SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
/x/ Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2000
/ / Transition Report Under Section 13 or 15(d) of the Exchange Act
For the Transition Period from ________ to __________
Commission File Number 000-____________
Access Power, Inc.
----------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Florida 59-3420985
------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10033 Sawgrass Dr., W, Ponte Vedra Beach, FL 32082
----------------------------------------------------
(Address of principal executive office) (Zip Code)
Issuer's telephone number, including area code: (904) 273-2980
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes X
No
At April 24, 2000, there were issued and outstanding 38,689,186 shares
of Common Stock.
Transitional Small Business Disclosure Format (check one):
Yes / / No /X/
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ACCESS POWER, INC.
(A Development Stage Company)
Balance Sheets
As of March 31, 2000 and December 31, 1999
<TABLE>
<CAPTION>
Assets March 31, December 31,
------ 2000 1999
----------- ------------
(unaudited)
<S> <C> <C>
Current assets:
Cash $ 1,866,044 $ 213,885
Accounts receivable 201,981 179,410
Notes receivable, stockholder 415,600 456,000
Prepaid expenses 473,845 263,638
Inventory 21,800 21,800
----------- -----------
Total current assets 2,979,270 1,134,733
----------- -----------
Property and equipment, net 389,394 439,656
Other assets 11,000 12,000
----------- -----------
Total assets $ 3,379,664 $ 1,586,389
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 493,124 $ 683,011
Notes payable 13,940 168,956
----------- -----------
Total current liabilities 507,064 851,967
----------- -----------
Long - term debt, less current portion 12,500 207,484
Convertible debentures 3,300,000 750,000
----------- -----------
Total liablities 3,819,564 1,809,451
----------- -----------
Stockholders' equity:
Common stock, $.001 par value, authorized 100,000,000 shares,
issued and outstanding 38,544,329 and 31,248,253 shares
in 2000 and 1999 38,544 31,249
Preferred stock, $.001 par value, authorized 10,000,000 shares,
issued and outstanding none and 3952 shares in 2000 and 1999 -- 4
Additional paid in capital 5,694,029 4,746,709
Deficit accumulated during the development stage (6,172,473) (5,001,024)
----------- -----------
Total stockholders' equity (439,900) (223,062)
----------- -----------
Total liabilities and stockholders' equity $ 3,379,664 $ 1,586,389
=========== ===========
</TABLE>
-2-
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
For the three months ended March 31, 2000 and 1999 and the cumulative period
from October 10, 1996 (date of inception) through March 31, 2000
For the period
October 10, 1996
through
2000 1999 March 31, 2000
----------- --------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss (1,171,449) $(484,270) $(6,272,473)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 51,262 81,405 604,404
Loss on disposal of property and equipment -- 6,880 33,341
Stock issued for services -- 210,000 827,924
Stock issued for interest 10,392 6,444 30,373
Change in operating assets and liabilities:
Accounts receivable (22,571) (18,985) (201,981)
Accounts payable and accrued expenses (189,887) 248,234 1,008,359
Other assets (210,207) (192,500) (397,011)
Inventory -- 2,055 (21,800)
----------- --------- -----------
Net cash used in operating activities (1,532,460) (140,737) (4,388,864)
----------- --------- -----------
Cash flows from investing activities
Proceeds from sale of property and equipment -- 10,050 52,320
Purchase of property and equipment -- -- (1,590,719)
Note receivable, stockholder 40,400 14,040 (414,500)
-----------
Net cash used in investing activities 40,400 24,090 (1,952,899)
----------- --------- -----------
Cash flows from financing activities:
Proceeds from issuance of stock 944,219 75,000 4,875,883
Proceeds from issuance of notes payable 3,300,000 25,000 5,005,025
Principal payments on notes payable (1,100,000) (7,500) (1,673,101)
----------- --------- -----------
Net cash provided by financing activities 3,144,219 92,500 8,207,807
----------- --------- -----------
Net change in cash 1,652,159 (24,147) 1,866,044
-----------
Cash, at beginning of period 213,885 33,156 --
----------- --------- -----------
Cash at end of period $ 1,866,044 $ 9,009 $ 1,866,044
=========== ========= ===========
</TABLE>
-3-
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
<TABLE>
<CAPTION>
Statements of Operations
For the three months ended March 31, 2000 and 1999 and the cumulative period
from October 10, 1996 (date of inception) through March 31, 2000
For the period
October 10, 1996
through
2000 1999 March 31, 2000
------------ ------------ ----------------
<S> <C> <C> <C>
Revenue:
Product sales $ -- $ 6,850 $ 233,090
Services 145,611 7,700 360,523
------------ ------------ ------------
Total revenue 145,611 14,550 593,612
------------ ------------ ------------
Costs and expenses:
Cost of sales -- 2,055 164,605
Product development and marketing 652,573 227,339 2,537,466
General and administrative 643,877 261,294 3,995,984
------------ ------------ ------------
Total costs and expenses 1,296,450 490,688 6,698,055
------------ ------------ ------------
Other income (expense):
Other income -- -- (4,581)
Interest expense (20,610) (8,132) (163,449)
------------ ------------ ------------
Total other income (expense) (20,610) (8,132) (168,030)
------------ ------------ ------------
Net loss $ (1,171,449) $ (484,270) $ (6,272,473)
============ ============ ============
Net loss per share $ (0.04) $ (0.03) $ (0.34)
============ ============ ============
Weighted average number of shares 31,688,258 16,979,668 18,719,094
============ ============ ============
</TABLE>
-4-
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
A. Basis of Presentation
---------------------
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed and omitted pursuant to such rules and regulations, although
management believes the disclosures are adequate to make the information
presented not misleading. These interim financial statements should be read in
conjunction with the Company's annual report and most recent financial
statements included in its report on Form 10-KSB for the year ended December 31,
1999 filed with the Securities and Exchange Commission. The interim financial
information included herein is unaudited; however, such information reflects all
the adjustments (consisting solely of normal recurring adjustments) which are,
in the opinion of management, necessary for a fair statement of results of
operations and cash flows for the interim periods. The results of operations for
the three months ended March 31, 2000 are not necessarily indicative of the
results to be expected for the full year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of the financial condition and results of
operations should be read in conjunction with the Financial Statements and Notes
appearing elsewhere in this report.
PLAN OF OPERATION
Overview
- --------
Access Power, Inc. was formed in 1996 to offer Internet-based
communications products and services in the U.S. and international markets. We
are creating a network of Internet telephony gateway servers and Internet
protocol and public switched telephone network circuits 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 company.
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. Customers anywhere in the world can use a PC and
software obtained from us to place unlimited calls to telephones anywhere in the
United States, Canada, and Puerto Rico for $10 per month or, for $20 per month,
such customers can place unlimited calls to those countries and twelve European
countries. In addition, customers in the United States can make unlimited calls
with their telephone to another telephone anywhere in the continental United
States for $49 per month and call anywhere in Alaska, Hawaii, Canada, and the
United Kingdom for 7 cents per minute. Calls to over fifty other countries are
29 cents per minute.
We are a reseller of third party PC telephone software called Internet
Phone, and "e-button." The e-button is an icon residing on a Web site that
connects a consumer browsing a Web page to a company's call center. This
technology allows corporate customers to voice-activate their Web site,
connecting consumers directly with sales departments, customer service or
technical support.
While in 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.
-5-
<PAGE>
Expansion Plans
- ---------------
We believe we must expand our gateway 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 our agreement with Lycos-Bertelsmann. Such expansion will increase
our revenues without causing us to incur significant capital expenditures.
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 such 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.
Raising Capital
- ---------------
We 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. We believe
that if the warrant were to be exercised, then the aggregate proceeds would be
sufficient to fund us for the next twelve months.
PERIOD ENDED MARCH 31, 2000 COMPARED TO PERIOD ENDED MARCH 31, 1999
Revenues and Costs of Revenues.
------------------------------
Revenues increased $131,061 from $14,550 to $145,611 in the
three months ended March 31, 2000. Software sales decreased from $6,850 to zero
as we concentrated on providing our Net.Caller service instead of reselling
software. Net.Caller service was inaugurated in April 1999 and therefore
provided no revenue in the first quarter last year compared to $145,611 this
year.
Expenses.
--------
Product development and marketing expenses were $652,573 for
the three months ended March 31, 2000 an increase of $425,234 or 187% from
$227,339 in the same period of the prior year. Telephone and Internet connection
charges represented $329,054 of this increase and marketing and public/investor
relations represented $81,403 of this increase. General and administrative
expenses increased $382,583 to $643,877 or 146% in the three months ended March
31, 2000 from $261,294 in the prior year. Finder's fees of $330,000 expended in
our efforts to raise capital accounted for the majority of this increase with
payroll and staffing expense representing an additional $25,835.
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
Revenues and Costs of Revenues.
-------------------------------
The Company realized no revenue from the sale of software in
the three months ended March 31, 1998 compared to software sales of $6,850 in
the three months ended March 31, 1999. The revenue generated from sale of
-6-
<PAGE>
services increased $4,605 from $3,095 during the three months ended March 31,
1998 to $7,700 during the three months ended March 31, 1999. Cost of software
sold during the three months ended March 31, 1999 was $2,055.
Expenses.
--------
Product development and marketing expenses were $227,339 for
the three months ended March 31, 1999; an increase of $111,381 or almost 100%
over such expenses for the three months ended March 31, 1998. The telephone and
internet connection charges represent $27,710 of this increase as the Company
increased deployment of its network. In addition depreciation and amortization
expenses increased $71,075 from the three months ended March 31, 1998 reflecting
the increase in capital expenditures during the last nine months of 1998.
General and administrative expenses increased nearly $10,000 or 4% from $244,894
for the three months ended March 31, 1998. Payroll expense was the major portion
of this increase as it totaled $172,699, an increase of $41,586 or 31%, from the
three months ended March 31, 1998 total of $131,113. The aforementioned increase
was offset by a decrease in travel expenses of $13,103 from $17,003 during the
three months ended March 31, 1998 and a decrease in outside temporary help of
$7,150 from $7,599 during the three months ended March 31, 1998 as the Company
initiated its cost reduction policy.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations through the
proceeds from the issuance of equity securities and loans from stockholders and
others. To date, we have raised approximately $4,875,833 from the sale of common
stock and preferred stock, and have borrowed approximately $5,005,025 from
investors and stockholders. Funds from these sources have been used as 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) through March 31, 2000. We realized
negative cash from operating activities for the three months ended March 31,
2000 of ($1,532,460) compared to negative cash from operating activities for the
three months ended March 31, 1999 of ($140,737) primarily due to higher net loss
and requirements by vendors for more prompt settlement of outstanding invoices.
vendors than previously. Investing activities for the period from inception
through March 31, 2000 consisted primarily of equipment purchases to build out
the initial network. Investing activities in the three months ended March 31,
2000 and March 31, 1999, were minimal.
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.
-7-
<PAGE>
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 issued an additional 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 three months ended March 31, 2000,
provided a net total of $3,144,219. Cash at the end of that period was
$1,866,044. As of April 26, 2000, we had cash of $1,484,044 and working capital
of $2,117,483
USE OF PROCEEDS
We expect to invest approximately $1,000,000 over the next twelve
months in capital equipment and software for network expansion. We are
performing ongoing cost benefit analyses to ensure that any existing under
utilized equipment is made available for redeployment to delay the need to
acquire new equipment.
-8-
<PAGE>
CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
The statements contained in the section captioned Management's Discussion and
Analysis of Financial Condition and Results of Operations which are not
historical are "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These forward-looking statements represent the
Company's present expectations or beliefs concerning future events. The Company
cautions that such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among other things, the
uncertainty as to the Company's ability to obtain financing on acceptable terms
to finance the Company's operations and growth strategy, acceptance of the
Company's technology and services in the market place, telecommunications
industry trends towards solutions not addressed by the Company's business,
increasing competition in the information technology services market, the
ability to hire, train and retain sufficient qualified personnel, and the
ability to develop and implement operational and financial systems to manage the
Company's growth.
-9-
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On January 18, 2000 the Company sold $800,000 of its 6% Convertible
Debentures due 2001 and on February 29, 2000 it sold $2,500,000 of its 6%
Convertible Debentures due 2002, in each case to Bamboo Investors, LLC an
investment fund managed by WEC Asset Management, LLC. The Company claimed an
exemption from registration under Section 4(2) of the Act for such offers and
sales.
The Company believes this investor to be an "accredited investor"
within the meaning of Rule 501 promulgated under the Act. In addition, the
investor agreed to acquire the securities for investment and not with a view to
the distribution thereof, and the documents representing the securities issued
to the investor contained a legend to the effect that such securities were not
registered under the Act and could not be transferred except pursuant to a
registration statement which has become effective under the Act, or an exemption
from such registration requirement. The issuance of such securities was not
underwritten.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 -- Financial Data Schedule.
(b) No Reports on Form 8-K were filed during this period
SIGNATURES
In accordance with the requirements of the Exchange Act, the Company
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ACCESS POWER, INC.
By: /s/ Glenn A. Smith Date: May 9, 2000
--------------------------------
Glenn A. Smith
President
/s/ Howard L. Kaskel Date: May 9, 2000
- ------------------------------------
Howard L. Kaskel
Chief Financial Officer
(principal financial and accounting officer)
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001041588
<NAME> ACCESS POWER, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,866,044
<SECURITIES> 0
<RECEIVABLES> 201,981
<ALLOWANCES> 0
<INVENTORY> 21,800
<CURRENT-ASSETS> 2,979,270
<PP&E> 1,523,650
<DEPRECIATION> 409,804
<TOTAL-ASSETS> 3,379,664
<CURRENT-LIABILITIES> 507,064
<BONDS> 0
0
0
<COMMON> 38,544
<OTHER-SE> (478,444)
<TOTAL-LIABILITY-AND-EQUITY> (439,900)
<SALES> 145,611
<TOTAL-REVENUES> 145,611
<CGS> 0
<TOTAL-COSTS> 1,296,450
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,610
<INCOME-PRETAX> (1,171,449)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,171,449)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,171,449)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
