Form 10-QSB for AMERICAN ACCESS TECHNOLOGIES, INC. filed on August 12, 1998
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[XX] Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934 For the quarterly period ended
June 30, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from ______________ to ________________
* * * * * * * * * * * * * * * * * * * * * *
Commission File No. 333-43589
AMERICAN ACCESS TECHNOLOGIES INCORPORATED
A Florida corporation
(Exact name of registrant as specified in charter, and state incorporated)
* * * * * * * * * * * * * * * * * * * * * *
Employer Identification No. 59-3410234
Altamonte Springs Florida 238 N. Westmonte Dr. Suite 210 32714
(Address of principal executive offices of registrant)
(407) 865-7696
(Registrant's telephone number, including area code)
* * * * * * * * * * * * * * * * * * * * * *
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 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 [ ].
The number of shares of AMERICAN ACCESS TECHNOLOGIES INC. Common Stock (Par
Value $0.001) outstanding at June 30, 1998 was 2,990,000
<PAGE>
American Access Technologies
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN ACCESS TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Assets Condensed from
Audited Financial
June 30, 1998 Statements
UNAUDITED Dec. 31, 1997
-------------------------------------------
<S> <C> <C>
Current Assets:
CASH AND CASH EQUIVALENTS $334,013 $442,555
ACCOUNTS RECEIVABLE 111,429 11,436
INVENTORY 73,986 21,586
PREPAID EXPENSES 5,005 3,547
-------------------------------------------
Total Current Assets 524,433 479,124
-------------------------------------------
Property, Plant, and Equipment:
FURNITURE AND EQUIPMENT 44,697 41,903
ACCUMULATED DEPRECIATION (12,185) (6,626)
-------------------------------------------
Total Property, Plant, & Equip 32,512 35,277
-------------------------------------------
Other Assets
PATENT COST 23,243 22,583
OTHER ASSETS 3,797 3,598
-------------------------------------------
Total Other Assets 27,040 26,181
-------------------------------------------
Total Assets $583,985 $540,582
===========================================
Liabilities and Stockholders' Equity
Current Liabilities:
ACCOUNTS PAYABLE $48,810 $17,705
ACCRUED EXPENSES 37,883 83,120
-------------------------------------------
Total Current Liabilities 86,693 100,825
-------------------------------------------
COMMITMENTS AND CONTINGENCIES ---- ----
Stockholders' Equity:
PREFERRED STOCK
$ .001 par value; authorized, 1,000,000 shares; none issued
COMMON STOCK
$ .001 par value; authorized 10,000,000 shares; issued &
outstanding, 2,990,000 shares at 6/30/98, 2,970,000 at 12/31/97 2,990 2,970
ADDITIONAL PAID IN CAPITAL 1,089,470 929,490
DEFICIT ACCUMULATED DURING
THE DEVELOPMENT STAGE (595,168) (492,703)
-------------------------------------------
Total Stockholders' Equity 497,292 439,757
-------------------------------------------
Total Liabilities and Stockholders' Equity $583,985 $540,582
===========================================
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Consolidated Statements of Operations
Unaudited
<TABLE>
<CAPTION>
Three Three Six Six
Months Months Months Months Cumulative
Ended Ended Ended Ended From
06/30/98 06/30/97 06/30/98 06/30/97 Inception
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Income
Revenues $187,252 $169,012 $317,051 $169,012 $548,673
------------------------------------------------------------------------------
Costs and Expenses
DIRECT COSTS 73,597 46,550 134,715 46,550 200,196
MARKETING & PROMOTIONS 30,032 62 46,647 62 85,468
PRODUCT DEVELOPMENT 2,977 (2,261) 16,100 3,241 33,774
GENERAL & ADMINISTRATIVE 134,078 121,324 228,321 300,793 831,048
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Total Costs & Expenses 240,684 165,675 425,783 350,646 1,150,486
------------------------------------------------------------------------------
Operating Income (Loss) (53,432) 3,337 (108,732) (181,634) (601,813)
------------------------------------------------------------------------------
Other Income (Expense)
Interest Income 1,464 0 6,268 0 10,260
Interest Expense 0 0 0 2,414 3,621
------------------------------------------------------------------------------
Total Other Income (Expense) 1,464 0 6,268 (2,414) 6,639
------------------------------------------------------------------------------
Income (Loss) from continuing operations (51,968) 3,337 (102,464) (184,048) (595,174)
Income from discontinued operations 0 0 0 0 4,606
------------------------------------------------------------------------------
Net Income ( Loss) ($51,968) $3,337 ($102,464) ($184,048) ($590,568)
==============================================================================
--------------------------------------------------------------
Net Income ( Loss) Per Common Share ($0.02) $0.00 ($0.03) ($0.06)
==============================================================
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
Unaudited
<TABLE>
<CAPTION>
Six Six
Months Months Cumulative
Ended Ended from
6/30/98 6/30/97 Inception
------------------------------------------------
<S> <C> <C> <C>
Cash Flows from operating activities:
Net income (loss) ($102,464) ($184,048) ($590,561)
------------------------------------------------
Adjustments to reconcile net income (loss)
to net cash provided by (use in)
operating activities:
Depreciation and amortization 5,559 3,061 12,185
Common stock issued for services 75,000
(Increase)/ decrease in assets:
Accounts receivable (99,993) (162,832) (111,429)
Inventory (52,400) (5,737) (73,986)
Prepaid expenses (1,458) (33,919) (5,005)
Other (860) (1,076) (4,458)
Increase/ decrease in liabilities:
Accounts payable
and accrued expenses: (14,132) 51,844 86,585
------------------------------------------------
Total adjustments (163,284) (148,659) (21,108)
------------------------------------------------
Net cash provided by (used in)
operating activities (265,748) (332,707) (611,669)
------------------------------------------------
Cash flows from investing activities:
Expenditures for development of patent (14,500)
Acquisition of property and equipment (41,903)
Purchase of furniture and fixtures (2,794) (26,657) (2,794)
Net cash provided by (used in) ------------------------------------------------
investing activities (2,794) (26,657) (59,197)
------------------------------------------------
Cash flows from financing activities:
Increase (decrease) notes payable 0 (100,000)
Proceeds from issuance of common stock and
exercise of warrants 160,000 569,377 1,010,777
Repayment of loan payable, stockholder (1,000) (1,000)
Distribution to stockholder (4,606)
Other (400)
Net cash provided by (used in)
------------------------------------------------
financing activities 160,000 468,377 1,004,771
------------------------------------------------
Net increase (decrease) in cash
and cash equivalents (108,542) 109,013 333,905
Cash and Cash equivalents, Beginning 442,555 61,761 108
------------------------------------------------
------------------------------------------------
Cash and Cash equivalents, Ending $334,013 $170,774 $334,013
================================================
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $2,424
======
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 Unaudited
1. Basis of Presentation
The accompanying unaudited consolidated condensed financial statements at June
30, 1998 have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-QSB and reflect all adjustments which, in the opinion of management, are
necessary for a fair presentation of financial position as of June 30, 1998 and
results of operations for the six months ended June 30, 1998 and 1997. All
adjustments are of a normal recurring nature. The results of operations for
interim periods are not necessarily indicative of the results to be expected for
a full year. The statements should be read in conjunction with the consolidated
financial statements and footnotes thereto for the year ended December 31, 1997
included in the company's Registrations Statement Form SB-2 filing.
2. Nature of Business and Summary of Significant Accounting Policies.
BUSINESS
American Access Technologies, Inc. develops specialized products for the
telecommunications industry. The company recently introduced its first
proprietary product, a Zone Cabling Termination Cabinet (the "Product") which it
plans to manufacture and distribute to the telecommunications industry. The
Product is a Device that is used in voice, computer and data transmission
systems throughout the world.
DEVELOPMENT STAGE ENTERPRISE
As noted above, the Company was incorporated on October 21, 1996. To date, the
Company has been principally engaged in organizational activities, the promotion
of its product and raising capital. Planned operations, as described above, have
commenced but revenue generated to date is not considered significant in
relation to the Company's business plan. Accordingly, the Company is considered
to be in the development stage, and the accompanying consolidated financial
statements represent those of a development stage enterprise.
COMMON STOCK
On June 30, 1998, 20,000 warrants were exercised, at $8.00 per warrant, which
resulted in 20,000 common stock shares being issued. In August, 1998 an
additional 40,000 warrants were exercised at $8.00 per share. The company has a
remaining 570,000 warrants.
NET LOSS PER COMMON SHARE
In 1997, the Company adopted Statements of Financial Accounting Standards (SFAS)
No. 128, "Earnings per Share" which requires the presentation of both basic and
diluted earnings (loss) per share.
Basic net loss per common share has been computed based upon the weighted
average number of shares of common stock outstanding during the periods. The
shares of common stock issued in connection with the stock split effected in
February 1997, have been considered outstanding for all periods. In addition,
the shares of common stock issued to a Director in February 1997, prior to an
initial registration of the Company's common stock and at a price at that time
have been treated as outstanding during the entire period, pursuant to the
Securities and Exchange Commission Staff Accounting Bulletins. The number of
shares used in the computation were 2,990,000 and 3,083,000 for 1998 and 1997
respectively. Diluted net loss per common share, assuming exercising of the
warrants granted, is not presented as the effect of conversion is anti-dilutive.
3. Contingencies
PENDING LITIGATION
The Company is a defendant in a suit filed in January 1998 in
the 18th Judicial Circuit Court of Florida by Steve R. Jones, the Company's
President from April to August 1997, which seeks damages of $17,000 and a
declaratory judgment as to the enforceability of a consulting agreement with the
Company. The Company is vigorously defending the case and does not believe it
has any liability to the plaintiff. The case is in the early stages, and there
can be no assurance of the ultimate outcome.
5
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THREE MONTHS ENDED JUNE 30, 1998 COMPARED WITH THE THREE MONTHS ENDED JUNE 30,
1997 AND SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH THE SIX MONTHS ENDED JUNE
30, 1997.
REVENUES
Revenues for the three months ended June 30, 1998 increased by $18,240
or 10.8%, to $187,252, compared to $169,012 for the three months ended June 30,
1997. Revenues for the six months ended June 30, 1998 increased by $148,039 or
87.6% to $317,051 compared to $169,012 for the six months ended June 30, 1997.
The initial distribution of the Company's product did not occur until the second
quarter of 1997, as the Company was primarily involved in training distributor's
personnel in the operation, functioning and marketing of the Company's product.
COSTS AND EXPENSES
Direct costs represent the cost incurred by the Company to have its
product manufactured and assembled by outside contractors. These costs
represented 39.3% of revenues for the three months ended June 30, 1998, 27.5% of
revenues for the three months ended June 30, 1997, 42.5% of revenues for the six
months ended June 30, 1998 and 27.5% of revenues for the six months ended June
30, 1997.
Product development costs incurred in the three months ended June 30,
1998 was $2,977 and for the six months ended June 30, 1998 was $16,100 as
compared to $3,241 for the same six month period in 1997. This increase in costs
occurred in the Company's continuing efforts to modify and update its design to
vendor specifications.
Marketing and Promotion expenses increased by $29,970 to $30,032 for
the three months ended June 30, 1998 compared to $62 for the three months ended
June 30, 1997. The expenses of $46,647 for the six months ended June 30, 1998
was an increase of $46,585 over expenses for the same six months ended June 30,
1997, which only totaled $62. This was a result of the company's effort to
continue to develop and market their product.
General and Administrative expenses increased by $12,754 to $134,078
for the three months ended June 30, 1998 compared to $121,324 for the three
months ended June 30, 1997. This increase was the result of costs associated
with the continued development growth of the company including efforts in the
pending acquisition of Omega Metals, Inc. Expenses for the six months ended June
30, 1998 decreased by $72,472 to $228,321 as compared to total expenses to
$300,793 for the six months ended June 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company required cash for the operating activities of $265,748
during the six months ended June 30, 1998 as compared to $332,707 during the six
months ended June 30, 1997. The major source of cash for the six months ended
June 30, 1998, was funded from financing activities through the exercising of
warrants to purchase common stock of $160,000. The use of cash is due primarily
to support expenditures for start up operations and manufacture, promotion and
distribution of its products.
The Company's operating and capital requirements in connection with its
operations have been and will continue to be significant. Based on its current
plans, the Company anticipates that revenues earned from product sales will be
the primary source of funds for operating activities. The Company believes that
revenues in addition to existing cash and cash equivalents remaining from
proceeds of it private offering, will be sufficient to meet its capital and
liquidity needs for the next 12 months. The Company also believes that cash
required to fulfill purchase orders will be available through bank borrowings or
factoring, if required. The company's primary customers are substantial
corporations with credit ratings that will support such credit arrangements.
The Company is still in the process of emerging from the development
stage and, therefore, has generated little revenue to date. As reflected in the
accompanying financial statements, the Company incurred a net loss of $51,968
for the quarter ended June 30, 1998 compared to a net income of $3,337 for the
same quarter in 1997. Management's plans include the following:
1. The Company has arranged for marketing in association with
manufacturers and distributors of telecommunications equipment,
which will enable the Company to obtain orders for its products
with a minimal expenditure of the Company's resources. The Company
is presently organizing a manufacture's rep program to assist in
the distribution of their equipment.
6
<PAGE>
2. The Company has arranged for manufacture of its products by an
outside supplier in order to minimize the financial requirements
necessary for production. The Company is intending to purchase
this manufacturer. The status of this acquisition is discussed in
the Other Matters note included in this filing.
3. The company believes that it can acquire working capital through
sale of additional securities (including exercise of outstanding
warrants), or borrowings, including bank borrowing, in view of the
nature of its customer base. Nevertheless, the Company continues
to be subject to a number of risk factors, including the
uncertainty of market acceptance for its product line, the need
for additional funds, competition, technological obsolescence and
the difficulties faced by start up companies in general.
OTHER MATTERS
On July 15, 1998 the company entered into a letter of intent to
purchase all the issued common stock of Omega Metals, Inc. The company utilizes
Omega Metals, Inc. as its source of most of its manufactured products. There are
various contingencies associated with this purchase and no assurance that the
acquisition will be completed at this date.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a defendant in a suit filed in January 1998 in the 18th
Judicial Circuit Court of Florida by Steve R. Jones, the Company's President
from April to August 1997, which seeks damages of $17,000 and a declaratory
judgment as to the enforceability of a consulting agreement with the Company.
The Company is vigorously defending the case and does not believe it has any
liability to the plaintiff. The case is in the early stages, and there can be no
assurance of the ultimate outcome.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 12, 1998
AMERICAN ACCESS TECHNOLOGIES, INC.
(Registrant)
By: /s/ Bobby E. Story
----------------------------------------
Bobby E. Story
Secretary/Treasurer
Chief Financial Officer
By: /s/ Victor E. Murray
----------------------------------------
Victor E. Murray
President
7
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 334,013
<SECURITIES> 0
<RECEIVABLES> 111,429
<ALLOWANCES> 0
<INVENTORY> 73,986
<CURRENT-ASSETS> 524,433
<PP&E> 44,697
<DEPRECIATION> (12,185)
<TOTAL-ASSETS> 583,985
<CURRENT-LIABILITIES> 86,693
<BONDS> 0
0
0
<COMMON> 2,990
<OTHER-SE> 494,302
<TOTAL-LIABILITY-AND-EQUITY> 583,985
<SALES> 187,252
<TOTAL-REVENUES> 187,252
<CGS> 73,597
<TOTAL-COSTS> 240,684
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (51,968)
<INCOME-TAX> 0
<INCOME-CONTINUING> (51,968)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (51,968)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
