SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 2000
[_] Transition Report Under Section 13 or 15(d) of
The Exchange Act For the Transition Period from ___________ to ___________
Commission File Number 000-____________
Access Power, Inc.
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(Is Exact Name of Small Business Issuer as Specified 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)
Issuer's telephone number, including area code: (904) 273-2980
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes X
No
At August 1, 2000, there were issued and outstanding 43,275,555 shares of
common stock, par value $0.001.
Transitional Small Business Disclosure Format (check one): Yes No X
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ACCESS POWER, INC.
(A Development Stage Company)
BALANCE SHEETS
As of June 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
ASSETS 30-JUN DECEMBER 31,
------ 2000 1999
---- ----
(unaudited)
<S> <C> <C>
Current assets:
Cash $ 546,392 $ 213,885
Accounts receivable 181,058 179,410
Notes receivable 415,600 456,000
Prepaid expense 414,856 263,638
Inventory 21,800 21,800
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Total current assets 1,579,706 1,134,733
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Property and equipment, net 588,571 439,656
Other assets 10,000 12,000
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Total assets $2,178,277 $ 1,586,389
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
Accounts payable and accrued expenses $ 473,436 $ 683,011
Notes payable - 168,956
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Total current liabilities 473,436 851,967
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Long - term debt, less current portion - 207,484
Convertible debentures 2,255,000 750,000
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Total liablities 2,728,436 1,809,451
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Stockholders' equity:
Common stock, $.001 par value, authorized 100,000,000 shares,
issued and outstanding 41,293,233 and 31,248,253 shares
in 2000 and 1999 41,294 31,249
Preferred stock, $.001 par value, authorized 10,000,000 shares,
issued and outstanding none and 3952 shares in 2000 and 1999 - 4
Additional paid in capital 6,752,636 4,746,709
Deficit accumulated during the development stage (7,344,089) (5,001,024)
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Total stockholders' equity (550,159) (223,062)
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Total liabilities and stockholders' equity $2,178,277 $ 1,586,389
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</TABLE>
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ACCESS POWER, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 2000 and 1999 and the
cumulative period from October 10, 1996 (date of inception)
through June 30, 2000
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 10, 1996
2000 1999 THROUGH
(unaudited) JUNE 30, 2000
---------------- ---------------- -------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (2,343,065) $ (1,178,096) $ (7,344,089)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 102,525 162,817 655,667
Loss on disposal of property and equipment - 6,880 33,341
Stock issued for services 47,000 264,983 874,924
Stock issued for interest 26,748 14,000 46,729
Change in operating assets and liabilities: -
Accounts receivable (1,648) (21,475) (181,058)
Accounts payable and accrued expenses (209,571) 483,016 991,382
Other assets (151,218) - (438,022)
Inventory - 2,640 (21,800)
------------ ------------ ------------
Net cash used in operating activities (2,529,229) (265,235) (5,382,926)
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from sale of property and equipment - 10,050 52,320
Purchase of property and equipment (249,441) (36,502) (1,840,160)
Note receivable 40,400 (506,909) (415,600)
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Net cash used in investing activities (209,041) (533,361) (2,203,440)
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Cash flows from financing activities:
Proceeds from issuance of stock 1,942,217 907,700 5,872,274
Proceeds from issuance of notes payable 3,300,000 72,804 5,005,025
Principal payments on notes payable (2,171,440) (57,500) (2,744,541)
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Net cash provided by financing activities 3,070,777 923,004 8,132,758
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Net change in cash 332,507 124,408 546,392
Cash, at beginning of period 213,885 33,156 -
------------ ------------ ------------
Cash at end of period $ 546,392 $ 157,564 $ 546,392
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</TABLE>
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<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
For the three months and six months ended June 30, 2000 and
1999 and the cumulative period from October 10, 1996
(date of inception) through June 30, 2000
(unaudited)
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 10, 1996
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, THROUGH
2000 1999 2000 1999 JUNE 30, 2000
-------------- --------------- -------------- ------------- -------------------
<S> <C> <C> <C> <C> <C>
Revenue:
Software/hardware sales $ - $ 1,550 $ - $ 8,400 $ 223,881
Telcommunication services 108,556 11,700 254,167 19,400 478,287
------------ ------------ ------------ ----------- ------------
-
Total revenue 108,556 13,250 254,167 27,800 702,168
------------ ------------ ------------ ----------- ------------
-
Costs and expenses: -
Cost of sales - 585 - 2,640 164,605
Product development and marketing 754,298 418,254 1,406,871 645,593 3,191,764
General and administrative 508,372 284,989 1,152,249 546,283 4,504,356
------------ ------------ ------------ ----------- ------------
Total costs and expenses 1,262,670 703,828 2,559,120 1,194,516 7,860,725
------------ ------------ ------------ ----------- ------------
Loss from operations (1,154,114) (690,578) (2,304,953) (1,166,716) (7,158,557)
Other income (expense):
Interest income - - - - 2,295
Interest expense (17,501) (3,248) (38,112) (4,500) (180,947)
Loss on disposal of equpiment - - - (6,880) (6,880)
------------ ------------ ------------ ----------- ------------
Total other income (expense) (17,501) (3,248) (38,112) (11,380) (185,532)
------------ ------------ ------------ ----------- ------------
Net loss $ (1,171,616) $ (693,826) $ (2,343,065) $(1,178,096) $ (7,344,089)
============ ============ ============ =========== ============
Net loss per share $ (0.03) $ (0.03) $ (0.07) $ (0.06) $ (0.37)
============ ============ ============ =========== ============
Weighted average number of shares 39,189,807 25,825,159 37,639,055 20,457,552 19,968,684
============ ============ ============ =========== ============
</TABLE>
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<PAGE>
A. BASIS OF PRESENTATION --------------------- Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed and omitted
pursuant to such rules and regulations, although management believes the
disclosures are adequate to make the information presented not misleading. These
interim financial statements should be read in conjunction with the Company's
annual report and most recent financial statements included in its report on
Form 10-KSB for the year ended December 31, 1999 filed with the Securities and
Exchange Commission. The interim financial information included herein is
unaudited; however, such information reflects all the adjustments (consisting
solely of normal recurring adjustments), which are, in the opinion of
management, necessary for a fair statement of results of operations and cash
flows for the interim periods. The results of operations for the period ended
June 30, 2000 are not necessarily indicative of the results to be expected for
the full year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND NOTES
APPEARING ELSEWHERE IN THIS REPORT.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The statements contained in the section captioned Management's Discussion
and Analysis of Financial Condition and Results of Operations that are not
historical are "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These forward-looking statements represent the
Company's present expectations or beliefs concerning future events. The Company
cautions that such forward-looking statements involve known and unknown risks,
uncertainties, and other factors which may cause the actual results,
performance, or achievements of the Company to be materially different from any
future results, performance, or achievements expressed or implied by such
forward-looking statements. Such factors include, among other things, the
uncertainty as to our ability to obtain financing on acceptable terms to finance
our operations and growth strategy, acceptance of our technology and services in
the market place, telecommunications industry trends towards solutions not
addressed by our business, increasing competition in the information technology
services market, the ability to hire, train and retain sufficient qualified
personnel, and the ability to develop and implement operational and financial
systems to manage our growth.
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.
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<PAGE>
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 from 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 have developed a new service called FreeWebCall.com, which began during
the third quarter of 2000. FreeWebCall.com provides customers with free
PC-to-phone and PC-to-PC calling. The PC-to-PC service is global and the network
will initially support PC-to-phone calls from anywhere in the world to a regular
phone in the United States, Canada, or the United Kingdom. We sell
advertisements and display them to our customers while they log-in to the
network and use the service for their long distance calling.
We intend to expand our network and customer base internationally through
affiliates and other business relationships, such as the relationship defined by
our agreement with Lycos-Bertelsmann. We believe 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.
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<PAGE>
MARKETING
Currently, our sales initiative is directed toward FreeWebCall.com and
Net.Caller PC-to-Phone service customers. FreeWebCall.com will be promoted by a
major advertising campaign managed by an outside advertising agency. The
initial campaign will include radio, billboard, and web-site advertising in
major markets and on major sites. Our Net.Caller marketing efforts focus on
business and marketing partnerships such as with Internet Service Providers
("ISPs") and 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.
RAISING CAPITAL
We sold 6% convertible debentures in the amount of $800,000 in January of
2000 and $2,500,000 in February of 2000 to an investor. In addition, the
investor purchased a warrant to purchase an additional $2,500,000 of debentures
on the same terms.
PERIOD ENDED JUNE 30, 2000 COMPARED TO PERIOD ENDED JUNE 30, 1999
REVENUES AND COSTS OF REVENUES. Revenues increased $95,306 from $13,250 to
$108,556 in the three months ended June 30, 2000 compared to the same period in
1999. Revenues increased $226,367 to $254,167 from $27,800 in the six months
ended June 30, 2000 compared to the prior year. These increases were the result
of sales of our Net.caller checkservice which we began to offer April of 1999.
Software sales decreased from $1,550 to zero and $8,400 to zero in the three and
six months periods ended June 30,2000 compared to the prior year because we
concentrated on providing our Net.Caller service instead of reselling software.
EXPENSES. Product development and marketing expenses were $754,298 for the
three months ended June 30, 2000, an increase of $336,044, or 80%, from $418,254
for the same three months of the prior year. Telephone charges represented
$237,949 of this increase and marketing and public/investor relations
represented $147,742 of this increase. For the six months ended June 30,2000,
product development and marketing increased $750,918, or 118%, to $1,406,871.
Telephone charges represented $521,270 and marketing and public/investor
relations represented $226,758 of this increase. General and administrative
expenses increased $223,383, or 78%, to $508,372 in the three months ended June
30, 2000 from $284,989 for the same period in the prior year. Payroll and
outside staffing services represented $205,909 of this increase. For the six
months ended June 30,2000, general and administrative expenses increased
$605,966, or 111%, to $1,152,249. Payroll and outside staffing represented
$231,744 of this increase and finder's fees on the capital raises accounted for
$350,000 of the increase.
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 $5,872,274 from the sale of common stock
and preferred stock, and we have borrowed approximately $5,005,025 from
investors and stockholders. Funds from these sources have been used as working
capital to fund the build-out of our network and for internal operations,
including the purchases of capital equipment.
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<PAGE>
We generated negative cash flow from operating activities for the period
from inception (October 10, 1996) through June 30, 2000. We realized negative
cash from operating activities for the six months ended June 30, 2000 of
($2,529,229) compared to negative cash from operating activities of ($265,235),
primarily due to higher net loss and faster payments to vendors than previously.
Investing activities for the period from inception through June 30, 2000
consisted primarily of equipment purchases to build out the network. Investing
activities in equipment in the six months ended June 30, 2000 were $249,441 and
were negligible in the same period ended June 30, 1999.
The timing and amount of our capital requirements will depend on a number
of factors, including demand for our products and services and the availability
of opportunities for international expansion through affiliations and other
business relationships.
We expect to invest approximately $4,000,000 over the next twelve months in
capital equipment and software for network expansion. We are performing ongoing
cost benefit analysis to ensure that any existing underutilized equipment is
made available for redeployment to delay the necessity to acquire new equipment.
We raised $100,000 in November of 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 of 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 of 1998 from the sale of 25 shares of Series
A Preferred Stock for $1,000 per share. In connection with this sale, we also
paid a professional service fee of $2,000 in cash.
We raised $75,000 in January of 1999 from the sales of an aggregate of 75
shares of Series A Preferred Stock for $1,000 per share. In connection with one
of these sales, we also issued 27,777 shares of common stock as a finder's fee
and recognized expense of $7,500 and an increase to capital stock of the same
amount. We received $150,000 as a good faith deposit with the letter of intent
and issued 1,500,000 shares of common stock in return to the investor.
In April of 1999, we issued 512,000 shares of common stock in exchange for
a debt repayment and the interest due on the debt. We issued 2,630,000 shares of
common stock upon the exercise of employee stock options for $1,257,100. In
September of 1999, we issued $1,000,000 of 6% convertible debentures. We issued
$200,000 of 6% convertible debentures in December of 1999, $800,000 of 6%
convertible debentures in January of 2000, and $2,500,000 of 6% convertible
debentures in February of 2000.
Our financing activities for the six months ended June 30, 2000, provided a
net total of $3,070,777. Cash at the end of that period was $546,392. As of
August 1, 2000, we had cash of $341,388 and working capital of $872,690.
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<PAGE>
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 business relationships.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 Financial Data Schedule.
(b) No Reports on Form 8-K were filed during this period
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Company caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ACCESS POWER, INC.
By: /s/ Glenn A. Smith Date: August 10, 2000
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Glenn A. Smith
President
/s/ Howard L. Kaskel Date: August 10, 2000
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Howard L. Kaskel
Chief Financial Officer
(principal financial and accounting officer)
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EXHIBIT INDEX
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EXHIBIT NO. DESCRIPTION
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27 Financial Data Schedule
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