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PROSPECTUS PURSUANT
TO RULE 424(B)(1)
FILE NO. 333-43589
AMERICAN ACCESS TECHNOLOGIES, INC.
1,030,000 SHARES OF COMMON STOCK
630,000 WARRANTS EXPIRING FEBRUARY 11, 2000 TO PURCHASE
630,000 SHARES OF COMMON STOCK
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. See "Risk Factors"
beginning on page 5 for a discussion of certain risk factors that should be
considered by prospective investors of the securities offered hereby.
The security holders named under "Plan of Distribution - Selling
Security Holders" have advised the Company that they may from time to time sell
or otherwise dispose of Warrants to purchase Common Stock of the Company or
shares of the Common Stock to which this Prospectus relates (of which 630,000
shares are issuable upon exercise of the Warrants) at prices then prevailing in
the over-the-counter market or otherwise at prices then obtainable. The Company
will not receive any of the proceeds from the sale of Common Stock or Warrants
by such security holders other than amounts received upon exercise of the
Warrants in accordance with their terms (see "Description of Securities -
Warrants" elsewhere in this Prospectus). Such security holders, and any
securities dealers or brokers to or through which they effect sales of the above
shares of Common Stock or Warrants, may be deemed to be underwriters with
respect to such securities within the meaning of the Securities Act of 1933, and
any profits realized by such persons may be deemed to be underwriting
commissions. The exercise price of the Warrants is $8.00 per share. If all of
the Warrants are exercised in full the Company would receive proceeds of
$5,040,000. The Warrants expire on February 11, 2000.
The Company is not aware of any public market for the Warrants of the
Company.
The Company's Common Stock is quoted on the OTC Electronic Bulletin
Board under the symbol AATK. On May 15, 1998, the closing bid quotation for
the Common Stock on the OTC Electronic Bulletin Board was $7.00.
Costs and expenses in connection with the registration of the
securities offered hereby, estimated at $27,061, are to be borne by the
Company. Brokers' commissions, taxes and other selling expenses are to be borne
by the selling security holders and are not expected to exceed normal selling
expenses for sales in the over-the-counter market.
THE DATE OF THIS PROSPECTUS IS MAY 15, 1998.
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THE COMPANY INTENDS TO FURNISH ITS SHAREHOLDERS WITH ANNUAL REPORTS CONTAINING
AUDITED FINANCIAL STATEMENTS CERTIFIED BY ITS INDEPENDENT PUBLIC ACCOUNTANTS AND
QUARTERLY REPORTS CONTAINING UNAUDITED FINANCIAL STATEMENTS FOR EACH OF THE
FIRST THREE QUARTERS OF EACH FISCAL YEAR.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
more detailed information and the financial statements, including the notes
thereto, appearing elsewhere in this Prospectus.
SECURITIES REGISTERED
<TABLE>
<S> <C>
Shares of Common Stock which may be offered by the
Selling Security Holders.............................................1,030,000
Warrants which may be offered by the Selling Security Holders............630,000
Shares of Common Stock to be outstanding assuming all shares to
which this Prospectus relates are sold...............................3,600,000
</TABLE>
BUSINESS
The Company is a development stage Florida corporation which was
incorporated on October 21, 1996 to develop, design and manufacture products for
the telecommunications industry. The Company's first product, a zone cabling
termination cabinet, to facilitate the laying of cable for telecommunications
systems, specifically designed for the telecommunications cabling approach known
as "Zone Cabling", introduced in January 1997. The Company's independent
certified public accountants have included an explanatory paragraph in their
report on the Company's financial statements to express substantial doubt as to
the Company's ability to continue as a going concern.
The telecommunications industry in general is one that is continually
and rapidly expanding. Trends toward increased high speed data systems,
corporate networking and desktop personal computing, have created the need for
higher speed cabling, new ways to connect cabling and higher speed switching.
The Company's Zone Cabling Termination Cabinet ("ZCTC") was introduced
to the telecommunications industry in January 1997. This product acts as a
mini-telephone closet that fits into the ceiling the grid system and is
supported to the building structure by threaded rods, disguising its appearance
and providing a high degree of concealment, esthetic appearance as well as
security. The cabinet's design allows the mounting of telecommunications
apparatus on a removable equipment mounting plate located on the enclosure
access door. The product acts as a consolidation, distribution and termination
point for the system, as well as a multi-user outlet. Use of the ZCTC in
conjunction with "Zone Cabling" facilitates installation and moves, adds and
changes.
The Company outsources its entire product prototyping, production,
manufacturing, assembly and packaging operations to a singe independent
supplier.
The Company's goal is to become a leading supplier of structured
telecommunications cabling system components. The Company's offices are located
at 238 N. Westmonte Drive, Suite 210, Altamonte Springs, FL 32714. Its telephone
number is (407) 865-7696.
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DIVIDENDS
The Company has not paid any cash dividends and does not expect to pay
cash dividends in the foreseeable future.
SUMMARY FINANCIAL INFORMATION
The summary financial data set forth below is derived from and should
be read in conjunction with the financial statement, including the notes
thereto, appearing elsewhere in this Prospectus.
Statement of Operations Data:
<TABLE>
<CAPTION>
Year Ended
December 31
-----------------------
1997 1996
---- ----
<S> <C>
Revenues 231,622 --
Loss from continuing operations (426,455) (66,248)
Income from discontinued operations -- 4,606
Net (loss) (426,455) (61,642)
Net (loss) per common share (.14) (.02)
Weighted average number of shares 3,083,000 2,850,000
</TABLE>
Balance Sheet Data:
<TABLE>
<CAPTION>
December 31, 1997
--------------------------------------
Actual
--------
<S> <C>
Working capital $378,299
Total assets 540,582
Total liabilities 100,825
Stockholders' equity 439,757
</TABLE>
- --------------------
RISK FACTORS
The Securities offered herein involve a high degree of risk.
Accordingly, before deciding to purchase, investors should carefully consider
the following risk factors along with the other matters discussed herein.
LOSSES INCURRED DURING START-UP OF OPERATIONS; MODIFIED ACCOUNTANT'S
REPORT. The Company began its business described herein in October 1996 and has
recently introduced its first
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product. As with many start-up company's, expenses are currently in excess of
revenues as the Company continues to invest its resources into continuing
product development and marketing. Since inception through December 31, 1997,
the Company has a cumulative loss of $488,097. There was a net loss of $426,455
for the fiscal year ended December 31, 1997 and a net loss of $61,642 for the
fiscal year ended December 31, 1996.
As of December 31, 1997, the Company had working capital of $378,299.
Although the Company's working capital requirements for the next 12 months will
be substantially dependent upon sales activities, the Company's internal
projections call for working capital requirements of approximately $692,000 for
such period. Accordingly, the Company is subject to the risks of any new
business and the likelihood of success of the Company must be considered in
light of the problems, expenses, difficulties and complications of a new
business and the highly competitive environment in which the Company operates.
There can be no assurance that the Company will be able to achieve and sustain
profitable operations in the future. The Company's independent certified public
accountants have included an explanatory paragraph in their report on the
Company's financial statements to express substantial doubt as to the Company's
ability to continue as a going concern. See "Financial Statements" contained
herein.
NEED FOR ADDITIONAL FUNDS. The Company will require substantial
additional funding to further develop its products, marketing and operations.
Although the Company believes that such funds will become available from sources
including cash flow from its operations, bank loans, factoring or sale of
additional securities, including exercise of the Warrants herein, it has not
formulated any specific plan for raising additional funds, including sale of
additional equity securities, as of the date of this Prospectus. There can be no
assurance that such additional funds would be available when needed or that they
would be available on attractive terms or that raising additional funds would
not result in substantial reduction in the value of the Company's shares.
NO ASSURANCE OF COMMERCIAL SUCCESS; UNCERTAINTY OF MARKET ACCEPTANCE.
The Company's products compete in the highly competitive market for
telecommunications products. The Company's prospects for success will therefore
depend on its ability to successfully market its products to distributors who
may be inhibited from doing business with the Company because of their
commitment to other products. As a result, demand and market acceptance for the
Company's produces is subject to a high level of uncertainty. The Company
currently has limited financial, personnel and other resources to undertake the
extensive activities that will be necessary to produce and market its products.
There is no assurance that the Company will be able to formalize expanded
marketing arrangements or that its marketing efforts will result in substantial
additional revenues. See "Business".
DEPENDENCE UPON KEY MANAGEMENT. The Company is dependent upon the
members of management set forth herein. Accordingly, the Company will be
adversely affected if the services of such persons ceased to be available to the
Company.
COMPETITION; PRODUCT OBSOLESCENCE. The markets for the technology and
products developed by the Company are characterized by rapid changes and
evolving industry standards often resulting in product obsolescence or short
product life cycles. As a result, certain companies may be developing
technologies or products of which the Company is unaware which may be
functionally similar, or superior, to some or all of those being developed by
the Company. These companies may have substantially greater financial,
technical, personnel and other resources than the Company and may have
established reputations for success in developing and sales of their products.
The ability of the Company to compete will depend on its ability to continually
enhance and improve such products and technology, to adapt its products to be
compatible with specific products manufactured by others, and to successfully
develop and market new products and technology. There is no assurance that the
Company will be able to compete successfully, that its competitors or future
competitors will not develop technologies or products that render the
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Company's products and technology obsolete or less marketable or that the
Company will be able to successfully enhance its products or technology or adapt
them satisfactorily.
PROTECTION OF PROPRIETARY INFORMATION. The Company has applied for a
patent on its Zone Cabling product. There is no assurance that any patents will
be obtained. If obtained, there is no assurance that any patents will afford the
Company commercially significant protection of its technologies or that the
Company will have adequate resources to enforce its patents. The Company also
intends to seek foreign patent protection. With respect to foreign patents, the
laws of other countries may differ significantly from those of the United States
as to the patentability of the Company's products or technology. Moreover, the
degree of protection afforded by foreign patents may be different from that in
the United States. Patent applications in the United States are maintained in
secrecy until patents issue, and since publication of discoveries in the
scientific or patent literature tends to lag behind actual discoveries by
several months, the Company cannot be certain that it will be the first creator
of inventions covered by any patent applications it makes or the first to file
patent applications on such inventions.
POTENTIAL LACK OF LIQUIDITY. The Company's common stock currently
trades on the OTC Bulletin Board under the symbol: AATK. Stocks trading on the
OTC Bulletin Board generally attract a smaller number of market makers and a
less active public market and may be subject to significant volatility. Sales
of substantial amounts of shares of the Company's common stock in the public
market pursuant to exercise of the warrants herein and additional capital
financing transactions which may be undertaken by the Company in the future
could adversely affect the market price of the Company's common stock and the
Company's ability to raise equity capital in the future and may make it more
difficult for an investor to liquidate his investment in the Company.
NO CASH DIVIDENDS. The Company has not paid, nor does it presently
contemplate the payment of, any cash dividends on its Common Stock.
USE OF PROCEEDS
No assurance can be given that any or all of the Warrants will be
exercised. Accordingly, as far as can be determined as of the date of the
Prospectus, the proceeds received by the Company upon any exercise of Warrants
will be used for general corporate purposes and for working capital which may
include payment of salaries, rent, research and development, purchase of
inventory and marketing expenses. Such proceeds would aggregate $5,040,000 if
all the Warrants were exercised in full.
MARKET FOR SECURITIES
The Company's Common Stock is traded in the over-the-counter market and
is included in the NASD Electronic Bulletin Board under the symbol AATK. Trading
began on August 15, 1997.
The following is the range of high and low bid prices for the Company's
Common Stock for the periods indicated
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
August 15, 1991 through
September 30, 1997 $7.625 $ 2.50
October 1, 1997 through
December 31, 1997 $12.00 $ 7.20
January 1, 1998 through
March 31, 1998 $12.25 $11.00
</TABLE>
The above represents inter-dealer quotations which do not include
retail mark-ups, markdowns, or commissions, and do not necessarily represent
actual transactions.
The approximate number of record holders of the Company's Common Stock
as of May 15, 1998 was approximately 27.
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RECENT FINANCING
Since September 30, 1997, the Company issued 86,667 shares of its
Common Stock to holders of outstanding Common Stock Purchase Warrants and
received proceeds of $260,000.
DIVIDEND POLICY
The Company has not paid any dividends on its Common Stock, and it is
not anticipated that any dividends will be paid in the foreseeable future. The
Board of Directors intends to follow a policy of retaining earnings, if any, to
finance the growth of the Company. The declaration and payment of dividends in
the future will be determined by the Board of Directors in light of conditions
then existing, including the Company's earnings, financial condition, capital
requirements and other factors.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
The Company was formed in October 1996 to acquire the assets of Vic
Murray and Associates, Inc. (VMA). The purchase of VMA was for the primary
purpose of obtaining the pending patent for the Zone Cabling Termination
Cabinet, the product which the Company has since developed and marketed.
Shortly after the acquisition of VMA, the Company made a determination
to discontinue the operations and business activities of VMA, which was a
manufacturer's representative of various products. Accordingly, all of the
operations of VMA have been reflected as discontinued operation in the
accompanying statements of operations. The following discussion and analysis
reviews the operations by the Company in 1995, 1996 and 1997. The 1995 and 1996
periods reflect the historical operations of VMA as discontinued operations, as
described above. The operations of the Company with regard to the development
and sale of these Zone Cabling Termination Cabinet are reflected in the
historical operations for 1997. The following discussion and analysis should be
read in conjunction with a discussion about risk factors and the consolidated
financial statements of the Company, included elsewhere in this Prospectus.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH THE YEAR ENDED
DECEMBER 31, 1996
REVENUES
The Company earned $231,622 in sales revenue during 1997. Revenue for
1996 was zero, because the Company did not commence sales of its Zoning Cabling
Termination Cabinet until 1997. This represents an increase of 100%. All other
revenues relating to the activities of VMA during 1996 are reflected in
discontinued operations, net of costs and expenses.
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COSTS AND EXPENSES
Management and consulting fees paid to officers/directors/stockholders
consists of fees paid for the personal services rendered by these officers, who
are also directors and stockholders of the Company. These increased 518% to
$285,384 for 1997 as compared with $46,154 for 1996. The increase is due to a
full year of fees paid and accrued to the officers of the company during 1997.
Product development costs include research, development and legal costs
associated with registering and maintaining the patent held by the Company for
its product. Such costs increased 68% to $11,072 for 1997 as compared with
$6,601 for 1996.
Marketing expenses include costs associated with informing customers
and potential customers about the product through means such as brochures,
specification sheets and the Internet. These expenses increased 100% to $38,821
in 1997 as compared with $0 in 1996.
General and administrative expenses include the general overhead costs
of operating the Company, as well as marketing costs, such as trade shows and
advertising. These expenses increased 2,004% to $258,888 in 1997 as compared
with $12,301 in 1996.
Interest expense represents the interest cost incurred on the debt
outstanding during the first quarter of 1997 and the last quarter of 1996. This
expense increased 103% to $2,424 as compared with $1,192 for 1996.
INCOME FROM DISCONTINUED OPERATIONS
Income from discontinued operations represents the net operating
results of VMA. Such net income, which represents the net results of operations
of VMA, totaled $4,606 for the year ended December 31, 1996. There were no
results from VMA as of December 31, 1997 due to the cessation of operations in
the prior year.
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH THE YEAR ENDED DECEMBER 31,
1995 REVENUES
Revenues for 1996 and 1995 were zero, because the Company did not
commence sales of its Zoning Cabling Termination Cabinet until 1997. All other
revenues relating to the activities of VMA are reflected in discontinued
operations, net of costs and expenses.
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COSTS AND EXPENSES
Management and consulting fees paid to officers/directors/stockholders
consists of fees paid for the personal services rendered by these officers, who
are also directors and stockholders of the Company. These costs amounted to
$46,154 for 1996.
Product development costs include research, development and legal costs
associated with registering and maintaining the patent held by the Company for
its product. Such costs totaled $6,601 for 1996.
General and administrative expenses include the general overhead costs
of operating the Company, as well as marketing cost, such as trade shows and
advertising. These expenses totaled $12,301 in 1996.
Interest expense represents the interest cost incurred in the debt
outstanding during 1996. This expense amounted $1,192 for 1996.
Costs and expenses for 1995 were zero, because all of the costs and
expenses incurred by the Company have been presented in discontinued operations,
and applied against the revenue generated from the discontinued operations of
VMA.
INCOME FROM DISCONTINUED OPERATIONS
Income from discontinued operations represents the net operating
results of VMA. Such net income, which represents the net results of operations
of VMA, decreased $10,531 for the year ended December 31, 1996, as compared to
the same period ended December 31, 1995. The decrease was attributable primarily
to the cessation of operations.
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LIQUIDITY AND CAPITAL RESOURCES
The Company required cash for operating activities of approximately
$325,000 during the year ended December 31, 1997 and $21,000 during the year
ended December 31, 1996. The use of cash in both periods is due primarily to
Company expenditures for start up operations and promotion and distribution of
its products.
Cash used in investing activities, which includes patent development
and acquisition of fixed assets, was approximately $43,000 for the year ended
December 31, 1997 and $13,000 for the year ended December 31, 1996. This
increase was due to purchases of office equipment and computers as well as
expenses associated with protecting and making effective the Company's patent.
The Company received $100,000, from a short-term note payable during
the year ended December 31, 1996. This note was repaid in the first quarter of
1997. The Company completed a private placement of its stock which provided
proceeds of approximately $848,000 to the Company. The Company was provided with
cash from financing activities of approximately $749,000 for the year ended
December 31, 1997 and $95,800 for the year ended December 31, 1996.
The Company's operating and capital requirements in connection with its
development and marketing activities have been and will continue to be
significant. Based on its current plans, the Company anticipates that revenues
earned as a result of distribution agreements executed as of the date of this
filing, 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 its 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 development stage and, therefore, has
generated little revenue to date. As reflected in the accompanying financial
statements, the Company incurred net losses of approximately $426,000 in 1997
and $62,000 in 1996, and reflects a deficit accumulated during the development
stage of approximately $493,000 as of December 31, 1997. This condition raises
substantial doubt as to the ability of the Company to continue as a going
concern. Management's plans with regard to this going concern matters include
the following:
1. The Company has arranged for marketing in association with
manufacturers and distributors of telecommunication equipment as described
herein under "Business - Marketing" which will enable the Company to obtain
orders for its products with a minimal expenditure of the Company's resources.
2. The Company has arranged for manufacture of its product by an
outside supplier (see "Business - Marketing") in order to minimize the
financial requirements necessary for production.
3. The Company believes that it can acquire working capital through
sale of additional securities (including exercise of the Warrants herein), or
borrowing, including bank borrowing in view of the nature of its customer base.
See, Risk Factors - Need for Additional Funds, Losses Incurred During Start-Up
of Operations; Modified Accountant's Report and No Assurance of Commercial
Success; Uncertainty of Market Acceptance.
BUSINESS
COMPANY BACKGROUND
The Company's founder, Vic Murray, began working in the electrical,
cable and industrial supply business in 1945. As a Manufacturer's
Representative, he worked for such high profile companies as Graybar Electric
Company and Florida Electric Supply. Mr. Murray opened Vic Murray & Associates
as an independent manufacturer's representative in 1977 and such firm was
incorporated as Vic Murray & Associates, Inc. (VMA). VMA developed agency
relationships with electrical engineers, electrical contractors, municipalities,
power companies and distribution companies throughout the State of Florida. The
Company acquired VMA in exchange for Company common stock in 1996 and ceased its
manufacturer's representative business in order to engage exclusively in the
business described herein,
As a direct result of the break-up of the AT&T monopoly, thousands of
technology, service and equipment companies began to develop revolutionary
telecommunications products and services.
These companies could now fairly compete for business within the
rapidly evolving multi-billion dollar telecommunications industry.
Simultaneously, the computer industry evolved
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at a rapid pace as well. The telecommunications industry was forever changed and
for the first time in this industry, a myriad of new business opportunities
emerged.
Richard Murray was directed to research and evaluate the industry to
determine in which categories of supply and support they would specialize. The
decision was made to focus on wire management for voice, data, fiber optic, CCTV
and CATV applications. With the birth of new and revolutionary high speed
telecommunications technology and equipment, wiring and wire management would
become a critical part of the telecommunications industry.
Along with other specialists throughout the United States, the Murray's
quickly realized that designers of new buildings and renovations did not
consider adequate spacing and design requirements in order to accommodate the
telecommunications wiring. Although wire and wire management is a critical
portion of telecommunications, in some cases, the design engineers actually had
forgotten to include it in the project design. These engineering and industry
oversights create significant and expensive changes in structure design
resulting in the loss of usable or otherwise rentable spaces. Additionally,
excessive future moves, adds and changes (MAC's), of personnel offices,
telephones, data terminals and other cable termination points were generally
given little consideration.
BACKGROUND FOR PRODUCT DEVELOPMENT
Until now, Wire Management Systems have not evolved as rapidly as the
Telecommunications Industry as a whole. Industry leaders began to realize that
with the advent of technologically advanced equipment, systems, new methods of
conveyance (e.g. Fiber Optics) and the demand for connection to the "Information
Super Highway", the established methods of wiring and wire management were
outdated.
Telecommunication wiring originates outside the building and is routed
into the building through either an underground, direct buried or aerial service
entrance facility. An internal room within the building is designated as the
Entrance Facility (EF) and is normally located either on the first or in a
basement floor level. This space can also be used as the Equipment Room (ER). If
this space serves as the ER and houses the EF, it may also contain the main hub
of backbone pathways and cables that feed the various Telecommunications Closets
(TC) throughout the building. This main hub location is known as the Main
Cross-connect (MC). As a minimum, each and every floor of the building has a
Telephone Closet (TC). The TC functions to connect backbone cables to horizontal
cables (Horizontal Cross-connect - HC) or backbone cables to backbone cables.
TCs that contain backbone cables and pathways from the MC and from another TC
are called an Intermediate Cross-connect (IC). From the MC, high pair count
backbone cables are fed to every floor's designated TC (IC or HC). Cabling is
distributed to each floor through vertical and horizontal backbone cables and
pathways located in the center of the building that are usually surrounded by
firewalls. Every station location, (phone, fax, data, computer etc., located at
each Work Area - WA) is required to have two horizontal cables that run from the
WA back to the TC which in turn is fed back to the IC or MC. ANSI/TIA/EIA 568-A
telecommunications
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standards require two drops per WA. This wiring from the TC to the workstation
is generally referred to a "star" topology. Therefor each cable drop is a
"direct run" from the Work Area to the Telecommunications Closet and its
associated Horizontal Cross-connect.
This method of wiring and wire management provides for very little
cabling system flexibility to accommodate future moves, adds or changes (MAC
service orders).
The MC services the whole building and is generally located in a common
area. The TC is also located in common areas within each floor. The HC could be
as far as 295 ft. (90 meters) away from each termination point in the Work Area.
For uncatagorized voice wiring, the maximum backbone cable length is 800 meters.
This means that a massive amount of wire is required for telecommunication
applications. It is not unusual for a high rise building of 40 floors to have
200 - 300 Miles of wiring. The old method of zone cabling, requires very
expensive modular furniture for cable distribution within the office environment
in order to meet the multitude of industry standards and regulations. In some
applications, even modular furniture may not meet industry guidelines. The
Company's products are specifically designed to provide cabling solutions.
Today the telecommunications industry methods of information conveyance
must be able to handle more traffic than ever before. Wire and wire management
must be able to provide voice, data, video and low-voltage communications
faster, cheaper, cleaner, longer runs, using less space, while at the same time
accommodating long term considerations for expensive moves, adds and changes
(MAC's). Utilizing old methods of zone cabling, each and every move, add and
change for each workstation drop requires that a new "home run" be installed
back to the TC-HC. The Zone Cabling Termination Cabinet eliminates that need by
placing the telecommunications equipment close to the workstation and in an
inconspicuous location. Zone cabling moves, add's and changes are not only
expensive but time consuming and inconvenient. Cabling, wire management and
telecommunications technology is rapidly evolving. The industry leaders began to
address the need for new cabling methods and equipment. These companies,
industry associations and individual experts have joined together to create new
and revolutionary standards. Companies such as Lucent Technologies, Ortronics,
AT&T, Krone, Belden, Siecor, Hubbell, Leviton Telcom, Superior Modular Products
and American Access Technologies, Inc., in conjunction with various standards
organizations and telecommunications standards committee's, are developing and
introducing innovations in wire/cabling design, connections, consolidation,
distribution and termination points, providing for telecommunication signals to
be transmitted cheaper, faster, longer and clearer utilizing less space. This
method of cabling is called "Open Office Architecture'"
"Open Office Architecture" or more commonly called "Zone Cabling", is a
design allowed by ANSI/TIA/EIA Telecommunications Systems Bulletin 75. The
purpose of this design is to horizontally extend the location of the
consolidation point closer to the individual Work Areas. These locations of
consolidation points are called Zones.
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ZONE CABLING
Zone Cabling is officially defined as an "Interconnection in the
horizontal cabling which allows work station drops to be reconfigured frequently
without disturbing the horizontal cable run".
Zone Cabling is used in open office areas, hotels, convention centers,
entertainment and theme parks, hospitals, government buildings, schools,
industrial complexes, data centers, banks, and any other area where a flexible
cable layout is required to support collaborative work or provide service to an
area of high density and common use. Zone Cabling is used to support office
areas where reconfiguration of work areas is required due to a high rate of
rearrangements and/or reconfigurations (Moves, Adds and Changes are often
referred to as Churns).
PRODUCT AND PRODUCT DEVELOPMENT
The Company determined that it needed to expand in this market place as
rapidly as possible. The Company was reorganized and is now named American
Access Technologies, Inc. The purpose of the Company is to identify, design,
develop, and manufacture new products for any and all telecommunications cabling
applications with a specific focus on zone cabling. The Company consulted with
many of the leading telecommunications specialists and engineers and all were in
agreement. No one had developed a device that met all of the industry standards
and could effectively and efficiently be utilized as a zone cabling
consolidation/distribution/termination point. However, some sort of device was
absolutely required to complete the "Open Office Architecture"/Zone Cabling
design. American Access Technologies, Inc. performed the necessary research and
verified that no such Zone Cabling Termination Cabinet existed. In fact, such
research indicated that no one was even developing such a zone device.
The Company has designed a consolidation/distribution/termination point
enclosure called Zone Cabling Termination Cabinet, (ZCTC) and currently holds a
Utility Patent Pending for such enclosure that may be installed in the ceiling,
above the ceiling, on or in the wall or on or in the floor structure. The
ceiling ZCTC is uniquely utilized as a consolidation/distribution/termination
enclosure that fits into the suspended ceiling the and system. The ZCTC provides
easy access to the horizontal cabling backbone, reduces material and
installation effort, and minimizes office disruption and down time of systems
while at the same time enhances telecommunication security and reduces the floor
and wall space requirements for termination apparatus. The floor ZCTC provides
the same application solution in a floor installation.
The Company believes its ZCTC products are the only enclosures
manufactured that can function as a consolidation, distribution, termination
pointer multi-user outlet in a zone cabling system and still comply with all
industry and government guidelines, standards and regulations. The ZCTC products
provides an enclosure that can be utilized for any and all low voltage wiring
systems including but not limited to voice, data, video, HVAC, building
controls, security, and fire/life/safety wiring systems. The ZCTC was designed
to accommodates all manufacturers
12
<PAGE> 14
equipment including Category 3, 4 and 5 Jack Panels, Patch Panels, and Punch
Panels as well as fiber optic cables.
PRODUCT APPLICATION
The ZCTC will reduce the amount of wire needed for home runs from the
workstation to the TC-HC. These individual home runs will now run from the Work
Area to the ZCTC which is now located closer to the station termination
(modular jack). The ZCTC will be located within a controlled work environment
which is readily accessible located in the ceiling the grid system. The ZCTC is
designed to physically accommodate all of the newly developed "Open Office
Architecture" wiring equipment and distribution connections. This enclosure is
mounted in a standard 2ft. x 4 ft. ceiling the grid system but is physically
attached to the building structure to support the weight of the equipment
installed within the enclosure. The equipment access door opens from below the
ceiling the for easy maintenance, installations or MAC'S. Specially trained
technicians will no longer be required to effectuate MAC'S. The new wiring and
distribution equipment is of the modular plug-in type (not one time use)
creating less down time, loss of productivity and can be easily re-routed and
reused. The initial installation of the ZCTC is approximately the same as the
old method of Distribution Cabling. However, the Company believes the short term
and long term cost savings are very significant. It estimates that the ZCTC will
reduce short term and long term costs by:
Fire Stopping-reduced cable penetration resulting in reduced material
cost.
Cable reuse-Cable can be re-routed for re-use.
Labor-Zone Cabling Termination Cabinet allows shorter cable runs for
MAC's
The Zone Cable Termination Cabinet (ZCTC) provides better utilization
of the common area TC's. and provides the building owners more usable space.
The ZCTC provides for more efficient utilization of horizontal cables and it
significantly reduces the physical mass of cables to be run throughout the
building.
It also moves the point of connection closer to the Work Area making
it easier to effect changes and modifications without disturbing the work force.
Ceiling the is attached to the exposed "underside" of the enclosure disguising
its appearance thereby providing an degree of concealment and security for the
horizontal cable consolidation/distribution/termination point. It offers greater
security to the communication system since it is obscured, out of reach and
can easily be monitored by closed circuit TV. Breaking down communications
into zones is a sensible and cost effective alternative to the conventional
methods of cabling a building.
The benefits include: Reduced employee disruption, reduced system down
times, lower hourly rate for qualified technicians.
13
<PAGE> 15
STANDARDS
The standards, regulations and various Industry association guidelines
are very specific. The Company believes its Zone Cabling Termination Cabinet
(ZCTC) is the only product that meets the standards/requirements of the
telecommunications industry Building Industrial Consulting Services
International (BICSI), National Electric Code regulations NEC 300-22 B & C,
American National Standards Institute/Telephone Industry Association/Electrical
Industry Association publication 568 A, as well as the Zone Cabling guidelines
as specified in the newly released Telecommunications Systems Bulletin - TSB 75.
The Zone Cabling Termination Cabinet (ZCTC) is the only product known to the
Company that meets or exceeds these regulations and guidelines and has and
Underwriters Laboratories listing of UL 1863. This product is the only product
that has been tested by Underwriters Laboratories for this application.
Therefore, Underwriters Laboratories has assigned this product to a new category
listing. This listing is identified as UL 1863 (Telecommunications Cabinets)
under 31RF, and is further identified as a Type 12 rated enclosure for Plenum
type installations. The ZCTC is also listed as UL2043. The ZCTC is currently the
only enclosure manufactured to these standards.
MARKETING
The primary focus of marketing efforts is to "PARTNER" with major
equipment manufacturers and telecommunications distributors since the Company's
products are designed to enhance the sales the manufacturer and distributor.
Since the Company's products enable the placement of telecommunications
equipment into ZONES and still comply with all of the industry guidelines and
building regulations, each of these companies can use the Company's enclosure to
sell more of their products. By partnering with the Company each manufacturer
and/or distributor has opportunity to gain a larger share of their respective
markets. The Company is providing various support programs and materials that
enhances its partners marketing plan.
The Company has developed several collateral marketing pieces. These
collateral material pieces range from one page to an eight page full color
product and application brochure. Our printed materials and World Wide Web Site
currently serves as our primary marketing tools. All of these marketing/media
materials provide Company information, product information, engineering
specifications, drawings, application for use, installation instruction,
features and benefits tailored to each individual market need. Additionally the
World Wide Web Site provides marketing support materials that can be downloaded
and printed at individual locations throughout the world. Questions and answers
can be transmitted via e-mail feedback capability, query analysis for tracking
of inquiries, lead generation for the distributors, distribution of marketing
materials to end users not normally addressed by the individual distributors.
The largest and most recognized telecommunications training and
certification organization (BICSI) is currently using the ZCTC line of products
as an integral part of their Zone Cabling Training and Certification course.
14
<PAGE> 16
The Company is participating with its partners in trade shows as a
component in their individual booths and hospitality suites. However, the
Company will individually participate in three or four trade shows per year. Two
of the shows are focused around standards, training and certifications. The
remaining two shows are industry product shows. The Company attended SUPERCOMM
97 that was held in New Orleans in June 1997. The Company believes that certain
of its partner relationships were as a result of its show presence.
The end users of the Company's products contract with specialized,
BICSI Certified Registered Communications Distribution Designers (RCDD),
qualified engineers and contracting firms. These specialist design, specify,
purchase and install cabling of all types, switches and all other
telecommunications equipment as required by the end user. All product purchases
are made through authorized distributors with the exception of certain companies
who can purchase extremely large quantities as a private label type product.
The market potential for the Zone Cabling Termination Cabinet is
believed to be large and can be generally classified within two categories-
"New Installation" and "Refurbishment of Existing Facilities".
DISTRIBUTION AND SALES
American Access Technologies has entered into a national distribution
contract with ANIXTER Internationals, Inc.
Anixter International Inc. (NYSE: AXE), 1996 revenues $2.5 billion.
Anixter International is a leading value-added provider of integrated
cabling and networking solutions that support business information and network
infrastructure requirements. Anixter teams with customers to implement these
solutions by combining a variety of customized pre- and post-sale services,
products from the world's leading manufacturers, and superior logistics
management through a global network of 37 countries with 205 domestic operating
locations. Anixter International also owns approximately 19 percent of ANTEC
(NASDAQ: ANTC).
American Access Technologies has negotiated distribution agreements
with the following Regional distributors:
CED-American Electric, Inc. (Data Voice)
Founded over 100 years ago as a private Company and has grown to over
400 locations spread over 48 states and Canada. CED gross revenues in 1996
exceed $500 million and they employee over 3,500 people in their service area.
They stock over 25,000 separate inventory items with well in excess of 1 million
warehousing facilities.
State Electric Supply
15
<PAGE> 17
State Electric was founded in 1954 in Dunbar, West Virginia, as a
private Company and has grown to over 22 locations spread over seven states.
State Electric Supply gross revenues in 1996 of over $125 million, and
employees over 500 people in their service area.
Core Data Comm, a Regional Distributor specializing in
telecommunications.
American Access Technologies, Inc., is currently negotiating with
several National Distributors. There can be no assurance of any additional
distribution agreements.
COMPETITION
The market for telecommunications products is highly competitive and
subject to rapid technological change, regulatory developments and emerging
industry standards. The Company believes that the principal competitive factors
in its markets are conformance to standards, reliability, safety, product
features, price, performance and quality of customer support. There can be no
assurance that the Company will compete successfully in the future with respect
to these or other factors.
MANUFACTURING
The Company has developed all of its products utilizing computer
assisted design drawings (CADD). Master copies of its products are safeguarded
at the home office and certain copies are available to outsource firms.
At present, the Company outsources it's product prototyping,
production, manufacturing, assembly and packaging to Omega Metals, Inc., located
in Keystone Heights, Florida. As a contract manufacturer, Omega Metals
specializes in providing complete manufacturing and assembly services. As part
of their complete services package, Omega Metals provides manufacturing as well
as consulting services, product prototype development plus short and/or long run
manufacturing for the products designed by the Company. After product prototypes
are reviewed, modified and accepted by the Company, Omega Metals manufactures
the products, provides complete product assembly, performs manufacturing quality
assurance, packages the products and ships as specified by the Company.
Employing the most current computer controlled equipment on the market,
they have a manufacturing capacity of approximately five (5,000) thousand units
per month and have additional space for expansion as the need arises. Their
manufacturing capability is not limited to only precision metal fabrication as
they also provide on site state of the art high-tech surface coatings such as
Iridizing, Powder Coating, Silk Screening and specialized production painting.
The Company does not have a long-term supply contract with Omega
Metals, Inc. However, the Company believes that other companies are qualified to
manufacture its products if Omega Metals, Inc. is terminated as a supplier for
any reason.
16
<PAGE> 18
FUTURE PRODUCT DEVELOPMENT
As the Company identified the specific product needs of the
telecommunications industry they developed products to address these needs.
Products designed to date have been accepted by the major Standards and Code
Authorities throughout the United States. The products assist equipment
manufacturers in marketing their own products.
The Company's first design was a low-voltage Zone Cabling Termination
Cabinet which mounts within the ceiling the grid system. The Company developed
accessory equipment to permit cable penetrations and maintain fire rating.
The second phase was to develop a cabinet that serves as a termination,
distribution and/or consolidation point within a raised floor data center. This
unit has been developed with a prototype. It is estimated that this unit will be
in production within the next six months.
The third phase includes a high-voltage termination cabinet that mounts into
the ceiling the grid system to house active electronics, including computer
hubs, routers and switches. This unit will accommodate Fiber Optics as well as
conventional copper wiring. We anticipate that this unit will be U.L. listed
and into production within the next six months.
There can be no assurance that any new products will be successfully
developed or marketed.
INTELLECTUAL PROPERTY
The Company has filed with the United States Department of Commerce,
Patent and Trademark Office application for patent, pending No. 08785006, for
Zone Cabling Termination Cabinet and Communications Cable Interconnection
Apparatus and Associated Method for an Open Office Architecture. The patent
application contains approximately 67 various claims associated with zone
cabling techniques.
The Company is preparing a formal filing under the Patent Cooperation
Treaty for European filing and will have foreign applications filed before
January 1998.
There can be no assurance that any patents will be granted on the
Company's products or, if granted, that they will provide meaningful
protection against competing products which may be introduced. See "Litigation."
GOVERNMENT REGULATION - INDUSTRY STANDARDS
The markets for the Company's products are characterized by the need to
meet governmental and industry standards. In the U.S., the Company's products
must comply with various regulations established by the Federal Communications
Commission and Underwriters Laboratories, as well as
17
<PAGE> 19
standards established by Bell Communications research and local building codes.
The ZCTC has been approved by Underwriters Laboratories for low voltage
communications and meets or exceeds the national electrical code requirements
when used with appropriate fire foam kits in association with cable access
penetration models
The Company maintains membership in trade organizations such as the
Telecommunications Industry Association, International Association of Electrical
Inspectors and Building Industrial Consulting Services International.
EMPLOYEES
As of December 3, 1997 substantially all of the activities of the
Company are undertaken by its three officers, who are engaged pursuant to
Executive Management Agreements, and two commission sales representatives. See
"Executive Compensation - Executive Management Agreements".
LITIGATION
The Company is defendant in a suit filed in January 1998 in the 18th
Judicial Circuit Court of Florida by Steve R. Jones who was the Company's
President from April 1997 to August 1997. Mr. Jones seeks rescission of a
consulting agreement he signed with the Company in August 1997, a declaration
that certain provisions of such agreement relating to non-competition, trade
secrets, non-disclosure and conflict of interest are no longer applicable to Mr.
Jones, damages for failure of the Company to make consulting payments of $7,500
per quarter to Mr. Jones and the present value of his stock options which he
agreed to surrender to the Company (200,000 options at $8.00 per share) and the
value of 200,000 shares of the Company's common stock which he surrendered
pursuant to the consulting agreement. The Company believes it was justified in
not paying Mr. Jones' consulting fees due to Mr. Jones' failure to perform the
consulting services assigned to him. Mr. Jones, through his attorney, has also
indicated that Mr. Jones is the inventor, or a co-inventor, of the Company's
Zone Calling Termination Cabinet. The Company does not believe that Mr. Jones
is the inventor or a co-inventor of such product and such issue is not included
in the litigation with Mr. Jones. If it were determined that Mr. Jones was the
inventor or co-inventor of the Company's product, such fact could cause the
invalidity of any patent issued to the Company on such product.
FACILITIES
The Company's executive offices in Altamonte Springs, Florida comprise
3,000 square feet and are leased on a 3 year lease expiring December 31, 1999 at
a rent of $3,133 per month.
MANAGEMENT
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
----------------- ---- ---------
<S> <C> <C>
Victor E. Murray 73 President, Director
Richard A. Murray 43 Vice President, Director
Bobby E. Story 56 Secretary, Treasurer, Director
John W. Cooney 62 Director
Victor D. Phillips 55 Director
</TABLE>
VICTOR E. MURRAY, President and Director, has a 30 year track record of
success in the Electrical Engineering field with experience in distribution,
manufacturing and marketing. He has worked with companies such as Florida
Electrical Supply, Graybar Electric, James & Associates and Ralston, Lowe, Inc.
The clients he has served range from engineers and contractors to power
companies and municipalities. Employment history for the past five (5) years is:
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<PAGE> 20
October 1996 to February 1997 and August 1997 to Present: President -
American Access Technologies, Inc.
January 1, 1995 to October 1996: President - Vic Murray & Associates,
Inc.
April 1977 to December 31, 1994: Vic Murray & Associates, Inc.
Manufacturer's Representative
RICHARD A. MURRAY, Vice President-Sales and Director, has over 15 years
experience in the electrical field specializing in such area as Ozone
Generation, electrical switching and telecommunications. He has over 2 years
high level military training in sensitive electrical technologies. Mr. Murray
was Vice President of Sales for COOL WAY. Employment history for the past five
(5) years is:
October 1996 to Present: Vice President - American Access Technologies,
Inc.
January 1, 1995 to October 1996: Vice President - Vic Murray &
Associates, Inc.
April 1977 to December 31, 1994: Vic Murray - associates - associate,
manufacturer's representative specializing in the telecommunications supplies,
wiring, and equipment.
BOBBY E. STORY, Secretary/Treasurer, CFO and Director, has been a
former practicing CPA and real estate developer during the past 30 years. He
worked for Arthur Young & Company CPA (now Ernst & Young, LLP), Treasurer for
Condey Corporation an international developer located in Winter Park, Florida,
and directed the real estate operations in Florida for Drexel Burnham Lambert &
Company. He functions as the Chief Financial Officer for the corporation.
Employment history for the past five (5) years is:
October 1996 to Present: Sec/Treasury, CFO - American Access
Technologies, Inc.
August 1996 to October 1996: Financial Advisor - Self employed.
March 1996 to August 1996: George S. May Co. Project Manager
April 1987 to March 1996: NACEX, Inc. Controller, Vice President
Finance
JOHN W. COONEY, Director, is a certified public accountant. He was
Senior Tax Partner at Coopers Lybrand, LLP, until he retired in 1986. He has
practiced as a tax and financial consultant since then. Employment history for
the past five (5) years is:
January 1987 to Present: Operates J. W. Cooney, CPA as a sole
proprietorship.
VICTOR D. PHILLIPS, Director, is a member of the Company's Active
Advisory and Consulting Board. He has been in the telecommunications industry
for over 30 years, certified as
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<PAGE> 21
a Registered Communications Distribution Designer, teaches as a certified BICSI
instructor, past National President of BICSI and is currently President of
Information Transport Systems Designers International which provides consulting,
design, inspection and project management services. Mr. Phillips is a member of
the International Association of Electrical Inspectors and is a communications
inspector and member of the Florence County Board of Appeals in Florence, South
Carolina. Employment history for the past five years is:
August 1991 to Present: President of Information Transport Systems
Designers.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation paid to the
Company's chief executive officer for the last three completed fiscal years. No
executive officer of the Company received compensation of $100,000 or more
during any such year.
<TABLE>
<CAPTION>
Name and Other Annual
Principal Position Year Total Income Bonus Compensation
- ------------------ ---- ------------ ----- ------------
<S> <C> <C> <C> <C>
Victor E. Murray, President 1995* $51,576 -0- -0-
1996* $25,501 -0- -0-
1997 $60,000
</TABLE>
*paid by Vic Murray and Associates, Inc.
DIRECTOR COMPENSATION
At present, director fees are paid to Victor D. Phillips at the rate of
$250 per meeting plus travel and lodging expenses. No other fees are paid for
director services.
EXECUTIVE MANAGEMENT AGREEMENTS
On October 21, 1996 three officers of the Company have entered into
management agreements with the Company. The individuals and their titles are as
follows:
Victor E. Murray President
Bobby E. Story Chief Financial Officer
Richard A. Murray Vice President
Their combined responsibilities are to organize policies and procedures
for business operations, secure short and long term financing, develop products
and/or services, develop market and sell products and/services, provide (legal,
accounting and industry specific) services to properly organize and profitably
operate the Company.
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<PAGE> 22
Each officer is authorized a management fee of $5,000.00 per month
however, each will be paid $693.00 per week. The unpaid balance due each officer
will accrue. Accrued compensation will be paid as directed by the board of
directors but shall be paid on or before December 31, 1998. State or federal
taxes on compensation paid are the sole responsibility of each officer
individually.
The term of the agreements are on a month to month basis and may be
terminated by either party by giving notice of at least 30 days prior to
anticipated termination.
INDEMNIFICATION
FLORIDA BUSINESS CORPORATION ACT
Subsection (1) of Section 607.0850 of the Florida Business Corporation
Act ("BCA") empowers a corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise (including an employee benefit plan),
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Subsection (2) of Section 607.0850 of the BCA empowers a corporation
to indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the corporation to procure a judgment in its favor by reason of the fact
that such person acted in any of the capacities set forth above, against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
under similar standards, except that no indemnification may be made in respect
to any claim, issue or matter as to which such person shall have been adjudged
to be liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the court in which such action
or suit was brought, or any other court of competent jurisdiction, shall
determine that despite the adjudication of liability, but in view of all of the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
BCA Section 607.0850 further provides that indemnification provided
for by Section 607.0850 shall not be deemed exclusive of any other rights to
which the indemnified party may be entitled and empowers the corporation to
purchase and maintain insurance on behalf of a director, officer, employee or
agent of the corporation against any liability asserted against him and
incurred by him in the capacities set forth above, or arising out of his status
as such, whether or not the corporation would have the power to indemnify him
against such liabilities under Section 607.0850.
ARTICLES OF INCORPORATION
Article 4 of the Company's Articles of Incorporation provides that the
Company shall indemnify those persons entitled to be indemnified, to the
fullest extent permitted by law.
SECURITIES AND EXCHANGE COMMISSION POLICY
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers or
persons controlling the Company, the Company has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Victor E. Murray, President, is the father of Richard A. Murray, Vice
President of the Company. They co-invented the primary product of the Company,
the Zone Cabling Termination Cabinet and subsequently assigned all rights to the
patent to the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of December 5, 1997, the beneficial
ownership of the Company's Common Stock by (i) the only persons who own of
record or are known to own, beneficially, more than 5% of the Company's Common
Stock; (ii) each director and executive officer of the Company; and (iii) all
directors and officers as a group.
<TABLE>
<CAPTION>
Percent of
Number of Outstanding
Name Shares Common Stock(1)
<S> <C> <C>
Victor E. Murray 400,000 13.47%
Richard A. Murray 400,000 13.47%
Bobby E. Story 390,000 13.13%
Steven K. Robinson 200,000 6.73%
Steve R. Jones 200,000 6.73%
John W. Cooney 50,000 1.68%
Victor D. Phillips -0- -0-
Bridge Bank Ltd. 800,000 26.94%
Cede & Co. 186,947 6.29%
</TABLE>
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<PAGE> 23
<TABLE>
<S> <C> <C>
Officers and Directors
as a group (5 persons) 1,240,000 41.75%
</TABLE>
(1) Based upon 2,970,000 shares outstanding
Does not include warrants to purchase Common Stock at $8.00 per share
as follows: Victor E. Murray - 70,000 shares; Richard A. Murray - 70,000 shares;
Steven K. Robinson - 70,000 shares; Bobby E. Story - 70,000 shares; and Capital
International Securities Group, Inc. - 350,000 shares.
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 10,000,000 shares of Common Stock
with $.001 par value. The holders of the Common Stock are entitled to one vote
per each share held and have the sole right and power to vote on all matters on
which a vote of stockholders is taken. Voting rights are non-cumulative. The
holders of shares of Common Stock are entitled to receive dividends when, as and
if declared by the Board of Directors, out of funds legally available therefore
and to share pro-rata in any distribution to stockholders. The Company
anticipates that any earnings will be retained for use in its business for the
foreseeable future. Upon liquidation, dissolution, or winding up of the Company,
the holders of the Common Stock are entitled to receive the net assets held by
the Company after distributions to the creditors. The holders of Common Stock do
not have any preemptive right to subscribe for or purchase any shares of any
class of stock. The outstanding shares of Common Stock and the shares offered
hereby will not be subject to further call or redemption and will be fully paid
and non-assessable
STOCK PURCHASE WARRANTS
Each Stock Purchase Warrant will entitle the registered holder to
purchase one share of the Company's Common Stock for $8.00. The exercise prices
of the Warrants and the number of shares issuable upon exercise of such Warrants
will be subject to adjustment to protect against dilution in the event of stock
dividends, stock splits, combinations, subdivisions and reclassification.
Warrants may be exercised by payment of the exercise price in United States
funds by cash or certified or bank check. No fractional shares of Common Stock
will be issued in connection with the exercise of Warrants. Warrants may not be
exercised unless a registration statement pursuant to the Securities Act, as
amended, covering the underlying shares of Common Stock is current and such
shares have been qualified, or there is an exemption from qualification
requirements under the securities laws of the state of residence of the holder
of the Warrants. In the event that there is no such registration statement or
exemption from registration, the holder will not be able to exercise the
Warrants.
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<PAGE> 24
Unless extended by the Company at its discretion, the Warrants will
expire at 3:00 p.m. Eastern time on February 11, 2000. In the event a holder of
Warrants fails to exercise the Warrants prior to their expiration, the Warrants
will expire and the holder thereof will have no further rights with respect to
the Warrants.
The Warrants may be exercised upon surrender of the Warrant
certificate on or prior to the expiration date at the offices of the warrant
agent, with the exercise form on the reverse side of the Warrant certificate
completed and executed as indicated, accompanied by full payment of the exercise
price (by certified check or bank draft payable to the Company) to the warrant
agent for the number of Warrants being exercised. The Warrant Holders do not
have the rights or privileges of holders of Common Stock.
No Warrant will be exercisable unless at the time of exercise the
Company has filed a current registration statement with the Commission covering
the shares of Common Stock issuable upon exercise of such Warrant and such
shares have been registered or qualified or deemed to be exempt from
registration or qualification under the securities laws of the state of
residence of the holder of such Warrant. While it is the Company's intention to
do so, there can be no assurance that it will be able to do so.
PLAN OF DISTRIBUTION/
SELLING SECURITY HOLDERS
PLAN OF DISTRIBUTION
The Warrants and/or shares offered hereby may be sold from time to
time directly by the Selling Security Holders. Alternatively, the Selling
Security Holders may from time to time offer such securities through
underwriters, dealers or agents. The distribution of securities by the Selling
Security Holders may be effected in one or more transactions that may take
place on the over-the-counter market, including ordinary broker's transactions,
privately-negotiated transactions or through sales to one or more
broker-dealers for resale of such securities as principals, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. Usual and customary or specifically negotiated
brokerage fees or commissions may be paid by the Selling Security Holders in
connection with such sales of securities. The securities offered by the selling
Security Holders may be sold by one or more of the following methods, without
limitations: (a) a block trade in which a broker or dealer so engaged will
attempt to sell the securities as agent but may position and resell a portion
of the block as principal to facilitate the transaction; (b) purchases by a
broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers, and (d) face-to-face
transactions between sellers and purchasers without a broker-dealer. In
effecting sales, brokers or dealers engaged by the Selling Security Holders may
arrange for other brokers or dealers to participate. The Selling Security
Holders and intermediaries through whom such securities are sold may be deemed
"underwriters" within the meaning of the Act with respect to the securities
offered, and any profits realized or commissions received may be deemed
underwriting compensation.
At the time a particular offer of securities is made by or on behalf
of a Selling Security Holder, to the extent required, a Prospectus will be
distributed which will set forth the number of securities being offered and the
terms of the Offering, including the name or names of any underwriters, dealers
or agents, if any, the purchase price paid by any underwriter for sales
purchased from the Selling Stockholder and any discounts, commissions or
concessions allowed or reallowed or paid to dealers and the proposed selling
price to the public.
The following security holders may offer Warrants and/or shares of
Common Stock issuable upon exercise of such Warrants:
<TABLE>
<CAPTION>
Number of
Warrants
or Shares Number of
Which may Warrants
be Offered and Shares
Number of Pursuant to be Owned
Warrants to this After the
Name and Company Affiliation Owned Prospectus Offering*
- ---------------------------- ----- ---------- ---------
<S> <C> <C> <C>
Capital International Securities Group, Inc. 350,000 350,000 -0-
Bobby E. Story, Secretary, Treasurer, Director 70,000 70,000 390,000
Victor E, Murray, President 70,000 70,000 400,000
Richard A, Murray, Vice President, Director 70,000 70,000 400,000
Steven K. Robinson 70,000 70,000 200,000
</TABLE>
23
<PAGE> 25
Capital International Securities Group, Inc. received the foregoing
Warrants in connection with acting as Placement Agent for the Company's private
placement in February 1997.
The following security holder may offer shares of Common Stock:
<TABLE>
<CAPTION>
Number
Of Shares
Which may be Number of
Offered Shares
Number of Pursuant to be Owned
Shares to this After the
Name Owned Prospectus Offerings
---- ----- ---------- ---------
<S> <C> <C> <C>
Steven R. Jones 200,000 200,000 -0-
Steven K. Robinson 200,000 200,000 -0-
</TABLE>
*Assuming all Warrants and/or Shares are sold.
LEGAL MATTERS
The validity of the securities offered hereby is being passed upon for
the Company by Joel Bernstein, 9701 Biscayne Boulevard, Miami, Florida.
EXPERTS
The financial statements appearing in this Prospectus and Registration
Statement have been audited by Rachlin Cohen & Holtz, CPA's, independent
certified public accountants, as set forth in their report thereon appearing
elsewhere herein and in the Registration Statement, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form SB-2 under the Securities Act with respect to the
securities offered hereby. This Prospectus, filed as a part of the Registration
Statement, does not contain certain information set forth in or annexed as
exhibits to the Registration Statement, and reference is made to such exhibits
to the Registration Statement for the complete text thereof. For further
information with respect to the Company and the securities offered hereby,
reference is made to the Registration Statement and to the exhibits filed as
part thereof, which may be inspected and copied at the public reference
facilities of the Commission in Washington, D.C., and at the Commission's
regional offices at 500 West Madison Street, Chicago, IL 60604; 7 World Trade
Center, New York, NY 10048; and 5757 Wilshire Boulevard, Los Angeles, CA 90034;
and copies of such material can be obtained from the Public Reference Section of
the Commission, 450 5th Street, N.W., Washington, DC 20549, at prescribed rates
and are available on the World Wide Web at: http://www.sec.gov.
24
<PAGE> 26
AMERICAN ACCESS TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-1
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheet F-2
Statements of Operations F-3
Statements of Stockholders' Equity (Deficiency) F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6 - F-14
</TABLE>
<PAGE> 27
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
American Access Technologies, Inc.
We have audited the accompanying consolidated balance sheet of American Access
Technologies, Inc. and Subsidiary (a development stage company) as of December
31, 1997, and the related consolidated statements of operations, stockholders'
equity (deficiency) and cash flows for each of the two years in the period then
ended and cumulative from inception. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of American Access
Technologies, Inc. and Subsidiary as of December 31, 1997, and the results of
their operations and their cash flows for each of the two years in the period
then ended and cumulative from inception in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As more fully discussed in
Note 2 to the consolidated financial statements, the Company is in the
development stage and has incurred net losses in 1997 and 1996 and reflects a
deficit accumulated during the development stage as of December 31, 1997. This
condition raises substantial doubt as to the ability of the Company to continue
as a going concern. Management's plans with regard to this matter are also
described in Note 2 to the consolidated financial statements. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
RACHLIN COHEN & HOLTZ
Miami, Florida
March 25, 1998
F-1
<PAGE> 28
AMERICAN ACCESS TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 442,555
Accounts receivable 11,436
Inventory 21,586
Prepaid expenses 3,547
---------
Total current assets 479,124
---------
Property and Equipment 35,277
---------
Other Assets:
Patent costs 22,583
Other assets 3,598
---------
Total other assets 26,181
---------
Total assets $ 540,582
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses:
Management and consulting fees, interest and
reimbursements due to officers/directors/stockholders $ 83,120
Other 17,705
---------
Total current liabilities 100,825
---------
Commitments, Contingencies and Other Matters --
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 and outstanding 2,970,000 shares 2,970
Additional paid-in capital 929,490
Deficit accumulated during the development stage (492,703)
---------
Total stockholders' equity 439,757
---------
Total liabilities and stockholders' equity $ 540,582
=========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE> 29
AMERICAN ACCESS TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended
December 31, Cumulative
------------------------- from
1997 1996 Inception
--------- --------- ---------
<S> <C> <C> <C>
Revenues $ 231,622 $ -- $ 231,622
--------- --------- ---------
Costs and Expenses:
Direct costs 65,480 -- 65,480
Management and consulting fees,
officers/directors/stockholders 285,384 46,154 331,538
Product development 11,072 6,601 17,673
Marketing and promotion 38,821 -- 38,821
General and administrative 258,888 12,301 271,189
--------- --------- ---------
659,645 65,056 724,701
--------- --------- ---------
Loss before Other Income (Expense) (428,023) (65,056) (493,079)
--------- --------- ---------
Other Income (Expense):
Interest Income 3,992 -- 3,992
Interest Expense (2,424) (1,192) (3,616)
--------- --------- ---------
1,568 (1,192) 376
--------- --------- ---------
Loss from Continuing Operations (426,455) (66,248) (492,703)
Income from Discontinued Operations -- 4,606 4,606
--------- --------- ---------
Net Loss $(426,455) $ (61,642) $(488,097)
========= ========= =========
Net Loss Per Common Share $ (0.14) $ (0.02)
========= =========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 30
AMERICAN ACCESS TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
------------------------ Paid-In Development
Shares Amount Capital Stage Total
---------- ------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1995:
Issuance of common stock for cash ($.001 per share) 2,800,000 $ 2,800 $ -- $ -- $ 2,800
Net income -- -- -- 15,137 15,137
Stockholder distribution -- -- -- (15,137) (15,137)
---------- ------- -------- --------- ---------
Balance, December 31, 1995 2,800,000 2,800 -- -- 2,800
Year Ended December 31, 1996:
Contributed capital -- -- 7,083 -- 7,083
Net loss -- -- -- (61,642) (61,642)
Stockholder distribution -- -- -- (4,606) (4,606)
---------- ------- -------- --------- ---------
Balance, December 31, 1996 2,800,000 2,800 7,083 (66,248) (56,365)
Year Ended December 31, 1997:
Issuance of common stock to director
for consulting services ($1.50 per share) 50,000 50 74,950 -- 75,000
Sale of common stock in private placement
($1.50 per share), net of related costs 400,000 400 487,577 -- 487,977
Exercise of placement agent warrants
($3.00 per share) 120,000 120 359,880 -- 360,000
Retirement of common stock issued to officers (400,000) (400) -- -- (400)
Net loss -- -- -- (426,455) (426,455)
---------- ------- -------- --------- ---------
Balance, December 31, 1997 2,970,000 $ 2,970 $929,490 $(492,703) $ 439,757
========== ======= ======== ========= =========
</TABLE>
See notes to financial statements.
F-4
<PAGE> 31
AMERICAN ACCESS TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended
December 31, Cumulative
------------------------- from
1997 1996 Inception
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss $(426,455) $ (61,642) $(488,097)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 6,626 -- 6,626
Common stock issued for services 75,000 -- 75,000
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (11,436) -- (11,436)
Inventory (21,586) -- (21,586)
Prepaid expenses (673) (2,874) (3,547)
Other assets 4,540 (8,138) (3,598)
Increase in accounts payable and accrued expenses 49,079 51,638 100,717
--------- --------- ---------
Net cash used in operating activities (324,905) (21,016) (345,921)
--------- --------- ---------
Cash Flows from Investing Activities:
(Increase) decrease in note receivable 5,000 (5,000) --
Expenditures for development of patent (14,500) -- (14,500)
Acquisition of property and equipment (33,676) (8,227) (41,903)
--------- --------- ---------
Net cash used in investing activities (43,176) (13,227) (56,403)
--------- --------- ---------
Cash Flows from Financing Activities:
Proceeds from (repayment of) note payable (100,000) 100,000 --
Proceeds from sale of common stock and exercise of warrants 847,977 -- 847,977
Proceeds from issuance of common stock to founding stockholders 2,300 500 2,800
Repayment of loan payable, stockholder (1,000) -- (1,000)
Distribution to stockholder -- (4,606) (4,606)
Other (400) -- (400)
--------- --------- ---------
Net cash provided by financing activities 748,877 95,894 844,771
--------- --------- ---------
Net Increase in Cash and Cash Equivalents 380,796 61,651 442,447
Cash and Cash Equivalents, Beginning 61,759 108 108
--------- --------- ---------
Cash and Cash Equivalents, Ending $ 442,555 $ 61,759 $ 442,555
========= ========= =========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 1,082 $ 2,424
========= =========
Non-cash investing and financing activities:
Investment in subsidiary by means of payable to stockholder $ 1,000
=========
Issuance of common stock for receivable $ 900
=========
Patent contributed to Company by certain stockholders $ 7,083
=========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 32
AMERICAN ACCESS TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND CAPITALIZATION
American Access Technologies, Inc. ("the Company") was incorporated
on October 21, 1996, under the laws of the State of Florida. The
Company's Certificate of Incorporation, as amended on November 25,
1996, authorizes the Company to issue and have outstanding at any
one time 10,000,000 shares of common stock, par value $.001 per
share and 1,000,000 shares of preferred stock, par value $.001 per
share. The Company was organized to acquire all of the voting
common stock of Vic Murray & Associates, Inc. ("VMA"). VMA was
incorporated on December 19, 1994, under the laws of the State of
Florida.
On October 21, 1996, the Company acquired all of the common stock
of VMA. Certain stockholders of the Company are related to the
stockholder of VMA. This transaction has been accounted for as a
reorganization of entities under common control, and, accordingly,
the acquisition has been accounted for in a manner similar to the
pooling of interests method. Retroactive effect has been given to
this acquisition in the accompanying consolidated financial
statements.
In October 1996 and December 1996, the Company issued an aggregate
of 1,400,000 shares of common stock to the founding stockholders of
the Company for the par value thereof. On February 11, 1997, the
Board of Directors declared a stock dividend in the amount of one
share for each share of common stock then outstanding, with each
stockholder to pay the Company the par value thereof. As a result
of this stock dividend, the previously issued and outstanding
1,400,000 shares of common stock became 2,800,000 shares of common
stock, with the total consideration of $2,800 (par value) having
been paid therefor. Retroactive effect has been given to this stock
split in the accompanying consolidated financial statements, and
all references to the number of shares of common stock gives effect
to the stock split effected on February 11, 1997.
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.
PRINCIPLES OF CONSOLIDATION
These accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary. All
intercompany accounts and transactions have been eliminated.
F-6
<PAGE> 33
AMERICAN ACCESS TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Although these
estimates are based on management's knowledge of current events and
actions it may undertake in the future, they may ultimately differ
from actual results.
REVENUE RECOGNITION
The Company recognizes revenue from product sales at the time the
product is shipped to the customer. The Company does not generally
grant return privileges to customers.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash balances at
financial institutions that, from time to time, exceed federally
insured limits. The Company believes that such risks are minimized
as a result of the size and stature of the financial institution in
which the Company maintains its account.
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.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments, including
short-term securities, with an original maturity of three months
or less to be cash equivalents.
Short-term securities (generally commercial paper maturing in
approximately 30 days) are stated at cost plus accrued income,
which approximates market value.
INVENTORY
Inventory, which is primarily composed of parts, supplies and
certain product components, is stated at the lower of cost or
market, with cost determined using an average cost method. The
Company does not generally carry finished goods inventory.
F-7
<PAGE> 34
AMERICAN ACCESS TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed
on the straight-line method at rates based on the estimated useful
lives of the assets. Expenditures for major betterments and
additions are charged to the asset accounts, while replacements,
maintenance and repairs which do not extend the life of the
respective assets are charged to expense currently.
PATENT
The Company has capitalized certain incremental costs incurred
related to acquiring a patent on the Company's product. This patent
was pending at December 31, 1997; therefore, amortization of the
patent has not commenced.
PRODUCT DEVELOPMENT COSTS
Costs in connection with the development of the Company's product
are comprised of design, production, consulting and other related
professional fees. These costs have been charged to expense as
incurred.
NET LOSS PER COMMON SHARE
In 1997, the Company adopted Statement 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
below the offering price at that time (see Note 7) 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 3,083,000 and
2,850,000 for 1997 and 1996, respectively. Diluted net loss per
common share, assuming exercising of the warrants granted, is not
presented as the effect of conversion is anti-dilutive.
NOTE 2. BASIS OF PRESENTATION
As described above, the Company was incorporated on October 21, 1996,
and since that time has been primarily involved in organizational
activities, developing a strategic plan for the marketing and
distribution of its product and raising capital. Planned operations
have commenced, but little revenue has been generated to date.
Accordingly, the Company is considered to be in the development stage
and the accompanying consolidated financial statements represent those
of a development stage enterprise.
F-8
<PAGE> 35
AMERICAN ACCESS TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 2. BASIS OF PRESENTATION (Continued)
The accompanying consolidated financial statements have been presented
in accordance with generally accepted accounting principles, which
assume the continuity of the Company as a going concern. However, as
discussed above, the Company is in the development stage and, therefore
has generated little revenue to date. As reflected in the accompanying
consolidated financial statements, the Company has incurred net losses
of $426,455 in 1997 and $61,642 in 1996, and reflects a deficit
accumulated during the development stage of $492,703 as of December 31,
1997. This condition raises substantial doubt as to the ability of the
Company to continue as a going concern.
Management's plans with regard to this matter include the adoption of a
business plan intended to define the Company's strategy for growth and
raising additional capital in order to increase revenues sufficient to
cover costs and expenses and generate positive cash flows. The Company
will distribute its product in the industrial and commercial markets
through manufacturer's representatives and distributors. During the
next twelve months, the Company anticipates that it will have various
contracts in place with major telecommunications companies throughout
the majority of the United States (see Note 12).
The eventual outcome of the success of management's plans cannot be
ascertained with any degree of certainty. The accompanying consolidated
financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
NOTE 3. CASH AND CASH EQUIVALENTS
<TABLE>
<S> <C>
Cash $ 42,555
Short-term securities 400,000
--------
$442,555
========
</TABLE>
NOTE 4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Estimated Useful Lives
(Years)
----------------------
<S> <C> <C>
Office furniture and equipment 3-5 $41,903
Less accumulated depreciation 6,626
-------
$35,277
=======
</TABLE>
NOTE 5. INCOME TAXES
The Company accounts for income taxes under the provisions of Statement
of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes". SFAS No. 109 requires the recognition of deferred tax
liabilities and assets for temporary differences, operating loss
carryforwards, and tax credit carryforwards existing at December 31,
1997. An effective tax rate of 34% was used to calculate the deferred
income taxes.
F-9
<PAGE> 36
AMERICAN ACCESS TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 5. INCOME TAXES (Continued)
A temporary difference is a difference between the tax basis of an
asset or liability and its reported amount in the financial statements
that will result in taxable or deductible amounts in future years when
the asset is recovered or the liability is settled. Deferred taxes
represent the future tax return consequences of these differences.
As of December 31, 1997, the Company had net operating loss
carryforwards for federal income tax reporting purposes amounting to
approximately $488,000, which expire in varying amounts to the year
2012.
The Company has not recognized any benefit of such net operating loss
carryforwards in the accompanying consolidated financial statements in
accordance with the provisions of SFAS No. 109 as the realization of
this deferred tax benefit is not considered more likely than not. A
100% valuation allowance has been recognized to offset the entire
effect of the Company's net deferred tax asset. The Company's net
deferred tax asset position is composed primarily of the Company's tax
loss carryforwards.
The components of the deferred tax asset were as follows:
<TABLE>
<S> <C>
Deferred tax asset $ 166,000
Less valuation allowance (166,000)
---------
Net deferred tax asset $ --
=========
</TABLE>
In accordance with certain provisions of the Tax Reform Act of 1986, a
change in ownership of greater than 50% of a corporation within a three
year period will place an annual limitation on the corporation's
ability to utilize its existing tax benefit carryforwards. The
Company's utilization of its tax benefit carryforwards may be
restricted in the event of possible future changes in the ownership of
the Company from the exercise of warrants or other future issuances of
common stock.
NOTE 6. PREFERRED STOCK
The Company is authorized to issue 1,000,000 shares of preferred stock,
par value $.001. The Board of Directors of the Company has the
authority, without further action by stockholders, to issue the
preferred stock in one or more series, and to fix for any series the
dividend rate, redemption price, liquidation or dissolution
preferences, conversion rights, voting rights and other preferences and
privileges. As of December 31, 1997, the Company has not designated any
series of preferred stock and no shares of preferred stock have been
issued or are outstanding.
F-10
<PAGE> 37
AMERICAN ACCESS TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 7. COMMON STOCK
PRIVATE PLACEMENT OF SECURITIES
During the period from February to April 1997, the Company raised
additional capital through a private placement offering of its
securities. The private placement offering consisted of a maximum
of 100,000 units, each unit consisting of four shares of common
stock being offered by the Company on a "best efforts" basis at a
price of $6.00 per unit through a Placement Agent. Upon sale of the
units, the Company would receive gross proceeds of $600,000, before
payment of commissions and other offering costs. The Placement
Agent received a stipulated commission of 10% of funds received
from the offering and certain expense allowance and administrative
fee of 3% and 2% of the funds received from the offering,
respectively, and was issued warrants to purchase 120,000 shares of
common stock at $3 per share and 350,000 shares at $8 per share.
The sale of these units resulted in the issuance of 400,000 shares
of common stock for net proceeds totaling $487,977.
Additionally, in September and October 1997, the Company issued
120,000 shares of common stock resulting from the exercise of the
Placement Agent warrants at $3.00 per share.
ISSUANCE OF COMMON STOCK TO DIRECTOR FOR SERVICES
In February 1997, the Board of Directors authorized the issuance of
50,000 shares of common stock to a newly elected director, with
payment of par value thereof. These shares have been recorded in
the accompanying consolidated financial statements at their
estimated fair value of $1.50 per share, as measured by the
offering price of the Company's common stock in the 1997 private
placement of securities which took place at or about that time (see
above). Inasmuch as these shares were issued to the director, the
estimated fair value of these shares ($75,000) has been charged to
expense in 1997 and included in management and consulting fees,
officers/directors/stockholder.
RESIGNATION OF OFFICERS AND RETIREMENT OF COMMON STOCK AND WARRANTS
In August 1997, the consulting agreement between an officer and the
Company was modified (see Note 8). The modified agreement
stipulated that the officer return 200,000 shares of common stock
which was originally sold to the officer for $.001 per share. The
Company also canceled 70,000 warrants at $8.00 per share which were
held by the officer. In December 1997, the Company dismissed the
services of the officer (see Note 9).
On December 9, 1997, the Company executed a management termination
agreement with another officer. Under the terms of the agreement,
the officer returned 200,000 shares of common stock. The common
stock was originally sold to the officer for $.001 per share. The
officer has agreed to abide by certain terms regarding
non-disclosure of information and trade secrets which are effective
for two years subsequent to the date of the agreement.
F-11
<PAGE> 38
AMERICAN ACCESS TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 7. COMMON STOCK (Continued)
WARRANTS
On February 11, 1997, the Board of Directors authorized the
issuance of 700,000 warrants to purchase one share common stock per
warrant at an exercise price of $8.00 per share expiring on
February 11, 2000; the 700,000 warrants authorized includes 350,000
Placement Agent warrants described above. In August 1997, warrants
to purchase 70,000 shares were cancelled in connection with the
resignation of an officer/stockholder (see above), resulting in
remaining warrants to purchase a total of 630,000 shares of common
stock outstanding at December 31, 1997.
NOTE 8. RELATED PARTY TRANSACTIONS
NOTE PAYABLE - BRIDGE BANK, LTD.
In December 1996, the Company arranged a $100,000 note payable to
Bridge Bank, Ltd., considered one of the founding stockholders of
the Company. The obligation was repaid in February 1997, from the
net proceeds of the 1997 private placement of securities (see Note
7). The note provided for interest at 15%; interest expense on the
note amounted to approximately $2,400 in 1997 and $1,200 in 1996.
MANAGEMENT AGREEMENTS
The Company entered into management agreements with four
stockholders dated October 21, 1996, on a month-to-month basis not
to exceed eighteen months. The agreements provide for compensation
of $60,000 per year per stockholder. On December 9, 1997, one of
the agreements was terminated through a management termination
agreement (see Note 7).
CONSULTING AGREEMENT
The Company entered into a consulting agreement with one of its
stockholders dated October 21, 1996, on a month-to-month basis. The
agreement provides for compensation of $60,000 per year. This
agreement was modified on August 28, 1997, reducing the
compensation base to $30,000. In addition, the modified agreement
stipulated the return of 200,000 shares of common stock and
cancellation of 70,000 stock purchase warrants.
NOTE 9. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Company leases its administrative facilities under an operating
lease, which expires in 1999. Future minimum rentals due under the
lease are approximately as follows for the years ending December
31:
<TABLE>
<S> <C>
1998 $37,600
1999 37,600
-------
$75,200
=======
</TABLE>
Rent charged to operations amounted to approximately $35,000 in
1997 and $6,000 in 1996.
F-12
<PAGE> 39
AMERICAN ACCESS TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 9. COMMITMENTS AND CONTINGENCIES (Continued)
PENDING LITIGATION
The Company is involved in litigation with a former
officer/stockholder of the Company in connection with a modified
consulting agreement with the Company (see Note 7) whereby he
surrendered 200,000 shares of common stock and cancelled 70,000
stock warrants previously held. The former officer is currently
seeking a rescission of this consulting agreement, damages for
failure to make consulting payments and the present value of the
stock options he agreed to surrender and the value of the 200,000
shares of common stock which he surrendered.
The Company denies that it has any liability to the individual and
has filed a motion to dismiss the case. Management plans to
vigorously defend the case. As of the date of this report, the case
was in its initial stages. Therefore, the amount of liability, if
any, cannot be estimated by management.
NOTE 10. DISCONTINUED OPERATIONS
In October 1996, the Company acquired all the voting common stock of
Vic Murray & Associates, Inc. in order to acquire the patent developed
by the stockholder of Vic Murray & Associates, Inc. and his son. All
assets were transferred to the Company at their historical cost. No
further business was conducted in Vic Murray & Associates, Inc.
therefore Vic Murray & Associates, Inc. is accounted for on a
retroactive basis as a discontinued operation in the accompanying
consolidated financial statements.
Summarized information for the discontinued operations for the year
ended December 31, 1996 is as follows:
<TABLE>
<S> <C>
Revenues $106,145
Costs and expenses 101,539
--------
Net income $ 4,606
========
</TABLE>
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The respective carrying value of certain on-balance-sheet financial
instruments approximated their fair value. These instruments include
cash, accounts receivable and accounts payable. Fair values were
assumed to approximate carrying values for these financial instruments
since they are short-term in nature and their carrying amounts
approximate fair values or they are receivable or payable on demand.
F-13
<PAGE> 40
AMERICAN ACCESS TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 12. CONTRACTS WITH DISTRIBUTORS
As of December 31, 1997, the Company had entered into Stocking
Distributor Agreements with seven distributors. The agreements set
forth terms whereby the distributors may purchase products from the
Company for resale to their customers within the U.S. and Canada and
Mexico when the Company releases its products for sale in those
countries. The prices for the products covered by the agreements are
based upon the intention of the distributors to purchase a minimum
number of units during the next twelve months after execution of the
agreements (an aggregate of approximately 60,000 units as of December
31, 1997). Revenue from these future sales will be recorded at such
time as the units are shipped to the distributors. The agreements are
for a term of one year and are automatically renewed each year
thereafter unless either party gives written notice of its intent to
cancel the arrangement, and contain, among other things, a warranty
effective for one year after the date of sale.
In February 1998, the Company executed a value added reseller agreement
with another company, in order to actively market and sell the product.
The reseller will have exclusive rights in the state of Texas to market
the product through its direct sales. The agreement stipulates that the
reseller will purchase a minimum of 4,000 units in the next three
years. Revenue from these future sales will be recorded at such time as
the units are shipped to the customer.
NOTE 13. OTHER MATTERS
MAJOR CUSTOMER
During the year ended December 31, 1997, the Company had one
customer that accounted for approximately 74% of sales.
MAJOR SUPPLIER
The Company outsources its entire product prototyping, production,
manufacturing, assembly and packaging operations to a single
independent supplier.
OTHER
In January 1998, Underwriter Laboratories, Inc. authorized the
Company to apply the UL mark to its product. Management believes
that the UL mark distinguishes the quality of the product due to
the requirements necessary to bear the UL mark and that recognition
of the UL mark should enhance sales.
F-14
<PAGE> 41
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No dealer, salesman or any other person has been authorized to give any
information or to make any representation other than those contained in this
prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company.
-----------------
This Prospectus does not constitute an offer of any securities other than
those to which it relates or an offer to sell or a solicitation of any offer to
buy any securities in any jurisdiction to any person to whom it is unlawful to
make such offer in such jurisdiction. The delivery of this Prospectus at any
time does not imply that the information herein is correct as of any time
subsequent to its date. Notwithstanding the foregoing, the Company has
undertaken to amend this Prospectus in the event of any fundamental changes in
the affairs of the Company.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary ............................................................. 4
Risk Factors ................................................................... 5
Use of Proceeds ................................................................ 7
Market for Securities........................................................... 7
Recent Financing................................................................ 8
Dividend Policy................................................................. 8
Management's Discussion and
Analysis of Results of Operation
and Financial Condition........................................................ 8
Business ....................................................................... 11
Management ..................................................................... 20
Indemnification ................................................................ 23
Certain Relationships and Related Transactions ................................. 23
Security Ownership of Certain Beneficial
Owners and Management ......................................................... 23
Description of Securities ...................................................... 24
Plan of Distribution/Selling Security Holders .................................. 25
Legal Matters .................................................................. 26
Experts ........................................................................ 26
Additional Information ......................................................... 26
Index to Financial Statements .................................................. F-1
</TABLE>
UNTIL SEPTEMBER 14, 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THE DISTRIBUTION DESCRIBED HEREIN, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS WITH RESPECT TO THE OFFERING HEREIN.
AMERICAN ACCESS
TECHNOLOGIES, INC.
-----------------
PROSPECTUS
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