Registration No. 333-________
As filed with the Securities and Exchange Commission on April 17, 2000
U.S. Securities and Exchange Commission
Washington, D.C. 20549
----------------
Form SB-2
Registration Statement Under the Securities Act of 1933
----------------
Access Power, Inc.
Florida 4813 59-3420985
------- ---- --------------
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)
10033 Sawgrass Drive West, Suite 100
Ponte Vedra Beach, Florida 32082
(904) 273-2980
(Address and telephone number of principal executive offices)
------------------------------------
Glenn A. Smith
10033 Sawgrass Drive West, Suite 100
Ponte Vedra Beach, Florida 32082
(904) 273-2980
(Name, address and telephone number of agent for service)
------------------
Copies to:
Dennis J. Stockwell
Kilpatrick Stockton LLP
1100 Peachtree Street, Suite 2800
Atlanta, Georgia 30309
(404) 815-6500
(404) 815-6555 (fax)
------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434
check the following box. / /
<TABLE>
<CAPTION>
Calculation of Registration Fee
============================================================================================================================
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
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value 11,125,562 <F1> 0.62 <F2> 6,897,848.44<F2> $1,821.03
- -----------------------------------------------------------------------------------------------------------------------------
Warrants to Purchase Common Stock 1,000,000 __ <F3> __ <F3> $0.00
- -----------------------------------------------------------------------------------------------------------------------------
Warrants to Purchase Common Stock 400,000 0.20 <F4> 80,000.00 <F4> $21.12
=============================================================================================================================
<FN>
<F1> Included in the initial filing of this registration statement.
<F2> Previously paid in connection with the initial filing of this
registration statement.
<F3> Includes 3,221,650 shares issuable upon conversion of outstanding 6%
Convertible Debentures of the registrant and 3,221,650 shares that may
be acquired by holders of an outstanding warrant for the purchase of
additional 6% Convertible Debentures and a warrant for 500,000 shares
of our common stock. The number of shares registered for issuance upon
conversion of the debentures is an estimate based upon the conversion
formula applied as of a recent date. [$.97]
<PAGE>
<F4> Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act and based on the
average of the high and low price per share of Access Power, Inc.
common stock as quoted on the OTC Bulletin Board on April 10, 2000.
<F5> Common stock issuable upon exercise of outstanding warrants with an
exercise price of $0.42 per share. (6) 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.
</FN>
</TABLE>
------------------
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.
================================================================================
<PAGE>
11,200,000 Shares of Common Stock
1,400,000 Warrants to Purchase Common Stock
ACCESS POWER, INC.
-------------------------
The shares of common stock, par value $.001 per share, and warrants to
purchase shares of common stock of Access Power, Inc. being offered under this
prospectus are being offered for sale by some of our stockholders. We will not
receive any of the proceeds from the sale of these shares or warrants. We will,
however, receive $2,918,000 if all outstanding warrants are exercised and
$2,500,000 if the warrant to purchase debentures is exercised. If all of the
debentures are then converted, at least $5,800,000 of indebtedness will be
converted to equity.
We will pay certain of the legal and other expenses of this offering,
estimated to be $40,000. The selling stockholders 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. See "Plan
of Distribution."
Our common stock is traded over the counter. Bid and asked prices 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 March 31, 2000 the last bid price of the common
stock as reported was $1.38. As of December 1, 1999, there were 28,741,358
shares of our common stock outstanding, 1,650,000 shares issuable upon the
exercise of issued and outstanding warrants to purchase our common stock, and
approximately 8,348,000 shares issuable upon conversion of certain
debentures,$3,300,000 of which debentures are currently outstanding and
$2,500,000 of which may be purchased pursuant to an outstanding warrant to
purchase such debentures.
The selling stockholders 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 stockholders
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 5 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 April ____, 2000
<PAGE>
SUMMARY
YOU SHOULD CAREFULLY READ THE ENTIRE PROSPECTUS BEFORE INVESTING IN THE
COMMON STOCK.
In 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 which 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 technology
offers users new and less expensive ways to communicate long distance over the
Internet without dependence on traditional long distance telephone lines. Calls
can be made to regular telephones or personal computers from either a PC or a
regular telephone. Calls from a PC to a telephone can be originated from
anywhere in the world over the Internet to one of our servers, and then through
traditional telephone lines to a regular telephone anywhere in the United
States, Canada, and Puerto Rico. Telephone-to-telephone calls may be originated
from anywhere in the United States and may terminate anywhere in North America,
Puerto Rico, Brazil, Chile, Columbia, Venezuela, Costa Rica, Aruba, the Bahamas,
the Dominican Republic, the United Kingdom, Bermuda, British Virgin Islands,
Cayman Islands, U.S. Virgin Islands, twenty-seven European countries, and
thirteen countries in Africa, Asia, and the Middle East. 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). Net.Caller
PC-to-Phone customers download free software from our web site to their PC. This
software allows them to use their PC to call from anywhere in the world to a
regular telephone in the United States, Canada, or Puerto Rico. On November 24,
1999, we expanded the Net.Caller PC-to-Phone Service to include twelve European
countries.
On September 1, 1999, we began selling a flat-rate, unlimited usage
telephone-to-telephone service under the tradename Net.Caller(TM)
Phone-to-Phone. Net.Caller Phone-to-Phone customers place calls using
traditional telephony equipment. Calls may be placed from anywhere in the United
States 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.
Additionally, we sell a PC telephone software package called Internet
Phone for Access Power through our web site. 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.
Our e-button(TM) software is a third-party browser plug-in that is
automatically downloaded and installed upon the first attempt to use it. This
technology allows consumers viewing a company's web site to instantly dial up a
designated representative of that company, usually someone providing sales or
support services, by clicking on an icon. Our e-button software could provide
electronic commerce benefits to any company with a traditional call center. The
e-button software and service was released December 2, 1999.
2
<PAGE>
We have entered into agreements with several companies to expand our
products and services into Europe, the Philippines, Southeast Asia, and Africa.
We intend to pursue additional international expansion via joint ventures and
other business arrangements throughout South America, Africa, and the Pacific
Rim.
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 gateway network by utilizing new
technology as it is developed. We plan to expand our customer base by continuing
to provide discount retail and wholesale international calling services.
Market
- ------
Our market includes residential and commercial users of advanced
communications products and services. 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
- ------------
<TABLE>
<CAPTION>
<S> <C>
Common stock offered by selling stockholders.............. 11,125,562 shares <F1>
Warrants offered by selling stockholders.................. 1,400,000 warrants<F2>
Common stock to be outstanding after the offering......... 48,542,400 shares <F1> <F3>
OTC Bulletin Board symbol................................. "ACCR"
- -------------------
<FN>
<F1> The offered shares include (i) 3,221,650 shares of common stock that
may be acquired by holders of our 6% Convertible Debentures upon
conversion thereof, based on a three-day average market price of $0.97
per share, for the period ended April 10, 2000, but subject to
adjustment for the applicable average market price at the time of
conversion under the conversion formula (see "Description of 6%
Convertible Debenture"); (ii) 1,150,000 shares of common stock that may
be acquired by holders of outstanding warrants; and (iii)3,221,650
shares of common stock that may be acquired by holders of an
outstanding warrant for the purchase of (1) $2,500,000 of our 6%
Convertible Debentures upon conversion thereof, based the formula price
described above, but subject to adjustment for the applicable average
market price at the time of conversion and (2) a warrant for 500,000
shares of our common stock.
<F2> 400,000 warrants give the holder the right to purchase from us one
share of our common stock for $0.42 and 1,000,000 warrants give the
holder the right to purchase for $2.20
<F3> Assumes the exercise of all outstanding warrants and conversion of all
outstanding debentures. Does not include outstanding options to
purchase 10,143,000 shares of common stock (having a weighted average
exercise price of $0.2077 per share) except for options exercisable for
479,500 shares.
</FN>
</TABLE>
3
<PAGE>
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. The
audited 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 the "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
section and the financial statements and notes thereto, and other financial data
included elsewhere in this prospectus.
For the years ended
December 31,
-------------------------------
1999 1998
Revenue:
Product sales .................... $ 9,450 $ 214,431
Services ......................... 170,601 53,519
------------ ----------
Total revenue .................... 180,051 267,950
------------ ----------
Cost and expenses:
Cost of sales .................... 2,955 161,650
Product development and marketing 1,015,737 731,672
General and administrative ....... 1,642,134 1,315,600
------------ ----------
Total costs and expenses: ........ 2,660,826 2,208,922
------------ ----------
Loss from operations ............. (2,480,775) (1,940,972)
Total other income (expense) - Net (23,170) (124,375)
Net loss ......................... (2,503,945) (2,065,347)
Net loss per share ............... $ (0.10) $ (0.18)
Weighted average number of shares 25,174,029 11,776,511
BALANCE SHEET DATA DECEMBER 31, 1999
Cash and cash equivalents $ 213,885
Working capital 282,766
Total assets 1,586,389
Long-term debt, less current portion 207,484
Stockholders' equity (deficit) (223,062)
Access Power Advanced Communications(TM), e-button(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.
4
<PAGE>
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. You should also carefully read the cautionary statement following the
"Risk Factors" section regarding our use of forward-looking statements.
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.
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 Plan of Operations."
If consumers do not accept our product, 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 revenues. 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. The lower quality of voice transmissions
through our network compared to traditional long-distance services will be a
factor in consumer acceptance of our services. See "Proposed Business of Access
Power."
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, thus decreasing 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 "Proposed Business of Access
Power."
5
<PAGE>
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 two parties using
telephones. Other competitors of ours 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 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, and services and may be reluctant to use
new telecommunications providers. In particular, our target customers, small and
medium-sized businesses, 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.
Competition for customers in the target market is primarily on the
basis of price, the type and quality of services offered, and customer service.
We price our services at a discount to the prices charged by traditional long
distance carriers, and 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 "Proposed Business of
Access Power -- 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 employment agreements in the near 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
the traditional long-distance telephone service.
6
<PAGE>
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.
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 intend to 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 our profitability.
- ---------------------------------------------------------------
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
7
<PAGE>
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 our profitability.
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 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.
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."
If we cannot develop strategic alliances with marketing partners, we may not be
able to develop a sufficient customer base.
- --------------------------------------------------------------------------------
Our marketing strategy and, therefore, our performance, 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 technology, products, and services. We have established a
significant business relationship with only one entity 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.
We may not be able to manage our growth, which may impede our profitability.
- ----------------------------------------------------------------------------
If we cannot manage our growth effectively, we may experience decreased
profitability or may not become profitable at all. Our future profitability
depends on the expansion of our customer base. If we cannot effectively control
and utilize our expansion of products and services, the quality of those
products and services may suffer and, as a result, we may not be able to retain
or attract customers.
Our lack of experience in the small office and home office market may inhibit
market acceptance of our products and services.
- --------------------------------------------------------------------------------
Market acceptance of our technology, products, and services is critical
to our success and ability to generate revenues. We intend to market our
products to the small office and home office market and to institutions
throughout the United States. Our principal employees have had substantial
experience in other endeavors, but that is no assurance that we will be
successful in obtaining market acceptance of our products and services.
8
<PAGE>
Our ability to pay dividends is limited.
- ---------------------------------------
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.
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
stockholder approval by simple majority vote. Our directors and officers, in the
aggregate and including stock options, own beneficially 12,835,200 shares of
common stock, and this will not be affected by this offering.
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 indeterminate number of shares of common stock, and the common stock
underlying those rights is being registered for resale to the public under
federal law. Additionally, if the holders of the convertible debentures exercise
their conversion right immediately after a significant decrease in the market
price of the common stock, stockholders 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
March 31, 2000. See "Executive Compensation."
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 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
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.
9
<PAGE>
Our stock price may be highly volatile and subject to wide fluctuations.
- ------------------------------------------------------------------------
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 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, we will
have a total of 49,022,000 shares of common stock outstanding at the time of
this offering. Shares in the amount of up to the 18,014,855 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 10,000,000 shares
registered under an SB-2 effective on February 16, 1999, 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 develop or be sustained after this offering. See "Shares Eligible for
Future Sale."
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," and 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."
10
<PAGE>
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 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."
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
Plan of Operations," "Proposed Business of Access Power," 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.
11
<PAGE>
CAPITALIZATION
The following table shows our short-term debt, long-term debt, and
capitalization as of December 31, 1999, and pro forma as adjusted to reflect (1)
the issuance subsequent to December 31, 1999, of 6% convertible debentures with
a face amount of $2,500,000, (2) the conversion subsequent to December 31, 1999,
of the 6% convertible debentures at a conversion rate based on a $0.97 market
price for the common stock (average of the lowest three bids during the
twenty-two business days before conversion) into shares of common stock, (3) the
exercise of a warrant to purchase 500,000 shares of common stock at an exercise
price of $2.20 per share, (4) the conversion subsequent to December 31, 1999 of
$750,000 of 6% convertible debentures outstanding at that date at $0.3688, (5)
the issuance on December 31, 1999 of 6% convertible debentures with a face
amount of $800,000, (6) the conversion subsequent to December 31, 1999 of
$800,000 of 6% convertible debentures at a fixed price of $0.42, and (7) the
issuance of shares of common stock subsequent to December 31, 1999. This table
should be read in conjunction with our Financial Statements and the related
Notes thereto contained elsewhere in this prospectus.
<TABLE>
<CAPTION>
December 31, 1999
------------------------------
Pro Forma
Actual As Adjusted
------------- -----------
<S> <C> <C> <C>
Current portion of long-term debt and capital lease
obligations<F1>......................................... $ 168,956 $ 168,956
- ------------- -----------
Long-term obligations, less current portion<F1>............ $ 957,484 207,484
Stockholders' equity:
Preferred Stock, par value $0.001 per share,
10,000,000 shares authorized; 3,952 shares of Series B
preferred stock issued and outstanding; 3,952 shares of
Series B preferred stock issued and outstanding as
adjusted................................................ 4 4
Common stock, par value 0.001 per share,
100,000,000 shares authorized; 31,248,253 shares
issued and outstanding; 37,032,445 shares issued
and outstanding, as adjusted ........................... 31,249 39,587
Additional paid-in capital ................................ 4,746,709 9,228,071
Retained earnings (deficit) ............................... (5,001,024) (5,001,024)
- ------------- -----------
Total stockholders' equity (deficiency) ............... (223,062) 4,326,638
- ------------- -----------
Total capitalization.................................. $ 903,378 $ 4,703,078
============= ===========
- -----------------------
<FN>
<F1> Includes $750,000 of 6% convertible debentures, see Note 3 of Notes to
the Financial Statements for additional information relating to our
debt.
</FN>
</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 common stock in the
future.
12
<PAGE>
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. Our
technology offers users new and less expensive ways to communicate long distance
over the Internet without dependence on traditional long distance telephone
lines. Calls can be made to regular telephones or personal computers from either
a PC or a regular telephone. Calls from a PC to a telephone can be originated
from anywhere in the world over the Internet to one of our servers, and then
through traditional telephone lines to a regular telephone anywhere in the
United States, Canada, Puerto Rico, the United Kingdom, France, Germany, Italy,
Spain, Belgium, Denmark, Switzerland, the Netherlands, Sweden, Ireland and
Luxembourg. Telephone-to-telephone calls may be originated from anywhere in the
United States and terminate anywhere in North America, Puerto Rico, Brazil,
Chile, Columbia, Venezuela, Costa Rica, Aruba, the Bahamas, the Dominican
Republic, United Kingdom, Bermuda, British Virgin Islands, Cayman Islands, U.S.
Virgin Islands, twenty-seven European countries, and thirteen countries in
Africa, Asia, and the Middle East.
Industry Background
- -------------------
Historically, long distance telephone services have been offered
through public switched telephone networks utilizing traditional telephone
lines, a well-established and generally good quality service. In recent years,
however, the Internet's developing technology, 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, which has developed a less expensive and more workable
method of telecommunication over the Internet. This alternative to traditional
telephone communication was developed from applications introduced in the early
1990s allowing standard commercial transmission of voice and audio using
Internet protocols. This technology enables multi-media personal computer users
to converse over the Internet. Companies that offer Internet telephony services
and products are generally referred to as Internet telephony service providers.
The global marketplace is quickly becoming familiar with the Internet and its
value as a communications mechanism. Service providers are expanding the
Internet and users are demanding enhanced services including voice, audio, and
video transmissions. Companies have invested millions of dollars to develop new
and enhanced applications to improve the service quality and lower
implementation costs.
The Internet protocol telephony technology is superior to traditional
long distance telephone services in several ways. First, voice and message
traffic through traditional telephone systems is subject to tariffs, making
traditional telecommunication more expensive than Internet telephony. 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.
Voice-over-Internet protocol service is a significant development in
the growing Internet industry. New applications 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 mechanisms. They will allow companies to
act faster and close the gap between themselves and their customers, employees,
and vendors.
The Access Power Solution
- -------------------------
We are developing our Internet-based telephony network, Access Power
Advanced Communications(TM), and service, Net.Caller(TM), to provide a domestic
and international communications network that allows customers to place calls
through the Internet using traditional terminal equipment and PCs. Unlike
traditional long-distance telephone systems that use switch based systems, we
use the Internet as the backbone to complete the long distance connection. This
13
<PAGE>
eliminates the fees associated with long distance carriers, because
Internet-based communication is not subject to tariffs. Our service allows users
to place long distance calls from their PC to an enabled PC for free, or from
their PC to a regular telephone at a significantly lower cost than traditional
long distance services. Advanced Communications customers can take advantage of
the cost savings associated with the Internet-based telephony service even
without a PC by placing a regular telephone-to-telephone call through our
network of gateway servers.
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 switched telephone networks. Such services include
voice-enabled websites, interactive document and data sharing, and multi-media
data transmissions, including video capability. Accordingly, regional and
multinational corporations can use a single network to integrate voice and data
transmissions, thus realizing low cost interoffice communication through
Internet protocol telephony.
We are committed to establishing a worldwide network to provide
alternative long distance service and new Internet protocol telephony-based
services. Our gateway servers which are deployed at strategic geographic
locations will serve as a bridge for communications traffic to or from customers
in those geographic locations between the public switched telephone network and
the Internet. The gateway server converts voice transmission to data packets,
using less bandwidth and eliminating separate voice network costs.
Communications traffic from or to standard telephone equipment (such as in
phone-to-phone and PC-to-phone calling) involves local telephone pathways and,
for those destinations not currently served by a local gateway server,
traditional long distance lines (usually through a wholesale arrangement) at
each end with the Internet as the pathway in between.
Products and Services
- ---------------------
Our voice-over-Internet protocol network, Access Power Advanced
Communications(TM), integrates traditional telephone functions with advanced
Internet-based communications technology. This service enables users to
communicate over the Internet from a PC to a regular telephone or from a regular
telephone to another regular telephone with a significant reduction in costs
over that of traditional telephony. Through this service, a user 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, and
Puerto Rico. At this time, telephone-to-telephone calls may be originated from
anywhere in the United States and can be terminated anywhere in North America
and over fifty foreign countries.
To complement our service, we offer our customers two third-party
software products: Internet Phone for Access Power and Net.Caller(TM). 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(TM) is a more basic calling utility that can be downloaded free of
charge from our web site.
Personal Computer-to-Phone
--------------------------
Access Power's PC-to-phone service offers customers the ability to call
a regular telephone utilizing software installed on their multi-media PC. To
initiate the service, a customer registers on our web site and downloads either
Net.Caller or Internet Phone for Access Power software.
Net.Caller(TM)
--------------
Net.Caller software is a product that has been developed as a modified
or more simple version of Internet Phone by VocalTec, the owner and developer of
both software programs. It is designed for our customers who only need the basic
PC-to-phone use. Net.Caller software is free of charge and can be downloaded
from our web site from anywhere in the world. Net.Caller customers pay a flat
rate of $10 per month, for unlimited calls to the United States, Canada and
14
<PAGE>
Puerto Rico or a flat rate of $20 per month for unlimited calls to the United
States, Canada, Puerto Rico and twelve European countries. 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.
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 regular 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
proceed to join PC-to-PC community chat rooms, create private rooms, dial
directly to another PC, or call a regular 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;
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; and o live motion video (no
additional hardware is required to receive video).
e-button(TM)
------------
The e-button software provides tremendous 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. The software is a browser plug-in that is quickly and
automatically downloaded and installed upon the first attempt to use it.
Phone-to-Phone
--------------
We offer long distance service from anywhere in the United States to a
regular 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.
15
<PAGE>
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 expansion of our international Internet
protocol telephony network through joint venture partnerships and other business
relationships in the targeted regions; the leveraging of the network and its
inherent low operating costs to provide discount retail and wholesale
international calling services; the exploitation of new technology including
Net.Caller 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.
Net.Caller
- ----------
In April of 1999, we introduced our Net.Caller PC-to-Phone telephony
service. Customers can use the Internet Phone for Access Power software,
VocalTec's Internet Phone 5 software, or our free Net.Caller software to utilize
the Net.Caller service. Customers need a multi media personal computer and
Internet connection to use the service. Customers from anywhere in the world can
place calls to a regular telephone in the United States, Canada or Puerto Rico.
Customers pay $10.00 per month for unlimited usage. Customers pay $20 per month
for unlimited usage to call the United States, Canada, Puerto Rico, the United
Kingdom, France, Germany, Italy, Spain, Belgium, Denmark, Switzerland, the
Netherlands, Sweden, Ireland and Luxembourg.
On September 1, 1999, we began selling a flat-rate unlimited usage
telephone-to-telephone service under the tradename Net.Caller(TM)
Phone-to-Phone. Net.Caller Phone-to-Phone customers place calls using
traditional telephony equipment. Calls may be placed from anywhere in the United
States to anywhere in the continental United States. Calls made to areas outside
of the continental U.S. are billed on a per minute usage basis.
The Net.Caller service is primarily being marketed from our web site.
We are also enacting 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
exposing the Net.Caller service to people who are viewing the particular web
site. When the person viewing the banner clicks on the ad they are provided with
information and an opportunity to order the service. When we acquire a customer
as a direct result of the affiliate web site banner ad, we pay the affiliate a
commission.
Expand Net.Caller Service to International Markets
- --------------------------------------------------
We have entered an agreement with Lycos-Bertelsmann GmbH that
designates us as a premier partner of Lycos. Lycos-Bertlesmann will be promoting
the sale of Net.Caller to it's Pan-European customer base through the strategic
placement of banner ads, promotional buttons, text links, and other hyperlinks
on highly active Lycos web pages.
Leverage the Low Operating Costs of our Network
- -----------------------------------------------
Internet protocol telephony calls are treated as data communications
and are not subject to expensive access fees like standard long-distance calls.
This is especially significant when it comes to international calls, where extra
fees can be a significant addition to the cost of a call. Our technology will
enable us to offer international calling at reduced costs to customers. We
anticipate that joint ventures and other business relationships we intend to
create overseas will focus on marketing and selling our services in the
international market.
16
<PAGE>
We feel 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.
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 international telephone companies wishing to expand their service offerings
to their customer base. We believe we are well-positioned to offer low cost
carrier services to such providers.
Exploit Net.Caller and the e-button
- -----------------------------------
We offer PC-to-Phone service whereby calls can be originated from a
multi-media PC from anywhere in the world and terminate in the United States,
Canada, Puerto Rico or any of twelve western 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 proven 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 web
site, 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. Additionally, we have
contracted with VocalTec to provide technical support for the Internet Phone for
Access Power.
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 web site, and
written invoices are available upon request.
Competition
- -----------
We have nearly three years of experience building and fine-tuning one
of the first Internet protocol telephony networks in the United States. Because
of our experience, we believe that we have the ability to deploy our technology
at a faster rate and with less missteps than other Internet telephony companies.
We have basic billing capabilities in place and are developing more
sophisticated billing capabilities to accommodate the more complex commercial
transactions in which we intend to engage. We have network management tools and
a secure web site capable of taking new account orders in real-time.
17
<PAGE>
We believe our competitive strength lies in being first to market with
Internet protocol telephony services. We also believe we are likely to move
faster than a giant telephone company. We believe that our status as a
developmental company with low overhead allows us to offer highly competitive
prices to consumers, such as the Net.Caller PC-to-Phone service cost of $10 per
month for unlimited usage. To fully develop the market and establish momentum to
capture market share, we have to aggressively build our customer base now. We
must expand our network so that it can handle higher volumes of traffic, and we
might reduce dependency on traditional long distance telephone lines to complete
calls to protect margins. To grow our customer base, we believe we also need to
further develop our customer acquisition programs, such as the arrangement that
the Lycos-Bertelsmann agreement provides.
We may face direct competition, such as other companies that offer
Internet protocol telephony services, or indirect competition, such as companies
that offer traditional or other alternative long distance telephony services.
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 include ICG Communications, IPVoice.com,
iBasis, and ITXC. All of these companies route voice traffic worldwide over the
Internet.
Sales and Marketing
- -------------------
Our market includes residential and business users of advanced
communications products and services. The services include phone-to-phone,
PC-to-phone, and PC-to-PC communications. Access Power's current pricing for
service is very competitive and we are poised to balance new product
introductions with consumer demands and expectations.
The primary target market for these products and services are the
millions of consumers and business owners, from small businesses to
corporations, using the Internet. Currently the sales initiative is directed
toward Net.Caller PC-to-Phone service customers. Our marketing efforts focus on
aggregating a strong community of affiliates who display one of the Net.Caller
banner ads on their web site soliciting the viewer to order Net.Caller. We pay
the affiliate a commission based on customers who order Net.Caller from the
affiliate's web site.
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
resident 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. The broader ancillary target for the phone-to-phone service is traditional
phone users.
e-button will be sold to businesses that have a web site and call
center. According to Yahoo!, as of October 27, 1999, there were over 518,000
business-oriented webpages worldwide. Many 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 product.
18
<PAGE>
Electronic Commerce and Internet Telephony
- ------------------------------------------
One of the key indicators for our growth may be the development of the
Internet and electronic commerce. The Internet has grown at a rapid pace over
the last several years, and we believe commercial transactions on the Internet
have steadily increased over that time period. According to International Data
Corporation, Internet users purchased over $50 billion worth of products and
services during 1998. ActivMedia estimates that the amount of Internet-generated
revenue will increase to approximately $1.2 trillion in 2002.
e-button will create new options for the way Internet users conduct
commerce by providing less costly, more sophisticated communications support.
According to Nua Ltd., twenty-four percent of American companies sold their
goods and services on-line in 1998, and that statistic is projected to more than
double to fifty-six percent during 1999. The Association of National Advertisers
says that as of mid-1999, forty-four percent of United States companies are
selling on-line. We have established a web site for our own e-commerce.
Customers simply provide credit card information to order products and services.
Using the World Wide Web maximizes our ability to sell our products and
services twenty-four hours a day, 365 days a year, while minimizing the need for
direct sales contact. Currently, our customers come to our web site through
Internet search engines and Internet hyperlinks. Transactions transpire and
payment is procured on-line, reducing the ultimate cost of the sale. With the
web site as our storefront, our overall sales expenses of ours are decreased.
According to a February of 1999 Piper Jaffray report, revenue estimates
in the services segment of the Internet telephony industry were $119 million
during 1998 and are expected to be $8.6 billion in 2003, a compounded annual
growth rate of 168% between 1997 and 2003.
End User Market
- ---------------
The personal computer user is generally higher than average in income
and education, younger, and considered "independent" and a "trendsetter." The
most sought-after segment in this group is the "digital citizen"; that is, those
"super connected" with a PC, Internet access, and at least one other personal
telecommunications device (e.g., pager, cellular telephone, laptop, etc.). We
believe, based on our research, that this is a group committed to communicating
on the Internet. A Nielson NetRatings report states that during June of 1999,
the United States home Internet audience totaled 105.3 million, and Mediamark
Research Inc. indicates that 64 million United States adults are regular (once a
month) Internet users. The United States Department of Commerce reports that 80
million Americans and 200 million people worldwide are connected to the
Internet. The International Data Corporation and Gartner Group reported that
second quarter of 1999 global PC sales grew over the same period in 1998 by
approximately twenty-seven percent to more than 25 million units.
The Small Office/Home Office Market
- -----------------------------------
We believe the small office and home office market segment accounts for
a significant portion of new company formations. We also believe that the
evolution of "work life" will continue to expand the small office and home
office market as corporations attempt to reduce operating costs and improve
productivity with telecommuting and "virtual offices." We feel self-employment
will continue to grow as a result of corporate downsizing and outsourcing and as
individuals become less dependent on traditional career paths. The changing
workplace demands rapid telecommunications advancement, and the small office and
home office segment is believed to be currently using the Internet in large
numbers. The International Data Corporation states that the small office and
home office market purchased $51.1 billion on high-tech goods during 1998.
19
<PAGE>
International Markets
- ---------------------
International opportunities are especially attractive to us.
International growth of the Internet is believed to have surpassed that of the
United States and, by the year 2001, it is projected that the international
market will comprise a majority of Internet telephony usage. Internet
telephony's cost savings through the avoidance of "settlement fees" will play a
part in this rapid expansion. Settlement fees are tariffs that foreign telephone
companies charge for access to their domestic networks. We believe that the
biggest near-term revenue opportunities exist in the international markets. A
June 22, 1998 report by Datamonitor, a global strategic market analysis company,
indicates that the international voice market in particular presents a huge
opportunity for Internet telephony service providers. Profit margins are high
for these services. The report also indicates that Internet protocol telephony
will account for over ten percent of international telephony traffic in Europe
and the U.S. by the year 2002. Telegeography, an industry research firm,
estimates that the international long distance service market will reach $79
billion by 2001.
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 includes two successive extension
options and first right of refusal on 2,000 square feet of vacant contiguous
space. Access Power pays approximately $3,000 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 April 10, 2000, we engaged fifteen full time and six part-time
employees.
Litigation
- ----------
None.
20
<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 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 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. 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 $20 per month to
those countries as well as 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.
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 the Lycos-Bertelsmann agreement. 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
21
<PAGE>
intend to continue marketing the e-button software, and we expect to realize a
fair amount of 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.
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. We are of the
opinion that if the warrant were exercised then the aggregate proceeds would be
sufficient to fund us for the next three years.
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), 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 lower
payroll of $88,775, lower travel of $37,258 and lower 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 $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 $326,534 or 24.8%.
Professional fees for marketing and equity financing increased $701,666 from
$206,680 to $908,348 or 339.5%. These expenses were offset by lower payroll of
$88,775, lower travel of $37,258, lower temporary help of $13,506 in 1999
compared to 1998 and a gain from settlement of a law suit with a vendor of
$142,412.
22
<PAGE>
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 $2,782,700 from the sale of common stock
and preferred stock, and have borrowed approximately $1,400,000 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 September 30, 1999. We realized
negative cash from operating activities for the nine months ended September 30,
1999, of ($1,035,308) compared to negative cash from operating activities of
($45,292) primarily due to faster payment being required by vendors than
previously. Investing activities for the period from inception through September
30, 1999 consisted primarily of equipment purchases to build out the initial
network. Investing activities in the nine months ended September 30, 1999, were
$466,221 compared to $1,104,890 during the nine months ended September 30, 1998.
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 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 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 twelve months ended December 31, 1999,
provided a net total of $2,854,196. Cash at the end of that period was $213,884.
As of March 13, 2000, we had cash of $2,558,000 and working capital of
$2,863,135.
23
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors and their ages as of March 31,
2000 are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <S>
Glenn A. Smith 44 President, Chief Executive Officer, and Director
Tod R. Smith 38 Chief Technology Officer, General Counsel, and Director
Maurice J. Matovich 40 Chief Operations Officer and Director
Howard Kaskel 54 Chief Financial Officer
</TABLE>
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
stockholder 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 $96,000 100,000
</TABLE>
STOCK OPTIONS
The following table summarizes certain information regarding options to
purchase Common Stock granted to the Chief Executive Officer during the year
ended December 31, 1999. We did not grant any stock appreciation rights in 1999.
24
<PAGE>
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
(Individual Grants)
- ----------------------------------------------------------------------------------------------------------------------
Number of Securities Percent of Total Options/ Exercise or Base
Underlying Options/ SARS Granted to Employees Price
Name SARs Granted (#) in Fiscal Year ($/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 1, 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. Access Power does not have employment agreements with any
other of our executive officers.
DIRECTORS COMPENSATION
The directors have not received compensation for their duties as such,
and we have no current plans to compensate directors for serving on the Board in
the future.
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 stockholders, 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, as amended, 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.
25
<PAGE>
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 10% 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
its 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.
26
<PAGE>
CERTAIN MARKET INFORMATION
PRICE RANGE OF COMMON STOCK
Our common stock is traded over-the-counter and quoted on the Bulletin
Board under the symbol "ACCR" on a limited and sometimes sporadic basis. Quoting
began in December of 1997. The reported high and low bid prices for the common
stock are shown below for the indicated periods through March 31, 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
March 21, 2000, there were approximately 304 stockholders of record of the
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
PRINCIPAL AND SELLING STOCKHOLDERS
The table below sets forth certain information regarding the beneficial
ownership of the common stock, as of March 21, 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 the Chief Executive Officer, (iii)
all directors and executive officers as a group, and (iv) the selling
stockholders. Unless otherwise indicated, each of the stockholders listed below
has sole voting and investment power with respect to the shares beneficially
owned.
27
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Owned Prior Shares Beneficially
to the Offering Owned After the
Offering<F6>
Number
of Shares
Beneficial Owner Number Percent to be Sold Number Percent
- ---------------- ------ ------- ---------- ------ -------
<S> <C> <C> <C> <C> <C>
Glenn A. Smith<F1> 7,106,500 13.3% 0 7,106,500 13.3%
Tod Smith<F2> 2,290,000 4.6% 0 2,290,000 4.6%
Maurice J. Matovitch<F2> 1,944,750 3.9% 0 1,944,750 3.9%
Subramanian Sundaresan 562,000 1.1% 562,000 -- --
T. Wayne Davis 1,000 * 1,000 -- --
Kimberly DeVigil 20,000 * 20,000 -- --
Anthony Naples 50,000 * 50,000 -- --
Tatum CFO Partners, LLP<F3> 479,500 * 479,500 -- --
Bamboo Investors LLC<F4> 9,748,062 17.1% 9,748,062 -- --
Paul Revere Capital Corp. 250,000 * 250,000 -- --
Harold Berliner 15,000 * 15,000 -- --
All directors and executive
officers as a group 12,246,750 21.3% 11,125,562 12,246,750 21.3%
(4 persons) <F1> <F2>
- --------------------
*Less than 1%.
<FN>
<F1> Includes 10,400 shares of common stock held for a minor child,
4,415,000 shares subject to presently exercisable options.
<F2> Includes 1,650,000 shares subject to presently exercisable options.
<F3> Includes 479,500 shares subject to presently exercisable options.
<F4> Includes 6,443,300 shares of common stock issuable upon conversion of
debentures held by such stockholder (or which could be purchased
pursuant to the exercise of a warrant) based upon a three day average
shares price of $0.97, 1,904,762 shares representing $800,000 of
debenture dated January 18, 2000 which are convertible at the higher of
a three day average shares price or $0.42 and warrants for common stock
issuable at $0.42 and $2.20. 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.
</FN>
</TABLE>
The actual number of shares of common stock deemed to be beneficially
owned by and offered by Bamboo Investors LLC 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. Under the registration statement of
which this prospectus is a part, we have registered an additional number of
shares of our common stock that we may be required to issue upon conversion of
the debentures and the warrants held by Bamboo Investors LLC, Paul Revere
Capital Corp. as a result of any stock split, stock dividend or similar
transaction involving our common stock.
SELLING WARRANT HOLDERS
Bamboo Investors LLC is the holder of transferable warrants to purchase
900,000 shares of common stock. It also holds a warrant to purchase additional
transferable warrants to purchase 500,000 shares of common stock. See
"Description of Warrants." All of these transferable warrants may be sold under
the registration statement of which this prospectus is apart.
PLAN OF DISTRIBUTION
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
28
<PAGE>
prospectus will be filed to disclose such of 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 (which 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 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
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.
We have advised the selling security holders that the anti-manipulative
rules under the Securities Exchange Act of 1934, including Regulation M, may
29
<PAGE>
apply to sales in the market of the common stock offered hereby. We have also
advised the selling security holders of the requirement for the delivery of this
prospectus in connection with resales of the securities.
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 Bulletin Board. We have no
plans to list the common stock on NASDAQ or on any 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 6% Convertible Debentures, we will have a
total of 49,022,000 shares of common stock outstanding at the time of this
offering.(1) Shares in the amount of up to 11,125,562 registered for sale by
the selling stockholders, if sold under this registration, 28,014,855 shares
registered by selling stockholders in previous registrations and 3,578,000
shares of common stock previously sold by us pursuant to an exemption under
Regulation 504 will, after the offering, be freely tradable without restriction
or further registration under the Securities Act, except that any shares
purchased by 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.
- -----------------
(1)Assumes the conversion of debentures into 6,443,300 shares of common stock
based on a conversion rate, as set forth in the formula described in "6%
Convertible Debenture" below, and an average market price of common stock at
$0.97.
SALES OF RESTRICTED SECURITIES
In general, under Rule 144 as currently in affect, 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 391,000 shares on a diluted basis) 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
30
<PAGE>
following summary of our capital stock does not purport to be complete and is
qualified in its entirety by reference to our Articles of Incorporation, as
amended and restated, and Bylaws, as amended and restated, that are included as
exhibits to the Registration Statement of which this prospectus forms a part,
and the applicable provisions of the Florida Business Corporation Act.
COMMON STOCK
Holders of common stock are entitled to one vote per share on any issue
submitted to a vote of the stockholders and do not have cumulative voting rights
in the election of directors. 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.
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 stockholders 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. Therefore, the holders of a majority
of the outstanding shares of common stock and the preferred stock voting in an
election of directors can elect all of the directors then standing for election,
if they choose to do so. The preferred stockholders 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 stockholders
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
stockholders 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 stockholders, 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
stockholders. Any surplus that remains after this distribution is completed
shall be distributed to the Series B preferred stockholders in accordance with
the provisions set forth below and then to the common stockholders. 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
31
<PAGE>
to any outstanding shares of our Series A preferred stock, prior to and in
preference to any distribution to our common stockholders, 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
stockholders. Any surplus that remains after this distribution is completed
shall be distributed pro rata among the common and Series B preferred
stockholders. 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.
DESCRIPTION OF WARRANTS
In connection with our sale of $2,500,000 of our 6% Convertible
Debentures we issued the investor warrants to purchase 500,000 shares of common
stock. The investor also received a special warrant which it may exercise to
purchase an additional $2,500,000 of our 6% Convertible Debentures as well as
another warrant to purchase 500,000 shares of common stock. The purchase price
of the additional common stock warrants is $100. 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. These are the warrants covered by this
prospectus, 500,000 of which are owned by a selling stockholder, and 500,000 of
which the selling stockholder may purchase from us.
This prospectus also covers an additional 400,000 warrants that entitle
the holder to purchase common stock for $0.42 per share (subject to possible
anti-dulution adjustments). The warrants expire on September 30, 2002, and they
are transferale.
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 stockholders, 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.
Special Voting Requirements. Our Bylaws provide that all actions taken
---------------------------
by the stockholders must be taken at an annual or special meeting of the
stockholders or by unanimous written consent. The Bylaws provide that special
meetings of the stockholders may be called only by a majority of the members of
the Board of Directors. Under our Bylaws, stockholders are required to comply
with advance notice provisions with respect to any proposal submitted for
stockholder vote, including nominations for elections to the Board of Directors.
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 stockholders 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
32
<PAGE>
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 person
benefit. As a result, stockholders may be unable to recover monetary damages
against directors for actions taken by them, which constitute negligence, or
gross negligence or which are in violation of their fiduciary duties, although
injunctive or other equitable relief may be available. The foregoing provisions
of 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 stockholders, removal of directors, 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.
TRANSFER AGENT
Our Transfer Agent and Registrar is Atlas Stock Transfer & Trust
Company, Salt Lake City, Utah.
DESCRIPTION OF 6% CONVERTIBLE DEBENTURES
We have sold $2,500,000 of our 6% Convertible Debentures due February
28, 2002 and have issued a warrant to the same investor to purchase an
additional $2,500,000 of such debentures. 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
33
<PAGE>
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 (80%) 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 for 125% of the outstanding principal and
accrued interest.
LEGAL MATTERS
The validity of the common stock being offered hereby is being passed
upon for us by L. Van Stillman, Boca Raton, Florida.
EXPERTS
Our financial statements at December 31, 1999, and for the year ended
December 31, 1999, and the period from our inception appearing in this
prospectus and the Registration Statement have been audited by Parks, Tschopp,
Whitcomb & Orr, independent auditors, as indicated in their report thereon
appearing herein and in the Registration Statement, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a
Registration Statement on Form SB-2 under the Securities Act 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. This prospectus, which is a part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement and
the exhibits thereto. For further information with respect to us and our common
stock and the Warrants, reference is made to the Registration Statement,
including the exhibits and schedules thereto. Statements contained in this
prospectus concerning the contents of any contract or any other document are not
necessarily complete and such instance reference is 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, as amended (the "Exchange Act"), 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.
34
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report . . . . . . . . . . . . . . . F-1
Financial Statements:
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . F-2
Statements of Operations . . . . . . . . . . . . . . . . . F-3
Statements of Stockholders' Equity . . . . . . . . . . . . F-4
Statements of Cash Flows . . . . . . . . . . . . . . . . . F-5
Notes to Financial Statements . . . . . . . . . . . . . . . F-6
<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
<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-2
<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 equpiment (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-3
<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-4
<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-5
<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-6
<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-7
<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-8
<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-9
<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-10
<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-11
<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-12
<PAGE>
<TABLE>
<CAPTION>
============================================================== ==============================================================
<S> <C>
No dealer, salesperson, or other person has been 11,200,000 SHARES
authorized to give any information or to make any COMMON STOCK
representations other than those contained in this
prospectus in connection with the offer made by this 1,400,000 COMMON STOCK WARRANTS
prospectus and, if given or made, such information or
representations must not be relied upon as having been
authorized by Access Power, Inc. Neither the delivery of ACCESS POWER, INC.
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 does not constitute an offer to sell or a PROSPECTUS
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. Until, all dealers that effect transaction
in these securities, whether or not participating in this
offering, may be required to deliver a prospectus. This is
in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions.
TABLE OF CONTENTS
Item Page
- ---- ----
Summary ........................................... 2
Summary Financial Data............................. 4
Risk Factors....................................... 5 April 17, 2000
Capitalization.....................................13
Dividend Policy....................................13
Certain Market Information.........................14
Business...........................................14
Management's Discussion and
Analysis of Financial Condition
and Results of Operations......................23
Management.........................................27
Principal and Selling Stockholders.................31
Selling Warrant Holders............................32
Plan of Distribution...............................32
Shares Eligible for Future Sale....................33
Description of Capital Stock.......................34
Description of Warrants............................36
Description of 6% Convertible
Debentures......................................37
Legal Matters......................................38
Experts............................................38
Additional Information.............................38
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.
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission Registration Fee............................. 1,842.15
NASD Filing Fees and Blue Sky Fees and Expenses................................. 5,000.00
Printing and Engraving Expenses................................................. 1,000.00
Legal Fees and Expenses......................................................... 20,000.00
---------
Total .............................................................. 27,842.15
</TABLE>
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 $.001 per share, of
Access Power, Inc. (filed as Exhibit 4.3 to the 10-Q and is
hereby incorporated by reference)
5.1* ...... Opinion of L. Van Stillman with respect to the legality of the
securities being registered
10.1 ...... International Master Franchise Agreement between Access Power,
Inc. and Access Power Canada, Inc. (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
II-1
<PAGE>
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 ...... Purchase and Sale Agreement between Access Power, Inc. and
Netspeak Corporation dated as of June 17, 1998 (filed as Exhibit
10.4 to the 1999 SB-2 and is hereby incorporated by reference)
10.5 ...... 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)
10.6 ...... 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)
10.7** ...... 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)
10.8** ...... Internet Telephony Services Agreement dated October 2, 1998
between Access Power, Inc. and Ldt Net Com, Inc. (filed as
Exhibit 10.8 to the 1999 SB-2 and is hereby incorporated by
reference)
10.9 ...... 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)
10.10 ...... 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)
10.11 ...... Securities Purchase Agreement dated as of September 30, 1999,
among Access Power, Inc., certain stockholders 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)
10.12 ...... 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)
10.13 ...... 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)
10.14 ...... 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)
10.15**...... 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)
10.16 ...... 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)
23.1 ...... Consent of L. Van Stillman, (included in Exhibit 5.1).
23.2 ...... Consent of Parks, Tschopp, Whitcomb & Orr, dated April 17, 2000
24.1 ...... Power of Attorney (included in Signature Page)
- ---------------------------
* To be filed by amendment.
** Certain portions of this exhibit have been omitted pursuant to the grant
of a request for confidential treatment.
<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 13th day of April, 2000.
ACCESS POWER, INC.
By: /s/ Glenn Smith
Glenn Smith
Chief Executive Officer
Each person whose signature appears below hereby constitutes and
appoints Glenn A. Smith and Maurice J. Matovich and either of them, his or her
true and lawful attorneys-in-fact with full power of substitution, for him or
her and in his or her name, place and stead, in any and all capacities, to sign
any and all amendments (including post-effective amendments) to this
Registration Statement, and to sign a new registration statement filed to
register additional securities pursuant to Rule 462(b) under the Securities Act
of 1933, as amended, and to cause the same to be filed, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby granting to said attorneys-in-fact and agent, full
power and authority to do and perform each and every act and thing whatsoever
requisite or desirable to be done in and about the premises, as fully to all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all acts and things that said attorneys-in-fact and
agents, or their substitutes or substitute, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on the 13th day
of April, 2000, in the capacities indicated.
Signature Position
--------- --------
/s/ Glenn A. Smith Glenn A. Smith, President and Chief
- ------------------------- Executive Officer and Director
(Principal Executive Officer)
/s/ Howard L. Kaskel Howard L. Kaskel, Chief Financial
- ------------------------- Officer (Principal Financial
and Accounting Officer)
/s/ Tod R. Smith Tod R. Smith, Director
- --------------------------
/s/ Maurice J. Matovich Maurice J. Matovich, Director
- --------------------------
<PAGE>
EXHIBIT INDEX
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 $.001 per share, of
Access Power, Inc. (filed as Exhibit 4.3 to the 10-Q and is
hereby incorporated by reference)
5.1* ...... Opinion of L. Van Stillman with respect to the legality of the
securities being registered
10.1 ...... International Master Franchise Agreement between Access Power,
Inc. and Access Power Canada, Inc. (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
<PAGE>
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 ...... Purchase and Sale Agreement between Access Power, Inc. and
Netspeak Corporation dated as of June 17, 1998 (filed as Exhibit
10.4 to the 1999 SB-2 and is hereby incorporated by reference)
10.5 ...... 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)
10.6 ...... 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)
10.7** ...... 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)
10.8** ...... Internet Telephony Services Agreement dated October 2, 1998
between Access Power, Inc. and Ldt Net Com, Inc. (filed as
Exhibit 10.8 to the 1999 SB-2 and is hereby incorporated by
reference)
10.9 ...... 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)
10.10 ...... 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)
10.11 ...... Securities Purchase Agreement dated as of September 30, 1999,
among Access Power, Inc., certain stockholders 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)
10.12 ...... 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)
10.13 ...... 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)
10.14 ...... 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)
10.15**...... 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)
10.16 ...... 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)
23.1 ...... Consent of L. Van Stillman, (included in Exhibit 5.1).
23.2 ...... Consent of Parks, Tschopp, Whitcomb & Orr, dated April 17, 2000
24.1 ...... Power of Attorney (included in Signature Page)
- ---------------------------
* To be filed by amendment.
** Certain portions of this exhibit have been omitted pursuant to the grant
of a request for confidential treatment.
The Board of Directors
Access Power, Inc.:
We consent to the use of our report dated March 9, 2000 in the Registration
Statement on Form SB-2 and related Prospectus of Access Power, Inc. for the
registration of 11,200,000 shares of its common stock, and 1,400,000 warrants to
purchase common stock, and to the reference to our firm under the heading
"Experts" therein.
/s/ Parks, Tschopp, Whitcomb & Orr, P.A.
PARKS, TSCHOPP, WHITCOMB & ORR, P.A.
Maitland, Florida
April 17, 2000
