SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
/X/ Annual Report Pursuant to
Section 13 or 15(d) of The
Securities Exchange Act of
1934
For the Fiscal Year Ended December 31, 1999
/ / Transition Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Commission File Number ___-_____
ACCESS POWER, INC.
(Name of Small Business Issuer in its Charter)
Florida 59-3420985
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
10033 Sawgrass Dr., W, Ponte Vedra Beach, FL 32082
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (904) 273-2980
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes /X/ No / /
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. /X/
State issuer's revenues for its most recent fiscal year. $180,051
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock as of a specified date within the past 60
days: As of March 13, 2000 there were 34,703,097 shares of Common Stock
outstanding held by non-affiliates of the issuer, with an aggregate value of
$68,295,659 (based upon a value of $1.968 per share, the average of the high and
low bid price of the Common Stock on March 13, 2000
At March 13, 2000, there were issued and outstanding 38,544,329
shares of Common Stock.
Transitional Small Business Disclosure Format (check one): Yes / / No /x/
DOCUMENTS INCORPORATED BY REFERENCE
None.
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PART I
ITEM 1. DESCRIPTION OF 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. See "Management's Discussion and Analysis".
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.
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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
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 network 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,
Puerto Rico and twelve pan-European countries. 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.
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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.
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.
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 simpler version of Internet Phone by VocalTec Communications Ltd., 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 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.
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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 is a third-party browser plug-in that is quickly
and automatically downloaded and installed upon the first attempt to use it. It
provides tremendous electronic commerce benefits to any company with a
traditional call-center. This technology allows consumers viewing a company's
web site by clicking on an icon to instantly dial up a designated representative
of that company, usually someone providing sales or support services.
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.
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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 name 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
advertisement exposing the Net.Caller service to people who are viewing the
particular web site. When the person viewing the advertisement clicks on the
banner, they are provided with information about the service and an opportunity
to order it. When Access Power acquires a customer as a direct result of the
affiliate web site banner advertisement, the Company pays the affiliate a
commission.
Expand Net.Caller Service to International Markets
We have entered into an agreement with Lycos-Bertelsmann GmbH that
designates us as a premier partner of Lycos. Lycos-Bertlesmann is 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.
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.
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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
market to our customers under the "e-button" mark. 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.
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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
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 face direct competition, such as other companies that offer Internet
protocol telephony services, and 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.
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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
telephone users.
e-button is marketed 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.
ELECTRONIC COMMERCE (E-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 were
selling on-line. We have established a web site for our own electronic 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 are decreased.
According to a February 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.
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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 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.
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.
EMPLOYEES
As of March 13, 2000 the Company retained 13 full time employees and 3
part-time employees.
CERTAIN FACTORS AFFECTING FORWARD LOOKING STATEMENTS
We believe that certain statements contained in this Annual Report on
Form 10-KSB may constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause our actual results, performance or achievements, or industry results,
to vary materially from our predicted results, performance or achievements, or
those of the industry. Our factors include, among others, the following:
o General economic and business conditions;
o Changes in government regulations, including those overseas;
o Marketplace changes in pricing levels;
o Changes in technology;
o Competition; entry of large telecommunications companies into
the market;
o Availability of liquidity sufficient to meet the Company's
need for capital;
o Availability of qualified personnel;
o Ability to create and maintain strategic alliances; and
o Various other factors referenced in this Report.
We will not update the forward-looking information to reflect actual
results or changes in the factors affecting the forward-looking information.
The forward-looking information referred to above includes, but is not
limited to:
a) expectations regarding sales growth, gross margins and
selling, general and administrative expenses;
b) expectations regarding the Company's financial condition and
liquidity, as well as future cash flows and availability of
investment capital;
c) expectations regarding capital expenditures; and
d) expectations regarding the impact of affiliations and
strategic alliances on growth.
ITEM 2. PROPERTY
The Company headquarters, executive offices and customer service center are
located in facilities consisting of approximately 1,800 square feet in a 13,500
square foot office building in Ponte Vedra Beach, Florida. The three-year lease
on the space started September 1997 and includes two successive extension
options and first right of refusal on 2,000 square feet of vacant contiguous
space. The Company will pay approximately $3000 per month rent under this lease
during 2000. The Company believes the office space is adequate for its current
needs and could easily be replaced with other suitable accommodations.
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The Company maintains its server hardware through co-location arrangements
with local exchange carriers at locations where the Company desires to maintain
a gateway. These facilities must be climate controlled and offer the necessary
telephone and electrical power services, but the Company believes such
facilities are generally available from more than one source.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At a special meeting held on December 23, 1999, the stockholders
approved a resolution of the Board of Directors amending the Company's Articles
of Incorporation increasing the number of authorized common shares from 40
million to 100 million. Votes cast in favor of the amendment were 10,767,004,
votes against the proposal totaled 203,820, and 3,250 shares abstained.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded over-the-counter and quoted on the
Bulletin Board under the symbol "ACCR" on a limited and sometimes sporadic
basis. Quoting began in December 1997. The reported high and low bid prices for
the Common Stock are shown below for the period through December 31, 1999. The
prices presented are bid prices which represent prices between broker-dealers
and do not include retail mark-ups and mark-downs or any commission to the
broker-dealer. The prices do not necessarily reflect actual transactions. As of
March 21, 2000 there were approximately 304 stockholders of record of the Common
Stock.
BID
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LOW HIGH
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1998
First Quarter . . . . . . . . . . . . $0.81 $1.38
Second Quarter . . . . . . . . . . . $1.38 $4.06
Third Quarter . . . . . . . . . . . . $0.53 $2.19
Fourth Quarter . . . . . . . . . . . $0.22 $0.91
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
The following provides information of all sales of outstanding stock
which were not registered under the Securities Act of 1933 (the "Act").
In December 1999 Bamboo Investors, LLC, an investment fund managed by
WEC Asset Management, LLC, exercised its warrant to purchase $200,000 of the
Company's 6% convertible debentures. Principal and accrued but unpaid interest
under the debentures may be converted by the holder at any time into common
stock of the Company at a formula rate which, as of March 21, 2000 would be
$0.42 per share. The Company claims an exemption from registration under Section
4(2) of the Act for this offer and sale. The securities were offered and sold to
one investor, who the Company believed was an accredited investor within the
meaning of Rule 501 promulgated under the Act. The investor agreed to acquire
the securities for investment and not with a view to their distribution.
ITEM 6. 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 10-KSB.
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
intend to continue marketing the e-button software, and we expect to realize a
fair amount of revenues from those sales.
11
<PAGE>
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
the company's 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.
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 $3,930,000 from the sale of common stock
and preferred stock, and have borrowed approximately $1,700,000 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.
12
<PAGE>
We generated negative cash flow from operating activities for the period
from inception (October 10, 1996) through December 31, 1999. We realized
negative cash from operating activities for the twelve months ended December 31,
1999, of ($161,089) 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 December
31, 1999 consisted primarily of equipment purchases to build out the initial
network. Investing activities in the twelve months ended December 31, 1999, were
$464,023 compared to $1,119,841 during the twelve months ended Decembr 31, 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 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, the Company
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.
We issued 512,000 shares of common stock in exchange for a debt repayment
and the interest due thereon in April 1999.
We issued 2,630,000 shares of common stock upon the exercise of employee
stock options for $1,257,100.
We issued $1,000,000 of 6% convertible debentures in September of 1999.
We issued $200,000 of 6% convertible debentures in December of 1999.
We issued $800,000 of 6% convertible debentures in January of 2000.
We issued $2,500,000 of 6% convertible debentures in February of 2000.
13
<PAGE>
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.
ITEM 7. FINANCIAL STATEMENTS
The financial statements and the independent auditor's report are included
in this report beginning at page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CENTRAL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE NET
The executive officers and directors of the Company and their ages as
of March 13, 2000 are as follows:
NAME AGE POSITION
Glenn A. Smith 44 President, Chief Executive Officer
and Director
Tod R. Smith 38 Chief Technology Officer, General
Counsel and Director
Maurice J. Matovich 40 Chief Operations Officer and Director
Howard L. Kaskel 53 Chief Financial Officer
Glenn A. Smith has served as the President, Chief Executive Officer and
a director of Access Power, Inc. since the Company's formation in 1996. He has
over twenty years experience in developing interactive systems and
Internet-based businesses and services. From 1992 to 1996 Mr. Smith was
self-employed as a developer of advanced computer telephony systems and
services.
Tod R. Smith has served as Chief Technology Officer and General Counsel
since 1998 and a director of the Company since 1997. Mr. Smith worked at AT&T as
a Technical Staff member specializing in computer consulting and the development
of software from 1988 to 1998.
Maurice Matovich has served as Chief Operating Officer since 1998 and a
director for Access Power since 1997. Mr. Matovich served as a manager at AT&T
where he specialized in high-tech operations management, client relations and
stockholder relations from 1984-1997.
Howard L. Kaskel has served as the Chief Financial Officer for Access
Power since 1998. Mr. Kaskel also is currently a limited partner with Tatum CFO
Partners, LLP, a partnership of career chief financial officers. Mr. Kaskel has
been devoting his full time to the Company. Mr. Kaskel served as the Chief
Financial Officer of DeFalco Advertising from 1996 to 1997 and as the Chief
Financial Officer of Pinnacle Site Development Inc. in 1998. He was a partner at
Kaskel, Solowiei & Associates, a financial consulting firm, from 1993 to 1996,
where he advised companies regarding acquisitions, divestitures and business
planning
14
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the annual
compensation for services in all capacities to the Company for the year ended
December 31, 1999 with respect to the Chief Executive Officer:
Long-Term
Compensation
------------
Awards
------------
Annual Compensation Securities
Name and ------------------- Underlying
Principal Position Salary Options(#)
------------------ ------ ----------
Glenn A. Smith, Chief
Executive Officer $96,000 4,700,000
STOCK OPTIONS
The following table summarizes certain information regarding options to
purchase Common Stock granted to the Chief Executive Officer during the year
ended December 31, 1999. The Company did not grant any stock appreciation rights
in 1999.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
<TABLE>
<CAPTION>
Number Of Percent Of
Securities Total Options/
Underlying SARs Granted Exercise Or
Options/SARs To Employees Base Price
Name Granted (#) In Fiscal Year ($/Sh) Expiration Date
---- ----------- -------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Glenn A. Smith 200,000 2% $0.22 1/7/09
Glenn A. Smith 4,000,000 38% $0.11 3/24/09
Glenn A. Smith 500,000 5% $0.53 6/14/09
</TABLE>
The following table summarizes the number and value of unexercised
options held by the Chief Executive Officer as of December 31, 1999. The Chief
Executive Officer exercised options for 500,000 shares in the year December 31,
1999.
FISCAL YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
Number Of Securities
Underlying Unexercised Value of Unexercised
Options/SARs At In-The-Money Options/
FY-End (#) SARs At FY-End ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable <F1>
---- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Glenn A. Smith 200,000 /0 $118,000/0
Glenn A. Smith 4,000,000 /0 $2,360,000/0
<FN>
<F1>This value has been calculated based on the average of the last bid and
asked price of the Common Stock as quoted on the Bulletin Board on
December 31, 1999.
</FN>
</TABLE>
15
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Howard
Kaskel. The agreement provides that Mr. Kaskel will serve as Chief Financial
Officer of the Company on a part-time basis (four days per week) for a base
salary of $9,000 per month. Additional days are paid at the rate of $550 per
day. The agreement is terminable by the Company upon thirty (30) days written
notice with all payments required pursuant to the agreement to be paid on or
before the termination date. The Company does not have employment agreements
with any other of its executive officers.
DIRECTORS COMPENSATION
The directors have not received compensation for their duties as such,
and the Company has no current plans to compensate directors for serving on the
Board in the future.
STOCK INCENTIVE PLAN
In June, 1997, the Company adopted its Stock Incentive Plan (the
"Plan") to provide selected employees and affiliates providing services to the
Company or its affiliates an opportunity to purchase Common Stock of the
Company. The Plan promotes the success and enhances the value of the Company by
linking the personal interests of participants to those of the Company's
stockholders, and by providing participants with an incentive for outstanding
performance. Awards under the Plan may be structured as "incentive stock
options" (ISOs) as defined in Section 422 of the Internal Revenue Code of 1986,
as amended ("IRC"), for employees or as non-qualified stock options for any
participant.
The Plan, as amended, provides that the aggregate number of shares of
Common Stock with respect to which options may be granted pursuant to the Plan
shall not exceed 2,500,000 shares.
ISOs are subject to certain limitations prescribed by the IRC,
including the requirement that such options be granted with an exercise price no
less than the fair market value of the Common Stock at the date of grant and
that the value of stock with respect to which ISOs are exercisable by a
participant for the first time in any year under the terms of the Plan (and any
other incentive stock option plans of the Company and its subsidiaries) may not
exceed $100,000, based on the fair market value of the stock at the date of
grant. In addition, ISOs may not be granted to employees who own more than 10%
of the combined voting power of all classes of voting stock of the Company,
unless the option price is at least 110% of the fair market value of the Common
Stock subject to the option and unless the option is exercisable for no more
than five years from the grant date.
The compensation committee of the Board of Directors of the Company has
discretion to set the terms and conditions of options, including the term,
exercise price and vesting conditions, if any, to determine whether the option
is an ISO or a non-qualified stock option, to select the persons who receive
such grants and to interpret and administer the Plan.
As of the date of this 10-KSB, options to purchase an aggregate of
2,100,500 shares of Common Stock have been granted under the Plan and were
outstanding, including options for 400,000 shares of Common Stock issued to
Glenn A. Smith. Mr. Smith's options have an exercise price of $0.11 per share
for 100,000 shares, $0.54 per share for 100,000 shares and $0.22 per share for
200,000 shares.
16
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the
beneficial ownership of the shares of Common Stock as of March 13, 2000, by (i)
each person who is known by the Company to be the beneficial owner of more than
five percent (5%) of the issued and outstanding shares of Common Stock, (ii)
each of the Company's directors and executive officers and (iii) all directors
and executive officers as a group:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent of Shares
Beneficial Owner* Beneficial Owner Outstanding**
------------------- -------------------- -----------------
<S> <C> <C> <C>
Glenn A. Smith, CEO<F1> 7,106,500 16.5%
Tod Smith, CTO <F2> 2,290,000 5.7%
Maurice Matovich, COO <F2> 1,944,750 4.8%
Howard L. Kaskel, CFO <F3> 905,500 2.3%
Bamboo Investors, LLC <F4> 4,223,394 10.3%
New York, NY
All Directors and Executive 12,246,750 26.1%
Officers as a Group (4 persons)
- --------------------
*Unless otherwise indicated, the beneficial owner's address is the same as the
Company's principal office. **Percentages calculated on the basis of the amount
of outstanding shares plus, for each person, any shares that person has the
right to acquire within 60 days pursuant to options or other rights.
<FN>
<F1> Includes 91,200 shares of Common Stock held for minor children and
4,415,000 shares subject to presently exercisable options.
<F2> Includes 1,650,000 shares subject to presently exercisable options.
<F3> Includes 705,500 shares subject to presently exercisable options.
<F4> Shares of Common Stock issuable upon conversion of convertible debentures
at fixed and variable prices and warrants to purchase common shares at fixed
prices.
</FN>
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
ITEM 13. EXHIBITS, LIST, AND REPORTS ON FORM 8-K.
(a) EXHIBITS. The exhibits filed as part of this Annual report on Form
10-KSB are as listed below. All exhibits are incorporated by reference to the
indicated exhibit to the Company's registration of its Common Stock on Form
10-SB, as amended.
Exhibit No. Description
----------- -----------
3.1 Composite Articles of Incorporation of the
Registrant, including all amendments.
3.2 Bylaws of the Registrant (filed as Exhibit 3.2 of the
Company's Registration Statement on Form SB-2 (File
No. 333-65069) is hereby incorporated by reference)
4.1 Form of Common Stock Certificate of the Registrant
(filed as Exhibit 4.1 of the Company's Registration
Statement on Form SB-2 (File No. 333-65069) is hereby
incorporated by reference)
4.2 6% Convertible Debenture due September 30, 2001(filed
as Exhibit 4.2 of Access Power, Inc.'s quarterly
report on Form 10-QSB for the quarter ended September
30, 1999, 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 of
Access Power, Inc.'s quarterly report on Form 10-QSB
for the quarter ended September 30, 1999, is hereby
incorporated by reference)
4.4 Schedule of omitted similar documents (filed
herewith) to 6% Convertible Debenture incorporated by
reference to Exhibit 4.2 to the Company's quarterly
report on Form 10-QSB for the quarter ended September
30, 1999
4.5 Schedule of omitted similar documents (filed
herewith) to Warrant to purchase common stock, par
value $.001 per share, of the Company incorporated by
reference to Exhibit 4.3 to the Company's quarterly
report on Form 10-QSB for the quarter ended September
30, 1999
10.1 International Master Franchise Agreement between
Access Power, Inc. and Access Power Canada, Inc.
(filed as Exhibit 10.1 of the Company's Registration
Statement on Form SB-2 (File No. 333-65069) is hereby
incorporated by reference)
10.2 Access Power, Inc. Stock Option Plan (filed as
Exhibit 10.2 of the Company's Registration Statement
on Form SB-2 (File No. 333-65069) is hereby
incorporated by reference)
10.3 Amendment No. 1 to Stock Option Plan (filed as
Exhibit 10.3 of the Company's Registration Statement
on Form SB-2 (File No. 333-65069) 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 of the Company's
Registration Statement on Form SB-2 (File No.
333-65069) is hereby incorporated by reference)
10.5 Employment Agreement with Howard Kaskel dated July 1,
1998 (filed as Exhibit 10.5 of the Company's
Registration Statement on Form SB-2 (File No.
333-65069) 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
of the Company's Registration Statement on Form SB-2
(File No. 333-65069) is hereby incorporated by
reference)
17
<PAGE>
10.7 Internet Telephony Services Agreement dated December
14, 1998, between Access Power, Inc. and Access
Universal, Inc. (filed as Exhibit 10.7 of the
Company's Registration Statement on Form SB-2 (File
No. 333-65069) 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 of the Company's
Registration Statement on Form SB-2 (File No.
333-65069) 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 of the Company's Registration
Statement on Form SB-2 (File No. 333-65069) is hereby
incorporated by reference)
10.10 Retainer Agreement dated September 23, 1999, among
Acces Power, Inc., Tatum CFO Partners, LLP, and
Howard Kaskel (filed as Exhibit 10.1 of Access Power,
Inc.'s quarterly report on Form 10-QSB for the
quarter ended September 30, 1999, 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 of Access
Power, Inc.'s quarterly report on Form 10-QSB for the
quarter ended September 30, 1999, 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 of Access Power, Inc.'s quarterly report
on Form 10-QSB for the quarter ended September 30,
1999, 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 of Access Power,
Inc.'s quarterly report on Form 10-QSB for the
quarter ended September 30, 1999, 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 of Access Power, Inc.'s
quarterly report on Form 10-QSB for the quarter ended
September 30, 1999, 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 of Access Power, Inc.'s quarterly
report on Form 10-Q for the quarter ended September
30, 1999, 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 of Access Power, Inc.'s
quarterly report on Form 10-Q for the quarter ended
September 30, 1999, is hereby incorporated by
reference)
10.17 Schedule of omitted similar documents (filed
herewith) to Securities Purchase Agreement
incorporated by reference to Exhibit 10.2 to the
Company's quarterly report on Form 10-QSB for the
quarter ended September 30, 1999
10.18 Schedule of omitted similar documents (filed
herewith) to Warrant to purchase 6% Convertible
Debentures and common stock warrants of the Company
incorporated by reference to Exhibit 10.3 to the
Company's quarterly report on Form 10-QSB for the
quarter ended September 30, 1999
10.19 Schedule of omitted similar documents (filed
herewith) to Registration Rights Agreement
incorporated by reference to Exhibit 10.4 to the
Company's quarterly report on Form 10-QSB for the
quarter ended September 30, 1999
23.1 Consent of Parks, Tschopp, Whitcomb & Orr, dated
March 29, 2000
27.1 Financial Data Schedule (for SEC use only)
* Certain portions of this exhibit have been omitted pursuant to the grant of a
request for confidential treatment.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the last
quarter of the period covered by this report.
18
<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>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Company
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ACCESS POWER, INC.
By: /s/ Glenn A. Smith
Glenn A. Smith, Chief Executive Officer
Date: 3/29/00
In accordance with the Exchange Act, this Report has been signed below by
the following persons on behalf of the Company in the capacities set forth and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Position Date
--------- -------- ----
<S> <S> <C>
/s/ Glenn A. Smith President and Chief 3/29/00
Glenn A. Smith Executive Officer and Director
(principal executive officer)
/s/ Howard Kaskel Chief Financial Officer 3/28/00
Howard Kaskel (principal financial and
accounting officer)
/s/ Tod R. Smith Director 3/28/00
Tod R. Smith
/s/ Maurice J. Matovich Director 3/28/00
Maurice J. Matovich
</TABLE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH
REPORTS FILED PURSUANT TO SECTION 15(d) OF THE
EXCHANGE ACT BY NON-REPORTING ISSUERS
The Company is furnishing the Commission for its information in a
supplemental submission a copy of a proxy statement and form of proxy used in
connection with a special meeting of shareholders during 1999.
<PAGE>
Exhibit Index
Exhibit No. Description
----------- -----------
3.1 Composite Articles of Incorporation of the
Registrant, including all amendments.
3.2 Bylaws of the Registrant (filed as Exhibit 3.2 of the
Company's Registration Statement on Form SB-2 (File
No. 333-65069) is hereby incorporated by reference)
4.1 Form of Common Stock Certificate of the Registrant
(filed as Exhibit 4.1 of the Company's Registration
Statement on Form SB-2 (File No. 333-65069) is hereby
incorporated by reference)
4.2 6% Convertible Debenture due September 30, 2001(filed
as Exhibit 4.2 of Access Power, Inc.'s quarterly
report on Form 10-QSB for the quarter ended September
30, 1999, 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 of
Access Power, Inc.'s quarterly report on Form 10-QSB
for the quarter ended September 30, 1999, is hereby
incorporated by reference)
4.4 Schedule of omitted similar documents (filed
herewith) to 6% Convertible Debenture incorporated by
reference to Exhibit 4.2 to the Company's quarterly
report on Form 10-QSB for the quarter ended September
30, 1999
4.5 Schedule of omitted similar documents (filed
herewith) to Warrant to purchase common stock, par
value $.001 per share, of the Company incorporated by
reference to Exhibit 4.3 to the Company's quarterly
report on Form 10-QSB for the quarter ended September
30, 1999
10.1 International Master Franchise Agreement between
Access Power, Inc. and Access Power Canada, Inc.
(filed as Exhibit 10.1 of the Company's Registration
Statement on Form SB-2 (File No. 333-65069) is hereby
incorporated by reference)
10.2 Access Power, Inc. Stock Option Plan (filed as
Exhibit 10.2 of the Company's Registration Statement
on Form SB-2 (File No. 333-65069) is hereby
incorporated by reference)
10.3 Amendment No. 1 to Stock Option Plan (filed as
Exhibit 10.3 of the Company's Registration Statement
on Form SB-2 (File No. 333-65069) 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 of the Company's
Registration Statement on Form SB-2 (File No.
333-65069) is hereby incorporated by reference)
10.5 Employment Agreement with Howard Kaskel dated July 1,
1998 (filed as Exhibit 10.5 of the Company's
Registration Statement on Form SB-2 (File No.
333-65069) 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
of the Company's Registration Statement on Form SB-2
(File No. 333-65069) is hereby incorporated by
reference)
17
<PAGE>
10.7 Internet Telephony Services Agreement dated December
14, 1998, between Access Power, Inc. and Access
Universal, Inc. (filed as Exhibit 10.7 of the
Company's Registration Statement on Form SB-2 (File
No. 333-65069) 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 of the Company's
Registration Statement on Form SB-2 (File No.
333-65069) 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 of the Company's Registration
Statement on Form SB-2 (File No. 333-65069) is hereby
incorporated by reference)
10.10 Retainer Agreement dated September 23, 1999, among
Acces Power, Inc., Tatum CFO Partners, LLP, and
Howard Kaskel (filed as Exhibit 10.1 of Access Power,
Inc.'s quarterly report on Form 10-QSB for the
quarter ended September 30, 1999, 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 of Access
Power, Inc.'s quarterly report on Form 10-QSB for the
quarter ended September 30, 1999, 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 of Access Power, Inc.'s quarterly report
on Form 10-QSB for the quarter ended September 30,
1999, 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 of Access Power,
Inc.'s quarterly report on Form 10-QSB for the
quarter ended September 30, 1999, 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 of Access Power, Inc.'s
quarterly report on Form 10-QSB for the quarter ended
September 30, 1999, 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 of Access Power, Inc.'s quarterly
report on Form 10-Q for the quarter ended September
30, 1999, 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 of Access Power, Inc.'s
quarterly report on Form 10-Q for the quarter ended
September 30, 1999, is hereby incorporated by
reference)
10.17 Schedule of omitted similar documents (filed
herewith) to Securities Purchase Agreement
incorporated by reference to Exhibit 10.11 to the
Company's quarterly report on Form 10-QSB for the
quarter ended September 30, 1999
10.18 Schedule of omitted similar documents (filed
herewith) to Warrant to purchase 6% Convertible
Debentures and common stock warrants of the Company
incorporated by reference to Exhibit 10.3 to the
Company's quarterly report on Form 10-QSB for the
quarter ended September 30, 1999
10.19 Schedule of omitted similar documents (filed
herewith) to Registration Rights Agreement
incorporated by reference to Exhibit 10.4 to the
Company's quarterly report on Form 10-QSB for the
quarter ended September 30, 1999
23.1 Consent of Parks, Tschopp, Whitcomb & Orr, dated
March 29, 2000
27.1 Financial Data Schedule (for SEC use only)
* Certain portions of this exhibit have been omitted pursuant to the grant of a
request for confidential treatment.
The following composite Articles of Incorporation of Access Power, Inc. reflect
the Articles of Incorporation as filed with the Secretary of State of Florida
together with the changes instituted by Articles of Amendment dated May 23,
1997, November 19, 1998, September 29, 1999 and December 29, 1999.
ARTICLES OF INCORPORATION
OF
ACCESS POWER, INC.
The undersigned incorporator hereby forms a corporation under Chapter
607 of the laws of the State of Florida.
ARTICLE I. NAME
----------------
The name of the corporation shall be:
ACCESS POWER, INC.
The address of the principal office of this corporation shall be 61
South Roscoe Road, Ponte Vedra Beach, Florida 32082, and the mailing address of
the corporation shall be the same.
ARTICLE II. NATURE OF BUSINESS
-------------------------------
This corporation may engage or transact in any or all lawful activities
or business permitted under the laws of the United States, the State of Florida
or any other state, country, territory or nation.
ARTICLE III. CAPITALIZATION
-----------------------------
The total number of shares of capital stock which the Corporation has
the authority to issue is one hundred ten million (110,000,000). The total
number of shares of common stock which the Corporation is authorized to issue is
one hundred (100,000,000) and the par value of each share of such common stock
is one-tenth of one cent ($.001) for an aggregate par value of forty thousand
dollars ($100,000). The total number of shares of preferred stock which the
Corporation is authorized to issue is ten million (10,000,000) and the par value
of each share of such preferred stock is one-tenth of one cent ($.001) for an
aggregate par value of ten thousand dollars ($10,000). The voting powers,
designations, preferences and relative, participating, optional or other rights,
if any, and the qualifications, limitations or restricts, if any, of the
preferred stock, in one or more series, shall be fixed by one or more
resolutions providing for the issuance of such stock adopted by the
Corporation's board of directors (the "Board of Directors"), in accordance with
the provisions of the General Corporation Law of the State of Florida and the
Board of Directors is expressly vested with authority to adopt one or more such
resolutions.
1
<PAGE>
1. CREATION OF SERIES A CONVERTIBLE PREFERRED STOCK. There is hereby
created a series of preferred stock consisting of 1,200 shares and designated as
the Series A Convertible Preferred Stock, having the voting powers, preferences,
relative, participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set forth below.
2. DIVIDEND PROVISIONS. The holders of shares of Series A Convertible
Preferred Stocks shall be entitled to receive, when and as declared by the Board
of Directors out of any funds at the time legally available therefor dividends
at a par with the holders of Common Stock as if the Series A Convertible
Preferred Stock had been converted into Common Stock on the record date for the
payment of the dividend. Dividends shall be waived with respect to any series of
Series A convertible Preferred Stock shall rank on a parity with each other
share of Series A Convertible Preferred Stock with respect to dividends.
3. REDEMPTION PROVISIONS. Each share of the Series A convertible
Preferred Stock is redeemable, at the option of the Company, upon the terms and
conditions set froth herein, prior to the day the registration statement to be
filed by the Company becomes effective. On the day the registration becomes
effective, all rights of the Company to a redemption of said shares shall be
waived, as of 5 P.M. on the previous day, and any notice of redemption after
said time shall be null and void. If notice of redemption is received prior to
the time which said right expires, said shares shall be redeemable in the
following manner at a price of One Thousand Five Hundred ($1,500.00) Dollars per
share (the "Redemption Price"). The Corporation shall have the right to redeem
each Share within twenty- four (24) hours after the Notice of Conversion (as
defined in Section 5(a)) is given by a Holder with respect to such Shares. The
Corporation shall effect such redemption by payment to the Holder by wire
transfer or certified check payable to Holder on or before the Redemption Date,
which shall be the later of (i) the fifth (5th) calendar day after Notice of
Conversion or (ii) the date on which the Holder had delivered the certificates
representing the Preferred Shares proposed to be converted pursuant to Section
5(a)(1). In the event the Corporation shall not make such payment it shall be
deemed to have waived its right to redemption as to those Shares. The
Corporation shall have the right to redeem less than all of the Shares which are
subject to the Notice of Conversion.
2
<PAGE>
4. LIQUIDATION PROVISIONS. In the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the Series A
Convertible Preferred Stock shall be entitled to receive an amount equal to One
Thousand Five Hundred ($1,500.00) Dollars per share. After the full preferential
liquidation amount has been paid to, or determined and set apart for, all other
series of Preferred Stock hereafter authorized and issued, if any, the remaining
assets of the Corporation available for distribution to shareholders shall be
distributed ratably to the holders of the common stock. In the event the assets
of the Corporation available for distribution to its shareholders are
insufficient to pay the full preferential liquidation amount per share required
to be paid the Corporation's Series A Convertible Preferred Stock, the entire
amount of assets of the Corporation available for distribution to shareholders
shall be paid up to their respective full liquidation amounts first to the
Series A Convertible Preferred Stock, then to any other series of Preferred
Stock hereafter authorized and issued, all of which amounts shall be distributed
ratably among holders of each such series of Preferred Stock, and the common
stock shall receive nothing. A reorganization or any other consolidation or
merger of the Corporation with or into any other corporation, or any other sale
of all substantially all of the assets of the Corporation, shall not be deemed
to be a liquidation, dissolution or winding up of the Corporation within the
meaning of this Section 4, and the Series A Convertible Preferred Stock shall be
entitled only to (i) the right provided in any agreement or plan governing the
reorganization or other consolidation, merger or sale of assets transaction,
(ii) the rights contained in the Florida Corporation Law and (iii) the rights
contained in other Sections hereof.
5. CONVERSION PROVISIONS. The holders of shares of Series A Convertible
Preferred Stock shall have conversion rights as follows (the "Conversion
Rights"):
(a) RIGHT TO CONVERT.
(1) Each share of Series A Convertible Preferred Stock (the
"Preferred Shares") shall be convertible, at the option of its holder
pursuant to the terms set forth herein, into a number of shares of
common stock of the Company at the initial conversion rate (the
"Conversion Rate") defined below.
3
<PAGE>
The initial Conversion Rate, subject to the adjustments
described below, shall be a number of shares of common stock (rounded
to the nearest whole number equal to $1,000 divided by the lower of(i)
Sixty-five (65%) of the average Market Price of the common stock for
the five trading days immediately prior to the Conversion Date (defined
below) or (ii) 75% of closing bid price on the day of first
disbursement from escrow, increased proportionately for any reverse
stock split and decreased proportionately for any forward stock split
or stock dividend. For purposes of this Section 5(a)(1), Market Price
shall be the closing bid price of the common stock on the Conversion
Date, as reported by the National Association of Securities Dealers
Automated Quotation System (NASDAQ) or the closing bid price on the
over the counter market if other than NASDAQ, averaged over the five
trading days prior to the date of conversion.
The Holder shall notify the Corporation, by facsimile notice
to the Corporation at (904) 273-6309, copy by overnight courier to
Access Power, Inc., 10033 Sawgrass Drive West, Suite 100, Ponte Verda,
Florida 32004 of the Holder's intent to convert (the "Notice of
Conversion") in the form set forth in Section 5(a)(3) hereof, executed
by the holder of the Preferred Share(s) or a specified portion (as
above provided) hereof, and accompanied, if required by the Company, by
proper assignment hereof in blank. Such conversion shall be effectuated
by surrendering the Preferred Shares to be converted (with a copy, by
facsimile or courier, to the Company) to the Company's registrar and
transfer agent, Atlas Stock Transfer Company, 5899 S. State Street,
Salt Lake City, Utah 84107 ("Transfer Agent"). The date on which notice
of conversion (the "Conversion Date" is given shall be the date on
which the holder has delivered to the Company, by facsimile or hand
delivery, of the Notice of Conversion duly executed to the Company. The
Company shall cause the Transfer Agent to complete the issuance and
delivery of Common Shares within five (5) calendar days of receipt of
such conversion form, provided that the Company or its agent has
received the Series A Convertible Preferred Stock certificates which
are the subject of the conversion on or prior to such fifth calendar
day.
4
<PAGE>
(2) No less than 25 (or multiple thereof) shares of Series A
Convertible Preferred Stock may be converted at any one time. No
fractional shares of common stock shall be issued upon conversion of
the Series A Convertible Preferred Stock, in lieu of fractional shares,
the number of shares issuable will be rounded to the nearest whole
share.
(3) Upon receipt of a Notice of Conversion, the Corporation
shall absolutely and unconditionally be obligated to cause a
certificate or certificates representing the number of shares of Common
Stock to which the converting holder or Preferred Shares shall be
entitled as provided herein, which shares shall constitute fully paid
and nonassessable shares of Common Stock to be issued to, delivered by
overnight courier to, and received by such holder by the fifth (5th)
calendar day following the Conversion Date, unless the company has duly
redeemed the Preferred Shares which are the subject of the Notice of
Conversion in accordance with Section 3 hereof. Such delivery shall be
made at such address as a holder may designate thereof in its Notice of
Conversion or in its written instructions submitted together therewith.
In the event the Company fails to deliver the shares of Common Stock in
accordance with the terms and conditions set forth herein, the Company
shall be liable for the payment of a penalty and shall be
unconditionally obligated to pay the Converting Shareholder(s) an
additional monetary penalty of $200.00 per $10,000 converted per day
after five (5) days should the converted shares not be delivered to the
Converting Shareholder(s) as provided for in Section ________.
(4) The form of conversion Certificate shall read
substantially as follows:
The undersigned holder (the "Holder") is surrendering to
Access Power, Inc., a Florida corporation (the "Company"), one
or more certificates representing shares of Series A
Convertible Preferred Stock of the Company (the "Preferred
Stock") in connection with the conversion of all or a portion
of the Preferred Stock into shares of Common Stock, $.001 par
value per share, of the Company (the "Common Stock") as set
forth below.
1. The Holder understands that the Preferred Stock was issued
by the Company pursuant to the exemption from registration under the
United States Securities Act of 1933, as amended (the "Securities
Act"), provided by Regulation D promulgated thereunder.
5
<PAGE>
2. The Holder represents and warrants that all offers and
sales of the Common Stock issued to the Holder upon such conversion of
the Preferred Stock shall be made (a) pursuant to an effective
registration statement under the Securities Act, (b) in compliance with
Rule 144, or (c) pursuant to some other exemption from registration.
Number of Shares of Preferred Stock being converted:
--------------------------------------
Applicable Conversion Price:___________________________
Number of Shares of Common Stock Issuable:_____________
Date of conversion:____________________________________
Delivery Instructions for certificates of Common Stock and
for new certificates representing any remaining shares of
Preferred Stock;
=======================================================
=======================================================
NAME OF HOLDER:
-------------------------
-------------------------
(Signature of Holder)
(b) Adjustments to Conversion Rate
------------------------------
(1) RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. if the common
stick issuable on conversion of the Series A Convertible Preferred
Stock shall be changed into the same or a different number of shares of
any other class or classes of stock, whether by capital reorganization,
reclassification, reverse stock split or forward stock split or stock
dividend or otherwise (other than a subdivision or combination of
shares provided for above), the holders of the Series A Convertible
Preferred Stock shall, upon its conversion, be entitled to receive, in
lieu of the common stock which the holders would have become entitled
to received but for such change, a number of shares of such other class
or classes of stock that would have been subject to receipt by the
holders if they had exercised their rights of conversion of the Series
A Convertible Preferred Stock immediately before that change.
6
<PAGE>
(2) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALE OF
ASSETS. If at any time there shall be a capital reorganization of the
Corporation's common stock (other than a subdivision, combination ,
reclassification or exchange of shares provided for elsewhere in this
Section (b) or merger of the Corporation into another corporation, or
the sale of the Corporation's properties and assets as, an entirety to
any other person), then, as a part of such reorganization, merger or
sale, lawful provision shall be made so that the holders of the Series
A Convertible Preferred Stock shall thereafter be entitled to receive
upon conversion of the Series A Convertible Preferred Stock shall
thereafter be entitled to receive upon conversion of the Series A
Convertible Preferred Stock, the number of shares of stock or other
securities or property of the Corporation, or of the successor
corporation resulting from such merger, to which holders of the common
stock deliverable upon conversion of the Series A Convertible Preferred
Stock would have been entitled on such capital reorganization, merger
or sale if the Series A Convertible Preferred Stock had been converted
immediately before that capital reorganization, merger or sale to the
end that the provisions of this paragraph (b)(3) (including adjustment
of the Conversion Rate then in effect and number of shares purchasable
upon conversion of the Series A Convertible Preferred Stock) shall be
applicable after that event as nearly equivalent as may be practicable.
(3) In the event (a) the Company does not file a registration
statement under the Securities Act of 1933 covering the Common Stock
issuable upon conversion of the Series A Convertible Preferred Stock
within 30 days of the closing (the "Closing Date"), (b) the
registration statement is not declared effective within 120 days of the
Closing Date or (c) the Company does not issue the Common Shares within
the time limits set forth in the penultimate sentence of Section
5(a)(1), Conversion Rate shall be adjusted to increase the number of
shares of common stock assessable by 5%. The foregoing adjustments are
cumulative and not exclusive.
7
<PAGE>
(c) NO IMPAIRMENT. The Corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, merger, dissolution, or any other
voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying
out of all the provision of this Section 5 and in the taking of all
such actions as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Convertible Preferred
Stock against impairment.
(d) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Rate for any shares of
Series A Convertible Preferred Stock, the Corporation at its expense
shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of Series
A Convertible Preferred Stock effected thereby a certificate setting
forth such adjustment or readjustment and showing in detail the facts
upon the written request at any time of any holder of Series A
Convertible Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Rate at the time in effect, and
(iii) the number of common stock and the amount, if any, of other
property which at the time would be received upon the conversion of
such holder's shares of Series A Convertible Preferred Stock.
(e) NOTICES OF RECORD DATE. In the vent of the establishment
by the Corporation of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a cash dividend) or other
distribution, the Corporation shall mail to each holder of Series A
Preferred Stock at least twenty (20) days prior to the date specified
therein, a notice specifying the date on which any such record is to be
taken for the purpose of such dividend or distribution and the amount
and character of such dividend or distribution.
8
<PAGE>
(f) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of common stock solely for the purpose
of effecting the conversion of the shares of the Series A Convertible
Preferred Stock such number of its shares of common stock as shall from
time to time be sufficient to effect the conversion of all then
outstanding shares of the Series A Preferred Stock, and if at any time
the number of authorized but unissued shares of common stock shall not
be sufficient to effect the conversion of all then outstanding shares
of the Preferred Stock, the Corporation will take such corporate action
as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of common stock to such number of shares
as shall be sufficient for such purpose.
(g) NOTICES. Any notices required by the provisions of this
Paragraph (e) to be given to the holders of shares of Series A
Convertible Preferred Stock shall be deemed given if deposited in the
United Sate mail, postage prepaid, and addressed to each holder of
record at its address appearing on the books of the Corporation.
EXHIBIT I
CERTIFICATE OF CONVERSION
The undersigned holder (the "Holder") is surrendering to Access Power,
Inc., a Florida corporation (the "Company"), one or more certificates
representing shares of Series A Convertible Preferred Stock of the
Company (the "Preferred Stock") in connection with the conversion of
all or a portion of the Preferred Stock into shares of Common Stock,
$.001 par value per share, of the Company (the "Common Stock") as set
forth below.
1. The Holder understands that the Preferred Stock was issued
by the Company pursuant to the exemption from registration under the
United States Securities Act of 1933, as amended (the "Securities
Act"), provided by Regulation D promulgated thereunder.
9
<PAGE>
2. The Holder represents and warrants that all offers and
sales of the Common Stock issued to the Holder upon such conversion of
the Preferred Stock shall be made (a) pursuant to an effective
registration statement under the Securities Act, (b) in compliance with
Rule 144, or (c) pursuant to some other exemption from registration.
Number of Shares of Preferred Stock being converted: ________
Applicable Conversion Price: ________________________________
Number of Shares of Common Stock Issuable:___________________
Date of conversion: _________________________________________
Delivery Instructions for certificates of Common Stock and
for new certificates representing any remaining shares of
Preferred Stock;
=============================================================
=============================================================
NAME OF HOLDER:
-------------------------------
-------------------------------
(Signature of Holder)
SERIES B CONVERTIBLE PREFERRED STOCK
-------------------------------------
SERIES B CONVERTIBLE PREFERRED STOCK. There is established within the
Corporation's authorized Preferred Stock a series to be designated "Series B
Convertible Preferred Stock" consisting of four thousand (4,000) shares (the
"Series B Preferred Stock") and having the powers, preferences and other rights
and the qualifications, limitations and restrictions set forth herein. The
following is a statement of the powers, designations, preferences, privileges,
rights, qualifications, limitations and restrictions of the Series B Preferred
Stock:
10
<PAGE>
1. DIVIDENDS; OTHER DISTRIBUTIONS. The holders of the Series B
Preferred Stock shall receive no preference with respect to dividends or other
distributions (other than any distribution described in Section 2 of this
Article III) that shall be declared or paid on any of the Corporation's common
stock, par value $0.001 (the "Common Stock"), provided, however, any dividend
(including any share dividend) or other distribution on the Common Stock as
declared by the board of directors, if any, shall be made to the holders of
Common Stock and Series B Preferred Stock, pro rata, determined as of the record
date as a fraction of such dividend or distribution, the numerator of which is
the sum of the number of shares of Common Stock then held by each holder thereof
plus the number of shares of Common Stock which they then have the right to
acquire upon conversion of the shares of Series B Preferred Stock then held by
them ("Conversion Shares") and the denominator of which is the sum of the
aggregate number of shares then outstanding of (i) Common Stock, plus (ii)
Conversion Shares, plus (iii) all other Common Stock equivalents resulting from
any other series or class of Preferred Stock having rights to share in dividends
and distributions of the Company PARI PASSU with the Common Stock.
2. LIQUIDATION PREFERENCE. In the event of any liquidation,
dissolution, or winding up of the Corporation, either voluntary or involuntary,
distributions to the shareholders of the Corporation shall be made in the
following manner:
(a) Except as may be limited by (b) below, the holders of the
Series B Preferred Stock shall be entitled to receive, prior to and in
preference to any distribution of any of the assets or surplus funds of
the Corporation available for distribution to its shareholders (the
"Available Funds"), whether from capital, surplus, earnings, or
otherwise to the holders of the Common Stock or any other equity
security of the Corporation, by reason of their ownership of such stock
or equity security, the amount of $0.001 per share (the "Series B
Preference Amount"). If the amount of the Available Funds is
insufficient to permit the payment to all holders of the Series B
Preferred Stock of their full Series B Preference Amount, then all of
the Available Funds shall be distributed among the holders of the then
outstanding Series B Preferred Stock pro rata, determined by
multiplying the amount of the Available Funds by a fraction, the
numerator of which is the number of shares of Series B Preferred Stock
then held by each holder thereof and the denominator of which is the
sum of the aggregate number of shares then outstanding of (i) Series B
Preferred Stock plus (ii) all other series or classes of Preferred
Stock having liquidation rights PARI PASSU with the Series B Preferred
Stock.
11
<PAGE>
(b) If, upon the completion of the distributions contemplated
by Section 2(a) of this Article III, Available Funds remain available
for distribution by the Corporation, such remaining Available Funds, if
any, shall be distributed among the holders of Common Stock and Series
B Preferred Stock, pro rata, determined by multiplying the amount of
the remaining Available Funds by a fraction, the numerator of which is
the sum of the number of shares of Common Stock then held by each
holder thereof plus the number of Conversion Shares which they then
have the right to acquire and the denominator of which is the sum of
the aggregate number of shares then outstanding of (i) Common Stock,
plus (ii) Conversion Shares, plus (iii) all other Common Stock
equivalents resulting from any other series or class of Preferred Stock
having rights to share in the proceeds of a liquidation of the Company
PARI PASSU with the Common Stock, provided, however, that in no case
may the holders of Series B Preferred Stock receive more than the
greater of the Series B Preference Amount and the amount that would
have been distributable to them as holders of Common Stock if all
shares of Series B Preferred Stock had been converted and the Series B
Preference Amount was not payable.
(c) Written notice of liquidation stating a payment date and
the aggregate amount of the Series B Preference Amount due shall be
provided by mail, postage prepaid, or by facsimile, not less than 20
days prior to the payment date stated therein, to the record holders of
the Series B Preferred Stock, such notice to be addressed to each such
holder at its address as shown in the records of the Corporation.
3. VOTING RIGHTS. The holders of the Series B Preferred Stock shall be
entitled to vote the number of votes as is equal to the number of shares of
Common Stock into which such holder's shares of Series B Preferred Stock could
be converted at the record date for determination of the shareholders entitled
to vote on any matters, or, if no such record date is established, at the date
such vote is taken or any written consent of shareholders is solicited, and
shall have voting rights and powers equal to the voting rights and powers of the
Common Stock (except as otherwise expressly provided herein or required by law)
such votes to be counted together with all other shares of stock of the
Corporation having general voting power and not separately as a class.
4. CONVERSION. The holders of the Series B Preferred Stock shall have
conversion rights as follows (the "Series B Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series B Preferred Stock
shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share at the office of the
Corporation or any transfer agent for the Series B Preferred Stock,
into one thousand (1000) fully paid and nonassessable shares of Common
Stock (the "Conversion Rate"). No amount shall be payable by a
shareholder in respect of the conversion of any share of Series B
Preferred Stock.
12
<PAGE>
(b) MECHANICS OF CONVERSION. No fractional shares of Common
Stock shall be issued upon conversion of Series B Preferred Stock. All
shares of Common Stock (including fractions thereof) issuable upon
conversion of more than one share of Series B Preferred Stock by a
holder thereof shall be aggregated for purposes of determining whether
the conversion would result in the issuance of any fractional share.
If, after the aforementioned aggregation, the conversion would result
in the issuance of a fraction of a share of Common Stock, the
Corporation shall, in lieu of issuing any fractional shares to which
the holder would be otherwise entitled, pay cash equal to the fair
market value of such fractional share on the date of conversion, which
fair market value shall be determined in good faith by the Board of
Directors. Before any holder of Series B Preferred Stock shall be
entitled to convert the same into full shares of Common Stock and to
receive certificates therefor, such holder shall surrender the
certificate or certificates therefor, duly endorsed, at the office of
the Corporation or of any transfer agent for the Series B Preferred
Stock or the Common Stock, and shall give written notice to the
Corporation at such office that such holder elects to convert the same.
The Corporation shall, as soon as practicable thereafter, issue and
deliver at the office of the Corporation or at such transfer agent's
office to such holder of Series B Preferred Stock, (i) a certificate or
certificates for the number of shares of Common Stock to which such
holder shall be entitled as aforesaid, and (ii) cash or a check payable
to the holder of such Series B Preferred Stock in the amount of any
cash amounts payable in lieu of the conversion into fractional shares
of Common Stock. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such
surrender of the Series B Preferred Stock to be converted or delivery
of the written conversion notice, whichever is later, and the person or
persons entitled to receive the Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or
holders of such Common Stock on the date of such conversion.
(c) ADJUSTMENT TO SERIES B CONVERSION RATE. The Conversion
Rate from time to time in effect shall be subject to adjustment from
time to time (i) in case the Corporation shall at any time subdivide
the outstanding shares of Common Stock, the Conversion Rate in effect
13
<PAGE>
immediately prior to such subdivision shall be proportionately
increased, and (ii) in case the Corporation shall at any time combine
the outstanding shares of Common Stock, the Conversion Rate in effect
immediately prior to such combination shall be proportionately
decreased, effective at the close of business on the date of such
subdivision or combination, as the case may be.
5. GENERAL PROVISIONS.
(a) ISSUE TAXES. The Corporation shall pay any and all issue
and other taxes that may be payable in respect of any issue or delivery
of shares of Common Stock on conversion of Series B Preferred Stock
pursuant hereto; provided, however, that the Corporation shall not be
obligated to pay any transfer taxes resulting from any transfer
requested by any holder in connection with any such conversion or
income tax of the holder of the Series B Preferred Stock.
(b) NO RE-ISSUANCE OF SERIES B PREFERRED STOCK. No shares of
Series B Preferred Stock acquired by the Corporation by reason of
redemption, purchase, conversion or otherwise shall be reissued, and
any such shares shall be canceled, retired, and eliminated from the
shares which the Corporation shall be authorized to issue; PROVIDED,
HOWEVER, that any such redeemed or purchased shares of Series B
Preferred Stock shall be eliminated from the shares which the
Corporation shall be authorized to issue only upon the filing with the
Secretary of State of the State of Florida a certificate of amendment
of these Articles of Incorporation in compliance with the General
Corporation Law of the State of Florida."
ARTICLE IV. REGISTERED AGENT
-----------------------------
The street address of the initial registered office of the corporation
shall be 1201 Hays Street, Tallahassee, Florida 32301, and the name of the
initial registered agent of the corporation at that address is Corporation
Service Company.
ARTICLE V. TERM OF EXISTING
----------------------------
This corporation is to exist perpetually.
14
<PAGE>
ARTICLE VI. DIRECTORS
---------------------
All corporate powers shall be exercised by or under the authority of,
and the business and affairs of the corporation managed under the direction of
its Board of Directors, subject to any limitation set forth in these Articles of
Incorporation. This corporation shall have two Directors, initially. The names
and addresses of the initial members of the Board of Directors are:
Glenn A. Smith 61 South Roscoe Road
Ponte Vedra Beach, Florida
32082
Michael L. Pitts 108 Nautilus Lane
Ponte Vedra Beach, Florida
32082
ARTICLE VII. INCORPORATOR
--------------------------
The name and street address of the incorporator to these Articles of
Incorporation:
Corporate Agents, Inc.
1201 Hays Street
Tallahassee, Florida 32301
The undersigned incorporator has executed these Articles of Incorporation
on October 10, 1996.
-------------------------------
Incorporator
It's Agent, Deborah D. Skipper
ACCEPTANCE OF REGISTERED AGENT DESIGNATED
-----------------------------------------
IN ARTICLES OF INCORPORATION
----------------------------
Corporation Service Company, a Delaware corporation authorized to
transact business in this State, having a business office identical with the
registered office of the corporation named above, and having been designated as
15
<PAGE>
the Registered Agent in the above and foregoing Articles, is familiar with and
accepts the obligations of the position on Registered Agent under Section
607.0505, Florida Statutes.
By: __________________________________
It's Agent, Deborah D. Skipper
Authorized Service Representative
Corporation Service Company
Access Power, Inc.
A form of 6% Convertible Debenture due February 28, 2002 with substantially the
same terms as Exhibit 4.2 to the Company's quarterly report on Form 10-QSB for
the quarter ended September 30, 1999 is not being separately filed. This
debenture has a face amount of $2,500,000 and a discount of 20% in the
conversion formula.
Access Power, Inc.
A Warrant to purchase 500,000 shares of common stock, par value $.001 per share,
of the Company with substantially the same terms as Exhibit 4.2 to the Company's
quarterly report on Form 10-QSB for the quarter ended September 30, 1999 is not
being separately filed. This warrant has an exercise price of $2.20 per share
and expires on February 28, 2003.
Access Power, Inc.
A Securities Purchase Agreement with substantially the same terms as Exhibit
10.2 to the Company's quarterly report on Form 10-QSB for the quarter ended
September 30, 1999 is not being separately filed. This agreement is for the
purchase of $2,500,000 debentures and a warrant to purchase 500,000 shares of
common stock.
Access Power, Inc.
A Warrant to Purchase 6% Convertible Debentures and common stock warrants of the
Company with substantially the same terms as Exhibit 10.3 to the Company's
quarterly report on Form 10-QSB for the quarter ended September 30, 1999 is not
being separately filed. This agreement is for the purchase of $2,500,000
debentures and a warrant to purchase 500,000 shares of common stock.
Access Power, Inc.
A Registration Rights Agreement with substantially the same terms as Exhibit
10.4 to the Company's quarterly report on Form 10-QSB for the quarter ended
September 30, 1999 is not being separately filed. This agreement provided the
Company with an additional fifteen days to file its registration statement after
the closing of the securities purchase.
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement No. 333-76807 of Access Power, Inc., on Form S-8 of our
report dated March 9, 2000 appearing in this Annual Report on Form
10-KSB of Access Power, Inc. for the year ended December 31, 1999.
/s/ Parks, Tschopp, Whitcomb & Orr, P.A.
PARKS, TSCHOPP, WHITCOMB & ORR, P.A.
Maitland, Florida
March 29, 2000
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<NAME> ACCESS POWER, INC.
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
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