 in January 1999 from the sales of a total of 75
shares of Series A Preferred Stock for $1,000 per share. In connection with one
of these sales, we also issued 27,777 shares of common stock as a finder's fee
and recognized expense of $7,500 and an increase to capital stock of the same
amount. We received $150,000 as a good faith deposit with the letter of intent
and issued 1,500,000 shares of common stock in return to the investor.
In April of 1999, we issued 512,000 shares of common stock in exchange
for a debt repayment and the interest due on the debt. We issued 2,630,000
shares of common stock upon the exercise of employee stock options for
$1,257,100. In September of 1999, we issued $1,000,000 of 6% convertible
debentures. We issued $200,000 of 6% convertible debentures in December of 1999,
$800,000 of 6% convertible debentures in January of 2000, and $2,500,000 of 6%
convertible debentures in February of 2000.
Our financing activities for the nine months ended September 30, 2000,
provided a net total of $3,070,777. Cash at the end of that period was $185,830.
As of December 1, 2000, we had cash of $98,000 and working capital of
$(204,491).
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors and their ages as of November 1,
2000 are as follows:
NAME AGE POSITION
Glenn A. Smith 44 President, Chief Executive Officer, and
Director
Tod R. Smith 38 Chief Technology Officer, General Counsel,
and Director
Maurice J. Matovich 41 Chief Operations Officer and Director
Howard Kaskel 54 Chief Financial Officer
GLENN A. SMITH has served as our President, Chief Executive Officer,
and a director since our 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.
TOD R. SMITH has served as our Chief Technology Officer and General
Counsel since 1998 and as a director 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 our Chief Operating Officer since 1998
and as a director since 1997. Mr. Matovich served as a manager at AT&T where he
specialized in high-tech operations management, client relations, and
shareholder relations from 1984 to 1997.
HOWARD KASKEL has served as our Chief Financial Officer since 1998. Mr.
Kaskel also is currently a limited partner with Tatum CFO Partners, LLP, a
partnership of career chief financial officers. From 1996 to 1997, Mr. Kaskel
served as the Chief Financial Officer of DeFalco Advertising and as the Chief
Financial Officer of Pinnacle Site Development Inc. until joining us in 1998. He
was a partner at Kaskel, Solowiei & 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 us for the year ended December
31, 1999 with respect to the Chief Executive Officer:
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation Awards
----------------------------------------------------------------------------------------------------------------------
Name and Principal Position Year Salary Securities Underlying Options (#)
------------------------------------------------------------------------------- --------------------------------------
<S> <C> <C> <C>
Glenn A. Smith, 1999 $96,000 4,700,000
Chief Executive Officer 1998 $96,000 100,000
1997 $96,000 100,000
</TABLE>
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<PAGE>
STOCK OPTIONS
The following table summarizes certain information regarding options to
purchase common stock granted to the Chief Executive Officer during the year
ended December 31, 1999. We did not grant any stock appreciation rights in 1999.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
(Individual Grants)
----------------------------------------------------------------------------------------------------------------------
Number of Securities Percent of Total Options/ Exercise or Base
Underlying Options/ SARS Granted to Employees Price
Name SARs Granted (#) in Fiscal Year ($/Sh) Expiration Date
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Glenn A. Smith 200,000 2% $ 0.22 1/07/09
Glenn A. Smith 4,000,000 38% $ 0.11 3/24/09
Glenn A. Smith 500,000 5% $ 0.53 6/14/09
</TABLE>
The following table summarizes the number and value of unexercised
options held by the Chief Executive Officer as of December 31, 1999. The Chief
Executive Officer exercised options for 500,000 shares in the year December 31,
1999.
<TABLE>
<CAPTION>
FISCAL YEAR-END OPTION VALUES
----------------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money Option/
Options/SARS At SARs at Fiscal
Fiscal Year-End (#) Year-End ($)
Exercisable/ Exercisable/
Shares Acquired on Unexercisable Unexercisable
Name Exercise (#) Value Realized ($)
------------------------- ---------------------- --------------------- ------------------------ ----------------------
<S> <C> <C> <C> <C>
Glenn A. Smith 0 0 200,000 /0 $118,000/0
Glenn A. Smith 0 0 4,000,000 /0 $2,360,000/0
Glenn A. Smith 500,000 265,000 0 0
</TABLE>
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, 1999.
EMPLOYMENT AGREEMENTS
We entered into an employment agreement with Howard L. Kaskel in
September of 1999. The agreement provides that Mr. Kaskel will serve as our
Chief Financial Officer on a part-time basis (four days per week) for $10,800
per month which includes a base salary of $9,000 and a retainer of $1,800 for
Tatum CFO Partners, LLP, of which Mr. Kaskel is a partner. Additional days are
paid at the rate of $660 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 $19,380.
The agreement is terminable by us upon thirty days written notice with all
payments required pursuant to the agreement to be paid on or before the
termination date. We do not have employment agreements with any other of our
executive officers.
DIRECTOR COMPENSATION
The directors have not received compensation for their duties as
members of the board of directors, and we have no current plans to compensate
directors for serving on the board in the future.
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<PAGE>
STOCK INCENTIVE PLAN
In June of 1997, we adopted our Stock Incentive Plan to provide
selected employees and affiliates rendering services to us or our affiliates an
opportunity to purchase our common stock. The Stock Incentive Plan promotes our
success and enhances our value by linking the personal interests of participants
to those of our shareholders and by providing participants with an incentive for
outstanding performance. Awards under the Stock Incentive Plan may be structured
as "incentive stock options" as defined in Section 422 of the Internal Revenue
Code of 1986, for employees or as non-qualified stock options for any
participant. The aggregate number of shares of common stock with respect to
which options may be granted pursuant to the Stock Incentive Plan cannot exceed
2,500,000 shares.
Incentive stock options are subject to certain limitations, 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 the options are exercisable by a
participant for the first time in any year may not exceed $100,000, based on the
fair market value of the stock at the date of grant. In addition, incentive
stock options may not be granted to employees who own more than ten percent of
the combined voting power of all classes of our voting stock, 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.
The compensation committee of our board of directors 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 incentive
stock option or a non-qualified stock option; to select the persons who receive
such grants; and to interpret and administer the Stock Incentive Plan.
As of the date of this prospectus, options to purchase an aggregate of
2,100,500 shares of common stock have been granted under the Stock Incentive
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, $0.54 per share for 100,000 shares, and $0.22 per
share for 200,000 shares.
RELATED PARTY TRANSACTIONS
On September 30, 1999, we entered into Share Exchange Agreements with
our executive officers whereby the officers were issued one share of Series B
Convertible Preferred Stock for each one thousand shares of common stock
presented. Glenn Smith, Tod Smith, Maurice Matovich, and Howard Kaskel received
2,662, 640, 450, and 200 shares of Series B Convertible Preferred Stock,
respectively. In January of 2000, the Series B Convertible Preferred Stock was
converted back to common stock.
30
<PAGE>
CERTAIN MARKET INFORMATION
PRICE RANGE OF COMMON STOCK
Our common stock is traded over-the-counter and quoted on the OTC
electronic bulletin board under the symbol "ACCR" on a limited and sometimes
sporadic basis. Quoting began in December of 1997. The reported high and low bid
prices for the common stock are shown below for the indicated periods through
December 1, 2000. The prices presented are bid prices that 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 December 1, 2000, there were approximately 313 shareholders
of record of our common stock.
BID
---
LOW HIGH
--- ----
1998
----
First Quarter $0.81 $1.38
Second Quarter $1.38 $4.06
Third Quarter $0.53 $2.19
Fourth Quarter $0.22 $0.75
1999
----
First Quarter $0.08 $0.33
Second Quarter $0.12 $1.56
Third Quarter $0.30 $0.79
Fourth Quarter $0.20 $0.97
2000
----
First Quarter $0.37 $3.47
Second Quarter $0.43 $1.43
Third Quarter $0.22 $0.47
Fourth Quarter (through December 1, 2000) $0.13 $0.29
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares by
Grandview that it has obtained under the investment agreement. We will receive,
however, the sale price of any common stock purchased by Grandview under the
investment agreement and upon the exercise of outstanding warrants held by
Grandview.
We will not receive any of the proceeds from the sale of shares by the
other selling shareholders. We will receive, however, $4,568,000 if all
outstanding warrants to purchase common stock are exercised plus $2,046,440 if
all outstanding options to purchase common stock are exercised by the selling
shareholders. We expect to use the proceeds of any such sales for general
working capital purposes.
31
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
OVERVIEW
Shares of our common registered for resale under this prospectus will
constitute 87% of our issued and outstanding common shares as of December 1,
2000. The number of shares we are registering is based in part on our good faith
estimate of the number of shares we will issue to Grandview Court, LLC under the
investment agreement as limited by our available authorized but unissued common
stock. The number of shares we are registering for issuance under the investment
agreement may be higher than the number we actually issue under the investment
agreement. We intend to issue additional shares to Grandview in the future;
however, we do not currently have sufficient authorized but unissued common
stock to register for the future issuance to Grandview under the investment
agreement. If our shareholders approve an increase in our authorized common
stock at a special meeting that we intend to hold in February 2001, we will
register additional shares for issuance to Grandview. The remaining shares we
are registering are based upon shares held by, or underlying convertible
securities held by, the other selling shareholders.
Grandview is engaged in the business of investing in publicly traded
equity securities for its own account. Grandview's principal offices are located
in the Cayman Islands. Other than the warrants to purchase 225,000 shares of
common stock that we issued to Grandview in connection with closing the
investment agreement, Grandview does not own any of our securities as of the
date of this prospectus, and it has no other commitments or arrangements to
purchase or sell any of our securities other than its obligation to purchase
common shares under the investment agreement. There are no business
relationships between Grandview and us other than as contemplated in the
investment agreement. Grandview's managers will be solely responsible for making
investment decisions with regard to the common stock purchased by Grandview from
us.
Continental Capital and Equity Corporation has acted as placement agent
in connection with the investment agreement. Continental introduced Grandview to
us, and its duties as placement agent were undertaken on a reasonable best
efforts basis only. Continental made no commitment to purchase shares from us
and did not ensure us of the successful placement of any securities.
This prospectus covers 620,000 shares of common stock issued to
Continental for the general investor relations services it provides to us plus
approximately 194,481 shares to be issued to Continental as a placement fee for
introducing us to Grandview. The 194,481 shares registered pursuant to the
registration statement of which this prospectus forms a part are to be issued
pursuant to our agreement with Continental which provides that we will issue to
Continental shares of our common stock equal to 3% of the shares of common stock
issued to Grandview pursuant to each request for cash under the investment
agreement. Depending upon the amount of money we request from Grandview and the
price of our common stock, the number of shares we are required to issue to
Continental could be substantially more than the 194,481 shares we are currently
registering. Pursuant to this prospectus, Continental may resell the
approximately 814,481 shares of our common stock that it owns. The decision to
sell our common stock will be made by Continental's officers and board of
directors. Other than the shares of our common stock covered by this prospectus,
Continental does not own any of our securities as of the date of this
prospectus.
This prospectus covers 50,000 shares of common stock issued to James R.
Schnorf, Chief Executive Officer of Continental, as a fee for his review of our
business in anticipation of providing a bridge loan to us. We did not enter into
a bridge loan with Mr. Schnorf, but we were still required to issue the 50,000
shares to him. Pursuant to this prospectus, Mr. Schnorf may resell the 50,000
shares of our common stock that he owns. The decision to sell our common stock
will be made by Mr. Schnorf. Other than the shares of our common stock covered
by this prospectus, Mr. Schnorf does not directly own any of our securities as
of the date of this prospectus. Mr. Schnorf indirectly will own 814,481
additional shares of our common stock, however, through his position as Chief
Executive Officer of Continental.
This prospectus covers 26,307,460 shares of common stock held by Bamboo
Investors LLC that are underlying debentures convertible into common stock and
warrants to purchase common stock.
32
<PAGE>
Pursuant to this prospectus and previous registration statements, Bamboo may
resell the 26,900,000 shares of our common stock that it owns. The decision to
sell our common stock will be made by Bamboo's officers and board of managers.
The table below sets forth certain information regarding the beneficial
ownership of the common stock, as of December 1, 2000, by (i) each person known
to us to be the beneficial owner of more than 5% of the outstanding shares of
common stock, (ii) each of our directors and our Chief Executive Officer, (iii)
all directors and executive officers as a group, and (iv) the selling
shareholders.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Except as indicated, we believe each person
possesses sole voting and investment power with respect to all of the shares of
common stock owned by such person, subject to community property laws where
applicable. In computing the number of shares beneficially owned by a person and
the percentage ownership of that person, shares of common stock subject to
options or warrants held by that person that are currently exercisable or
exercisable within 60 days are deemed outstanding. Such shares, however, are not
deemed outstanding for the purposes of computing the percentage ownership of any
other person.
<TABLE>
<CAPTION>
Shares Beneficially Owned Shares Beneficially
Prior to the Offering Owned After the
Offering
----------------------------------------------- ------------------------
Number of Shares
BENEFICIAL OWNER NUMBER PERCENTAGE TO BE SOLD NUMBER PERCENTAGE
---------------- ------ ---------- ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Glenn A. Smith(1) 7,356,500 12.8% 4,650,000 2,706,500 2.74%
Tod Smith(2) 2,540,000 4.7% 1,900,000 640,000 *
Maurice J. Matovich(3) 2,094,750 3.9% 1,800,000 294,750 *
Howard Kaskel(4) 1,105,400 2.1% 893,000 212,400 *
Bamboo Investors LLC(5) 26,900,000 33.8% 26,307,460 - -
Grandview Court, LLC(6) 8,328,238 13.7% 8,328,238 - -
Continental Capital and Equity Corporation 814,481 * 814,481 - -
Tatum CFO Partners, LLP(7) 547,500 * 67,500 - -
William Thayer(11) 75,000 * 75,000 - -
Randy Heaps(12) 60,000 * 60,000 - -
James R. Schnorf 50,000 * 50,000 - -
Eric Dullas(15) 4,000 * 4,000 - -
Kim Saldutti(16) 3,000 * 3,000 - -
Doreen Sabina(17) 3,000 * 3,000 - -
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP 13,096,650 21.2% 9,243,000 3,853,650 3.9%
(4 PERSONS) (1) (2)
--------------------
*Less than 1%.
(1) Includes 10,400 shares of common stock held for a minor child and
4,650,000 shares subject to presently exercisable options. Mr. Smith is
our Chief Executive Officer and President, and is a director.
(2) Includes 1,900,000 shares subject to presently exercisable options. Mr.
Smith is our Chief Technology Officer and General Counsel, and is a
director.
(3) Includes 1,800,000 shares subject to presently exercisable options. Mr.
Matovich is our Chief Operations Officer and a director.
(4) Includes 893,000 shares subject to presently exercisable options. Mr.
Kaskel is our Chief Financial Officer and is also a partner of Tatum
CFO Partners, LLP.
(5) Includes 2,400,000 shares of common stock issuable upon exercise of
presently exercisable warrants. Also includes 2,500,000 shares held by
such shareholder issuable upon conversion of outstanding convertible
debentures based upon a three day average share price of $0.125. 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.
</TABLE>
33
<PAGE>
(6) Includes 225,000 shares of common stock issuable upon the exercise of
presently exercisable warrants at a price of $0.192 per share and
1,620,648 shares of common stock issuable upon the exercise of
presently exercisable warrants at a price of $0.15 per share. Does not
include shares or warrants issuable in the future under the investment
agreement that are not registered pursuant to the registration
statement of which this prospectus is a part. The number of shares
issuable will be determined by a formula described under INVESTMENT
AGREEMENT.
(7) Includes 547,000 shares subject to presently exercisable options.
(8) Includes 75,000 shares subject to presently exercisable options. Mr.
Thayer was our vice-president of sales until January 2000.
(9) Includes 60,000 shares subject to presently exercisable options. Mr.
Heaps performed work for us as an independent contractor.
(10) Includes 4,000 shares subject to presently exercisable options. Mr.
Dullas performed work for us as an independent a contractor.
(11) Includes 3,000 shares subject to presently exercisable options. Ms.
Saldutti is the wife of Mr. Ralph Saldutti. Mr. Saldutti performed work
for us as an independent contractor.
(12) Includes 3,000 shares subject to presently exercisable options. Ms.
Sabina performed work for us as an independent contractor.
The actual number of shares of common stock deemed to be beneficially
owned and offered by Bamboo and Grandview cannot be determined at this time and
could be materially less or more than this estimated number depending on the
future market price of our common stock.
SELLING WARRANT HOLDER
Bamboo is the holder of transferable warrants to purchase 2,400,000
shares of common stock. This prospectus covers the sale of 1,000,000 of these
warrants. See DESCRIPTION OF WARRANTS. All of these transferable warrants may be
sold under the registration statement of which this prospectus is a part or a
separate registration statement previously filed by us.
PLAN OF DISTRIBUTION
GENERAL
Grandview is offering the shares of our common stock for its account as
a statutory underwriter, and not for our account. We will not receive any
proceeds from the resale of our common stock by Grandview. Grandview will be
offering for sale up to 8,328,238 shares of our common stock acquired by it
pursuant to the terms of the investment agreement more fully descried below and
the warrants we issued to it in connection with the investment agreement.
Grandview has agreed to be named as a statutory underwriter within the meaning
of the Securities Act of 1933 in connection with such sales of our common stock
to it and will be acting as an underwriter in its resales of our common stock
under this prospectus. Grandview has, prior to any sales, agreed not to effect
any offers or sales of our common stock in any manner other than as specified in
this prospectus and not to purchase or induce others to purchase shares of our
common stock in violation of any applicable state and federal securities laws,
rules, and regulations and the rules and regulations governing the OTC
electronic bulletin board.
To permit Grandview to resell the shares of our common stock issued to
it under the investment agreement, we agreed to register those shares and to
maintain that registration. Therefore, we have agreed with Grandview that we
will prepare and file such amendments and supplements to the registration
statement and the prospectus as may be necessary in accordance with the
Securities Act of 1933 and the rules and regulations promulgated thereunder to
keep it effective until the earlier of (i) the date as of which Grandview may
sell all of the securities it holds without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act or (ii) the date on which (A) Grandview has sold
all the common stock required to be registered under the investment agreement;
(B) Grandview has no right to acquire any additional shares of common stock
under the investment agreement; (C) Grandview has no right to receive common
stock underlying the warrants we are required to issue to it pursuant to the
investment agreement.
Grandview is subject to the applicable provisions of the Exchange Act
of 1934, including without limitations, Rule 10b-5 thereunder. Under applicable
rules and regulations under the Exchange
34
<PAGE>
Act, any person engaged in a distribution of shares of our common stock may not
simultaneously engage in market making activities with respect to such
securities for a period beginning when such person becomes a distribution
participant and ending upon such person's completion of participation in a
distribution, including stabilization activities in the common shares to effect
covering transactions, to impose penalty bids, or to effect passive market
making bids. In connection with the transactions in our common stock, we also
will be subject to applicable provisions of the Exchange Act and the rules and
regulations promulgated thereunder, including, without limitations, the rule set
forth above. These restrictions may affect the marketability of the shares of
our common stock owned by Grandview.
All the selling security holders have advised us 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 or warrants. If we are notified by a selling security holder that any
material arrangement has been entered into with an underwriter for the sale of
their shares or warrants, then, to the extent required under the Securities Act
of 1933 or the rules of the Securities and Exchange Commission, a supplemental
prospectus will be filed to disclose the following information as we believe
appropriate: (i) the name of the participating underwriter; (ii) the number of
the shares or warrants involved; (iii) the price at which such shares or
warrants are to be sold, the commissions to be paid, or discounts or concessions
to be allowed to such underwriter; and (iv) other facts material to the
transaction.
Neither the shares nor warrants have been registered for sale by the
selling security holders under the securities laws of any state as of the date
of this prospectus. Brokers or dealers effecting transactions in these
securities should confirm the registration thereof under the securities laws of
the states in which transactions occur or the existence of any exemption from
registration.
We expect that the selling security holders will sell their securities
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 securities 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 security holders may effect such
transactions by selling the securities to or through broker-dealers, and such
broker-dealers may receive compensation in the form of concessions or
commissions from the selling security holders and/or the purchasers of the
securities for whom they may act as agent (and thus compensation may be in
excess of customary commissions). The selling security holders and any
broker-dealers that participate with the selling security holders in the
distribution of shares may be deemed to be underwriters and commissions received
by them and any profit on the resale of securities 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 security holders will sell any
or all of the common stock or warrants offered by them hereunder.
Sales of the securities on the OTC electronic 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
securities 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 transactions in which the
broker solicits purchasers.
In effecting sales, brokers or dealers engaged by the selling security holders
may arrange for other brokers or dealers to participate. From time to time the
selling shareholders may engage in short sales, short sales against the box,
puts and calls, and other hedging transactions in our securities, and may sell
35
<PAGE>
and deliver their shares of our common stock in connection with such
transactions or in settlement of securities loans. In addition, from time to
time a selling shareholder may pledge its shares pursuant to the margin
provisions of its customer agreements with its broker-dealer. Upon delivery of
such shares or a default by a selling shareholder, the broker-dealer or
financial institution may offer and sell such pledged shares from time to time.
The selling security holders are not restricted as to the price or
prices at which they may sell their share of common stock or warranties. Sales
of such securities at less than market prices may depress the market price of
our common stock. Moreover, the selling security holders are not restricted as
to the number of shares or warrants that may be sold at any one time.
The selling security holders will pay all commissions and their own
expenses, if any, associated with the sale of our common stock, other than the
expenses associated with preparing this prospectus and the registration
statement of which it is a part. We have agreed to pay such expenses of
Grandview as set forth in the table below.
On December 1, 2000, the closing bid price for our common stock was
$0.125 and the average daily trading volume for the last 30 trading days ended
December 1, 2000 was $0.168. If this market price and average trading volume
remained constant over the 18-month period of the investment agreement, each
request would be capped at $100,000. Under this example, we would issue
32,000,000 shares to Grandview at $0.1125 per share, a ten percent discount to
the volume-weighed average daily bid price of our common stock; provided that we
do not exceed the limit contained in the investment agreement or Grandview's
total beneficial ownership of common stock described below, and we have enough
authorized shares. Presuming we issue all 32,000,000 shares issuable under the
investment agreement and that we do not exceed the limit contained in the
investment agreement or Grandview's total beneficial ownership of common stock
described below and we have enough authorized shares, we will pay underwriting
compensation to and expenses for Grandview, and other offering expenses as
follows:
<TABLE>
<CAPTION>
UNDERWRITING COMPENSATION AND EXPENSES
--------------------------------------------------------------------------------------------------
PER SHARE TOTAL
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Discount to Grandview(1) (10%) $0.0125 $400,000
--------------------------------------------------------------------------------------------------
Expenses payable on behalf of Grandview
--------------------------------------------------------------------------------------------------
Escrow fees(2) 0.0023 72,000
--------------------------------------------------------------------------------------------------
Legal fees of Grandview 0.0005 15,000
--------------------------------------------------------------------------------------------------
Estimated offering expenses(3)
--------------------------------------------------------------------------------------------------
SEC filing fee 0.00 1,631.89
--------------------------------------------------------------------------------------------------
Accountant's fees and expenses 0.00 250
--------------------------------------------------------------------------------------------------
Legal fees and expenses 0.0005 15,000
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
Total $0.0158 $503,839.29
--------------------------------------------------------------------------------------------------
</TABLE>
(1) We also issued to Grandview a warrant to purchase 225,000 shares of our
common stock at $0.192 per shares as consideration for providing the investment
agreement. In addition, we are obligated to issue warrants for shares totaling
25% of the number of shares issued to Grandview under the investment agreement.
These warrants are described in more detail below.
(2) Assumes the highest fee payable to the escrow agent at the closing of each
request for cash from Grandview. This fee will range from $500 to $2000,
depending upon the amount of the request.
(3) We will also issue 194,481 shares to Continental Capital and Equity
Corporation, the placement agent who introduced Grandview to us, in connection
with the investment agreement, as described in INVESTMENT AGREEMENT.
We have advised the selling security holders that the anti-manipulative
rules under the Securities Exchange Act of 1934, including Regulation M, may
apply to sales in the market of the common stock
36
<PAGE>
offered hereby. We have also advised the selling security holders of the
requirement for the delivery of this prospectus in connection with resale's of
the securities.
REGISTRATION RIGHTS OF GRANDVIEW
We granted registration rights to Grandview to enable it to sell the
shares of our common stock that it purchases under the investment agreement. In
connection with such registration, we will have no obligation to:
o assist or cooperate with Grandview in the offering or disposition of
such shares;
o indemnify or hold harmless the holders of any such shares (other
than Grandview) or any underwriter designated by such holders; or
o obtain a commitment from an underwriter relative to the sale of any
such shares.
We will assume no obligation or responsibility whatsoever to determine
a method of disposition for such shares or to otherwise include such shares
within the confines of any registered offering other than the registration
statement of which this prospectus forms a part.
REGISTRATION RIGHTS OF OTHER SELLING SHAREHOLDERS
We granted registration rights to certain of the remaining selling
shareholders that are similar to the ones granted to Grandview to enable them to
sell the shares of our common stock. In connection with any such registration,
we will have no obligation to:
o assist or cooperate with the selling shareholders in the offering or
disposition of such shares;
o indemnify or hold harmless the holders of any such shares (other
than Bamboo Investors, LLC) or any underwriter designated by such
holders;
o obtain a commitment from an underwriter relative to the sale of any
such shares; or
o include such shares within any underwritten offering we do.
We will assume no obligation or responsibility whatsoever to determine
a method of disposition for such shares or to otherwise include such shares
within the confines of any registered offering other than the registration
statement of which this prospectus forms a part.
37
<PAGE>
INVESTMENT AGREEMENT
OVERVIEW
We entered into an investment agreement with Grandview Court, LLC, a
Cayman Islands limited liability company, on November 13, 2000, for the future
issuance and purchase of shares of our common stock. The investment agreement
establishes what is sometimes termed an equity line of credit.
In general, the agreement operates like this: the investor, Grandview,
has committed to provide us up to $30 million as requested by us over an
18-month period in return for common stock we issue to Grandview. Once every 11
trading days, we may request between $100,000 and $5,000,000. The maximum amount
we actually can request will be determined by multiplying 1.5 times the
volume-weighted average daily price of our common stock and the average trading
volume for the 30 trading days prior to our request.
We use the formulas in the investment agreement to determine the number
of shares we will issue to Grandview in return for the requested money. The
formulas for determining the actual request amounts, the number of shares we
issue to Grandview, and the price per share paid by Grandview are described
below. The aggregate total of all requests cannot exceed $30 million. For the
ten trading days preceding our request and the period between our request and
Grandview's payment, the volume weighted average price of our stock must be at
least $75,000, unless Grandview agrees to waive this requirement. We are under
no obligation to make a request during any period.
The per share dollar amount Grandview pays for our common stock for
each request includes a seven percent to ten percent discount to the average of
the three lowest closing bid prices during the ten day period after our request,
weighted by trading volume. The amount of the discount depends on the variance
between the average closing bid price on November 13, 2000, $0.16, and the
average of the lowest three closing bid prices during the ten days immediately
subsequent to our request for cash from Grandview. Subject to the conditions of
the investment agreement, Grandview has agreed to provide to us the amount of
the request less an escrow agent fee of between $500 and $2000, depending upon
the amount of the request, in exchange for shares of our common stock.
We have registered 194,481 shares of common stock for issuance to
Continental Capital and Equity Corporation, the placement agent who introduced
Grandview to us. Our agreement with Continental obligates us to issue shares of
our common stock to Continental each time Grandview purchases common stock from
us. At the end of each 10-day request period, we will issue to Continental
shares of our common stock equaling 3% of the common stock purchased by
Grandview during that period. Additionally, we have issued 620,000 shares of
common stock to Continental in return for investment relations services rendered
by it to us. Continental's 814,481 shares of our common stock are included in
the registration statement of which this prospectus is a part.
We have issued to Grandview warrants to purchase 225,000 shares of our
common stock on a cash or cashless basis with an exercise price of $0.192, which
was the 120% of the closing bid price on November 13, 2000, the closing date,
subject to adjustment as provided in the investment agreement. The warrants
expire November 13, 2003. We have registered the 225,000 shares of common stock
underlying these warrants pursuant to the registration statement of which this
prospectus is a part.
We have registered an additional 1,620,648 shares of common stock for
issuance pursuant to warrants that are required to be issued to Grandview each
time Grandview purchases common stock from us. At the end of each 10-day request
period, we will issue to Grandview warrants to purchase additional common stock
equaling 25% of the common stock purchased by Grandview during that period.
These warrants will have an exercise price of 120% of the average purchase price
paid by Grandview during the 10-day request period.
38
<PAGE>
The investment agreement does not permit us to request funds if the
issuance of shares of common stock to Grandview pursuant to the request would
result in Grandview owning more than 4.99% of our outstanding common stock on
the request date.
THE REQUEST PROCEDURE AND THE STOCK PURCHASES
We may make a request for cash by faxing a notice to Grandview that
states the amount we wish to request.
AMOUNT OF THE REQUEST
No request can exceed the lesser of $5,000,000 and the capped amount
that is derived from multiplying the average of the volume weighted average
price for the 30 trading days immediately preceding our request by 1.5. The
maximum amount of each request can be increased or decreased if agreed to by
Grandview and us.
PRICE OF SHARES
The price at which Grandview will purchase our common stock will be
determined as follows:
(i) If the average closing bid price on the date the request is issued
is less than $0.16 the common stock will be purchased at 90% of the average of
the lowest three closing bid prices during the ten days immediately subsequent
to our request; and
(ii) for every $1 increase over $0.16 the shares will be purchased for
1% more, to a maximum of 93% of the average of the lowest three closing bid
prices during the ten days immediately subsequent to our request.
NECESSARY CONDITIONS BEFORE GRANDVIEW IS OBLIGATED TO PURCHASE OUR SHARES
The following are some of the conditions that must be satisfied before
Grandview is obligated to purchase the shares of common stock that we wish to
sell from time to time:
o A registration statement for the shares must be declared effective
by the Securities and Exchange Commission and must remain effective
and available for making resales of the common shares purchased by
Grandview;
o Our common stock must remain listed on the OTC electronic bulletin
board or must be listed on another stock exchange or on NASDAQ;
o We must not have merged or consolidated with or into another company
or transferred all or substantially all of our assets to another
company, nor must a purchase, tender, or exchange offer have been
made to, and accepted by, the holders of more than 30% of our voting
stock;
o We must be in compliance with our obligations under the investment
agreement and related agreements, and we must not be in breach of,
or in default under, any material provision of the investment
agreement or related agreements.
o There can be no material adverse change in our business, operations,
properties, prospects, or financial condition;
o No injunction may be issued, or action commenced by a governmental
authority, prohibiting the purchase or the issuance of our common
stock;
39
<PAGE>
o No statute, rule, regulation, executive order, decree, ruling, or
injunction may be in effect which prohibits consummation of the
transactions contemplated by the investment agreement;
o No litigation or proceeding or any investigation by any governmental
authority can be pending or threatened against us or Grandview
seeking to restrain, prevent, or change the transactions
contemplated by the investment agreement or seeking damages in
connection with such transactions; and
o We may not have filed for protection from creditors.
RESTRICTIONS ON FUTURE FINANCINGS
The investment agreement limits our ability to raise money by selling
our securities for cash at a discount to the market price. Pursuant to the
investment agreement, for a period of one year after the date of this
prospectus, we may not, without the prior consent of Grandview, offer, sell,
grant any option to purchase, or otherwise dispose of any of our common stock or
securities convertible into common stock at a price that is less than the market
price of our common stock at the time of such issuance. If we need additional
financing, Grandview has a right of first refusal to provide the financing to
us. If Grandview does not wish to provide the financing to us, we may obtain the
financing through the disposition of our common stock or securities convertible
into common stock to a third party. There are exceptions to this limitation in
the following situations:
o Shares, options, or warrants issued pursuant to our stock option
plan;
o Shares issued upon the exercise of any currently outstanding
warrants or options and upon conversion of any currently outstanding
convertible debenture;
o Shares issued in connection with the capitalization or creation of a
joint venture with a strategic partner;
o Shares issued in connection with an acquisition by us of another
company; and
o Shares issued in a bona fide public offering by us of our
securities.
COSTS AND FEES ASSOCIATED WITH THE TRANSACTION
At the closing of the transaction on November 13, 2000, we delivered
the requisite opinion of counsel to Grandview and will pay the escrow agent,
Joseph LaRocco, P.C., $15,000 for his legal, administrative, and escrow costs.
In addition, each time we issue common stock to Grandview in return for cash, we
will pay Mr. LaRocco an escrow agent fee of between $500 and $2,000, depending
upon the amount of money we request from Grandview. Finally, as a placement fee
for introducing Grandview to us, we will ________ shares of our common stock to
Continental equaling three percent of the common stock purchased by Grandview
during each request period, as described above.
We also issued warrants for 225,000 shares to Grandview in connection
with the closing of the investment agreement. See DESCRIPTION OF WARRANTS.
TERMINATION OF THE STOCK PURCHASE AGREEMENT
The investment agreement will automatically terminate upon the earlier
of the date that:
o Grandview has purchased an aggregate of $30,000,000 of our common
stock;
o Is 18 months after the effective date of this registration
statement.
40
<PAGE>
o We file for protection from creditors;
o We issue or sell any equity securities or securities convertible
into or exchangeable for equity securities without the prior written
consent of Grandview if the primary purpose of such issuance or sale
is the raising of capital;
o Trading in our common stock is suspended by the Securities and
Exchange Commission or the OTC electronic bulletin board for a
period of five consecutive trading days;
o We suffer a material adverse change in our business, operations,
properties, or financial condition;
o The resale of our common stock by Grandview ceases to be registered
under the Securities Act of 1933; or
o Our common shares are delisted from the OTC electronic bulletin
board unless such delisting is in connection with the listing of
such shares on a comparable stock exchange or The NASDAQ Stock
Market.
Additionally, the investment agreement may be terminated by mutual
agreement of Grandview and us.
INDEMNIFICATION OF GRANDVIEW
Grandview is entitled to customary indemnification from us for any
losses or liabilities suffered by it based upon material misstatements or
omissions from the registration statement and the prospectus, except as they
relate to information supplied by Grandview to us for inclusion in the
registration statement and prospectus.
We are entitled to indemnification from Grandview for any losses or
liabilities suffered by us as a result of any misrepresentation or breach of any
representation or warranty made by Grandview in the investment agreement or
related agreements.
SHARES ELIGIBLE FOR FUTURE SALE
Through the date of this prospectus, there has been only limited
over-the-counter trading of our common stock by certain market makers who have
registered to enter quotes on the common stock on the OTC electronic bulletin
board. We have no plans to list the common stock on The NASDAQ National Market
System or on any national securities exchange. Sales of substantial amounts of
shares of our 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 our ability to
raise capital in the future through sales of our equity securities.
Assuming conversion of the $2,825,000 of 6% convertible debentures, the
exercise of warrants to purchase 2,400,000 shares of common stock and options to
purchase 10,713,000 shares of common stock, and the purchase of 8,328,238 shares
from us by Grandview pursuant to the investment agreement, we will have a total
of 98,737,336 shares of common stock outstanding at the time of this offering.1
Shares in the amount of up to 44,955,679 offered for sale by the selling
shareholders, if sold under this registration, 33,645,889 shares sold by selling
shareholders under previous registrations, and 3,578,000 shares of common stock
previously sold by us pursuant to an exemption under Regulation 504 will, after
-----------------
1 Assumes the conversion of debentures into 2,500,000 shares of common stock
based on a conversion rate, as set forth in the formula described in 6%
CONVERTIBLE DEBENTURES below, and three-day average market price of common stock
at $0.125 as of December 1, 2000 and does not include additional shares of
common stock or warrants that may be issued pursuant to the investment
agreement.
41
<PAGE>
the offering, be freely tradable without restriction or further registration
under the Securities Act, except that any shares purchased by our "affiliates,"
as that term is defined in Rule 144 under the Securities Act of 1933, 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 pursuant to Rule 144, which rule is summarized below. We are aware that
some shares have been sold in reliance on Rule 144.
SALES OF RESTRICTED SECURITIES
In general, under Rule 144 as currently in effect, a person who has
beneficially owned restricted securities, as defined in Rule 144, for at least
one year, including a person who may be deemed our affiliate, is entitled to
sell, within a three-month period, a number of shares of our common stock that
does not exceed the greater of one percent of the then-outstanding shares of
common stock (approximately 52,551,000 shares) and the average weekly reported
trading volume of our 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 us.
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.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 100,000,000 shares of common
stock, $0.001 par value, and 10,000,000 shares of preferred stock, $0.001 par
value. Of the preferred stock, 1,200 shares have been designated as Series A
Convertible Preferred Stock and 4,000 shares have been designated as Series B
Convertible Preferred Stock. Of the preferred stock, none are outstanding. The
following summary of our capital stock does not purport to be complete and is
qualified in its entirety by reference to our Amended and Restated Articles of
Incorporation and Amended and Restated Bylaws, 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 shareholders and do not have cumulative voting rights
in the election of directors. The holders of a majority of the outstanding
shares of common stock, along with the holders of any outstanding preferred
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 our Board of Directors may, in its discretion,
declare out of sources legally available therefor. See DIVIDEND POLICY. Upon our
dissolution, liquidation, or winding up, holders of common stock are entitled to
receive on a ratable basis, after payment or provision for payment of all our
debts and liabilities and any preferential amount due with respect to
outstanding shares of preferred stock, if any, all our assets 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 non-assessable.
42
<PAGE>
PREFERRED STOCK
Holders of our preferred stock are entitled to vote the number of
shares as is equal to the number of shares of common stock into which the
preferred stock is convertible on the record date for voting or written consent
eligibility. The preferred shareholders have voting rights and powers equal to
the voting rights and powers of the common stock, and do not have cumulative
voting rights in the election of directors. The preferred shareholders do not
have any preference with respect to dividends or other distributions, except for
the liquidation preference described below. Any dividends declared by our Board
of Directors will be made to the holders of common stock and preferred stock pro
rata as if the preferred stock had been converted into common stock on the
record date for the payment of the dividend. See DIVIDEND POLICY. Our preferred
shareholders do not have preemptive rights or other subscription rights, or any
rights to share in any sinking fund. The special rights to which the preferred
shareholders are entitled are set forth below.
SERIES A PREFERRED STOCK
Upon our dissolution, liquidation, or winding up, holders of Series A
preferred stock are entitled to receive on a ratable basis, after payment or
provision for payment of all our debts and liabilities, prior to and in
preference to any distribution to our other shareholders, the amount of $1,500
per share. If there are insufficient funds to fulfill this preference, then all
assets or surplus funds will be distributed pro rata to the Series A
shareholders. Any surplus that remains after this distribution is completed
shall be distributed to the Series B preferred shareholders in accordance with
the provisions set forth below and then to the common shareholders. Each share
of Series A preferred stock is convertible into the number of shares of common
stock (rounded to the nearest whole number) equal to $1,000 divided by 65% of
the average market price of the common stock for the five trading days previous
to the date on which the conversion occurs. There are no outstanding shares of
Series A preferred stock.
SERIES B PREFERRED STOCK.
Upon our dissolution, liquidation, or winding up, holders of Series B
preferred stock are entitled to receive on a ratable basis, after payment or
provision for payment of all our debts and liabilities including the preference
to any outstanding shares of our Series A preferred stock, prior to and in
preference to any distribution to our common shareholders, the amount of $0.001
per share. If there are insufficient funds to fulfill this preference, then all
assets or surplus funds will be distributed pro rata to the Series B
shareholders. Any surplus that remains after this distribution is completed
shall be distributed pro rata among the common and Series B preferred
shareholders. Each share of Series B preferred stock is convertible into 1,000
fully paid and nonassessable shares of common stock. There are no shares of
Series B preferred stock outstanding.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION AND BYLAWS
Our Amended and Restated Bylaws contain certain provisions, described
below, that could delay, defer, or prevent a change in control of us if the
board of directors determines that such a change in control is not in the best
interests of us and our shareholders, and could have the effect of making it
more difficult to acquire us or remove incumbent management.
CLASSIFIED BOARD. Under our Bylaws, our board of directors is divided
into three classes, with staggered terms of three years each. Each year the term
of one class expires. Our 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. Our
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.
43
<PAGE>
SPECIAL VOTING REQUIREMENTS. Our Bylaws provide that all actions taken
by the shareholders must be taken at an annual or special meeting of the
shareholders or by unanimous written consent. The Bylaws provide that special
meetings of the shareholders may be called only by a majority of the members of
the board of directors. Under our Bylaws, shareholders are required to comply
with advance notice provisions with respect to any proposal submitted for
shareholder vote, including nominations for elections to the board of directors.
Our Bylaws contain provisions requiring the affirmative vote of the holders of
at least two-thirds of the outstanding shares of each class and series of our
capital stock entitled to vote in the election of directors cast at a meeting of
the shareholders for that purpose.
INDEMNIFICATION AND LIMITATION OF LIABILITY. The Florida Business
Corporations 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 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 acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation. With respect to any criminal action or proceeding, the party must
have had no reasonable cause to believe his 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 Florida law 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 was a party
by reason of the fact that he 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 against such liability under Florida law. Access Power's
Bylaws provide for the indemnification of our directors and executive officers
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 is or was one of our directors or executive officers upon the
receipt of an undertaking to repay such amount, unless it is ultimately
determined that such person is not entitled to indemnification.
Under Florida law, a director is not personally liable for monetary
damages to us or any other person for acts or omissions in his 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 personal
benefit. As a result, shareholders 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 Florida law 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, us.
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 us pursuant to the foregoing provisions, we have 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 provisions of our
Articles and Bylaws, including those pertaining to a classified board, special
meetings of shareholders, removal of directors,
44
<PAGE>
and director liability and indemnification, may be amended only by the
affirmative vote of two-thirds of the shares of our capital stock entitled to
vote in the election of directors.
CERTAIN STATUTORY PROVISIONS
The Florida Business Corporations Act provides for special voting
requirements to approve affiliated transactions unless the transaction falls
under one or more enumerated exceptions.
DESCRIPTION OF WARRANTS
Bamboo Investors, LLC is the holder of three separate sets of warrants.
Two of the sets of warrants were issued in connection with the sale of
$2,500,000 of convertible debentures. The first set of warrants may be exercised
to purchase 500,000 shares of common stock. The second set of warrants may be
exercised to purchase an additional $2,500,000 of convertible debentures as well
as to purchase, for a price of $100, another warrant to purchase 500,000 shares
of common stock. All of the common stock warrants entitle the holder to purchase
common stock for $2.20 per share (subject to possible anti-dilution
adjustments). The warrants expire on February 28, 2003, and they are
transferable.
The third set of warrant held by Bamboo may be exercised to purchase
400,000 shares of common stock for $0.42 per share (subject to possible
anti-dilution adjustments). The warrants expire on September 30, 2002, and they
are transferable.
Grandview Court, LLC is the holder of two separate sets of warrants,
both of which were issued in connection with the investment agreement. The first
set of warrants may be exercised to purchase 225,000 shares of common stock at
an exercise price of $0.192 per share. The warrants expire November 13, 2003,
and they are transferable. The second set of warrants may be exercised to
purchase the number of shares of common stock equal to 25% of the shares issued
of common stock to Grandview each time we make a request for cash from
Grandview. These warrants will have an exercise price of 120% of the price at
which we issue the shares of common stock to Grandview pursuant to the request.
The warrants will expire three years from the date they are issued, and they are
transferable.
DESCRIPTION OF 6% CONVERTIBLE DEBENTURES
We have sold $2,800,000 of our 6% convertible debentures due February
28, 2002 and have issued a warrant to the same investor to purchase an
additional $2,200,000 of such debentures as well as another warrant to purchase
1,000,000 shares of common stock. Interest on the debentures is due at maturity,
and it may be paid in shares of common stock at our option. The number of shares
issuable for interest would be determined at the same rate as principal under
the debentures can be converted. Principal and accrued interest under the
debentures may be converted at any time by the holder thereof into a number of
shares equal to the quotient obtained by dividing the amount to be converted by
the applicable conversion price. The applicable conversion price is the lesser
of $2.20 and an amount equal to eighty percent of the average of the three
lowest daily closing bid prices during the twenty-two trading days immediately
preceding the date we are notified of the exercise of the conversion election.
If we fail to register or maintain the registration of the underlying common
stock as provided in a registration rights agreement with the investor, then the
investor may choose any conversion price during the affected period as the
applicable conversion price. If we undergo a change of control, then we will be
obligated to redeem the debentures for125% of the outstanding principal and
accrued interest.
TRANSFER AGENT
Our Transfer Agent and Registrar is Atlas Stock Transfer & Trust
Company, Salt Lake City, Utah.
45
<PAGE>
LEGAL MATTERS
The validity of the common stock being offered hereby is being passed
upon for us by Kilpatrick Stockton, LLP, Atlanta, Georgia.
EXPERTS
Our audited financial statements 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
We have filed with the Securities and Exchange Commission a
Registration Statement on Form SB-2 under the Securities Act of 1933 with
respect to the common stock and Warrants offered hereby. As used herein, the
term "Registration Statement" means the initial Registration Statement and any
and all amendments thereto. For further information with respect to us and our
common stock and the warrants, reference is made to the Registration Statement,
of which this prospectus forms a part, 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 made to such contract or other document filed with the SEC as an
exhibit to the Registration Statement. Each such statement is qualified in its
entirety by such reference.
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 SEC: 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 SEC upon
payment of prescribed fees, or at its web site at http://www.sec.gov.
We are subject to the reporting requirements of Section 15(d) of the
Securities Exchange Act of 1934, and, in accordance therewith, for a period of
up to one year, we will file periodic reports with the Securities and Exchange
Commission. Such periodic reports will be available for inspection and copying
at the public reference facilities and other regional offices referred to above.
46
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999:
Independent Auditors' Report F-2
Balance Sheets at December 31, 1999 and 1998 F-3
Statements of Operations for the years ended December 31, 1999 and 1998 and the
cumulative period from October 10, 1996
(date of inception) through December 31, 1999 F-4
Statement of Shareholders' Equity for the years ended December 31, 1999 and 1998
and the period from October 10, 1996 (date of inception) through
December 31, 1999 F-5
Statements of Cash Flows for the years ended December 31, 1999 and 1998 and the
cumulative period from October 10, 1996 (date of inception) through
December 31, 1999 F-6
Notes To Financial Statements - December 31, 1999 F-7
FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
Balance Sheets as of September 30, 2000 and December 31, 1999 (unaudited) F-14
Statements of Operations for the three months and nine months ended F-15
September 30, 2000 and 1999 and the cumulative period from October 10, 1996
(date of inception) through September 30, 2000 (unaudited)
Statement of Shareholders' Equity for the years ended December 31, 1999 and 1998
and the period from October 10, 1996 (date of inception) through
September 30, 2000 (unaudited) F-16
Statements of Cash Flows for the nine months ended June 30, 2000 F-18 and 1999
and the cumulative period from October 10, 1996 (date of inception) through
September 30, 2000 (unaudited)
Notes to Financial Statements - September 30, 2000 F-19
</TABLE>
F-1
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999:
Independent Auditors' Report F-2
Balance Sheets at December 31, 1999 and 1998 F-3
Statements of Operations for the years ended December 31, 1999 and 1998 and the
cumulative period from October 10, 1996
(date of inception) through December 31, 1999 F-4
Statement of Stockholders' Equity for the years ended December 31, 1999 and 1998
and the period from October 10, 1996 (date of inception) through
December 31, 1999 F-5
Statements of Cash Flows for the years ended December 31, 1999 and 1998 and the
cumulative period from October 10, 1996 (date of inception) through
December 31, 1999 F-6
Notes To Financial Statements - December 31, 1999 F-7
FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
Balance Sheets as of June 30, 2000 and December 31, 1999 F-14
Statements of Operations for the three months and six months ended June 30,
2000 and 1999 and the cumulative period from October 10, 1996 (date of
inception) through June 30, 2000 (unaudited) F-15
Statement of Stockholders' Equity for the years ended December 31, 1999 and 1998
and the period from October 10, 1996 (date of inception) through
June 30, 2000 F-16
Statements of Cash Flows for the six months ended June 30, 2000 and 1999 and
the cumulative period from October 10, 1996 (date of inception) through
June 30, 2000 F-18
Notes to Financial Statements - June 30, 2000 F-19
</TABLE>
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 sheets of Access Power, Inc. (a
development stage company) as of December 31, 1999 and 1998, and the related
statements of operations, stockholders' equity, and cash flows for the years
then ended, and the cumulative period from October 10, 1996 (date of inception)
through December 31, 1999. 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 audits provide 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, 1999 and 1998, and the results of
its operations and its cash flows for the years then ended, and the cumulative
period from October 10, 1996 (date of inception) through December 31, 1999, in
conformity with generally accepted accounting principles.
/s/ Parks, Tschopp, Whitcomb & Orr, P.A.
Maitland, Florida
March 9, 2000
F-2
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
Balance Sheets
December 31, 1999 and 1998
ASSETS
------
<TABLE>
<CAPTION>
1999 1998
------------- ------------
<S> <C> <C>
Current assets:
Cash $ 213,885 33,156
Accounts receivable 179,410 29,145
Notes receivable, stockholders 456,000 30,791
Prepaid expenses 263,638 --
Inventory 21,800 21,770
----------- ----------
Total current assets 1,134,733 114,862
----------- ----------
Property and equipment, net (note 2) 439,656 1,131,471
Other assets 12,000 16,000
----------- ----------
Total assets $ 1,586,389 1,262,333
=========== ==========
Liabilities and Stockholders' Equity
-----------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 683,011 1,373,978
Current portion of long-term debt 168,956 120,136
----------- ----------
Total current liabilities 851,967 1,494,114
----------- ----------
Long-term debt, less current portion (note 3) 207,484 --
Convertible debentures (note 4) 750,000 --
----------- ----------
Total liabilities 1,809,451 1,494,114
----------- ----------
Stockholders' equity:
Common stock, $.001 par value, authorized 100,000,000 shares, issued and
outstanding 31,248,253 and 12,325,788 shares
in 1999 and 1998 31,249 12,326
Preferred stock, $.001 par value, authorized 10,000,000 shares,
issued and outstanding 3,952 and 1,050 shares in 1999 and 1998 4 1
Additional paid in capital 4,746,709 2,252,971
Deficit accumulated during the development stage (5,001,024) (2,497,079)
----------- ----------
(223,062) (231,781)
----------- ----------
Commitments (notes 3 and 4)
Total liabilities and stockholders' equity $ 1,586,389 1,262,333
=========== ==========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the years ended December 31, 1999 and 1998 and the cumulative period from October 10, 1996
(date of inception) through December 31, 1999
For the Period
October 10, 1996
Through
1999 1998 December 31, 1999
------------ ----------- -----------------
<S> <C> <C> <C>
Revenue:
Product sales $ 9,450 214,431 223,881
Services 170,601 53,519 224,120
------------ ----------- -----------
Total revenue 180,051 267,950 448,001
------------ ----------- -----------
Costs and expenses:
Cost of sales 2,955 161,650 164,605
Product development and marketing 1,015,737 731,672 1,784,893
General and administrative 1,642,134 1,315,600 3,352,107
------------ ----------- -----------
Total costs and expenses 2,660,826 2,208,922 5,301,605
------------ ----------- -----------
Loss from operations (2,480,775) (1,940,972) (4,853,604)
Other income (expense):
Interest income -- 407 2,295
Interest expense (16,290) (124,375) (142,839)
Loss on disposal of equipment (6,880) -- (6,880)
------------ ----------- -----------
Total other income (expense) (23,170) (124,375) (147,420)
Net loss $ (2,503,945) (2,065,347) (5,001,024)
============ =========== ===========
Net loss per share $ (0.10) (0.18) (0.31)
============ =========== ===========
Weighted average number of shares 25,174,029 11,776,511 16,110,885
============ =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
For the years ended December 31, 1999 and 1998 and
the period from October 10, 1996
(date of inception) through December 31, 1999
Common Stock Preferred Stock
---------------------------- ---------------------------
Date Shares Amount Shares Amount
------------ ---------------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Common stock issued to founding directors 8,000,000 8,000 -- --
Net loss -- -- -- --
----------- ---------- ------ ------ -----------
Balances at December 31, 1996 8,000,000 8,000 -- --
Common stock issued for cash 5/23/97 750,000 750 -- --
Common stock issued for cash 6/30/97 1,000,000 1,000 -- --
Common stock issued for cash 7/97 - 10/97 1,734,000 1,734 -- --
Stock issuance cost -- -- -- --
Net loss -- -- -- --
----------- ---------- ------ ------ -----------
Balances at December 31, 1997 11,484,000 11,484 -- --
Preferred stock issued for cash 5/98 -- -- 1,000 1
Common stock issued as additional interest 2/2/98 50,000 50 -- --
Common stock issued as additional interest 2/19/98 125,000 125 -- --
Common stock issued as finder's fee 2/19/98 75,000 75 -- --
Common stock issued for services 2/98 25,000 25 -- --
Common stock issued for cash 9/24/98 50,000 50 -- --
Preferred stock issued for cash 11/98 -- -- 100 --
Common stock issued for finder's fee 11/98 60,857 61 -- --
Preferred stock issued for cash 12/98 -- -- 25 --
Common stock issued for investment banking fee 12/98 30,000 30 -- --
Conversion of preferred stock to common stock 12/98 425,931 426 (75) --
Net loss -- -- -- --
---------- ------ ------ -----------
Balances at December 31, 1998 12,325,788 12,326 1,050 1
---------- ------ ------ -----------
Common stock issued for cash 6/99 3,745,000 3,745 -- --
Preferred stock issued for cash 1/99 -- -- 75 --
Common stock issued for finder's fee 1/99 25,777 26 -- --
Common stock issued for services 6/99 3,207,950 3,208 -- --
Common stock issued as additional interest 12/99 144,204 144 -- --
Common stock issued to retire debt 4/99 400,000 400 -- --
Common issued on convertible debentures 12/99 2,464,691 2,465 -- --
Common stock converted to preferred 9/99 (3,952,000) (3,952) 3,952 4
Preferred stock converted to common stock 1/99 - 4/99 12,886,843 12,887 (1,125) (1)
Net loss -- -- -- --
---------- ------ ------ -----------
Balances at December 31, 1999 31,248,253 31,249 3,952 4
========== ====== ====== ==========
<CAPTION>
ADDITIONAL TOTAL
PAID IN ACCUMULATED STOCKHOLDERS'
CAPITAL DEFICIT EQUITY
----------- ---------- -----------
<S> <C> <C>
Common stock issued to founding directors (7,200) -- 800
Net loss -- (5,701) (5,701)
---------- ---------- ----------
Balances at December 31, 1996 (7,200) (5,701) (4,901)
Common stock issued for cash 35,000 -- 35,750
Common stock issued for cash 100,000 -- 101,000
Common stock issued for cash 854,573 -- 856,307
Stock issuance cost (75,000) -- (75,000)
Net loss -- (426,438) (426,438)
---------- ---------- ----------
Balances at December 31, 1997 907,373 (432,139) 486,718
Preferred stock issued for cash 999,999 -- 1,000,000
Common stock issued as additional interest 29,950 -- 30,000
Common stock issued as additional interest 84,250 -- 84,375
Common stock issued as finder's fee 24,925 -- 25,000
Common stock issued for services 27,163 -- 27,188
Common stock issued for cash 24,950 -- 25,000
Preferred stock issued for cash 100,000 -- 100,000
Common stock issued for finder's fee 19,817 -- 19,878
Preferred stock issued for cash 25,000 -- 25,000
Common stock issued for investment banking fee 9,970 -- 10,000
Conversion of preferred stock to common stock (426) -- --
Net loss -- (2,064,940) (2,064,940)
---------- ---------- ----------
Balances at December 31, 1998 2,252,971 (2,497,079) (231,781)
---------- ---------- ----------
Common stock issued for cash 1,282,455 -- 1,286,200
Preferred stock issued for cash 75,000 -- 75,000
Common stock issued for finder's fee 6,418 -- 6,444
Common stock issued for services 621,831 -- 625,039
Common stock issued as additional interest 19,837 -- 19,981
Common stock issued to retire debt 49,600 -- 50,000
Common issued on convertible debentures 447,535 -- 450,000
Common stock converted to preferred 3,948 -- --
Preferred stock converted to common stock (12,886) -- --
Net loss -- (2,503,945) (2,503,945)
---------- ---------- ----------
Balances at December 31, 1999 4,746,709 (5,001,024) (223,062)
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended December 31, 1999 and 1998 and the cumulative period
from October 10, 1996 (date of inception) through December 31, 1999
For the Period
October 10, 1996
Through
1999 1998 December 31, 1999
----------- ----------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(2,503,945) (2,064,940) (5,001,024)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 204,323 321,806 553,142
Loss on disposal of property and equipment 6,880 26,461 33,341
Stock issued for services 631,483 196,441 827,924
Stock issued for interest 19,981 -- 19,981
Change in operating assets and liabilities:
Accounts receivable (150,265) (19,549) (179,410)
Accounts payable and accrued expenses (173,025) 1,373,628 1,200,953
Other assets (263,638) (3,166) (286,804)
Inventory (30) 8,230 (21,800)
----------- ---------- ----------
Net cash used in operating activities (2,228,236) (161,089) (2,853,697)
----------- ---------- ----------
Cash flows from investing activities:
Proceeds from sale of property and equipment 12,050 40,270 52,320
Purchase of property and equipment (50,864) (1,153,416) (1,590,719)
Note receivable, stockholders (425,209) (6,695) (456,000)
----------- ---------- ----------
Net cash used in investing activities (464,023) (1,119,841) (1,994,399)
----------- ---------- ----------
Cash flows from financing activities:
Proceeds from issuance of stock 1,861,200 1,150,000 3,930,057
Proceeds from issuance of notes payable 1,575,000 110,000 1,705,025
Principal payments on notes payable (563,212) -- (573,101)
----------- ---------- ----------
Net cash provided by financing activities 2,872,988 1,260,000 5,061,981
----------- ---------- ----------
Net change in cash 180,729 (20,930) 213,885
Cash, at beginning of period 33,156 54,086 --
----------- ---------- ----------
Cash at end of period $ 213,885 33,156 213,885
=========== ========== ==========
</TABLE>
F-6
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
(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
international carriers and consumers.
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 and are included in other assets in the
accompanying balance sheet.
(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.
(Continued)
F-7
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
(1), CONTINUED
Development stage operations for the period ended December 31,
1999 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, 1999,
the Company has net operating loss carryforwards of approximately
$5,000,000 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 notes receivable which
amounts to approximately $635,000. The Company performs periodic
credit evaluations of its trade customers and generally does not
require collateral. The notes receivable consist primarily of
amounts due from employees from the exercise of stock options. The
notes are due no later than May 1, 2000. 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.
(Continued)
F-8
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
(1), CONTINUED
(f) 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.
The carrying value of software and development costs that have
been capitalized is regularly reviewed by the Company, and a loss
is recognized when the net realizable value falls below the
unamortized cost.
(Continued)
F-9
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
(1), CONTINUED
(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 6).
(m) Preferred Stock
---------------
The Company's redeemable convertible preferred stock has the
following provisions:
o The shares shall be redeemable, at the option of the
of the Company, at a stated redemption price of
$1,500 per share.
o Each share of preferred stock is convertible into
that number of shares of the Company calculated by
dividing $1,000 by the lower of 65% of the average
closing bid price of the Company for the five
trading days prior to conversion or 75% of the
closing bid price on the first day the funds from
the preferred stock offering are available.
F-10
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
(2) Property and Equipment
----------------------
Property and equipment consist of the following at December 31,:
<TABLE>
<CAPTION>
1999 1998
----------- ---------
<S> <C> <C>
Office furniture and equipment $ 59,908 59,908
Computer hardware 485,007 1,172,339
Computer software 278,769 227,905
----------- ---------
823,684 1,460,152
Less accumulated depreciation and amortization 384,028 328,681
----------- ---------
$ 439,656 1,131,471
=========== =========
</TABLE>
(3) Notes Payable
-------------
Notes payable consist of the following at December 31,:
<TABLE>
<CAPTION>
1999 1998
----------- ---------
<S> <C> <C>
Promissory notes to stockholders bearing interest at 6%
- 8% payable on demand. Unsecured $ 26,440 20,136
Note payable to individual, bearing interest at 12%,
payable upon capital financing of the Company in excess
of $3,000,000
-- 100,000
Note payable to vendor bearing interest at 10%, payable in
monthly installments of $18,236 through December, 2001
Note is a result of the settlement of litigation in which the
vendor agreed to reduce the price of purchased computer
hardware by approximately $636,000
350,000 --
----------- ---------
376,440 120,136
Less current portion 168,956 120,136
----------- ---------
Long-term debt, less current portion $ 207,484 --
=========== =========
</TABLE>
(4) 6% Convertible Debenture
------------------------
$1,000,000 and $200,000 and 6% Convertible Debentures were sold on
September 30, 1999 and December 30, 1999 respectively. They are
convertible into common stock by dividing each $100,000 debenture by
the lower of 75% of the average of the three lowest closing bid prices
during the preceding 22 trading days or 110% of such average price on
September 30, 1999 ($0.42), subject to certain adjustments. As of
December 31, 1999, $450,000 of the Convertible Debentures had been
converted into 2,496,895 common shares including shares converted
representing accrued interest to the conversion dates.
F-11
<PAGE>
ACCESS POWER,
INC. (A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
(5) Commitments
-----------
The Company leases its office space under a non-cancellable operating
lease with a remaining term of one year. Future minimum payments under
this lease are as follows:
Year Amount
---- ------
2000 21,500
Rent expense for the years ended December 31, 1999 and 1998 amounted to $48,982
and 50,817, respectively.
(6) 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.
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.
Total options granted through December 31, 1999 amounted to 2,100,500
at an average price of $.33.
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 and net loss per share would have been increased
to the pro forma amounts indicated below:
(Continued)
F-12
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
(6), CONTINUED
<TABLE>
<CAPTION>
For the period
October 10, 1996
Year ended Year ended through
December 31, 1999 December 31, 1998 December 31, 1999
----------------- ----------------- -----------------
<S> <C> <C> <C>
Pro forma net loss:
As reported $(2,503,945) (2,064,940) (5,001,024)
Pro forma (2,558,934) (2,132,712) (5,123,785)
Pro forma net loss per share
As reported (0.10) (0.18) (0.31)
Pro forma (0.10) (0.18) (0.32)
</TABLE>
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 1999
and 1998: no dividend yield; expected volatility of the underlying
stock of 90%, risk-free interest rate of 4.98% and 5.27%,
respectively, covering the related option period; and expected lives
of the options of 10 years based on the related option period.
F-13
<PAGE>
ACCESS POWER, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
As of September 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
----------- -----------
ASSETS (unaudited)
------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 185,830 $ 213,885
Accounts receivable 134,304 179,410
Notes receivable 415,600 456,000
Prepaid expense 673,359 263,638
Inventory 21,800 21,800
----------- -----------
TOTAL CURRENT ASSETS 1,430,893 1,134,733
----------- -----------
Property and equipment, net 673,658 439,656
Other assets 9,000 12,000
----------- -----------
TOTAL ASSETS $ 2,113,551 $ 1,586,389
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,175,390 $ 683,011
Notes payable -- 168,956
----------- -----------
TOTAL CURRENT LIABILITIES 1,175,390 851,967
Long - term debt, less current portion -- 207,484
Convertible debentures 625,000 750,000
----------- -----------
TOTAL LIABILITIES 1,800,390 1,809,451
----------- -----------
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value, 100,000,000 shares 31,249 49,816
authorized, 21,293,233 and 31,248,253 shares issued and
outstanding in 2000 and 1999 respectively
Preferred stock, $.001 par value, 10,000,000 shares -- 4
authorized, none and 3,952 shares issued and outstanding in
2000 and 1999 respectively
Additional paid in capital 8,891,583 4,746,709
Deficit accumulated during the development stage (8,628,238) (5,001,024)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY $ 313,161 (223,062)
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,113,551 $ 1,586,389
=========== ===========
</TABLE>
F-14
<PAGE>
ACCESS POWER, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
For the three months and nine months ended September 30, 2000 and
1999 and the cumulative period from October 10, 1996
(date of inception) through September 30, 2000
(unaudited)
<TABLE>
<CAPTION>
For the Period
October 10,
1996
Three Months Ended Nine Months Ended Through
September 30, September 30, September 30,
-------------------------------- ---------------------------------
2000 1999 2000 1999 2000
-------------- ------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
REVENUE:
Software/hardware sales $ - $ 1,050 $ - $ 9,450 $ 223,881
Telecommunication services 66,709 50,599 320,876 69,999 544,996
-------------- ------------- --------------- -------------- ---------------
Total revenue 66,709 51,649 320,876 79,449 768,877
-------------- ------------- --------------- -------------- ---------------
COSTS AND EXPENSES:
Cost of sales - 315 - 2,955 164,605
Product development and marketing 904,129 205,444 2,311,000 851,037 4,095,893
General and administrative 390,385 391,859 1,542,634 938,142 4,894,741
-------------- ------------- --------------- -------------- ---------------
Total costs and expenses 1,294,514 597,618 3,853,634 1,792,134 9,155,239
-------------- ------------- --------------- -------------- ---------------
Loss from operations (1,277,805) (545,969) (3,532,758) (1,712,685) (8386,362)
OTHER INCOME (EXPENSE):
Interest income - (318) - (7,198) 2,95
Interest expense (56,344) (2,833) (94,456) (7,333) (237,291)
Loss on disposal of equipment - - - - (6,880)
-------------- ------------- --------------- -------------- ---------------
Total other income (expense) (56,344) (3,151) (94,456) (14,531) (241,876)
-------------- ------------- --------------- -------------- ---------------
Net loss $(1,284,149) $(549,120) $(3,627,214) $(1,727,216) $(8,628,238)
============== ============= =============== ============== ===============
Net loss per share $(0.03) $(0.02) $(0.09) $(0.07) $(.0.40)
============== ============= =============== ============== ===============
Weighted average number of shares 43,971,501 31,386,691 39,749,871 24,126,030 21,815,055
============== ============= =============== ============== ===============
</TABLE>
F-15
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
For the years ended December 31, 1999 and 1998 and
the period from October 10, 1996
(date of inception) through December 31, 1999
Common Stock Preferred Stock
---------------------------- ---------------------------
Date Shares Amount Shares Amount
------------ ---------------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Common stock issued to founding directors 8,000,000 8,000 -- --
Net loss -- -- -- --
----------- ---------- ------ ------ -----------
Balances at December 31, 1996 8,000,000 8,000 -- --
Common stock issued for cash 5/23/97 750,000 750 -- --
Common stock issued for cash 6/30/97 1,000,000 1,000 -- --
Common stock issued for cash 7/97 - 10/97 1,734,000 1,734 -- --
Stock issuance cost -- -- -- --
Net loss -- -- -- --
----------- ---------- ------ ------ -----------
Balances at December 31, 1997 11,484,000 11,484 -- --
Preferred stock issued for cash 5/98 -- -- 1,000 1
Common stock issued as additional interest 2/2/98 50,000 50 -- --
Common stock issued as additional interest 2/19/98 125,000 125 -- --
Common stock issued as finder's fee 2/19/98 75,000 75 -- --
Common stock issued for services 2/98 25,000 25 -- --
Common stock issued for cash 9/24/98 50,000 50 -- --
Preferred stock issued for cash 11/98 -- -- 100 --
Common stock issued for finder's fee 11/98 60,857 61 -- --
Preferred stock issued for cash 12/98 -- -- 25 --
Common stock issued for investment banking fee 12/98 30,000 30 -- --
Conversion of preferred stock to common stock 12/98 425,931 426 (75) --
Net loss -- -- -- --
---------- ------ ------ -----------
Balances at December 31, 1998 12,325,788 12,326 1,050 1
---------- ------ ------ -----------
Common stock issued for cash 6/99 3,745,000 3,745 -- --
Preferred stock issued for cash 1/99 -- -- 75 --
Common stock issued for finder's fee 1/99 25,777 26 -- --
Common stock issued for services 6/99 3,207,950 3,208 -- --
Common stock issued as additional interest 12/99 144,204 144 -- --
Common stock issued to retire debt 4/99 400,000 400 -- --
Common issued on convertible debentures 12/99 2,464,691 2,465 -- --
Common stock converted to preferred 9/99 (3,952,000) (3,952) 3,952 4
Preferred stock converted to common stock 1/99-4/99 12,886,843 12,887 (1,125) (1)
Net loss -- -- -- --
---------- ------ ------ -----------
Balances at December 31, 1999 31,248,253 31,249 3,952 4
========== ====== ====== ==========
Conversion preferred to common 1/00 3,952,000 3,952 (3,952) (4)
Common stock issued on exercise of employee
stock options 1/00-3/00 632,000 632
Common stock issued on conversion of debentures 1/00 2,033,896 2,034
Common stock issued for interest 1/00 28,180 28
Common stock issued on exercise of warrant 1/00-2/00 600,000 600
Common s6tock issued on exercise of stock option 1/00 50,000 50
---------- ------ ------ ----------
Balances at March 31, 2000 38,544,329 38,545 -- --
========== ====== ====== ==========
Common stock issued on conveersion of debentures 4/00-6/00 2,706,897 2,707
Common stock issued for interest 4/00-6/00 42,007 41
---------- ------ ------ ----------
Balances at June 30, 2000 41,293,233 41,294 --
---------- ------ ------ ----------
Common stock issued on conversion of debentures 7/00 2,454,014 2,453
---------- ------ ------ ----------
Common stock issued for interest 7/00 64,785 65
---------- ------ ------ ----------
Common stock issued on conversion of debentures 8/00 2,902,856 2,902
---------- ------ ------ ----------
Common stock issued for interest 8/00 94,353 94
---------- ------ ------ ----------
Common stock issued on conversion of debentures 9/00 2,320,684 2,321
---------- ------ ------ ----------
Common stock issued for interest 9/00 77,723 77
---------- ------ ------ ----------
Common stock issued for services 9/00 620,000 620
---------- ------ ------ ----------
Net loss
---------- ------ ------ ----------
Balances at September 30, 2000 49,827,647 49,816
---------- ------ ------ ----------
<CAPTION>
ADDITIONAL TOTAL
PAID IN ACCUMULATED STOCKHOLDERS'
CAPITAL DEFICIT EQUITY
----------- ---------- -----------
<S> <C> <C>
Common stock issued to founding directors (7,200) -- 800
Net loss -- (5,701) (5,701)
---------- ---------- ----------
Balances at December 31, 1996 (7,200) (5,701) (4,901)
Common stock issued for cash 35,000 -- 35,750
Common stock issued for cash 100,000 -- 101,000
Common stock issued for cash 854,573 -- 856,307
Stock issuance cost (75,000) -- (75,000)
Net loss -- (426,438) (426,438)
---------- ---------- ----------
Balances at December 31, 1997 907,373 (432,139) 486,718
Preferred stock issued for cash 999,999 -- 1,000,000
Common stock issued as additional interest 29,950 -- 30,000
Common stock issued as additional interest 84,250 -- 84,375
Common stock issued as finder's fee 24,925 -- 25,000
Common stock issued for services 27,163 -- 27,188
Common stock issued for cash 24,950 -- 25,000
Preferred stock issued for cash 100,000 -- 100,000
Common stock issued for finder's fee 19,817 -- 19,878
Preferred stock issued for cash 25,000 -- 25,000
Common stock issued for investment banking fee 9,970 -- 10,000
Conversion of preferred stock to common stock (426) -- --
Net loss -- (2,064,940) (2,064,940)
---------- ---------- ----------
Balances at December 31, 1998 2,252,971 (2,497,079) (231,781)
---------- ---------- ----------
Common stock issued for cash 1,282,455 -- 1,286,200
Preferred stock issued for cash 75,000 -- 75,000
Common stock issued for finder's fee 6,418 -- 6,444
Common stock issued for services 621,831 -- 625,039
Common stock issued as additional interest 19,837 -- 19,981
Common stock issued to retire debt 49,600 -- 50,000
Common issued on convertible debentures 447,535 -- 450,000
Common stock converted to preferred 3,948 -- --
Preferred stock converted to common stock (12,886) -- --
Net loss -- (2,503,945) (2,503,945)
---------- ---------- ----------
Balances at December 31, 1999 4,746,709 (5,001,024) (223,062)
========== ========== ==========
Conversion preferred to common (3,948) 122,220
Common stock issued on exercise of employee
stock options 121,588 750,000
Common stock issued on conversion of debentures 747,966 10,392
Common stock issued for interest 10,364 47,000
Common stock issued on exercise of warrant 46,400 25,000
Common s6tock issued on exercise of stock option 24,950 (1,171,449) (1,171,449)
---------- ---------- ----------
Balances at March 31, 2000 5,694,029 (6,172,473) (439,899)
========== ========== ==========
Common stock issued on conversion of debentures 1,042,292 1,045,000
Common stock issued for interest 16,315 16,356
(1,171,616) (1,171,616)
---------- ---------- ----------
Balances at June 30, 2000 6,752,636 (7,344,089) (550,159)
Common stock issued on conversion of debentures 797,547 800,000
Common stock issued for interest 19,800 19,865
Common stock issued on conversion of debentures 662,098 665,000
Common stock issued for interest 20,783 20,877
Common stock issued on conversion of debentures 462,679 465,000
Common stock issued for interest 15,500 15,577
Common stock isued for services 160,580 161,200
---------- ---------- ----------
Net loss (1,284,149) (1,284,149)
---------- ---------- ----------
Balances at September 30, 2000 8,891,583 (8,628,238) 313,161
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-16
<PAGE>
ACCESS POWER, INC.
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2000 and 1999 and the
cumulative period from October 10, 1996
(date of inception)
through September 30, 2000
For The Period
October 10, 1996
Through
2000 1999 September 30, 2000
----------- ----------- ------------------
(unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,617,214) (1,727,216) $(8,628,238)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 153,788 244,229 706,929
Loss on disposal of property and equipment -- 6,880 33,341
Stock issued for services 161,200 234,983 1,036,124
Stock issued for interest 76,927 14,000 103,048
Change in operating assets and liabilities:
Accounts receivable 45,106 (67,877) (185,176)
Accounts payable and accrued expenses 492,379 407,876 1,742,170
Other assets (409,721) (151,138) (696,525)
Inventory -- 2,955 (21,800)
----------- ----------- -----------
Net cash used in operating activities (3,107,535) (1,035,308) (5,910,127)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment -- 10,050 52,320
Purchase of property and equipment (384,790) (48,862) (1,973,521)
Note receivable 40,400 (427,409) (415,600)
----------- ----------- -----------
Net cash used in investing activities (344,390) (466,221) (2,336,801)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock 3,169,220 1,411,200 7,802,274
Proceeds from issuance of notes payable 3,600,000 1,072,804 5,305,025
Principal payments on notes payable (3,345,350) (130,440) (4,674,541)
----------- ----------- -----------
Net cash provided by financing 3,423,870 2,353,564 8,432,758
activities
----------- ----------- -----------
Net change in cash (28,055) 852,035 185,830
Cash, at beginning of period 213,885 33,156 --
----------- ----------- -----------
Cash at end of period $ 185,830 $ 885,191 $ 185,830
=========== =========== ===========
</TABLE>
F-17
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
(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 international carriers and
consumers.
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 and are included in other assets in the
accompanying balance sheet.
(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.
(Continued)
F-18
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
(1), CONTINUED
Development stage operations for the period ended September 30, 2000
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, 2000, the Company
has net operating loss carryforwards of approximately $8,628,000 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
notes receivable which amounts to approximately $550,000. The Company
performs periodic credit evaluations of its trade customers and
generally does not require collateral. The notes receivable consist
primarily of amounts due from employees from the exercise of stock
options. The notes are due no later than May 1, 2001. 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.
(Continued)
F-19
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
(1), CONTINUED
(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.
The carrying value of software and development costs that have been
capitalized is regularly reviewed by the Company, and a loss is
recognized when the net realizable value falls below the unamortized
cost.
(Continued)
F-20
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
(1), CONTINUED
(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 6).
(m) PREFERRED STOCK
---------------
The Company's redeemable convertible preferred stock had the following
provisions:
o The shares were redeemable, at the option of the
Company, at a stated redemption price of $1,500 per
share.
o Each share of preferred stock was convertible into
that number of shares of the Company calculated by
dividing $1,000 by the lower of 65% of the average
closing bid price of the Company for the five trading
days prior to conversion or 75% of the closing bid
price on the first day the funds from the preferred
stock offering are available.
F-21
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
(1) PROPERTY AND EQUIPMENT
----------------------
Property and equipment consist of the following at September 30, 2000
and December 31, 1999:
<TABLE>
<CAPTION>
2000 1999
---------------- ----------------
<S> <C> <C>
Office furniture and equipment $ 72,747 59,908
Computer hardware 722,156 485,007
Computer software 379237 278,769
---------------- ----------------
1,174,140 823,684
Less accumulated depreciation and amortization 500,482 384,028
---------------- ----------------
$ 673,658 439,656
================ ================
</TABLE>
(3) NOTES PAYABLE
-------------
Notes payable consist of the following at September 30, 2000 and
December 31, 1999:
<TABLE>
<CAPTION>
2000 1999
---------------- ---------------
<S> <C> <C>
Promissory notes to shareholders bearing interest at 6% - 8% payable
on demand. Unsecured. - $ 26,440
Note payable to vendor bearing interest at 10%, payable in monthly
installments of $18,236 through December, 2001. Note is a result of
the settlement of litigation in which the vendor agreed to reduce
the price of purchased computer hardware by approximately $636,000.
- 350,000
---------------- ---------------
- 376,440
Less current portion 168,956
---------------- ---------------
Long-term debt, less current portion - $207,484
================ ===============
</TABLE>
(4) 6% CONVERTIBLE DEBENTURE
------------------------
$1,000,000, $200,000 and $800,000 6% Convertible Debentures were sold
on September 30, 1999, December 30, 1999 and January 18, 2000
respectively. They are convertible into common stock by dividing each
$100,000 debenture by the lower of 75% of the average of the three
lowest closing bid prices during the preceding 22 trading days or 110%
of such average price on September 30, 1999 ($0.42), subject to certain
adjustments. $2,500,000, $100,000, $100,000, $100,000 6% Convertible
Debentures were sold on February 29, 2000, August 14, August 30 and
September 2000 respectively. They are convertible into common stock by
dividing each $100,000 debenture by the lower of 80% of the average of
the three lowest closing
F-22
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
(4), CONTINUED
bid prices during the preceding 22 trading days or 110% of such average
price on February 28, 2000 ($2.20), subject to certain adjustments. As
of September 30, $4,175,000 of the Convertible Debentures had been
converted into 15,190,085 common shares including shares converted
representing accrued interest to the conversion dates.
(5) COMMITMENTS
-----------
The Company leases its office space under a non-cancelable operating
lease with a remaining term of two years. Future minimum payments under
this lease are as follows:
Year Amount
---- ------
2000 15,439
2001 61,756
2002 46,317
Rent expense for the nine months ended September 30, 2000 amounted to
$39,144
(6) 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.
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.
Total options granted through September 30, 2000 amounted to 2,100,500
at an average price of $.33. There were no incentive stock options
granted during the nine months ended September 30, 2000.
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
F-23
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
(6), CONTINUED
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 and net loss per share would have been increased
to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
For the period
October 10, 1996
Nine months ended Year ended through
September 30, 2000(a) DECEMBER 31, 1999 September 30, 2000
--------------------- ----------------- ------------------
<S> <C> <C> <C>
Pro forma net loss:
As reported $(3,627,214) $(2,503,945) (7,344,089)
Pro forma (3,627,214) (2,558,934) (7,466,850)
Pro forma net loss per share
As reported (0.09) (0.10) (0.37)
Pro forma (0.09) (0.10) (0.37)
</TABLE>
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 1999: no
dividend yield; expected volatility of the underlying stock of 90%,
risk-free interest rate of 4.98% and 5.27%, respectively, covering the
related option period; and expected lives of the options of 10 years
based on the related option period.
(a) There were no incentive stock options granted during the nine
months ended September 30, 2000.
F-24
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================================
<S> <C>
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN 44,955,679 SHARES COMMON STOCK
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS 1,000,000 COMMON STOCK WARRANTS
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 ACCESS POWER, INC.
AUTHORIZED BY ACCESS POWER, INC. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF ACCESS 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
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
DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION.
TABLE OF CONTENTS
ITEM PAGE
---- ----
Summary.............................................3
Cautionary Statement About
Forward-Looking Statements.......................6
Summary Financial Data..............................7
Risk Factors........................................8
Capitalization.....................................16
Dividend Policy....................................16 December __, 2000
Business...........................................17
Management's Discussion and
Analysis of Financial Condition
and Results of Operations......................24
Management.........................................28
Certain Market Information.........................31
Principal and Selling Shareholders.................32
Selling Warrant Holders............................34
Plan of Distribution...............................34
Investment Agreement...............................38
Shares Eligible for Future Sale....................41
Description of Capital Stock.......................42
Description of Warrants............................45
Description of 6% Convertible
Debentures......................................45
Transfer Agent.....................................45
Legal Matters......................................46
Experts............................................46
Additional Information.............................46
Index to Financial Statements.....................F-1
===========================================================================================================================
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an estimate of the approximate amount of the fees
and expenses (other than underwriting commissions and discounts) payable by us
in connection with the issuance and distribution of the shares of common stock.
Securities and Exchange Commission Registration Fee................. $ 1,631.89
NASD Filing Fees and Blue Sky Fees and Expenses..................... 0.00
Printing and Engraving Expenses..................................... 250.00
Legal Fees and Expenses............................................. 15,000.00
Accounting Fees and Expenses........................................ 250.00
---------
Total .................................................. $17,131.89
=========
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.
On August 4, 1997, we borrowed $200,000 from a bridge lender, an
accredited investor, and issued thereto bridge notes for the principal amount at
an interest rate of 12% percent per annum, payable monthly. In partial
consideration for making such loan, we also issued 100,000 shares of common
stock to the bridge lender. Exemption from registration for this sale is claimed
under Rule 504 of Regulation D, which does not require investors to be
accredited or sophisticated. We sold the shares through officers and directors
and did not use the services of a selling agent.
On February 2, 1998, we borrowed $100,000 from a bridge lender, an
accredited investor, and issued thereto bridge notes for the principal amount at
an interest rate of 1 percent per month simple interest. In partial
consideration for making such loan, we also issued 50,000 shares of common
stock. 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 us. Sales of securities in these
offerings were made only to persons who were "accredited investors" within the
meaning of Rule 501 promulgated under the Securities Act of 1933. We sold the
shares through officers and directors and did not use the services of a selling
agent.
On February 19, 1998, we borrowed $200,000 from a bridge lender, an
accredited investor, and issued thereto bridge notes for the principal amount at
an interest rate of 10% percent per annum, payable monthly. In partial
consideration for making such loan, we also issued 125,000 shares of common
stock to the bridge lender. 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 us. Sales of
securities in these offerings were made only to persons who were "accredited
investors" within the meaning of Rule 501 promulgated under the Securities Act
of 1933. Olympus Capital, Inc. acted as the exclusive placement agent in
connection with the bridge financing and received a finder's fee in the amount
of 75,000 shares of common stock in connection with such sale.
On March 23, 1998, the Inman Company was issued 25,000 warrants in
consideration for providing financial consulting services to us. Exemption from
registration for this sale is claimed under
II-1
<PAGE>
Rule 506 of Regulation D.
In a private placement which was commenced and completed in May, 1998,
we sold 1,000 shares of Preferred Stock, Series A, 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. Sales of
securities in these offerings 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 Securities Act of 1933, or an exemption from such
registration requirement. Stop transfer instructions have been given to the
Company's transfer agent with respect to such securities. The issuance of such
securities was not underwritten, and no commissions or other remuneration were
paid or given, directly or indirectly, in connection with such sales.
We raised $75,000 in January 1999 from the sales of a total of 75
shares of Series A Preferred Stock for $1,000 per share. In connection with one
of these sales, we also issued 27,777 shares of common stock as a finder's fee
and recognized expense of $7,500 and an increase to capital stock of the same
amount. We received $150,000 as a good faith deposit with the letter of intent
and issued 1,500,000 shares of common stock in return to the investor.
On March 4, 1999, we issued 2,100,000 shares of restricted common stock
to Norrstar Advertising, Inc., in consideration for public relations services
rendered to us. Our contract with Norrstar was terminated on September 25, 1999,
and we cancelled 1,810,000 shares of common stock owned by Norrstar. Exemption
from registration for this issuance is claimed under Section 4(2) of the
Securities Act of 1933.
In April of 1999, we issued 512,000 shares of common stock in exchange
for a debt repayment and the interest due on the debt. We issued 2,630,000
shares of common stock upon the exercise of employee stock options for
$1,257,100. In September of 1999, we issued $1,000,000 of 6% convertible
debentures. We issued $200,000 of 6% convertible debentures in December of 1999,
$800,000 of 6% convertible debentures in January of 2000, and $2,500,000 of 6%
convertible debentures in February of 2000. Exemption from registration is
claimed under Section 4(2) of the Securities Act of 1933.
In June of 1999, we issued 20,000 shares of restricted common stock to
Kim DeVigil in consideration for providing public relations services to us.
Exemption from registration for this sale is claimed under Section 4(2) of the
Securities Act of 1933.
On September 30, 1999, we issued $1,000,000 principal amount of our 6%
Convertible Debentures due 2001, warrants to purchase 200,000 shares of our
common stock, and an additional warrant to purchase $1,000,000 principal amount
of our 6% Convertible Debentures due 2001 and 200,000 additional shares of our
common stock to Bamboo Investors LLC, an accredited investor. Bamboo exercised
$200,000 of the warrant to purchase 6% Convertible Debentures in December
1999.Exemption from registration for this sale is claimed under Section 4(2) of
the Securities Act of 1933.
On October 4, 1999, we issued 1,300,000 shares of our restricted common
stock to Northstar Advertising, Inc. in connection with their rendition of
investment public relations services to us. Exemption from registration for this
issuance is claimed under Section 4(2) of the Securities Act of 1933.
II-2
<PAGE>
In January of 2000, we sold 6% convertible debentures in the amount of
$800,000 and $2,500,000 in February of 2000 to an investor. In addition, the
investor purchased a warrant to purchase an additional $2,500,000 of convertible
debentures on the same terms, of which the investor has recently exercised and
purchased $300,000 in debentures. Exemption from registration for this issuance
is claimed under Section 4(2) of the Securities Act of 1933.
In September 2000, we issued 620,000 shares of Common Stock to the
Investor Relations consulting firm used by us. Exemption from registration for
this sale is claimed under Rule 506 of Regulation D of the Securities Act of
1933.
In November 2000, we issued 50,000 shares of Common Stock to a
potential investor to reimburse for his due diligence efforts. We decided not to
go forward with this transaction. Exemption from registration for this sale is
claimed under Rule 506 of Regulation D of the Securities Act of 1933.
In November 2000, we entered into an investment agreement and related
documents with Grandview Court, LLC, an accredited investor, as further
described in this registration statement. Pursuant to this investment agreement,
we agreed to sell to the investor $30 million of our common stock in return for
cash. Exemption from registration for this sale is claimed under Rule 506 of
Regulation D of the Securities Act of 1933.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
Exhibit
Number Description of Exhibit
-------------- -----------------------------------------------------------------
3.1 Amended Articles of Incorporation of Access Power, Inc. (filed as
Exhibit 3.1 to Access Power, Inc.'s quarterly report on Form 10-QSB for
the quarter ended September 30, 1999 (the "10-Q") and is hereby
incorporated by reference)
3.2 Bylaws of the Registrant (filed as Exhibit 3.2 to Access Power, Inc.'s
annual report on Form 10-KSB for the year ended December 31, 1999 (the
"10-K") and is hereby incorporated by reference)
4.1 Form of common stock Certificate of the Registrant (filed as Exhibit
4.1 to the 10-K and is hereby incorporated by reference)
4.2 6% Convertible Debenture due September 30, 2001 (filed as Exhibit 4.2
to the 10-Q and is hereby incorporated by reference)
4.3 Warrant to purchase common stock, par value $0.001 per share, of Access
Power, Inc. (filed as Exhibit 4.3 to the 10-Q and is hereby
incorporated by reference)
4.4 Warrant to purchase common stock, par value $0.001 per share of Access
Power, Inc. dated November 13, 2000
5* Opinion of Kilpatrick Stockton, LLP with respect to the legality of the
securities being registered
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<PAGE>
10.1 International Master Franchise Agreement between Access Power, Inc. and
Access Power Canada, Inc. (filed as Exhibit 10.1 to Access Power,
Inc.'s Registration Statement on Form SB-2 (File No. 333-65069) (the
"1999 SB-2") and is hereby incorporated by reference)
10.2 Access Power, Inc. Stock Option Plan (filed as Exhibit 10.2 to the 1999
SB-2 and is hereby incorporated by reference)
10.3 Amendment No. 1 to Stock Option Plan (filed as Exhibit 10.3 to the 1999
SB-2 and is hereby incorporated by reference)
10.4 Employment Agreement with Howard Kaskel dated July 1, 1998 (filed as
Exhibit 10.5 to the 1999 SB-2 and is hereby incorporated by reference)
10.5 Agreement to terminate Master Franchise Agreement between Access Power,
Inc. and Access Power Canada, Inc. dated December 11, 1998 (filed as
Exhibit 10.6 to the 1999 SB-2 and is hereby incorporated by reference)
10.6** Internet Telephony Services Agreement dated December 14, 1998, between
Access Power, Inc. and Access Universal, Inc. (filed as Exhibit 10.7 to
the 1999 SB-2 and is hereby incorporated by reference)
10.7 Office Lease Agreement between Douglas Partnerships II, and Access
Power, Inc. dated August 1, 1997 (filed as Exhibit 10.9 to the 1999
SB-2 and is hereby incorporated by reference)
10.8 Retainer Agreement dated September 23, 1999, among Access Power, Inc.,
Tatum CFO Partners, LLP, and Howard Kaskel (filed as Exhibit 10.1 to
the 10-Q and is hereby incorporated by reference)
10.9 Securities Purchase Agreement dated as of September 30, 1999, among
Access Power, Inc., certain shareholders of Access Power, Inc. named
therein, and Bamboo Investors, LLC (filed as Exhibit 10.2 to the 10-Q
and is hereby incorporated by reference)
10.10 Warrant to purchase 6% Convertible Debentures and common stock warrants
of Access Power, Inc. (filed as Exhibit 10.3 to the 10-Q and is hereby
incorporated by reference)
10.11 Registration Rights Agreement, dated as of September 30, 1999, by and
among Access Power, Inc. and Bamboo Investors LLC (filed as Exhibit
10.4 to the 10-Q and is hereby incorporated by reference)
10.12 Share Exchange Agreement dated as of September 30, 1999 between Access
Power, Inc. and each of Glenn Smith, Maurice Matovich, Howard Kaskel,
and Tod Smith (filed as Exhibit 10.5 to the 10-Q and is hereby
incorporated by reference)
10.13** Web services agreement as of August 6, 1999, between Access Power, Inc.
and Lycos-Bertelsmann GmbH (filed as Exhibit 10.6 to the 10-Q and is
hereby incorporated by reference)
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<PAGE>
10.14 Consulting Agreement dated as of October 4, 1999 between Access Power,
Inc. and Northstar Advertising, Inc. (filed as Exhibit 10.7 to the 10-Q
and is hereby incorporated by reference)
10.15 Investment Agreement between Access Power, Inc. and Grandview Court,
LLC dated as of November 13, 2000.
10.16 Registration Rights Agreement between Access Power, Inc. and Grandview
Court, LLC dated as of November 13, 2000.
10.17 Escrow Agreement between Access Power, Inc. and Grandview Court, LLC
dated as of November 13, 2000.
23.1 Consent of Kilpatrick Stockton, LLP (included in Exhibit 5.1).
23.2 Consent of Parks, Tschopp, Whitcomb & Orr, dated December 14, 2000
24.1 Power of Attorney (included in Signature Page)
---------------------------
* Filed herewith.
** Certain portions of this exhibit have been omitted pursuant to the grant of
a request for confidential treatment.
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<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 20th day of December, 2000.
ACCESS POWER, INC.
By: *
--------------------------
Glenn A. Smith
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on the 20th day
of December, 2000, in the capacities indicated.
<TABLE>
<CAPTION>
Signature Position
--------- --------
<S> <C>
* Glenn A. Smith, President and Chief Executive Officer
----------------------------------- and Director (Principal Executive Officer)
* Howard L. Kaskel, Chief Financial Officer (Principal
----------------------------------- Financial and Accounting Officer)
* Tod R. Smith, Director
-----------------------------------
/s/ Maurice J. Matovich Maurice J. Matovich, Director
-----------------------------------
* By: /s/ Maurice J. Matovich
-------------------------------------
Maurice J. Matovich, Attorney-in-Fact
</TABLE>
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<PAGE>
EXHIBIT INDEX
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5. Opinion of Kilpatrick Stockton, LLP11
