ACCESS POWER INC
Filing Type: 10KSB40
Description: Annual Report
Filing Date: Apr 01, 2002
Period End: Dec 31, 2001
Primary Exchange: Over the Counter Bulletin Board
Ticker: ACCR
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Table of Contents
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10KSB40/A OTHERDOC
PART I.........................................................................2
ITEM 1.........................................................................2
ITEM 2.........................................................................4
ITEM 3.........................................................................4
ITEM 4.........................................................................5
PART II........................................................................5
ITEM 5.........................................................................5
Table 1........................................................................6
ITEM 6.........................................................................7
ITEM 7.........................................................................9
ITEM 8.........................................................................9
PART III.......................................................................9
ITEM 9.........................................................................9
ITEM 10.......................................................................10
Table 2.......................................................................11
Table 3.......................................................................11
ITEM 11.......................................................................12
Table 4.......................................................................12
Table 5.......................................................................12
Balance Sheet.................................................................17
Income Statement..............................................................18
Table 8.......................................................................19
Table 9.......................................................................20
Cash Flow Statement...........................................................21
Table 11......................................................................24
Table 12......................................................................25
Table 13......................................................................27
Table 14......................................................................27
EX-10 OTHERDOC
Table 15......................................................................30
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
/X/ Annual Report Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 2001
/ / Transition Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Commission File Number 333-65069
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. $19,645
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 16, 2002 there were 96,624,599 shares of Common Stock
outstanding held by non-affiliates of the issuer, with an aggregate value of
$1,932,492 (based upon a value of $0.02 per share, the average of the high and
low bid price of the Common Stock on March 16, 2002)
At March 16, 2002, there were issued and outstanding
109,370,099 shares of Common Stock.
Transitional Small Business Disclosure Format (check one): Yes / / No /x/
DOCUMENTS INCORPORATED BY REFERENCE
None.
1
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
Some of the statements in this annual report under
- ITEM 1. DESCRIPTION OF BUSINESS, and
- ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS,
and elsewhere in this annual report are "forward-looking statements."
Forward-looking statements include, among other things, statements about the
competitiveness of the telecommunications industry, our plans and objectives for
future operations, the likelihood of our success in developing and expanding our
business, potential regulatory obligations, and other statements that are not
historical facts. The forward-looking statements included herein are based upon
a number of assumptions and estimates, which are inherently subject to
significant uncertainties, many of which are beyond our control. When used in
this annual report, the words "anticipate," "believe,", "estimate," or similar
expressions generally identify forward-looking statements. Because
forward-looking statements involve risks and uncertainties, there are important
factors that could cause actual results to differ materially from those
expressed or implied by the forward-looking statements.
In evaluating these statements, you should specifically consider various
factors, including the risks outlined in this document and in our former
registration statements or future registration statements. These factors may
cause our actual results to differ materially from any forward-looking
statement.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Overview
Formed in 1996, Access Power, Inc. provides collaboration services to the
consumer and business markets and has been a pioneer provider of global
Internet-based communications for voice and multi-media applications,
integrating the Internet and traditional telephony. As of March 1, 2002 the
Company retained 6 full time, and 1 part time, employees. In addition, certain
aspects of Access Power's software development efforts are outsourced.
The Company's consumer-oriented web portal, FreeWebCall.com(TM), offers a
suite of PC-to-PC collaboration services including audio, text chat, video
conferencing, document sharing and program sharing. The offering of PC-to-Phone
services, offered through FreeWebCall.com and e-button(TM), to new customers,
has recently been suspended in response to market conditions.
PowerConferenceCall(TM), scheduled for launch during the second quarter of
2002, is a business-oriented audio conferencing service. The introduction of
PowerConferenceCall marks a focused expansion into the business-oriented segment
of the collaboration industry. Initially, this service will provide audio
conferencing, the largest portion of the collaboration market, utilizing the
public switched telephone network (PSTN). Longer term, we believe that the
growth of the market will continue to shift to more elaborate product suites
that will draw increasingly upon Internet-based features, possibly including
even the audio component of the conference. We will promote and service this
shift through an evolving integration of voice and data communications
technologies, drawing upon our background in the Internet-based communications
business.
Industry Background
The collaboration industry has been growing in both the consumer and
business segments. Traditional telephony technology is being combined with
evolving and increasing capabilities of Internet-based technologies,
establishing a dynamic infrastructure to support consumer and business
communication needs. The capabilities of these technologies and the increasing
acceptance and need for virtual collaboration have contributed to considerable
growth in the collaboration industry.
2
Historically, long distance telephone services have been offered through
PSTN using traditional telephone lines, a well-established and quality service.
In recent years, however, the Internet's developing technologies, unprecedented
popularity, and commercialization have accelerated the integration of
technologies involving computers and telephones.
This commercial integration has led to a new sector in the communications
industry, generally referred to as computer telephony or Internet telephony,
that has developed a less expensive and more workable method of
telecommunication over the Internet. Companies that offer Internet telephony
services and products are generally referred to as Internet telephony service
providers. Because the global marketplace is becoming familiar with the Internet
and its value as a communications mechanism, companies have invested millions of
dollars to develop new and enhanced applications to improve the service quality
and lower implementation costs of Internet telephony.
Internet telephony has certain advantages over traditional long distance
telephone services. First, voice and message traffic through Internet telephony
systems is less expensive than traditional telephone systems because Internet
telephony services are not subject to the tariffs affecting traditional
telephone services. Also, the Internet protocol telephony network routes
transmissions using packet-based switching that is less expensive to deploy and
allows for more efficient use of the capacity that exists in the communications
infrastructure. Second, Internet protocol telephony has superior capability than
traditional telecommunications technology for innovative features such as
interactive document and data sharing and multi-media data transmissions.
Despite these advances in Internet-based communications, the business
segment in particular has continued to utilize the traditional PSTN due to the
need for high voice transmission quality and reliability, especially for
multi-point conferencing.
Access Power Solutions and Strategies
Access Power provides separate solutions to the consumer and business
market segments.
Consumer Market
For consumers, we have historically provided PC-to-Phone and PC-to-PC
services primarily through FreeWebCall.com, a sponsor-supported product that
charges customers for long distance telephone usage for the PC-to-Phone
component. FreeWebCall.com customers' experience is supported by a
standards-based solution featuring Microsoft's NetMeeting software and Cisco
Systems hardware.
FreeWebCall.com reached a subscriber base over 500,000. This subscriber
base has fallen to approximately 30,000 reflecting the increasing availability
of inexpensive or free services from competitors. In response, we have suspended
processing new orders for FreeWebCall.com PC-to-Phone.com.
Business Segment
Access Power's products have historically been consumer-oriented, with
relatively limited product offerings, such as e-button, aimed at the business
segment. We are introducing a new product, PowerConferenceCall, announced in
March, 2002 and scheduled for launch in the second quarter of 2002 that is
targeted at the business community. PowerConferenceCall is an audio
teleconferencing service that utilizes and enhances the PSTN, bridging multiple
lines together, managing audio quality and providing conferencing features not
typically available on the traditional PSTN. This service is normally used by
business customers who pay for the service primarily on a per minute per line
basis. Feature sets apply to how the call can be managed by participants (e.g.,
self-muting) and hosts (e.g., recording segments of the call). Calls can be
scheduled, which enables certain features, such as system notifications and
reminders, or they can be initiated on demand, using pre-assigned toll-free
numbers and access codes.
3
The scheduled launch of PowerConferenceCall will expand our collaboration
presence in the business community. The business collaboration market is
substantial and we intend to establish ourselves in this market segment with
differentiated teleconferencing services. This service launch will increase our
utilization of the established PSTN for audio teleconferencing, which is the
technology that currently comprises most of the business collaboration market.
To the extent growth in the business collaboration industry shifts to more
elaborate product suites that draw increasingly upon Internet-based features, we
will have established an expanded relationship with that segment and will be
prepared to promote and support the evolving technologies and services.
This business segment of the collaboration market is well-established and
is growing rapidly. As a result there is a considerable base of well-established
competitors. These competitors fall primarily into two groups: 1) Traditional
telephone companies who also provide conferencing services; 2) Conference
Service Providers who specialize in conferencing services. Our strategy is to
compete with both groups on the basis of ease of use, features and overall
value, proactively selling our services to small and medium sized business in
selected business services markets that we believe are most likely to respond to
our value proposition.
ITEM 2. PROPERTY
The Company headquarters, executive offices and customer service center are
located in facilities consisting of approximately 3,000 square feet in a 13,500
square foot office building in Ponte Vedra Beach, Florida. The lease on the
space started in September 1997 and includes two successive extension options;
the first extension option was exercised on April 1, 2000. The Company is paying
approximately $5,000 per month rent under this lease which expires August 15,
2002. The Company believes the office space is adequate for its current needs
and could easily be replaced with other suitable accommodations.
The Company maintains its servers and network equipment through co-location
arrangements with local service providers. These facilities are climate
controlled and offer the necessary telephone, internet and electrical power
services. Providers of these services are available from more than one source.
ITEM 3. LEGAL PROCEEDINGS
Access Power is a party to two legal proceedings arising in the course of
its business. These proceedings are described below. Management recognizes the
uncertainties of litigation and the possibility that one or more adverse rulings
could materially impact operating results. However, although no assurances can
be given, Access Power believes, based on the nature of and Access Power's
understanding of the facts and circumstances which give rise to such actions and
claims, that the ultimate resolution of these items, are not likely to have a
materially adverse effect on Access Power's financial position.
4
In February of 2002, Sunrise International Leasing Corporation (the
Plaintiff) filed suit in Hennepin County District Court in the State of
Minnesota against Access Power (the Defendant). The Plaintiff is a leasing
organization, which leased equipment to Defendant. Plaintiff alleges that
Defendant defaulted on its lease payments and is seeking the return of the
leased equipment, along with $54, 645.55 plus expenses. Defendant is currently
in negotiations with the Plaintiff in this matter.
In February of 2002 Business Telecom, Inc (the Plaintiff) filed suit in St.
Johns County District Court in the State of Florida against Access Power (the
Defendant). The Plaintiff is a telecommunications service provider. The
Plaintiff is seeking $608,708.52 plus interest and court costs for services
related to a 1999 agreement between the parties. The Defendant believes it has
strong legal and factual defenses, and intends to vigorously contest the claim.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None during 4th quarter - see Part II Item 5 for Voting held March 7, 2001.
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
OTC electronic bulletin board under the symbol "ACCR" on a limited and sometimes
sporadic basis. Quoting began in December of 1997. The reported high and low bid
prices for the common stock are shown below for the indicated periods through
December 31, 2001. The prices presented are bid prices that represent prices
between broker-dealers and do not include retail mark-ups and mark-downs or any
commission to the broker-dealer. The prices do not necessarily reflect actual
transactions. As of December 31, 2001 there were approximately 352 shareholders
of record of our common stock.
Bid
---
Low High
--- ----
1998
----
First Quarter $0.81 $1.38
Second Quarter $1.38 $4.06
Third Quarter $0.53 $2.19
Fourth Quarter $0.22 $0.75
1999
----
First Quarter $0.08 $0.33
Second Quarter $0.12 $1.56
Third Quarter $0.30 $0.79
Fourth Quarter $0.20 $0.97
2000
----
First Quarter $0.37 $3.47
Second Quarter $0.43 $1.43
Third Quarter $0.22 $0.47
Fourth Quarter $0.09 $0.29
2001
----
First Quarter $0.05 $0.13
Second Quarter $0.03 $0.05
Third Quarter $0.02 $0.03
Fourth Quarter $0.02 $0.08
5
At a special meeting on March 7, 2001, our shareholders approved an
increase in our authorized capital stock to 500,000,000 shares of common stock,
$0.001 par value, and 10,000,000 shares of preferred stock, $0.001 par value. Of
the preferred stock, 1,200 shares have been designated as Series A Convertible
Preferred Stock and 4,000 shares have been designated as Series B Convertible
Preferred Stock. Of the preferred stock, none is outstanding. The following
summary of our capital stock does not purport to be complete and is qualified in
its entirety by reference to our Amended and Restated Articles of Incorporation
and Amended and Restated Bylaws, which are included as exhibits to the
Registration Statement that became effective December 6, 2001, and the
applicable provisions of the Florida Business Corporation Act.
Previous to March 7, 2001, we had issued 23,534,500 shares of common stock
to Grandview Court, LLP for an aggregate of $1,149,171. The shares were issued
as follows:
Date Number of Shares Price
---- ---------------- -----
1/21/01 2,222,222 $0.045
1/19/01 17,014,778 $0.045
2/12/01 4,297,500 $0.0657
-------------
23,534,500
Subsequent to our SB2 Registration becoming "effective" on 12/06/01, through
12/31/01 we issued 816,550 shares of common stock to Grandview Court, LLP for an
aggregate of $16,333.
12/12/01 121,650 $0.029
12/17/01 416,100 $0.028
12/19/01 125,000 $0.025
12/24/01 114,800 $0.025
12/27/01 39,000 $0.025
--------
816,550
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 DOCUMENT.
Operational Background
Formed in 1996, Access Power, Inc. provides collaboration services to the
consumer and business markets and has been a pioneer provider of global
Internet-based communications for voice and multi-media applications,
integrating the Internet and traditional telephony.
The Company's consumer-oriented web portal, FreeWebCall.com(TM), offers a
suite of PC-to-PC collaboration services including audio, text chat, video
conferencing, document sharing and program sharing. PC-to-Phone services,
offered through FreeWebCall.com and e-button(TM), are currently not being
offered to new customers in response to market conditions.
6
PowerConferenceCall(TM), scheduled for launch during the second
quarter of 2002, is a business-oriented audio conferencing service. The
introduction of PowerConferenceCall represents an expansion into the
business-oriented segment of the collaboration industry. Initially, this service
will provide audio conferencing, the largest portion of the collaboration
market, utilizing the public switched telephone network (PSTN). Longer term, we
believe that the growth of the market will continue to shift to more elaborate
product suites that will draw increasingly upon Internet-based features,
possibly including even the audio component of the conference. We will promote
and service this shift through an evolving integration of voice and data
communications technologies, drawing upon our background in the Internet-based
communications business.
Twelve Months Ended December 31, 2001 Compared To Twelve Months Ended December
31, 2000
REVENUES AND COSTS OF REVENUES
Total revenues for the twelve months ended December 31, 2001 decreased
$322,000 or 94% due to the decreased demand for the Net.Caller product that
offered flat rate calling to any telephone in a number of countries from any PC
worldwide. The company began marketing FreeWebCall.com in response to this
erosion, however market conditions limited sponsor-based revenue streams and,
for PC-to-Phone, subscriber-based revenue did not substantially develop.
Consequently, the offering of PC-to-Phone service portion of FreeWebCall to new
customers was subsequently suspended (in March, 2002). FreeWebCall.com PC-to-PC
service continues to operate without charge to subscribers.
A new product, PowerConferenceCall, is scheduled for launch in the second
quarter of 2002; this product is aimed at the business segment of the virtual
collaboration market. In this market, revenue is typically generated solely from
the subscriber without any reliance upon sponsor-based revenue streams. (See
additional information on this product under Part I, Item 1. Description of
Business.)
COSTS and EXPENSES (from Operations)
Operating Costs and Expenses decreased about $1.7 million, or 23%,
generally in response to lower business volumes. About two-thirds of the
decrease is associated with two expense categories: Telecommunications expenses
decreased about $0.6 million reflecting lower business volumes; Professional
services decreased about $0.5 million, which includes fees for securities
financing services. Various other expense categories contribute to the decrease,
including Public Relations, Affiliate Commissions, Office Expense, Payroll
Expense and Interest Expense, all reflecting generally lower business volumes.
Operating Costs and Expenses may increase generally in 2002, the extent of
which is tied most closely to the business volumes generated for
PowerConferenceCall. Examples of expense categories required to support this
product include Software Development, Depreciation on Hardware,
Telecommunications as well as Sales, Administrative and Technical Staff.
OTHER INCOME and EXPENSE
Other Expense (net) decreased about $2.1 million, or 85%, reflecting lower
interest costs associated with the conversion of Debentures (see Note 9 to
Financial Statements).
7
No significant Other Income or Expenses are anticipated in the near future
for 2002.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations through the proceeds
from the issuance of equity securities and loans from stockholders and others.
To date, we have raised approximately $4,340,000 from the sale of common stock
and preferred stock, and have borrowed approximately $3,958,000 from investors
and stockholders. Funds from these sources have been used as working capital to
fund the build-out of our network and for internal operations, including the
purchases of capital equipment.
We generated negative cash flow from operating activities for the period
from inception (October 10, 1996) through December 31, 2001. We realized
negative cash from operating activities for the year ended December 31, 2001, of
($1,531,733) compared to negative cash from operating activities of ($3,145,019)
for the year 2000. Investing activities for the period from inception through
December 31, 2001 consisted primarily of equipment purchases to build out the
network.
The timing and amount of our capital requirements will depend on a number
of factors, including demand for our products and services. At December 31,
2001, we had $3.2 million in accounts payable and accrued expenses. We signed an
amended and restated investment agreement with Grandview Court, LLC, a Cayman
Islands limited liability company, on September 19, 2001, for the future
issuance and purchase of shares of our common stock. The investment agreement
establishes what is sometimes referred to as an equity line of credit.
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 in June 1999. We issued $1,000,000 of 6%
convertible debentures in September of 1999 and $200,000 of 6% convertible
debentures in December of 1999.
We issued $800,000 of 6% convertible debentures in January of 2000,
$2,500,000 of 6% convertible debentures in February of 2000, $200,000 of 6%
convertible debentures in August of 2000, and $100,000 of 6% convertible
debentures in September of 2000.
We issued 19,237,000 shares of common stock in January 2001 and 4,297,500
shares of common stock in February 2001, both for cash. We issued 650,000 shares
of common stock in March 2001 in settlement of a lawsuit.
We issued 1,500,000 shares in May 2001 to secure obligations under an
investor relations agreement. In September 2001, we agreed to transfer all
rights to the shares to the service provider. We also issued options for 200,000
shares to the provider.
8
In December, 2001, we issued 816,550 shares of common stock to Grandview
Court, LLP for an aggregate of $16,333, pursuant to the equity line of credit
executed in September, 2001; we have issued additional common shares in 2002 and
expect to continue issuing shares under that agreement.
Our financing activities for the twelve months ended December 31, 2001
provided a net total of $1,368,046.
II-2
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 16, 2001 are as follows:
Name Age Position
---- --- --------
Glenn A. Smith 46 Chief Executive Officer
and Director
Bradley W. Benton 49 President, Chief Financial Officer and
Director
Maurice J. Matovich 42 Chief Operations Officer and Director
Tod R. Smith 40 Chief Information Officer, General
Counsel and Director
Ron Tregaskis 50 Chief Technology Officer and Director
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.
Bradley W. Benton joined Access Power on February 1, 2002 as President and
Chief Financial Officer. Mr. Benton led 2 telecommunications-based businesses;
one as Executive Director for an AT&T business unit; another as National
Director with PricewaterhouseCoopers. He also has extensive experience managing
consulting engagements as a Principal Consultant for PricewaterhouseCoopers in
the Customer Relationship Management industry as. He also has held several
senior financial management positions, including Controller and CFO
responsibilities for AT&T's emerging cellular business.
9
Howard L. Kaskel served as the Chief Financial Officer for Access Power
from 1998 through January 2002, as a limited partner with Tatum CFO Partners,
LLP, a partnership of career chief financial officers.
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.
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.
Ron Tregaskis was appointed Chief Technology Officer in March, 2002. Prior
to joining Access Power as Senior Vice President in 1997, Mr. Tregaskis was an
ITS Project Manager at Matrixx Marketing, where he was responsible for the
development and maintenance of employee care systems. Previously, he was a
senior systems analyst for AT&T where he gained extensive experience with
employee health and welfare systems. During his military service with the US
Navy, he was heavily involved in computer and telecommunications systems.
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 years ended
December 31, 1999, 2000, and 2001 with respect to the Chief Executive Officer
and the Chief Financial Officer (collectively, the "Named Executive Officers"):
Long-Term
Compensation
Annual Compensation Awards
Name and Principal Position Year Salary Outstanding Securities
Underlying Options (#)
--------------------------- ---- ------ ---------------------------------
Glenn A. Smith 2001 $96,000 4,050,000
Chief Executive Officer 2000 96,000 4,650,000
1999 96,000 4,700,000
Howard Kaskel, 2001 108,000 893,000
Chief Financial Officer 2000 108,000 1,094,000
1999 113,750 1,205,500
From time to time, in 2000 and 2001 and continuing into 2002, the company has
deferred and will continue to defer, the payment of compensation to its "Named
Executive Officers" and to other officers of the company.
STOCK OPTIONS
There were no options to purchase Common Stock granted to the Named
Executive Officers during the year ended December 31, 2001. The Company did not
grant any stock appreciation rights in 2001.
10
The following table summarizes the number and value of unexercised options
held by the Named Executive Officers as of December 31, 2001. The Chief
Executive Officer did not exercise any options in the year ending December 31,
2001.
FISCAL YEAR-END OPTION VALUES
Number of Securities
Underlying Unexercised Value of Unexercised In-The-Money
Options/SAR at FY-End (#) Options/SARs at FY-End ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------------------- -------------------------
Glenn A. Smith 200,000 / 0 (1)
3,500,000 / 0 (1)
100,000 / 0 (1)
250,000 / 0 (1)
Howard Kaskel 150,000 / 0 (1)
518,000 / 0 (1)
37,500 / 0 (1)
187,500 / 0 (1)
(1) At December 31, 2001, there were no unexercised stock options that were
in-the-money.
EMPLOYMENT AGREEMENTS
The Company had entered into retainer and employment agreements with Howard
Kaskel, most recently on June 29, 2001. The agreement most recently provided
that Mr. Kaskel will serve as Chief Financial Officer of the Company on a
part-time basis (two days per week) for a base salary of $6,000 per month.
Additional days are paid at the rate of $1000 per day. The agreement terminated
with Mr. Kaskel's resignation on January 25, 2002. 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.
11
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
11,484,500 shares of Common Stock have been granted under the Plan and were
outstanding, including options for 4,050,000 shares of Common Stock issued to
Glenn A. Smith and options for 893,000 shares of common stock issued to Howard
L. Kaskel. Mr. Smith's options have an exercise price of $0.11 per share for
4,100,000 shares, $0.54 per share for 100,000 shares, $0.22 per share for
200,000 shares and $0.51 per share for 250,000. Mr. Kaskel's options have an
exercise price of $0.22 per share for 150,000 shares, $0.11 per share for
518,000 shares, $0.54 per share for 37,500 shares, and $0.51 per share for
187,500 shares.
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 16, 2002, 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: The percentages below are calculated based upon 109,370,099
shares outstanding as of March 16, 2002.
Name and Address of Amount and Nature of Percent of Shares
Beneficial Owner* Beneficial Owner Outstanding**
----------------- ---------------- -------------
Glenn A. Smith, CEO 8,874,500(1) 7.82%
Tod Smith, CIO 4,540,000(2) 4.08%
Maurice Matovich, COO 4,069,000(3) 3.66%
Bradley W. Benton, Current CFO 2,000,000 1.83%
Howard L. Kaskel, Prior CFO 1,105,000(4) 1.00%
Ronald Tregaskis 1,080,000(5) 0.99%
All Directors and Executive 21,663,500(6) 17.54%
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.
12
(1) Includes 10,400 shares of Common Stock held for a minor child and 4,050,000
shares subject to presently exercisable options.
(2) Includes 1,900,000 shares subject to presently exercisable options.
(3) Includes 1,800,000 shares subject to presently exercisable options.
(4) Includes 893,000 shares of Common Stock subject to presently exercisable
options.
(5) Includes 75,000 shares of Common Stock subject to presently exercisable
options.
(6) Please see footnotes (1) through (3) and (5). Shares of Mr. Kaskel not
included as he had resigned prior to March 16, 2002.
ITEM 12. 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.
Exhibit
Number Description of Exhibit
--------------------------------------------------------------------------------
3.1 Amended Articles of Incorporation of Access Power, Inc. (filed as
Exhibit 3.1 to Access Power, Inc.'s quarterly report on Form 10-QSB for
the quarter ended September 30, 1999 (the "10-Q") and is hereby
incorporated by reference)
3.2 Bylaws of the Registrant (filed as Exhibit 3.2 to Access Power, Inc.'s
annual report on Form 10-KSB for the year ended December 31, 1999 (the
"10-K") and is hereby incorporated by reference)
4.1 Form of common stock Certificate of the Registrant (filed as Exhibit
4.1 to the 10-K and is hereby incorporated by reference)
4.2 6% Convertible Debenture due September 30, 2001 (filed as Exhibit 4.2
to the 10-Q and is hereby incorporated by reference)
4.3 Warrant to purchase common stock, par value $0.001 per share, of Access
Power, Inc. (filed as Exhibit 4.3 to the 10-Q and is hereby
incorporated by reference)
4.4 Warrant to purchase common stock, par value $0.001 per share of Access
Power, Inc. dated November 13, 2000 (filed as Exhibit 4.4 to Access
Power. Inc.'s Registration Statement on Form SB-2 (File No. 333-51836
(the "2000 SB-2") and is hereby incorporated by reference)
10.1 International Master Franchise Agreement between Access Power, Inc. and
Access Power Canada, Inc. (filed as Exhibit 10.1 to Access Power,
Inc.'s Registration Statement on Form SB-2 (File No. 333-65069) (the
"1999 SB-2") and is hereby incorporated by reference)
10.2 Access Power, Inc. Stock Option Plan (filed as Exhibit 10.2 to the 1999
SB-2 and is hereby incorporated by reference)
10.3 Amendment No. 1 to Stock Option Plan (filed as Exhibit 10.3 to the 1999
SB-2 and is hereby incorporated by reference)
10.4(a) Employment Agreement with Howard Kaskel dated July 1, 1998 (filed as
Exhibit 10.5 to the 1999 SB-2 and is hereby incorporated by reference)
13
10.4(b) Employment Agreement with Howard Kaskel dated June 29, 2001 (filed as
Exhibit 10 to the Form 10-QSB for the quarter ended June 30, 2001
and is hereby incorporated by reference)
10.5 Agreement to terminate Master Franchise Agreement between Access Power,
Inc. and Access Power Canada, Inc. dated December 11, 1998 (filed as
Exhibit 10.6 to the 1999 SB-2 and is hereby incorporated by reference)
10.6* Internet Telephony Services Agreement dated December 14, 1998, between
Access Power, Inc. and Access Universal, Inc. (filed as Exhibit 10.7 to
the 1999 SB-2 and is hereby incorporated by reference)
10.7 Office Lease Agreement between Douglas Partnerships II, and Access
Power, Inc. dated August 1, 1997 (filed as Exhibit 10.9 to the 1999
SB-2 and is hereby incorporated by reference)
10.8 Retainer Agreement dated September 23, 1999, among Access Power, Inc.,
Tatum CFO Partners, LLP, and Howard Kaskel (filed as Exhibit 10.1 to
the 10-Q and is hereby incorporated by reference)
10.9 Securities Purchase Agreement dated as of September 30, 1999, among
Access Power, Inc., certain shareholders of Access Power, Inc. named
therein, and Bamboo Investors, LLC (filed as Exhibit 10.2 to the 10-Q
and is hereby incorporated by reference)
10.10 Warrant to purchase 6% Convertible Debentures and common stock warrants
of Access Power, Inc. (filed as Exhibit 10.3 to the 10-Q and is hereby
incorporated by reference)
10.11 Registration Rights Agreement, dated as of September 30, 1999, by and
among Access Power, Inc. and Bamboo Investors LLC (filed as Exhibit
10.4 to the 10-Q and is hereby incorporated by reference)
10.12 Share Exchange Agreement dated as of September 30, 1999 between Access
Power, Inc. and each of Glenn Smith, Maurice Matovich, Howard Kaskel,
and Tod Smith (filed as Exhibit 10.5 to the 10-Q and is hereby
incorporated by reference)
10.13* Web services agreement as of August 6, 1999, between Access Power, Inc.
and Lycos-Bertelsmann GmbH (filed as Exhibit 10.6 to the 10-Q and is
hereby incorporated by reference)
14
10.14 Consulting Agreement dated as of October 4, 1999 between Access Power,
Inc. and Northstar Advertising, Inc. (filed as Exhibit 10.7 to the 10-Q
and is hereby incorporated by reference)
10.15 Amended and Restated Investment Agreement between Access Power, Inc.
and Grandview Court, LLC dated as of September 19, 2001 (filed as
Exhibit 10.15 to the 2001 SB-2 and is hereby incorporated by reference)
10.16 Amended and Restated Registration Rights Agreement between Access
Power, Inc. and Grandview Court, LLC dated as of September 19, 2001
(filed as Exhibit 10.16 to the 2001 SB-2 and is hereby incorporated by
reference)
10.17 Amended and Restated Escrow Agreement between Access Power,Inc. and
Grandview Court, LLC dated as of September 9, 2001 (filed as Exhibit
10.17 to the 2001 SB-2 and is hereby incorporated by reference)
10.18 Amendment to Lease and Guaranty Agreements between Access Power, Inc.
and Maguire Land Corporation dated April 1, 2000 (filed as Exhibit
10.18 to the 2000 10-K and is hereby incorporated by reference)
23.1 Consent of Kilpatrick Stockton, LLP (filed as Exhibit 23.1 to the 2001
SB-2 and is hereby incorporated by reference)
24.1 Power of Attorney (included in Signature Page) **
---------------------------
* Certain portions of this exhibit have been omitted pursuant to the grant of a
request for confidential treatment.
** Previously-filed
(b) Reports on Form 8-K were filed during this period
None
F-1
ACCESS POWER, INC.
(A Development Stage Company)
INDEX TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001
Independent Auditors' Report................................................F-2
Balance Sheets at December 31, 2001 and 2000................................F-3
Statements of Operations for the years ended December 31, 2001 and 2000 and the
cumulative period from October 10, 1996
(date of inception) through December 31, 2001............................F-4
Statements of Stockholders' Equity for the years ended December 31, 2001 and
2000 and the period from October 10, 1996 (date of inception) through
December 31, 2001........................................................F-5
Statements of Cash Flows for the years ended December 31, 2001 and 2000 and the
cumulative period from October 10, 1996 (date of inception) through
December 31, 2001........................................................F-6
Notes to Financial Statements...............................................F-7
15
F-2
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, 2001 and 2000, 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, 2001. 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the Untied States of America. 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, 2001 and 2000, 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, 2001, in
conformity with accounting principles generally accepted in the United States of
America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in note 3 to the
consolidated financial statements, the Company has experienced net operating
losses of $3,868,417 and $7,309,775 for the years ended December 31, 2001 and
2000, respectively. At December 31, 2001, the Company continues to experience a
working capital deficit and also has a stockholders' deficit of $2,793,280.
These matters raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans in regard to these matters are described in
note 2. The accompanying consolidated financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern.
March 14, 2002
/s/ Parks, Tschopp, Whitcomb & Orr, P.A.
Maitland, Florida
March 13, 2001
16
F-3
ACCESS POWER, INC.
(A Development Stage Company)
Balance Sheets
December 31, 2000 and 1999
Assets
2000
2001 (Restated)
-------------------- --------------------
Current assets:
Cash $ 2,786 $ 15,452
Certificate of deposit - 100,000
Accounts receivable 5,560 56,312
Prepaid expenses 69,637 560,993
-------------------- --------------------
Total current assets 77,983 732,757
-------------------- --------------------
Property and equipment, net (note 3) 354,389 721,724
Other assets 4,000 8,000
-------------------- --------------------
-------------------- --------------------
Total assets $ 436,372 $1,462,481
==================== ====================
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable and accrued expenses 3,229,652 2,154,321
Current portion of long-term debt (note 4) - 112,576
-------------------- --------------------
-------------------- --------------------
Total current liabilities 3,229,652 2,266,897
-------------------- --------------------
Convertible debentures (note 5) - 210,000
-------------------- --------------------
Total liabilities 3,229,652 2,476,897
-------------------- --------------------
Stockholders' equity (deficit) (notes 5 and 7):
Common stock, $.001 par value, authorized 500,000,000
shares, issued and outstanding 94,118,595 and
53,089,389 shares in 2001 and 2000 94,118 53,087
Notes receivable, stockholders (361,760) (402,315)
Preferred stock, $.001 par value, authorized
10,000,000 shares, issued and outstanding 0
shares in 2001 and 2000 - -
Additional paid in capital 14,007,978 12,000,011
Deficit accumulated during the development stage (16,533,616) (12,665,199)
-------------------- --------------------
-------------------- --------------------
(2,793,280) (1,014,416)
-------------------- --------------------
Commitments (notes 5, 6 and 7)
Total liabilities and stockholders' equity (deficit) $ 436,372 $1,462,481
==================== ====================
See accompanying notes to financial statements.
17
F-4
ACCESS POWER, INC.
(A Development Stage Company)
Statements of Operations
For the years ended December 31, 2001 and 2000 and the cumulative
period from October 10, 1996 (date of inception) through December
31, 2001
For the period
October 10, 1996
2000 through
2001 (Restated) December 31, 2001
-------------- -------------- ---------------------
Revenue:
Product sales $ - $ - 223,881
Services 19,645 341,370 625,593
-------------- -------------- ---------------------
Total revenue 19,645 341,370 849,474
-------------- -------------- ---------------------
Costs and expenses:
Cost of services - 1,438,776 1,803,454
Cost of sales - - 164,605
Product development and marketing 541,702 1,279,330 3,241,247
General and administrative 2,969,969 2,504,206 8,866,739
-------------- -------------- ---------------------
Total costs and expenses 3,511,671 5,222,312 14,076,045
-------------- -------------- ---------------------
Loss from operations (3,492,026) (4,880,942) (13,226,571)
Other income (expense):
Interest income 5,292 82 7,672
Interest expense (note 9) (239,478) (2,428,915) (3,165,632)
Loss on disposal of equpiment (142,205) - (149,085)
-------------- -------------- ---------------------
Total other income (expense) (376,391) (2,428,833) (3,307,045)
-------------- -------------- ---------------------
Net loss $(3,868,417) $(7,309,775) (16,533,616)
============== ============== =====================
Net loss per share $ (0.05) $ (0.16) (0.45)
============== ============== =====================
Weighted average number of shares 80,446,465 46,408,006 36,201,185
============== ============== =====================
See accompanying notes to financial statements.
18
F-5
ACCESS POWER, INC.
(A Development Stage Company)
Statement of Stockholders' Equity (Deficit)
For the years ended December 31, 2001 and 2000 and the cumulative period from
October 10, 1996 (date of inception) through December 31, 2001
Common Stock Preferred stock Additional Total
-------------------------------------- Paid in Accumulated Stockholders'
Date Shares Amount Shares Amount Capital Deficit Equity
------------- ---------------------------------------------------------------- ----------------
Common stock issued to founding directors 8,000,000 $ 8,000 - - (7,200) - 800
Net loss - - - - - (5,701) (5,701)
------------------------------ ------- ----------- --------------- -------------
Balances at December 31, 1996 8,000,000 8,000 - - (7,200) (5,701) (4,901)
Common stock issued for cash 05/23/1997 750,000 750 - - 35,000 - 35,750
Common stock issued for cash 06/30/1997 1,000,000 1,000 - - 100,000 - 101,000
Common stock issued for cash 7/97 - 10/97 1,734,000 1,734 - - 854,573 - 856,307
Stock issuance cost - - - - (75,000) - (75,000)
Net loss - - - - - (426,438) (426,438)
------------------------------ ------- ----------- --------------- -------------
Balances at December 31, 1997 11,484,000 11,484 - - 907,373 (432,139) 486,718
------------------------------ ------- ----------- --------------- -------------
Preferred stock issued for cash 5/98 - - 1,000 1 999,999 - 1,000,000
Common stock issued as additional
interest 02/02/1998 50,000 50 - - 29,950 - 30,000
Common stock issued as additional
interest 02/19/1998 125,000 125 - - 84,250 - 84,375
Common stock issued as finder's fee 02/19/1998 75,000 75 - - 24,925 - 25,000
Common stock issued for services 2/98 25,000 25 - - 27,163 - 27,188
Common stock issued for cash 09/24/1998 50,000 50 - - 24,950 - 25,000
Preferred stock issued for cash 11/98 - - 100 - 100,000 - 100,000
Common stock issued for finder's fee 11/98 60,857 61 - - 19,817 - 19,878
Preferred stock issued for cash 12/98 - - 25 - 25,000 - 25,000
Common stock issued for investment
banking fee 12/98 30,000 30 - - 9,970 - 10,000
Conversion of preferred stock to
common stock 12/98 425,931 426 (75) - (426) - -
Net loss - - - - - (2,064,940) (2,064,940)
------------------------------ ------- ----------- --------------- -------------
------------------------------ ------- ----------- --------------- -------------
Balances at December 31, 1998 12,325,788 12,326 1,050 1 2,252,971 (2,497,079) (231,781)
------------------------------ ------- ----------- --------------- -------------
Common stock issued for cash 6/99 3,745,000 3,745 - - 1,282,455 - 1,286,200
Preferred stock issued for cash 1/99 - - 75 - 75,000 - 75,000
Common stock issued for finder's fee 1/99 25,777 26 - - 6,418 - 6,444
Common stock issued for services 6/99 3,207,950 3,208 - - 621,831 - 625,039
Common stock issued as additional
interest 12/99 144,204 144 - - 19,837 - 19,981
Common stock issued to retire debt 4/99 400,000 400 - - 49,600 - 50,000
Common issued on convertible
debentures 12/99 2,464,691 2,465 - - 447,535 - 450,000
Common stock converted to preferred 9/99 (3,952,000) (3,952) 3,952 4 3,948 - -
Preferred stock converted to common
stock 1/99 - 4/99 12,886,843 12,887 (1,125) (1) (12,886) - -
Net loss - - - - (2,503,945) (2,503,945)
------------------------------ ------- ----------- --------------- -------------
Balances at December 31, 1999, as
previously reported 31,248,253 31,249 3,952 4 4,746,709 (5,001,024) (223,062)
Correction of error (note 8) - - - - 354,400 (354,400) -
------------------------------ ------- ----------- --------------- -------------
------------------------------ ------- ----------- --------------- -------------
Balances at December 31, 1999, as
restated 31,248,253 31,249 3,952 4 5,101,109 (5,355,424) (223,062)
------------------------------ ------- ----------- --------------- -------------
Preferred stock converted to common
stock 1/00 3,952,000 3,952 (3,952) (4) (3,948) - -
Common stock issued on exercise of
warrants 1/00-2/00 600,000 600 - - 46,400 - 47,000
Common stock issued for cash 1/00-3/00 682,000 682 - - 146,538 - 147,220
Common stock issued for services 9/00-11/00 670,000 670 - - 165,530 - 166,200
Common stock issued on convertible
debentures 1/00-12/00 15,540,325 15,540 - - 4,130,560 - 4,146,100
Common stock issued as interest 1/00-12-00 396,811 394 - - 91,102 - 91,496
Value of warrants in excess of
exercise price 1/00 - - - - 322,720 - 322,720
Value of beneficial conversion
feature of debentures 1/00-9/00 - - - - 2,000,000 - 2,000,000
Net loss, as restated - - - - - (7,309,775) (7,309,775)
------------------------------ ------- ----------- --------------- -------------
Balances at December 31, 2000, as
restated 53,089,389 $ 53,087 - - 12,000,011 (12,665,199) (612,101)
============================== ======= =========== =============== =============
See accompanying notes to financial statements. (Continued)
ACCESS POWER, INC.
(A Development Stage Company)
Statement of Stockholders' Equity (Deficit)
For the years ended December 31, 2001 and 2000 and the cumulative period from
October 10, 1996 (date of inception) through December 31, 2001
Common Stock Preferred stock Additional Total
------------------------ ----------------- Paid in Accumulated Stockholders'
Date Shares Amount Shares Amount Capital Deficit Equity
------ -------------- ------------- ----------------- -----------------------------------------
Common stock issued
for cash 24,351,050 24,352 - - 1,146,965 - 1,171,317
Common stock issued
for interest 106,101 106 - - 4,375 - 4,481
Common stock issued
for settlement of lawsuit 650,000 650 - - 37,700 - 38,350
Common stock issued for
convertible debentures 14,022,055 14,023 - - 505,227 - 519,250
Common stock issued for
services 1,500,000 1,500 - - 118,500 - 120,000
Common stock issued for
exercising warrants 400,000 400 - - (39,800) - (39,400)
Value of beneficial conversion
features of debentures 235,000 235,000
Net loss (3,868,417) (3,868,417)
-------------- ------------- -------------------------------------------------------
Balances at December 31, 2001 94,118,595 $ 94,118.00 - - 14,007,978 (16,533,616) (2,431,520)
============== ============= ==========================================================
See accompanying notes to financial statements.
F-6
ACCESS POWER, INC.
(A Development Stage Company)
Statements of Cash Flows
For the years ended December 31, 2001 and 2000 and the
cumulative period from October 10, 1996 (date of
inception) through December 31, 2001
For the period
October 10, 1996
2000 through
2001 (Restated) December 31, 2001
---------------- ---------------- --------------------
Cash flows from operating activities:
Net loss $ (3,868,417) $ (7,309,775) (16,533,616)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 178,109 261,397 992,648
Loss on disposal of property and equipment 142,205 - 175,546
Stock issued for services 158,350 166,200 1,152,474
Stock issued for interest 4,481 91,496 115,958
Value of beneficial conversion feature of debenture 235,000 2,000,000 2,575,000
Value of warrants in excess of exercise price - 322,720 337,120
Change in operating assets and liabilities:
Accounts receivable 50,752 15,772 (112,886)
Accounts payable and accrued expenses 1,076,431 1,471,310 3,441,555
Other assets 491,356 (185,939) (64,438)
Inventory - 21,800 -
---------------- ---------------- --------------------
Net cash used in operating activities (1,531,733) (3,145,019) (7,920,639)
---------------- ---------------- --------------------
Cash flows from investing activities:
Purchase of certificate of deposit 100,000 (100,000) -
Proceeds from sale of property and equipment 60,543 - 112,863
Purchase of property and equipment (9,522) (543,555) (1,753,606)
Note receivable, stockholders - 53,685 (402,315)
---------------- ---------------- --------------------
Net cash provided by (used) in investing activities 151,021 (589,870) (2,043,058)
---------------- ---------------- --------------------
Cash flows from financing activities:
Proceeds from issuance of stock 1,171,317 194,220 4,845,594
Proceeds from issuance of notes payable 309,305 3,712,576 5,726,906
Principal payments on notes payable (112,576) (370,340) (606,017)
---------------- ---------------- --------------------
Net cash provided by financing activities 1,368,046 3,536,456 9,966,483
---------------- ---------------- --------------------
Net change in cash (12,666) (198,433) 2,786
Cash, at beginning of period 15,452 213,885 -
---------------- ---------------- --------------------
Cash at end of period $ 2,786 $ 15,452 2,786
================ ================ ====================
See accompanying notes to financial statements.
F-7
ACCESS POWER, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2001 and 2000
(1) Summary of Significant Accounting Policies
(a) Nature of development stage operations
Access Power, Inc., (API or the Company) was formed on October 10,
1996. The Company offers Internet Telephony (IT) which will provide
advanced computer telephony solutions to the global consumer market
place, with an emphasis on marketing to 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.
The Company reviews the carrying value of property and equipment for
impairment whenever events and circumstances indicate that the carrying
value of an asset may not be recoverable from the estimated future cash
flows expected to result from its use and eventual disposition. In
cases where undiscounted expected future cash flows are less than the
carrying value, an impairment loss is recognized equal to an amount by
which the carrying value exceeds the fair value of assets.
(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)
ACCESS POWER, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2001 and 2000
(1), Continued
Development stage operations for the period ended December 31, 2001
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, 2001, the Company
has net operating loss carryforwards of approximately $10,000,000 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
receivable. The Company performs periodic credit evaluations of its
trade customers and generally does not require collateral. 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)
ACCESS POWER, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2001 and 2000
(1), Continued
(g) Cash Flows
For purposes of cash flows, the Company considers all highly liquid
investments 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 Company has earned revenues and plans to earn revenue by providing
access to its internet telephony system (access revenue) for long
distance calls placed by the Company's customers and those of other
carriers within the Company's service area (long distance). Access
revenue is billed one month in advance and is recognized when earned.
Long distance revenue is recognized when the service is rendered.
Equipment sales were recognized on delivery of the equipment to the
customer.
The Company also earns revenue from business services and electronic
commerce transactions. Business services revenues include fees. License
revenues for enterprise services are recognized under Statement of
Position No. 97-2, "Software Revenue Recognition" (SOP 97-2) when
persuasive evidence of an arrangement exists and delivery has occurred,
provided the fee is fixed and determinable, collectibility is probable
and the arrangement does not require significant customization of the
software. For contracts with multiple elements, and for which
vendor-specific objective evidence of fair value for the undelivered
elements exists, revenue is recognized for the delivered elements based
upon the residual contract value as prescribed by Statement of Position
No. 98-4, "Modification of SOP No. 97-2 with Respect to Certain
Transactions." Revenues from enterprise services were not significant
for all periods presented. Maintenance revenues for enterprise services
are recognized ratably over the term of the contract. Revenues from
advertising are recognized by the Company during the period the
advertising occurs.
The Company is presently operating in this one business segment and
only in the United States. (Continued)
ACCESS POWER, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2001 and 2000
(1), Continued
(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 be anti-dilutive.
(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. Software cost capitalized through
December 31, 2001 amounts to $403,257 and is depreciated over three
years.
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.
(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).
ACCESS POWER, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2001 and 2000
(1), Continued
(m) Comprehensive Income
In 1998, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." For the
years ended December 31, 2001 and 2000, the Company has no items of
comprehensive income.
(n) Recent Accounting Pronouncements
In December 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin No. (SAB 101), "Revenue Recognition in
Financial Statements." SAB 101 summarizes the SEC's views in applying
generally accepted accounting principles to revenue recognition in
financial statements. The Company adopted SAB 101 in the fourth quarter
of fiscal 2000. The adoption of SAB 101 did not have a material effect
on the Company's operations or financial position.
In April 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving
Stock Compensation, an interpretation of APB Opinion No. 25." Among
other issues, that interpretation clarifies the definition of employees
for purposes of applying Opinion No. 25, the criteria for determining
whether a plan qualifies as a non-compensatory plan, the accounting
consequence of various modifications to the terms of a previously fixed
stock option or award and the accounting for an exchange of stock
compensation awards in a business combination. This interpretation is
effective July 1, 2000, but certain conclusions in the interpretation
cover specific events that occur after either December 15, 1998 or
January 12, 2000. To the extent that this interpretation covers events
occurring during the period after December 15, 1998, or January 12,
2000, but before the effective date of July 1, 2000, the effect of
applying this interpretation is recognized on a prospective basis from
July 1, 2000. The implementation of this interpretation does not have a
material impact on the Company's financial statements.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," is required to be adopted in years beginning after June
15, 2000. The Company does not hold derivative instruments or engage in
hedging activities. The Company implemented Statement 133 beginning in
the first quarter of its fiscal year ending December 31, 2001, with no
effect on its financial position, results of operations or cash flows.
ACCESS POWER, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2001 and 2000
(2) Going Concern
The Company's consolidated financial statements have been presented on
a going concern basis which contemplates the realization and the
satisfaction of liabilities in the normal course of business. As more
fully described below, the liquidity of the Company has been adversely
affected by significant losses from operations. The Company reported
net losses of $3,868,417 and $7,309,775 for the years ended December
31, 2001 and 2000, respectively. Additionally, there is a stockholders'
deficit of $2,793,280 at December 31, 2001.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern without additional capital contributions
and/or achieving profitable operations. Management's plans are to
generate additional revenue from other services and to raise additional
capital through either debt or equity instruments. In this regard, in
March 2002, management announced the scheduled launch of a new service;
and management secured access to equity financing pursuant to an SEC
registration that became effective in December, 2001.
(3) Property and Equipment
Property and equipment consist of the following at December 31:
2001 2000
---------------- -----------------
Office furniture and equipment $ 101,667 $ 101,667
Computer hardware 669,031 861,821
Computer software 403,257 403,257
---------------- -----------------
-----------------
1,173,955 1,366,745
Less accumulated depreciation and amortization 819,566 645,021
---------------- -----------------
-----------------
$ 354,389 $ 721,724
================ =================
ACCESS POWER, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2001 and 2000
(4) Notes Payable
Notes payable consist of the following at December 31,:
2001 2000
Promissory notes to stockholders bearing interest at 6% - 8% payable
on demand. Unsecured. $ - $ 112,576
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.
- -
---------------- ---------------
- 112,576
Less current portion - 112,576
---------------- ---------------
Long-term debt, less current portion $ - $ -
================ ===============
(5) 6% Convertible Debenture
$1,000,000, $200,000, and $800,000 6% Convertible Debentures were sold
on September 30, 1999, December 30, 1999, and January 18, 2000,
respectively. They are convertible into common stock by dividing each
$100,000 debenture by the lower of 75% of the average of the three
lowest closing bid prices during the preceding 22 trading days or 110%
of such average price on September 30, 1999 ($0.42), subject to certain
adjustments. $2,500,000, $100,000, $100,000, $100,000 6% Convertible
Debentures were sold on February 29, 2000, August 14, August 30 and
September 15, 2000, respectively. They are convertible into common
stock by dividing each $100,000 debenture by the lower of 80% of the
average of the three lowest closing bid prices during the preceding 22
trading days or 110% of such average price on February 28, 2000
($2.20), subject to certain adjustments. As of December 31, 2001,
$5,109,250 of the convertible debentures had been converted into
32,027,071 common shares including shares converted representing
accrued interest to the conversion dates.
Accordingly, the Company recorded $235,000 and $2,322,720 non-cash
expense during the years ended December 31, 2001 and 2000,
respectively, to account for a beneficial conversion feature associated
with the debentures. The Company has presented the charge as interest
expense in the accompanying consolidated statements of operations.
ACCESS POWER, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2001 and 2000
(6) Commitments
The Company leases its office space under a non-cancellable operating
lease with a remaining term of less than one year.
Rent expense for the years ended December 31, 2001 and 2000 amounted to
$66,960 and $53,064, respectively.
(7) 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, 2001 amounted to 2,100,500
at an average price of $.33. There were no incentive stock options
granted during 2001.
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:
ACCESS POWER, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2001 and 2000
(7) Stock Options (Continued)
For the period
October 10, 1996
Year ended Year ended through
December 31, 2001 December 31, 2000 December 31, 2001
-------------------------- ------------------------- ---------------------------
Pro forma net loss:
As reported $(3,868,417) $(7,309,775) (16,533,616)
Pro forma (3,868,417) (7,309,775) (16,533,616)
Pro forma net loss per share
As reported (.05) (0.16) (0.45)
Pro forma (.05) (0.16) (0.45)
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.
ACCESS POWER, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2001 and 2000
(8) Selected Financial Data (Unaudited)
The following is a summary of the quarterly results of operations for
the years ended December 31, 2001 and 2000, respectively:
Quarter ended Quarter ended Quarter ended Quarter ended Year ended
March 31, June 30, September 30, December 31, December 31,
--------- -------- ------------- ------------ ------------
2001
Revenues $ 7,907 9,452 2,506 40,238 60,103
Gross profit 7,907 9,452 2,506 40,238 60,103
Net earnings from operations (1,150,803) (555,015) (386,180) (1,400,028) (3,492,026)
Basic and fully diluted
earnings per share (0.02) (0.01) (0.00) (0.02) (0.05)
Weighted-average number of
shares issued and outstanding 73,735,381 89,206,064 92,761,328 93,439,961 80,446,425
2000
Net revenues $ 145,611 108,556 66,709 20,494 341,370
Gross profit 145,611 108,556 66,709 20,494 341,370
Net earnings from operations (1,150,839) (1,154,414) (1,227,805) (1,347,884) (4,880,942)
Basic and fully diluted
earnings per share (0.04) (0.03) (0.03) (0.07) (0.16)
Weighted-average number of
shares issued and outstanding 31,688,258 39,189,807 43,971,501 50,292,651 46,408,006
(9) Prior Period Adjustment
The financial statements for the year ended December 31, 2000 have been
restated to reflect charges of $2,322,720 for additional interest
expense related to the beneficial conversion feature of convertible
debentures and warrants as required under Emerging Issues Task Force
98-5.
(Continued)
ACCESS POWER, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2001 and 2000
(9) Prior Period Adjustment (Continued)
The effects of this prior period adjustment for the year ended December
31, 2000 are as follows:
Loss from operations:
As previously reported $ (4,880,942)
As restated (4,880,942)
Net loss:
As previously reported (4,987,055)
As restated (7,309,775)
Net loss per share:
As previously reported (0.11)
As restated (0.16)
Accumulated deficit:
As previously reported (9,988,079)
As restated (12,665,199)
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 on March 31, 2002.
ACCESS POWER, INC.
By: *
-------------------------------------
Glenn A. Smith, Chief Executive Officer
Signature Position
--------- --------
* President and Chief
---------------------------- Executive Officer and Director
Glenn A. Smith (principal executive officer)
/s/ Bradley W. Benton
---------------------------- Chief Financial Officer
Bradley W. Benton (principal financial and accounting officer)
* Director
----------------------------
Tod R. Smith
/s/ Maurice J. Matovich Director
----------------------------
Maurice J. Matovich
*By: /s/ Maurice J. Matovich
------------------------------
Maurice J. Matovich
Attorney-in-Fact