Form 10-QSB for AMERICAN ACCESS TECHNOLOGIES, INC. filed on May 11, 1999
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[XX] Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934 For the quarterly period ended
March 31, 1999
OR
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from ______________ to ________________
* * * * * * * * * * * * * * * * * * * * * *
Commission File No. 000-24575
AMERICAN ACCESS TECHNOLOGIES INC.
A Florida corporation
(Exact name of registrant as specified in charter, and state incorporated)
* * * * * * * * * * * * * * * * * * * * * *
Employer Identification No. 59-3410234
Altamonte Springs Florida 238 N. Westmonte Dr. Suite 210 32714
(Address of principal executive offices of registrant)
(407) 865-7696
(Registrant's telephone number, including area code)
* * * * * * * * * * * * * * * * * * * * * *
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X]. NO [ ].
The number of shares of AMERICAN ACCESS TECHNOLOGIES INC. Common Stock (Par
Value $0.001) outstanding at March 31, 1999 was 3,265,470
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AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Audited
Financial
ASSETS Mar. 31, 1999 Statements
------ UNAUDITED Dec. 31, 1998
------------------------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 3,394,188 $ 637,776
Investments 0 2,825,177
Accounts receivable, net of allowance 883,032 806,960
Note receivable, related party 500,000 500,000
Inventories 330,595 297,440
Prepaid expenses and other current assets 69,522 60,466
Total current assets 5,177,337 5,127,819
------------------------------
Property, Plant and Equipment 1,246,251 1,313,630
Building Under Construction 158,442
Patent Costs 34,962 34,962
------------------------------
Total assets $ 6,616,992 $ 6,476,411
==============================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Line of credit $ 288,030 $ 296,002
Accounts payable and accrued expenses:
Compensation due to officers/directors/stockholders 0 111,235
Other 294,483 355,390
------------------------------
Total current liabilities 582,513 762,627
------------------------------
Deferred Income Taxes 69,000 69,000
------------------------------
Stockholders' Equity:
Series A 10% Senior Convertible Preferred stock,
$.001 par value; authorized 1,000,000 shares; issued and
outstanding 50,000 shares at liquidation value 5,000,000 5,000,000
Common stock, $.001 par value; authorized 10,000,000
shares; issued and outstanding 3,256,470 shares 61,256 3,256
Additional paid-in capital 1,923,384 1,512,634
Deficit (1,019,161) (871,106)
------------------------------
Total stockholders' equity 5,965,479 5,644,784
------------------------------
Total liabilities and stockholders' equity $ 6,616,992 $ 6,476,411
==============================
</TABLE>
See accompanying notes to financial statements
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AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Three Three
Months Months
Ended Ended
March 31, 1999 March 31, 1998
------------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 320,695 $ 75,355
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 74,402 59,311
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (76,072) (272,960)
Inventories (33,154) 110,902
Prepaid expenses and other assets (9,056) (49,266)
Increase (decrease) in:
Accounts payable and accrued expenses (172,142) 196,758
------------------------------
Net cash provided by operating activities 104,673 120,100
------------------------------
Cash Flows from Investing Activities:
Proceeds from investment changes 2,825,177 --
Patent costs -- (22,583)
Acquisition of property and equipment (net of sales and retirements) (21,517) 27,929
Costs for building under construction (143,949) --
------------------------------
Net cash provided by investing activities 2,659,711 5,346
------------------------------
Cash Flows from Financing Activities:
Proceeds from line of credit -- 150,000
Payments on loans and capital lease obligations (7,972) (194,219)
------------------------------
Net cash used in financing activities (7,972) (44,219)
------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 2,756,412 81,227
Cash and Cash Equivalents, Beginning 637,776 638,134
------------------------------
Cash and Cash Equivalents, Ending $ 3,394,188 $ 719,361
==============================
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 5,610 $ 30,104
==============================
</TABLE>
See accompanying notes to financial statements
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AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
Mar. 31, 1999 Mar. 31, 1998
-------------------------------
<S> <C> <C>
Net Sales
Formed metal $ 954,309 $ 692,914
Zone cabling termination cabinet 335,753 129,799
-------------------------------
Total Net Sales 1,290,062 822,713
-------------------------------
Costs and Expenses:
Cost of sales 501,777 390,078
Selling, general and administrative 727,677 538,551
-------------------------------
Total Cost and Expenses 1,229,454 928,629
-------------------------------
Net Operating Income (Loss) 60,608 (105,916)
-------------------------------
Other Income (Expense):
Interest income 233,128 4,804
Interest expense (5,610) (30,104)
Other income 17,399 206,571
-------------------------------
Total Other Income (Expense) 244,917 181,271
-------------------------------
Net Income Before Taxes 305,525 75,355
Income Taxes (Credit) (15,170) 0
-------------------------------
Net Income $ 320,695 $ 75,355
===============================
Net Income Per Common Share $ (.08) $ .02
===============================
</TABLE>
See accompanying notes to financial statements
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AMERICAN ACCESS TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999 Unaudited
1. Basis of Presentation
The accompanying unaudited consolidated condensed financial statements at March
31, 1999 have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-QSB and reflect all adjustments which, in the opinion of management, are
necessary for a fair presentation of financial position as of March 31, 1999 and
results of operations for the three months ended March 31, 1999 and 1998 and
cumulative. All adjustments are of a normal recurring nature. The results of
operations for interim periods are not necessarily indicative of the results to
be expected for a full year. The statements should be read in conjunction with
the consolidated financial statements and footnotes thereto for the year ended
December 31, 1998 included in the company's Registrations Statement Form SB-2
filing and 10-KSB.
2. Nature of Business and Summary of Significant Accounting Policies.
BUSINESS
American Access Technologies, Inc. develops specialized products for the
telecommunications industry. The company manufactures and distributes several
models of Zone Cabling Termination Cabinets (the "Product") to the
telecommunications industry. The Product helps manage and route wiring and
cabling used in voice, computer and data transmission systems throughout the
world.
Omega Metals, Inc. ("Omega"), a wholly-owned subsidiary of the Company, shears
and molds metal and manufactures metal-formed product for customers principally
in Florida and Georgia. Omega manufactures the Company's Product.
TERMINATION OF DEVELOPMENT STAGE
The Company was incorporated on October 21, 1996. Through November, 1998, the
Company had been principally engaged in organizational activities, the promotion
of its product and raising capital. Planned operations, as described above, had
commenced but revenue generated was not considered significant in relation to
the Company's business plan. Accordingly, the Company was considered to be in
the development stage, through the date of acquisition of Omega Metals, Inc. on
November 11, 1198.
Omega is a mature company, which has been in the operating stage for a number of
years with an established history of revenue and profits, significantly larger
than those of AAT. Accordingly, effective upon the acquisition of Omega, the
Company is no longer considered to be a development stage enterprise, and the
accompanying financial statements are presented as those of an established
operating enterprise.
NET LOSS PER COMMON SHARE
In 1997, the Company adopted Statements of Financial Accounting Standards (SFAS)
No. 128, "Earnings per Share" which requires the presentation of both basic and
diluted earnings (loss) per share.
Basic net loss per common share has been computed based upon the weighted
average number of shares of common stock outstanding during the periods. The
shares of common stock issued in connection with the stock split effected in
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February 1997, have been considered outstanding for all periods. In addition,
the shares of common stock issued to a Director in February 1997, prior to an
initial registration of the Company's common stock and at a price at that time
have been treated as outstanding during the entire period, pursuant to the
Securities and Exchange Commission Staff Accounting Bulletins. The computation
of earnings per share is reflected in the following schedule:
<TABLE>
<CAPTION>
Computation of Net Loss Per Common Share Three Months ended Year Ended
Mar. 31, 1999 Dec. 31, 1998
-----------------------------------
<S> <C> <C>
Net Income (Loss) $ 320,695 $ (492,814)
Cumulative Preferred Stock Dividend (125,000) (104,167)
Beneficial Conversion Preferred Stock Dividend (468,750) (781,250)
------------ -----------
$ (273,055) $(1,378,231)
------------ -----------
Weighted Average Common Shares Outstanding 3,030,270 2,992,500
Common Shares Issued to Acquire Omega Metals, Inc. 226,470 226,470
------------ -----------
Total Weighted Average Number of Common Shares and Equivalents 3,256,740 3,218,970
------------ -----------
Net Loss per Common Share $ (.08) $ (.43)
------------ -----------
</TABLE>
3. Contingencies
LITIGATION SETTLED
The Company was a defendant in a suit filed in January 1998 in
the 18th Judicial Circuit Court of Florida by Steve R. Jones, the Company's
president from April to August 1997. Jones sought damages and a declaratory
judgment as to the enforceability of a consulting agreement with the Company.
On March 17, 1999, this suit was settled in mediation.
American Access will receive no consultant agreement services from Mr. Jones,
and Mr. Jones will receive no compensation for such services. Mr. Jones will
receive certain stock options from registrant and will continue to be subject to
the non-competition and confidentiality provisions of his consultant agreement.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THREE MONTHS ENDED MARCH 31, 1999 COMPARED WITH THE THREE MONTHS ENDED
MARCH 31, 1998
REVENUES
Revenues for the three months ended March 31, 1999 increased by
$467,348 or 56.87% to $1,290,062 as compared to $822,714 for the three months
ended March 31, 1998. The parent company, American Access Technologies, Inc.,
was still in the development stage for the first quarter ended March 31, 1998,
and revenues were only $129,799. In the first quarter for the year ended March
31, 1999, revenues increased by $205,954 to $333,573. The company's subsidiary,
Omega Metal Inc., also had an increase in revenues of $261,394.
COSTS AND EXPENSES
Direct costs represent the cost incurred by the Company to have its
products manufactured and assembled. These costs represented 38.9% of revenues
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for the three months ended March 31, 1999, and 47.4% of revenues for the three
months ended March 31, 1998. The decrease in the direct costs is mainly
attributed to Omega Metals Inc. Due to a change in the customer mix, revenues
generated for March 31, 1999 required less direct labor and material costs than
for the previous year's quarter ended March 31, 1998.
Selling, General and Administrative expenses increased by $189,126 to
$727,677 for the three months ended March 31, 1999 compared to $538,551 for the
three months ended March 31, 1998. This increase was the result of costs
associated with the continued development growth of the company including
marketing and promotion, management costs, and professional fees associated with
the required filings.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities provided cash of $104,673 during the
three months ended March 31, 1999 as compared to $120,100 during the three
months ended March 31, 1998.
The Company's operating and capital requirements in connection with its
operations have been and will continue to be significant. Based on its current
plans, the Company anticipates that revenues earned from product sales will be
the primary source of funds for operating activities. The Company believes that
revenues in addition to existing cash and cash equivalents remaining from
proceeds of it private offering, will be sufficient to meet its capital and
liquidity needs for the next 12 months. The Company also believes that cash
required to fulfill purchase orders will be available through bank borrowings or
factoring, if required. The company's primary customers are substantial
corporations with credit ratings that will support such credit arrangements.
Management's plans include the following:
1. The Company has arranged for marketing in association with
manufacturers and distributors of telecommunications equipment,
which will enable the Company to obtain orders for its products
with a minimal expenditure of the Company's resources. The Company
is presently organizing a manufacture's rep program to assist in
the distribution of their equipment.
2. The Company has arranged for manufacture of its products by
purchasing the manufacturer in October, 1998, 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 outstanding
warrants), or borrowings, including bank borrowing, in view of the
nature of its customer base. Nevertheless, the Company continues
to be subject to a number of risk factors, including the
uncertainty of market acceptance for its product line, the need
for additional funds, competition, technological obsolescence and
the difficulties faced by start up companies in general.
SUBSEQUENT EVENTS
As of April 6, 1999, the Registration Statement became effective with
regard to the Series A 10% Senior Convertible Preferred Stock, of which there
were 50,000 shares issued and outstanding at $5,000,000. Through April 24, 1999,
$3,840,000 has been converted resulting in 275,212 common stock shares being
issued. A total of 216,383 shares were sold on the open market.
PART II. OTHER INFORMATION
The Registration Statement on April 6 became effective for the Series A
10% Senior Convertible Preferred Stock, of which there were 50,000 shares
outstanding at a gross of $5,000,000. Through April 24, 1999, 76% of the
Preferred Stock, $3,840,000 has been converted resulting in 275,212 common stock
shares being issued. A total of 216,383 shares were sold on the open market.
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American Access Technologies began trading on the Nasdaq Stock Market, Inc., as
a Small Cap listing, on April 13, 1999.
ITEM 6. EXHIBITS AND REPORTS
--------------------
(b) EXHIBITS
The following exhibits are being filed as part of this report:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C> <C>
27.0 Financial Data Schedule
( c ) Exhibits on Form 8-K Incorporated By Reference, as filed with the
Securities and Exchange Commission on March 29
and March 30, 1999, respectively.
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 11, 1999
AMERICAN ACCESS TECHNOLOGIES, INC.
(Registrant)
By: /s/ Bobby E. Story
----------------------------------------
Bobby E. Story
Secretary/Treasurer
Chief Financial Officer
By: /s/ Victor E. Murray
----------------------------------------
Victor E. Murray
President
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,394,188
<SECURITIES> 0
<RECEIVABLES> 911,032
<ALLOWANCES> 28,000
<INVENTORY> 330,595
<CURRENT-ASSETS> 5,177,337
<PP&E> 2,813,403
<DEPRECIATION> (1,567,152)
<TOTAL-ASSETS> 6,616,992
<CURRENT-LIABILITIES> 582,513
<BONDS> 0
0
5,000,000
<COMMON> 61,256
<OTHER-SE> 904,223
<TOTAL-LIABILITY-AND-EQUITY> 6,616,992
<SALES> 1,290,062
<TOTAL-REVENUES> 1,290,062
<CGS> 501,777
<TOTAL-COSTS> 1,229,454
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,610
<INCOME-PRETAX> 305,525
<INCOME-TAX> (15,170)
<INCOME-CONTINUING> 320,695
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 320,695
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
