SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
/X/ Quarterly Report Under Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2001
/_/ Transition Report Under Section 13 or 15(d) of The Exchange Act
Commission File Number 000-____________
Access Power, Inc.
---------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Florida 59-3420985
-------------------------------------------------------------------------
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
10033 Sawgrass Dr., W, Ponte Vedra Beach, FL 32082
-------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Issuer's telephone number, including area code: (904) 273-2980
At April 24, 2002, there were issued and outstanding 113,356,149 shares of
Common Stock.
Transitional Small Business Disclosure Format (check one): Yes __ No X
--------------------------------------------------------------------------------
Part I. Financial Information
Item 1 Financial Statements
ACCESS POWER, INC.
(A Development Stage Company)
Balance Sheets
As of March 31, 2002 and December 31, 2001
Assets
March 31, December 31,
2002 2001
------------------ ------------------
(unaudited)
Current assets:
Cash $ 585 $ 2,786
Certificate of deposit
Accounts receivable 5,560 5,560
Prepaid expenses 69,445 69,637
---------------------------------------
Total current assets 75,590 77,983
---------------------------------------
Property and equipment, net 316,945 354,389
Other assets 3,133 4,000
---------------------------------------
Total assets $ 395,668 $ 436,372
=======================================
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable and accrued expenses $ 3,236,885 $3,229,652
Current portion of long-term debt - -
---------------------------------------
Total current liabilities 3,236,885 3,229,652
---------------------------------------
Convertible debentures - -
------------------ ------------------
Total liabilities 3,236,885 3,229,652
---------------------------------------
Stockholders' equity (deficit):
Common stock, $.001 par value, authorized 500,000,000 shares, issued and
outstanding 110,196,553 and 94,118,595 shares
as of March 31, 2002 and Decmber 31, 2001 113,356 94,118
Notes receivable, stockholders (361,760)
Preferred stock, $.001 par value, authorized 10,000,000 shares,
issued and outstanding 0 shares in 2002 and 2001 - -
Additional paid in capital 13,885,136 14,007,978
Deficit accumulated during the development stage (16,839,709) (16,533,616)
---------------------------------------
(2,841,217) (2,793,280)
---------------------------------------
Commitments
Total liabilities and stockholders' equity (deficit) $ 395,668 $ 436,372
=======================================
ACCESS POWER, INC.
(A Development Stage Company)
Statements of Operations
(unaudited)
For the three months ended March 31, 2002 and 2001 and the cumulative period
from October 10, 1996 (date of inception) through March 31, 2002
For the period
October 10, 1996
2001 through
2002 (Restated) March 31, 2002
------------------ ----------------- --------------------------
Revenue:
Product sales $ - $ - $ 223,881
Services 298 7,907 625,891
------------------ ----------------- --------------------------
Total revenue 298 7,907 849,772
------------------ ----------------- --------------------------
Costs and expenses:
Cost of services - 325,497 1,803,454
Cost of sales - - 164,605
Product development and marketing 750 274,425 3,241,997
General and administrative 305,641 558,788 9,172,380
------------------ ----------------- --------------------------
Total costs and expenses 306,391 1,158,710 14,382,436
------------------ ----------------- --------------------------
Loss from operations (306,093) (1,150,803) (13,532,664)
Other income (expense):
Interest income - - 7,672
Interest expense - (184,481) (3,165,632)
Loss on disposal of equpiment - - (149,085)
------------------ ----------------- --------------------------
Total other income (expense) - (184,481) (3,307,045)
------------------ ----------------- --------------------------
Net loss $ (306,043) $(1,335,284) $ (16,839,709)
================== ================= ==========================
Net loss per share $ (0.00) $ (0.02) $ (0.43)
================== ================= ==========================
Weighted average number of shares 100,438,081 73,735,381 39,121,043
================== ================= ==========================
ACCESS POWER, INC.
(A Development Stage Company)
Statements of Cash Flows
For the three months ended March 31, 2002 and 2001 and the cumulative period
from October 10, 1996 (date of inception) through March 31, 2001
For the period
October 10, 1996
2001 through
2002 (Restated) March 31, 2002
---------------- ---------------- --------------------------
Cash flows from operating activities:
Net loss $ (306,093) $ (1,335,284) $ (16,839,709)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 40,581 76,839 1,033,229
Loss on disposal of property and equipment - - 175,546
Stock issued for services 46,036 38,350 1,198,510
Stock issued for interest - 4,481 115,958
Value of beneficial conversion feature of debenture - 180,000 2,575,000
Value of warrants in excess of exercise price - - 337,120
Change in operating assets and liabilities: -
Accounts receivable 193 12,749 (112,693)
Accounts payable and accrued expenses 7,234 (84,594) 3,448,789
Other assets - (76,663) (64,438)
Forfeited Payroll Liability 125,000 - 125,000
---------------- ---------------- --------------------------
Net cash used in operating activities (87,049) (1,184,122) (8,007,688)
---------------- --------------------------------------------
-
Cash flows from investing activities:
Purchase of certificate of deposit - - -
Proceeds from sale of property and equipment 2,660 6,400 115,523
Purchase of property and equipment (4,931) 10,898 (1,758,537)
Note receivable, stockholders - 39,400 (402,315)
---------------- ---------------- --------------------------
-
Net cash provided by (used) in investing activities (2,271) 56,698 (2,045,329)
---------------- --------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of stock 87,119 1,109,771 4,932,713
Proceeds from issuance of notes payable - 190,000 5,726,906
Principal payments on notes payable - (112,576) (606,017)
---------------- ---------------- --------------------------
-
Net cash provided by financing activities 87,119 1,187,195 10,053,602
---------------- --------------------------------------------
Net change in cash (2,201) 59,771 585
-
Cash, at beginning of period 2,786 15,452 -
---------------- ---------------- --------------------------
Cash at end of period $ 585 $ 75,223 $ 585
================ ============================================
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, 2001 filed with the Securities and Exchange
Commission. The interim financial information included herein is unaudited;
however, such information reflects all the adjustments (consisting solely of
normal recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of results of operations and cash flows for
the interim periods. The results of operations for the three months ended
March 31, 2001 are not necessarily indicative of the results to be expected
for the full year.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
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 10-QSB report.
Cautionary Statement for Purposes of the Safe Harbor Provisions of the
Private Securities Litigation Reform Act of 1995
The statements contained in the section captioned Management's
Discussion and Analysis of Financial Condition and Results of Operations which
are not historical are "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements
represent the Company's present expectations or beliefs concerning future
events. The Company cautions that such forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among other things, the
uncertainty as to the Company's ability to obtain financing on acceptable terms
to finance the Company's operations and growth strategy, acceptance of the
Company's technology and services in the market place, telecommunications
industry trends towards solutions not addressed by the Company's business,
increasing competition in the information technology services market, the
ability to hire, train and retain sufficient qualified personnel, and the
ability to develop and implement operational and financial systems to manage the
Company's growth.
Overview and Plan of Operation
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.
Access Power's products have historically been consumer-oriented, with
relatively limited product offerings aimed at the business segment.
PowerConferenceCall(TM), scheduled for launch during the second quarter of 2002,
is a business-oriented audio conferencing service that utilizes and enhances the
public switched telephone network (PSTN), bridging multiple lines together,
managing audio quality and providing conferencing features not available on the
traditional PSTN. The introduction of PowerConferenceCall marks a focused
expansion into the business-oriented segment of the collaboration industry. This
service will initially focus on audio conferencing with Internet-based account
and service management; 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, such as video, whiteboards,
application sharing and 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 consumer-based business.
PowerConferenceCall will 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. The business
segment of the collaboration market is substantial, 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.
We intend to establish ourselves in this market segment with
differentiated teleconferencing services. There are however risks that are
specific to this business opportunity. These are elaborated below.
We may not be able to compete effectively against our major competitors who have
substantially greater capital resources and brand recognition.
The industry is highly competitive, and many of our competitors have
greater capital resources and brand recognition. To compete successfully with
telecommunications and teleconferencing providers, we must competitively price
and maintain high quality services. This is an established market with a
considerable number of well-established competitors who have been providing
these services in some cases for many years. Prospective customers are very
likely currently working with a competitor and it may be difficult to present a
compelling reason for them to shift their business to PowerConferenceCall. In
addition, there are few regulatory barriers to entry in this market, so
competitive intensity can be expected to increase over time.
We may be forced to lower prices in response to competitive or market pressures.
In a highly-competitive market such as this, prices may fall over time
and they could fall precipitously. Beyond competitive pressures, the market
itself is developing new Internet-based technologies and customers may seek less
costly methods of collaborating. Current audio-based teleconferencing are
carried over conventional circuit-switched analog and digital telephone lines.
The use of the Internet to transmit long distance voice, video, and data and to
develop new types of communication services represents possible changes in
demand and pricing. There is risk that we may not be able to adequately address
and exploit these Internet opportunities, especially since the magnitude and
nature of change are not yet clear in the marketplace. We must therefore price
competitively and be responsive to and anticipate these pricing and technology
shifts.
Other technological innovations could render our proposed services obsolete.
We expect technical innovations to foster new developments in
teleconferencing services, such as more developed Internet telephony and more
sophisticated computers, telephones, private branch exchanges, customer-owned
facilities, virtual private networks, and centralized office switching
equipment. Major telecommunications companies could decide to offer lower-cost
teleconferencing services in an attempt to obtain greater market share in other
product areas. These innovations and developments could render our proposed
PowerConferenceCall service offerings uneconomic as currently defined. We must
therefore attempt to anticipate these changes and be prepared to adapt our
service.
We may not be able to successfully establish a critical mass of customers.
Access Power does not currently have a significant promotional budget to
support the product launch, relying instead upon a direct sales campaign.
Traditionally, the success rate of such direct selling efforts is low. To be
successful, we must be aggressive in establishing a base of target customers
necessary to achieve profitability.
We may not be able to successfully develop and integrate new technologies
required to support conferencing services.
Providing PowerConferenceCall service requires the configuration and
integration of new technologies, including hardware and software development. To
the extent problems are encountered with these new technologies, the product
launch could be significantly hampered. In addition, portions of the software
development effort are outsourced, creating a dependency on the outsourced
entity. In addition, we depend upon our software systems and communications
hardware to conduct our conferencing business. Infrastructures such as these are
vulnerable to damage or interruption from many factors, including natural
disasters, power loss, telecommunication failures, loss of Internet access,
physical and electronic vandalism or terrorism, computer viruses and hardware
defects.
We may not be able to develop new service offerings and hire and train
appropriate staff to market and manage growth.
If we do not develop new services and employ an innovative staff that can
capably manage our growth, we could adversely impact our business development,
operating results, and financial condition. The expansion of our business into
audio teleconferencing could strain our current management resources. To deliver
and support these new services, we will need to provide additional training for
current employees and compete in the market for new
employees, especially those who are skilled in the delivery of business
conferencing sevices and providing high quality customer service. To be
successful, we must attract and retain sufficiently qualified staff to support
our existing business and our expansion into PSTN -based conferencing services.
Our plans to expand may be discontinued if we are unable to obtain sufficient
financing.
Without sufficient financing, we may not be able to fully implement our
expansion into PowerConferenceCall. Available equity financings may be dilutive
to our shareholders and debt financing may impose restrictive covenants on the
way we operate our business. In addition, there is substantial liability to
vendors and employees from historical operations in the Internet-based consumer
segment of the collaboration market. If we cannot or do not obtain adequate
funds from operations or additional sources of financing, we may experience
operational difficulties and the loss of customers.
Financial Results of Operations for Period Ended March 31, 2002 Compared to
Period Ended March 31, 2001
Revenues and Costs of Revenues.
Revenues decreased $7,907 to virtually zero due to the decreased demand
for the PC-to-Phone services. The offering of PC-to-Phone services 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 this Part I, Item 2.
Expenses.
Operating Expenses decreased from $1,159,000 to about $306,391. This
reflects a general decrease in spending relating to the decline in business from
traditional consumer-based services.
Cost of Services and Product Development as well as Marketing expenses
were virtually eliminated from about $325,000 and $275,000 respectively a year
earlier, reflecting management's decision to re-focus the business on
PowerConferenceCall, which is being developed jointly by existing Company staff
and with sub-contractors who have agreed to defer compensation until such time
as revenues are generated.
General and Administrative expense declined from $559,000 to $306,000,
reflecting generally reduced spending as the business is re-focused.
Depreciation and Amortization declined from $77,000 to $40,000 reflecting the
sale of certain assets in 2001. Payroll compensation (paid and accrued) declined
from about $245,000 to $153,000 reflecting fewer staff.
Interest expense was about $185,000 in 2001 reflecting interest costs
associated with the conversion of Debentures. There was no interest expense in
the first quarter of 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 investor relations
services. 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.
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. Our financing activities for the twelve
months ended December 31, 2001 provided a net total of $1,368,046.
Our financing activities for the three months ended March 31, 2002,
provided a net total of $87,119, pursuant to the afore-mentioned equity line of
credit. Cash at the end of that period was $585. As of April 24, 2002, we had
cash of $135 and working capital of ($3,180,000).
PART II - OTHER INFORMATION
Item 1. 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.
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 2. Changes in Securities and Use of Proceeds
During the period January - March, 2002, the Company raised $87,118 by
issuing 5,761,600 shares of common stock to Grandview Court, LLC, a Cayman
Islands limited liability company, pursuant to a Registration Statement that
became effective December 6, 2001.
On February 27, 2002, 1,316,958 shares were issued to Maguire Land
Corp. for lease expense accrued in 2001.
On March 1, 2002, 2,000,000 shares were issued to Bradley W. Benton,
appointed President and CFO on February 1, 2002, as part of his negotiated
compensation structure.
On March 1, 2002, 7,000,000 shares were issued to Officers as follows:
Name Title Stock Issued
Glenn A. Smith CEO 2,000,000
Maurice Matovich COO 2,000,000
Tod Smith CIO & General Counsel 2,000,000
Ron Tregaskis CTO 1,000,000
These 7 million shares represent an attempt to more favorably position the
company's future by improving the capitalization of these Officers and
facilitating the transition of the business to the new PowerConferenceCall
service. In support of this forward-looking positioning, Glenn A. Smith, CEO,
has forfeited the approximately $125,000 of accrued but unpaid payroll due him
as of the date of the stock issuance. This amount exceeds the market value of
the issued 7 million shares as of April 24, 2002.
Item 5. Other Information
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' outsourcing practice; he also has
extensive experience managing consulting engagements as a Principal Consultant
for PricewaterhouseCoopers in the Customer Relationship Management industry.
Additionally, he has held several senior financial management positions,
including Controller and CFO responsibilities for AT&T's emerging cellular
business. His focus is on implementing the new PowerConferenceCall service.
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. Mr. Kaskel resiged on
January 25, 2002.
Ron Tregaskis was appointed Chief Technology Officer on February 26, 2002,
expanding his role with the company since joining in 1997.
Item 6. Exhibits and Reports on Form 8-K
(a) No Exhibits are being filed.
(b) No Reports on Form 8-K were filed during this period
SIGNATURES
In accordance with the requirements of the Exchange Act, the Company caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
ACCESS POWER, INC.
By:
/s/ Glenn A. Smith Date: April 26,2002
Glenn A. Smith
President
/s/ Bradley W. Benton Date: April 26,2002
Bradley W. Benton
Chief Financial Officer
(principal financial and accounting officer)