Form SB-2A for AMERICAN ACCESS TECHNOLOGIES INC filed on MARCH 30, 1999
FILE NO.333.68791
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 30, 1999
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3
FORM SB-2A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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AMERICAN ACCESS TECHNOLOGIES INC.
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(Name of small business issuer in its charter)
Florida 3661 59-3410234
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(State of Incorporation) (Primary Standard Industrial (IRS Employer I.D. Number)
Classification Number)
238 N. Westmonte Drive, Suite 210, Altamonte Springs FL 32714 (407) 865-7696
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(Address and telephone number of principal executive offices)
238 N. Westmonte Drive, Suite 210, Altamonte Springs, FL 32714
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(Address of principal place of business)
Victor Murray, President
American Access Technologies, Inc.
238 N. Westmonte Drive, Suite 210
Altamonte Springs, FL 32714
(407) 865-7696
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(Name, address and telephone number of agent for service)
Copies to;
Joel Bernstein, Esq., P.A.
11900 Biscayne Blvd. #604
Miami, FL 33181
(305) 892-1122
Fax:(305) 892-0822
Approximate date of proposed commencement of sale to the
public: From time to time after the Registration Statement
becomes effective. If any of the securities being
registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. /X/
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CALCULATION OF REGISTRATION FEE
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Title of each class of Amount of shares to Proposed maximum offer Proposed maximum Amount of
securities to be registered be registered price per unit (1) aggregate offering price registration
fee
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Common stock 588,235 $20.50 $12,058,817 $7,900.00
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(1) Estimated solely for purposes of calculating the registration fee based upon
the average of the bid and asked price in the over the counter market on
February 9, 1999.
American Access hereby amends the registration statement on such
date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Acts of 1933 or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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[LOGO]
588,235 shares of common stock
Public Offering
Prospectus
March 29, 1999
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American Access Technologies, Inc.
238 Westmonte Drive, Suite 210
Altamonte Springs, Florida 32714
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American Access common stock is traded on the OTC Electronic Bulletin Board
under the symbol AATK.
The shares for this offering are being sold by the selling security holders
named under Plan of Distribution - Selling Security Holders.
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Our ZCTC-RF 0822 Floor Unit
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Investing in the common stock involves a high degree of risk. You should
consider carefully the risk factors beginning on Page 5.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
March 30, 1999
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PROSPECTUS SUMMARY
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The offering
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Common Stock offered by selling security holders 588,235 shares
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Common stock to be outstanding if all of the above shares are sold (but not
including 570,000 shares which may be purchased on exercise of outstanding
warrants at $8.00 per share and 100,000 shares which may be
purchased on exercise of outstanding warrants at $25.00 per share.) 3,844,705 shares
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Our company
American Access develops and sells products that place
telecommunications equipment in office buildings, hospitals, convention centers,
schools, and any building in need of an efficient system to route information.
Our first product, called a zone cabling termination cabinet, was introduced in
January 1997. This product is a cabinet in which telecommunications equipment
may be mounted. Cables and wires that allow computers, telephones and fax
machines to work are also plugged into this cabinet.
In November 1998, we acquired Omega Metals, Inc. This company is a
sheet metal fabrication and assembly plant that manufactures products for
American Access and for other companies, primarily in the telecommunications
industry.
RISK FACTORS
Except for historical information, the information in this
prospectus and in our SEC reports contains forward-looking statements about our
expected future business and performance. Our actual operating results and
financial performance may prove to be very different from what we might have
predicted as of the date of this prospectus. We have a short operating history
by which you can evaluate our business and prospects
We were incorporated in October 1996 and have a limited operating
history from which to evaluate our business and prospects. Our operating results
in the future will be subject to all of the risks and uncertainties inherent in
the development and maturation of a business. We have only owned Omega Metals
since we acquired it in November 1998.
Our products may not be commercially successful
To date, we have only sold limited amounts of our products in the
commercial marketplace. To be successful, we will have to sell more of our
products. However, for several reasons, we may not be able to generate
increasing sales. Potential customers may not be able to see the advantage of
using our products over the traditional way of cabling telecommunications
products. Our competitors could introduce products that are more economical to
use, or that have better features, making them more attractive to buyers.
Our competitors may be better able to market their products
The markets for our products are highly competitive and subject to
rapid change. These markets are sensitive to the introduction of new products
and the enhancement of existing ones. Industry participants also aggressively
market their products.
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Competitors may be developing technologies or products which may be
similar or superior to ours. These competitors may have a better ability to
market their products.
In order to effectively compete, we need to make our business grow .
By generating greater revenues, we will have the resources to develop new
products in response to new technology. We will be able to meet customer
demands, and to sell products in a broad distribution channel. We cannot assure
that we will be able to grow sufficiently to compete effectively in this
marketplace.
We have had a history of operating losses and this may continue to
be the case.
Our expenses are currently greater than our revenues. Our ability to
operate profitably depends on increasing our sales and achieving sufficient
gross profit margins. We cannot assure you that we will operate profitably.
If we lose our key personnel, our business and prospects may be
adversely affected a
We only have a few key officers and directors. If any of them should
leave our company, this could have an adverse effect on our business and
prospects.
Competitors may copy our products
Although we have received patents in the United States on aspects of
our products, competitors may not be prevented from developing products
substantially equivalent to ours. Patent litigation entails high costs and can
take a long time. Therefore, our patent position may not prevent competition.
Additional shares could depress our stock price
If our stockholders sell substantial amounts of our common stock
(including shares issued upon the exercise of outstanding warrants and the
conversion of our convertible preferred stock into common stock) in the public
market, the market price of our common stock could fall.
Conversion of preferred stock will result in issuance of more shares of common
stock
We issued 50,000 shares of Series A 10% convertible preferred stock.
Each share is convertible into common stock. The number of shares of common
stock that may be issued upon conversion of the convertible preferred stock
depends upon the market price of our common stock at the time of the conversion.
Based upon the recent price of common stock of $18.00 per share, if the 50,000
shares of our preferred stock were converted inot common stock, we would issue
347,222 shares of common stock to our preferred stockholders. See "Description
of Securities - Preferred Stock." Short sales could be encouraged
If more shares of common stock are issued the lower the market price
of our common stock drops, then short sales by holders of the convertible
preferred stock and by others could be encouraged .Short sales would result in
further downward pressure on the market price of our common stock.
Substantial dilution due to increase in number of shares of common stock
outstanding
If lower price of the common stock results in substantial issue of
additional shares as a result of conversion of preferred stock into common
stock, the interest of holders of common stock would be subject to substantial
dilution.
Potential lack of liquidity
Our common stock trades on the OTC Electronic Bulletin Board. Stocks
trading on the OTC Electronic Bulletin Board generally attract a smaller number
of market makes and a less active public market, and may be subject to
significant volatility. It is more difficult to sell stock on the OTC Electronic
Bulletin Board.
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USE OF PROCEEDS
The shares being sold with this prospectus are being sold by selling
security holders. American Access will not receive the proceeds of any sales.
MARKET FOR SECURITIES
American Access' 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:
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High Low
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August 15, 1997 through September 30, 1997 $ 7.625 $ 2.50
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October 1, 1997 through December 31, 1997 $12.00 $ 7.20
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January 1, 1998 through March 31, 1998 $12.25 $11.00
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April 1, 1998 through June 30, 1998 $18.50 $12.25
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July 1, 1998 through September 30, 1998 $21.50 $19.00
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October 1, 1998 through December 31, 1998 $20.50 $17.75
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January 1, 1999 through February 28, 1999 $21.625 $18.875
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The above represents inter-dealer quotations which do not include
retail mark-ups, markdowns, or commissions, and do not necessarily represent
actual transactions. About 622 investors were record holders of American Access
common stock on February 4, 1999.
RECENT TRANSACTIONS
During October-December 1998 the company issued 50,000 shares of 10%
Series A Senior Convertible Preferred Stock with net proceeds of approximately
$4,262,180.
On November 11, 1998 the company issued 226,470 shares of common
stock in exchange for all the issued common stock of Omega Metals, Inc.
DIVIDEND POLICY
American Access 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 FINANCIAL CONDITION
AND RESULTS OF OPERATION
Overview
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American Access was formed in October 1996 to acquire the assets of
Vic Murray and Associates, Inc.. The purchase of VMA was to obtain the pending
patent for the Zone Cabling Termination Cabinet, the product that the company
has since developed and marketed.
Shortly after acquiring it, American Access discontinued the
operations and business activities of VMA, a manufacturer's representative of
various products. Today, we develop, design, and manufacture products for the
telecommunications industry. Our cabling cabinets store and efficiently
distribute the wiring and cables for computer, telephone, and television systems
installed in office buildings, hospitals, schools, convention centers, and any
building that needs an efficient system to route information.
In November 1998, American Access acquired Omega Metals, Inc., a
precision sheet metal fabrication operation, which has and will continue to
provide product prototyping, manufacturing, assembling and packaging operations
to the company. Omega operates as a wholly owned subsidiary with sales and
manufacturing intact. The company for $80,000 has acquired six acres adjacent to
Omega's north Florida site for a plant expansion of 30,000 sq. ft. The capital
cost to complete this expansion will be funded from cash flows and working
capital.
In October and November 1998, American Access issued 50,000 shares
of Series A 10% senior convertible preferred stock with net proceeds of
$4,262,180. 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
Revenues
Revenues for the year ended December 31, 1998 increased by
$579,693 to $4,936,204 as compared to $4,356,511 for the year ended December 31,
1997. The major increase was a result of additional sales of zone cable
termination cabinets of $360,464.
Costs and expenses
Direct costs for the year ended December 31, 1998 represented
45.7% of revenues. For the year ended December 31, 1997 these costs represented
51.3% of revenues.
Compensation and related benefits expenses for the year ended
December 31, 1998 amounted to $1,415,473, which was an increase of $546,958 from
the December 31, 1997 totals of $868,515. The former owner of Omega Metals,
Inc., was paid a year-end bonus for 1998 which was $452,397 greater than the
1997 bonus. This bonus was paid prior to the sale to American Access and
represents the major portion of increased costs between 1998 and 1997.
Selling, general and administrative expenses for the year
ended December 31, 1998 amounted to $1,661,479. This was an increase of $324,558
over the December 31, 1997 amount of $1,336,921. Marketing, promotion and sales
cost increases were approximately 50% of this increase and they were the result
of the company's continuing effort to develop and market its products.
Professional fees paid increased over $100,000 from 1997 to 1998. This was a
result of registration filings and audits required for those filings. .
Liquidity and capital resources
Net cash [used] by operating activities was [$391,889] and
[$267,214] for the years ended December 31, 1998 and 1997 respectively. Net cash
[used] by operating activities during the year ended December 31, 1998 primarily
consisted of net losses, increases in accounts receivables, offset by
depreciation and amortization, gains on sales of investments and equipment,
decrease in income refund receivable and decrease in inventories. Net cash
[used] by operating activities during the year ended December 31, 1997 primarily
consisted of net losses, increase in income fund receivable and inventories,
decrease in income tax payable, offset by depreciation and amortization, common
stock issued, deferred income taxes and increases in accounts payable.
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Net cash [used] by investing activities was [$3,285,999] and
[$46,964] for the years ended December 31, 1998 and 1997 respectively. In the
year ended December 31, 1998, the company used $85,635 to purchase equipment,
$4,281,803 for the acquisition of investments and $500,000 in notes receivable.
In the year ended December 31, 1997, the company used $37,464 to purchase
equipment.
Net cash provided by financing activities was $3,677,531 and
$565,614 for the years ended December 31, 1998 and 1997 respectively. In the
year ended December 31, 1998, American Access received proceeds of $480,000 from
the sale of common stock, $4,262,180 from the sale of preferred stock, $296,002
from the line of credit. The company utilized $100,000 to reduce notes payable,
$1,256,625 in payments on capital lease obligations, and the remaining amounts
were used to finance the company's business operations and investing activities.
In 1997, the company received proceeds from the sale of common stock in the
amount of $847,977. The company utilized $276,772 in payments on capital lease
obligations and the remaining amounts were used to finance the business
operations and investing activities.
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, American Access anticipates that revenues earned from product
sales will be the primary source of funds for operating activities. We believe
that revenues in addition to existing cash and cash equivalents remaining from
proceeds of it private offering, will be sufficient to meet capital and
liquidity needs for the next 12 months. We also believe that cash required to
fulfill purchase orders will be available through bank borrowings or factoring,
if required. Our primary customers are substantial corporations with credit
ratings that will support such credit arrangements.
Management's plans include the following:
1. American Access has arranged for marketing in association with
manufacturers and distributors of telecommunications equipment,
which will enable us to obtain orders for our products with a
minimal expenditure of our resources. The company is presently
organizing a manufacturer's rep program to assist in the
distribution of our equipment.
2. American Access purchased Omega Metals on November 11, 1998. The
main reason for this acquisition was to reserve capacity for the
manufacture of American Access products. The combined operation
provides a greater diversification of facilities and equipment.
Plans are under way for expansion of this facility.
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
In the first quarter of 1999, 9,000 restricted shares of stock
were issued as compensation to three persons.
Omega lost a major customer that ceased operations in the
fourth quarter of 1998. The lost revenue has been replaced. Omega is under
contract with Bill Shearer, Inc., to produce 10,000 ultraviolet light units,
called Eclipse, per month. This number is expected to increase to 4,000 per week
in the second quarter of this year.
RISKS ASSOCIATED WITH YEAR 2000 PROBLEM
Computer systems and software used by many companies may need
to be upgraded to accept four digit entries to distinguish 21st century dates
from 20th century dates. As is the case with most other companies using
computers in their operations, American Access recognizes the need to ensure
that its operations will not be adversely impacted by software or system
failures related to such Year 2000 problem. We have been reviewing our own
computer systems to assure Year 2000 compliance. Based on information currently
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available, American Access believes that the costs associated with Year 2000
compliance, and the consequences of incomplete or untimely resolution of the
Year 2000 problem, will not have a material adverse effect on our business,
financial condition and results of operations in any given year. However, even
if the company's internal systems are not materially affected by the Year 2000
problem, our business, financial condition and results of operations could be
materially adversely affected through disruption in the businesses with which we
interact.
OUR BUSINESS
Our background
American Access 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, incorporating it as Vic
Murray & Associates, Inc.. VMA developed agency relationships with electrical
engineers, electrical contractors, municipalities, power companies and
distribution companies throughout the State of Florida. American Access acquired
VMA in exchange for company common stock in 1996 and ceased its manufacturer's
representative business. We have chosen to engage exclusively in the business of
developing and manufacturing products that help manage the wires and cables
needed to route information by television, telephone, and computer.
In November 1998 we acquired Omega Metals, Inc. of Keystone Heights
Florida. Omega manufactures our products, maintaining the high standards it has
set for sheet metal fabrication in the telecommunications industry and in all of
its jobs.
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 at a
rapid pace. The telecommunications industry was forever changed. For the first
time in this industry, myriad business opportunities emerged.
Richard Murray was directed to research and evaluate the industry to
determine in which categories of supply and support we would specialize. The
decision was made to focus on wire management for voice, data, computer, closed
caption television, and cable television. With the birth of revolutionary high
speed 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
Murrays 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,
designers and engineers rarely considered future wiring and cable changes that
would have to be made when a business owner added or moved computers, telephones
and fax machines.
Background for product development
Until now, wire management systems have not evolved as rapidly as
the telecommunications industry. Industry leaders began to realize that with the
advent of technologically advanced equipment, systems, new methods of
conveyance, and the demand for connection to the Internet 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
facility. The wiring is then distributed to each floor of a building through
areas known as telecommunications closets. From the closets, all wiring is
sorted and distributed as needed to all the workers' stations on that floor.
Every workstation, where phones, computers and fax machines are located, is
required to have two horizontal cables running from it to the telecommunications
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closet. This traditional method of wiring is called star topology. It provides
very little flexibility when wires and cables need to be rerouted as additions
or changes are made at a workstation.
The telecommunications closet is located in a common area within
each floor. The cables distributed from it could be as far as 295 ft. (90
meters) away from each workstation. For voice wiring, the maximum main cable
length is 800 meters. This illustrates that a massive amount of wire is required
for telecommunications. It is not unusual for a 40-story building to have
200-300 miles of wiring. To meet the many industry standards and regulations,
the old method of cable distribution in an office environment requires very
expensive modular furniture to help route the miles of wires. In some
applications, even modular furniture may not meet industry guidelines. American
Access products meet industry standards and are specially designed solutions to
cabling problems.
Today, we all rely on staying in touch. People communicate more with
computers, phones and fax machines. To accommodate the growing
telecommunications industry, more cables and wires must be run to carry voice,
data, and video images faster, cheaper, cleaner, in longer runs, and using less
space. At the same time, future additions and changes to a system must be
considered. Old methods of wiring require that a new line of cable be run from
the user's desk, or workstation, back to the telecommunications closet for each
and every change. Our enclosure, the Zone Cabling Termination Cabinet,
eliminates the need for those new lines by placing the telecommunications
equipment close to the workstation and in an inconspicuous location.
Industry leaders have realized the need for new cabling methods and
equipment. These companies, industry associations, and individual experts have
joined to create revolutionary standards. Companies such as Lucent Technologies,
Ortronics, AT&T, Krone, Belden, Siecor, Hubbell, Leviton Telcom, Superior
Modular Products and American Access Technologies, Inc. have joined with various
organizations that set industry standards. Together we are developing and
introducing innovations in wire/cabling design and routing. This partnership
provides for efficient transmission of telecommunication signals into the zone
in a building where it is needed. This zone cabling is called Open Office
Architecture.
Open Office Architecture is endorsed under Telecommunications
Systems Bulletin 75, by the American National Standards Institute, the Telephone
Industry Association and the Electrical Industry Association. The purpose of
this design is to locate the bundled telecommunications cables closer to
individual workstations.
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 a changing or growing network for
communicating information.
AMERICAN ACCESS PRODUCTS
The American Access product line capitalizes on the need for zone
cabling solutions. Our cabinets provide efficiency and flexibility, and are the
only fire-rated and Underwriter's Laboratories approved systems in the industry.
In 1996, we consulted with many of the leading telecommunications
specialists and engineers. All were in agreement. No one had developed a device
that met all of the industry standards and could effectively and efficiently be
used to house and route telecommunications cables and wires. However, some sort
of device was absolutely required to complete the Open Office Architecture
design. American Access researched and verified that no such enclosure existed.
In fact, our research revealed that no one was even developing such a device.
We designed an enclosure to house and distribute telecommunications
wiring and equipment in buildings. This enclosure is called a Zone Cabling
Termination Cabinet. We currently hold a patent pending for this cabinet that
may be installed in the ceiling, above the ceiling, on or in the wall or in the
floor structure. The ceiling unit fits into the suspended ceiling, providing
easy access to the wires and cables running to each workstation. Less cable is
used. Installation is easier and quicker, causing fewer disruptions and down
time for office workers. The floor and modular furniture units provide the same
solution as our ceiling unit installations. Our modular furniture units are
named EthoCom and ComDeck.
We believe that our products are the only enclosures manufactured
that can efficiently house telecommunications cables, distribute wiring to
workstations, and store unused cabling until it is needed, while complying with
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all industry and government guidelines, standards and regulations. The cabinets
can be used for all low voltage wiring systems, including voice, data, video,
building controls, security, and fire/life/safety wiring systems. The cabinet
was designed to accommodate all manufacturers' equipment.
Product application
The zone cabling cabinet will reduce the amount of wire running from
the workstation to the telecommunications closet. The wiring will now run from
the workstation to our cabinet, which is readily accessible through the ceiling
grid system, the floor, or through the modular furniture. The cabinet is
designed to accommodate all of the newly developed Open Office Architecture
wiring equipment. This ceiling enclosure is mounted in a standard 2ft. x 4ft.
ceiling grid system, but is physically attached to the building structure to
support the weight of the equipment installed within the enclosure. The
equipment is reached through a door that opens from below the ceiling for easy
maintenance, installations and changes. Specially trained, highly-paid
technicians will no longer be required to make those changes when systems grow
or are reconfigured. The new equipment just plugs in, creating less down time
and less loss of productivity. Cables are easily re-routed and reused. Less
cable is used, reducing the cost of materials and labor. Money is saved with the
initial installation and when systems are changed.
The cabinets make better use of telecommunications closets, reducing
the mass of cables to be run throughout the building. Building owners are then
provided more usable space that generates rent.
Product standards
The standards, regulations and various industry association
guidelines are very specific. They address the components of the product, the
product itself, the installation, and every aspect that may affect the safety of
people or property, including:
o wire and cable lengths and widths, the minimum and maximum allowed. For
example, to wire for a telephone system, the maximum main cable length
is 800 meters;
o ability of the product to withstand heat and fire damage;
o Markings. Each enclosure must be marked with the manufacturer's name,
trademark, or other descriptive marking. An enclosure may also be
designated with environmental ratings, such as rainproof, watertight,
corrosion resistant and dust-tight;
o number of cables needed to run from the telecommunications closet to the
workstation,
o voltage and grounding concerns,
o and the ability of the product to function as advertised.
American Access believes its Zone Cabling Termination Cabinet is
the only product that meets the standards and requirements of the
telecommunications industry, including Building Industrial Consulting Services
International, 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.
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. In conducting product tests, Underwriters
Laboratories lists, classifies, or recognizes products for their ability to
perform as designed. A UL listing is the highest category a product can achieve,
implying that as tested, all components of the product work as expected. Our
products achieved this highest level after testing.
Additional information
American Access has filed with the Securities and Exchange
Commission a registration statement on Form SB-2 under the Securities Act with
respect to the securities being offered. This prospectus, filed as a part of the
registration statement, does not contain certain information contained in or
annexed as exhibits to the registration statements. Reference is made to
exhibits to the registration statement for the complete text. For further
information with respect to American Access and the securities hereby offered,
reference is made to the registration statement and to the exhibits filed as
part of it, 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:
o 500 West Madison Street, Chicago, IL 60604;
o 7 World Trade Center, New York, NY 10048;
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o and 5757 Wilshire Boulevard, Los Angeles, CA 90034;
o and copies of such material can be obtained from the Public Reference
Section of the Commission, 450 5th Street, N.W., Washington, D.C. 20549, at
prescribed rates and
o are available on the World Wide Web at : http://www.sec.gov.
MARKETING
By providing patented and innovative solutions to telecommunications
cabling, American Access creates a new market in the industry. Our sales and
marketing goal is to establish our company, through education and alliances, as
the industry leader in this potentially huge marketplace.
Our focus is to partner with major equipment manufacturers and
telecommunications distributors since our products are designed to enhance their
sales. Since our products enable the placement of telecommunications equipment
into zones, and still comply with all of the industry building regulations, each
of these companies can use our enclosure to sell more of their products. By
partnering with us, every manufacturer and distributor has opportunity to gain a
larger share of their respective markets. We also provide various support
programs and materials that enhances our partners' marketing plan.
We employ commissioned sales representatives firms, most of whom are
in place across the country. Their job is to get our product lines specified by
architects, consultants, and engineers, and to handle the needs of the
distributors in their territories. They are fully trained in our product line.
To maintain these relationships, we are adding a national sales director
position. Once in place, regional managers will oversee reps and distributors in
their territories.
American Access had developed several brochures to assist in
marketing. These brochures range from one page to an eight-page full-color
product and application brochure.
We have also developed a World Wide Web site.
Our printed materials and web site currently serve as our primary
marketing tools. They 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, Building Industry Consultants Services
International, (BICSI) is currently using our line of products as an integral
part of their Zone Cabling Training and Certification course.
We also participate with our partners in trade shows as a component
in their individual booths and hospitality suites. We also individually
participate in three or four trade shows per year. Two of the shows focus on
standards, training and certifications. Two shows are industry product shows. We
believe that some of our partner relationships are the result of our show
presence.
People in need of a telecommunications system contract with
designers and engineers, who design, specify, purchase and install cabling and
equipment. We sell our products to authorized distributors only, except for
certain companies that purchase extremely large quantities for private label.
Our cabinets are suitable for new installations and for upgrading
telecommunications systems in buildings. With an aggressive marketing plan in
place, to include partnering and a trained sales force, we believe that the
market potential for our products is enormous.
Distribution and sales
12
<PAGE>
American Access Technologies has entered into a national
distribution contract with Anixter, Internationals, Inc. (NYSE: AXE), which had
1996 revenues $2.5 billion. Anixter is an industry leader that teams with its
customers to design and implement telecommunications systems. A variety of
customized products and services are offered through a global network of 37
countries with 205 domestic operating locations.
American Access Technologies has negotiated distribution agreements
with the following regional distributors:
*CED-American Electric, Inc. (data voice)
Founded more than100 years ago as a private company, CED has grown
to more than 400 locations spread over 48 states and Canada. Gross revenues in
1996 exceeded $500 million. About 3,500 people are employed. More than 25,000
inventory items are stocked.
*State Electric Supply
State Electric was founded in 1954 in Dunbar, West Virginia, as a
private company and has grown to more than 22 locations spread over seven
states. State Electric Supply gross revenues in 1996 topped $125 million, with
more than 500 employees in the service area.
*Core Data Com
This regional distributor specializes 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. We believe that the principal competitive factors in our
markets are conformance to standards, reliability, safety, product features,
price, performance and quality of customer support. There can be no assurance
that American Access will compete successfully in the future with respect to
these or other factors.
MANUFACTURING/OMEGA METALS, INC.
American Access has developed all of its products using computer
assisted design drawings. Master copies of its products are safeguarded at the
home office. Certain copies are available to outsource firms.
On November 11, 1998, we acquired all the outstanding common stock
of Omega Metals, Inc. in exchange for 226,470 shares of our common stock. Omega
manufactures various products used in the telecommunications industry.
Omega is a precision sheet metal fabrication and assembly company
located in Northeast Florida midway between Jacksonville and Gainesville. The
company was established in 1981, serving a diverse client base of over 300,
including engineering, technology and electronic companies, mostly in the
Southeastern markets. Clients include the likes of Carlisle Industries, CSX
Railroad and the U.S. military.
Omega Metals, Inc. operates from its 30,000 sq. ft. manufacturing
facility situated on 3 acres of land that it owns. The manufacturing process is
run by a state-of-the-art computer control system. Manufacturing services
include precision stamping, bending, assembly, and painting . Quality control at
Omega Metals is based on the Department of Defense military standard
MIL-1-45208A. Inspection equipment is strictly maintained to assure consistent
quality.
Diversified facilities and equipment allow Omega Metals, Inc. to
handle a broad range of customer requirements. Strict attention to quality
assures our customers of consistent production and conformity to their specific
requirements.
13
<PAGE>
Omega's supplier, Tull Metals, has been its source for sheet metal
since 1981. No shortage has occurred during this time. Prices have been stable
during Omega's life. Sheet metal is currently plentiful in the marketplace, and
we are confident that Omega would have no problem replacing this supply at a
price consistent with Tull's price should that relationship end.
Omega's manufacturing capacity is approximately 5,000 units per
month. Manufacturing capability is not limited to only precision metal
fabrication. as Omega also provides state-of-the-art surface coatings and
specialized production painting.
By acquiring Omega with its 50 employees, American Access adds the
valuable long term management skills of Erik Wiisanen and John Presley.
Omega will continue to operate as a wholly owned subsidiary with
sales and manufacturing intact. Omega has acquired 6 acres adjacent to the
existing property and plans a first quarter plant expansion of 30,000 sq. ft to
supplement assembly capabilities. The capital cost to complete this expansion
will be funded from cash flows and working capital.
FUTURE PRODUCT DEVELOPMENT
As American Access identifies the specific product needs of the
telecommunications industry, products are developed to meet 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 that mounts within the ceiling grid system. We developed
accessory equipment to permit cable to penetrate walls and to maintain fire
rating.
The second phase was to develop a raised floor cabinet that houses
and routes cables. A working prototype is currently available. The unit is
expected to be in production within the next six months.
The third phase includes a high-voltage termination cabinet that
mounts into the ceiling grid system to house active electronics, including
computer hubs. This unit will accommodate fiber optics as well as conventional
copper wiring. Fiber optics are special cables that eliminate friction and allow
information to be transported at the speed of light. We anticipate that this
unit will be Underwriters Laboratories 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
American Access has filed with the United States Department of
Commerce, Patent and Trademark Office. an application for patent, pending No.
08785006, for the Zone Cabling Termination Cabinet and communications cable
interconnection apparatus and associated method for Open Office Architecture.
The patent application contains approximately 67 various claims associated with
zone cabling techniques. On April 26, 1998, we were informed by the Patent and
Trademark Office of its approval for patent of our cabling termination cabinet.
On June 5, 1998 we were informed of approval for patent of a communication cable
interconnection apparatus and associated method for an open office architecture.
American Access has made a formal filing under the Patent Cooperation Treaty,
Paris, France.
There can be no assurance that any patents will be granted on the
our products or, if granted, that they will provide meaningful protection
against competing products which may be introduced.
GOVERNMENT REGULATION - INDUSTRY STANDARDS
14
<PAGE>
Our products and those in the telecommunications industry must meet
governmental and industry standards. In the U.S., our products must comply with
various regulations established by the Federal Communications Commission and
Underwriters Laboratories, as well as standards established by Bell
Communications research and local building codes. Our cabinet has been approved
by Underwriters Laboratories for low voltage communications. It meets or exceeds
the national electrical code requirements. We belong to trade organizations such
as the Telecommunications Industry Association, International Association of
Electrical Inspectors and Building Industrial Consulting Services International.
EMPLOYEES
As of February 4, 1999 substantially all of American Access
activities are undertaken by its three officers. . Omega employs approximately
50 persons, including 5 in management,2 in marketing and sales, 3 in engineering
and 40 in production and distribution.
LITIGATION
American Access was defendant in a suit filed by Steve R. Jones in
January 1998 in the 18th Judicial Circuit Court of Florida. Mr. Jones was the
company's president from April 1997 to August 1997. He sought rescission of a
consulting agreement he signed with us in August 1997. Mr. Jones sought damages
for failure of American Access to make to him consulting payments of $7,500 per
quarter We believe we were justified in not paying Mr. Jones' consulting fees
due to Mr. Jones' failure to perform the consulting services assigned to him.
Our management believed it was only remotely likely that this litigation would
be be material to our investors. Our independent auditors have disclosed in Note
15 to the financial statements the range of loss by means of the damages that
the plaintiff is seeking, and also include an assertion that, because the case
is in its initial stages, management believes, based upon advice of counsel,
that the amount of liability, if any, is not presently susceptible to reasonable
estimation.
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.
FACILITIES
Our 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.
Omega operates out of a company owned facility consisting of
approximately 30,000 square feet of manufacturing/office complex located in Clay
County, Florida, situated on approximately 3 acres of land. The building and
land is owned by the corporation.
MANAGEMENT
The directors, executive officers, and key employees 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 Story 56 Secretary, Treasurer, Director
------------------------------- -------------- -------------------------------------------------------
John W. Cooney 62 Director
------------------------------- -------------- -------------------------------------------------------
Victor D. Phillips 55 Director
------------------------------- -------------- -------------------------------------------------------
John Presley 59 Director, President Omega Metals, Inc.
------------------------------- -------------- -------------------------------------------------------
Erik Wiisanen 52 Secretary, Treasurer, VP Marketing, Omega
------------------------------- -------------- -------------------------------------------------------
</TABLE>
15
<PAGE>
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 years is:
o October 1996 to February 1997 and August 1997 to present: President,
American Access Technologies, Inc.
o January 1, 1995 to October 1996: President, Vic Murray & Associates,
Inc.
o April 1977 to December 31, 1994: Manufacturer's representative, Vic
Murray & Associates, Inc.
Richard A. Murray, , vice president-sales and a director, has more
than 15 years of experience in the electrical field specializing in such area as
ozone generation, electrical switching and telecommunications. He has more than
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 years is:
o October 1996 to present: Vice president, American Access
Technologies, Inc.
o January 1, 1995 to October 1996: Vice president, Vic Murray &
Associates, Inc.
o April 1977 to December 31, 1994: Associate manufacturer's
representative, specializing in telecommunications supplies, wiring,
and equipment.
Bobby E. Story, secretary/treasurer, chief financial officer and
director, is a former practicing certified public accountant and real estate
developer during the past 30 years. He worked for Arthur Young & Company CPA
(now Ernst & Young, LLP), as treasurer for Condev 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 years is:
o October 1996 to present: Secretary, treasurer, chief financial
officer, American Access Technologies, Inc.
o August 1996 to October 1996: Financial advisor, self employed.
o March 1996 to August 1996: George S. May Co., project manager.
o 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 years is:
o January 1987 to present: Operates J.W. Cooney, CPA as a sole
proprietorship.
Victor D. Phillips , director, is a member of American Access Active
Advisory and Consulting Board. He has been in the telecommunications industry
for more than 30 years, certified as a registered communications distribution
designer. He teaches as a certified instructor for Building Industry Consultants
Services, Inc., and is past national president of that international,
not-for-profit telecommunications association. He 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:
o August 1991 to present: President of Information Transport Systems
Designers.
John Presley, director and president of Omega Metals, Inc. is a
graduate registered professional engineer. He graduated from the University of
Florida in January of 1961 with a BSME and attended a number of colleges for
graduate work. He worked in many industries as an engineer and manager before
founding Omega Metals in 1981. He retired for a short time in 1985 when he sold
the company. He took the company back in 1990. During his absence, he developed
industrial real estate. He has agreed to continue his management for two years.
16
<PAGE>
Erik Wiisanen, vice president-marketing for Omega. Mr. Wiisanen
graduated from Cornell University in 1965. He worked in banking until 1970 and
was a representative for shipping interests until helping found Omega Metals in
1981. He has been in charge of sales since 1981.
EXECUTIVE COMPENSATION
Summary compensation table
The following table sets forth the total compensation paid to the
Company's chief executive officer for the last four completed fiscal years. No
executive officer of the company received compensation of $100,000 or more
during any such year.
<TABLE>
<CAPTION>
---------------------------------- ----------- ------------------------ ------------------------ -----------------
Name and Principal Position Year Total Income Other Annual Bonus Other Annual
Compensation
---------------------------------- ----------- ------------------------ ------------------------ -----------------
<S> <C> <C> <C> <C>
Victor E. Murray, President 1995* $51,576 -0- -0-
---------------------------------- ----------- ------------------------ ------------------------ -----------------
1996* $25,501 -0- -0-
---------------------------------- ----------- ------------------------ ------------------------ -----------------
1997 $60,000 -0- -0-
---------------------------------- ----------- ------------------------ ------------------------ -----------------
1998 $60,000 $30,000 (paid in 1999) -0-
---------------------------------- ----------- ------------------------ ------------------------ -----------------
</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.
EMPLOYMENT AGREEMENTS
On November 11, 1998 two officers of Omega Metals, Inc. entered into
management agreements with Omega Metals, Inc. The individuals and their titles
are as follows:
John Presley Director, President, Omega
Erik Wiisanen Secretary/Treasurer, V.P. Marketing, Omega
Each officer is authorized a salary of $125,000 per year plus a
profit participation of 10% of Omega's net profits in excess of $1,200,000 per
year. The term of the agreements is for two (2) years, ending November 14, 2000.
They may be terminated by action of the Board of Directors for cause on 30 days
prior notice.
INDEMNIFICATION
Florida Business Corporation Act
Subsection (1) of Section 607.0850 of the Florida Business
Corporation Act 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
17
<PAGE>
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.
Who we indemnify
Article 4 of American Access Articles of Incorporation provides that
the company shall indemnify those persons entitled to be indemnified, to the
fullest extent permitted by law.
Indemnification against public policy
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 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 American Access. They co-invented the company's primary product, 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 February 4, 1999, the
beneficial ownership of American Access common stock, based upon 3,265,470
shares outstanding, by:
o the only persons who own of record or are known to own, beneficially, more
than 5% of the company's common stock;
o each director and executive officer of the company; and
o all directors and officers as a group.
18
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------- -------------------------------- ------------------------------------
Name Number of Shares Percent of Outstanding Common Stock
- -------------------------------------- -------------------------------- ------------------------------------
<S> <C> <C>
Victor E. Murray 400,000 12.28%
- -------------------------------------- -------------------------------- ------------------------------------
Richard A. Murray 400,000 12.28%
- -------------------------------------- -------------------------------- ------------------------------------
Bobby E. Story 390,000 11.98%
- -------------------------------------- -------------------------------- ------------------------------------
John Presley 113,235 3.47%
- -------------------------------------- -------------------------------- ------------------------------------
John W. Cooney 50,000 1.68%
- -------------------------------------- -------------------------------- ------------------------------------
Victor D. Phillips 4,500 .14%
- -------------------------------------- -------------------------------- ------------------------------------
*Bridge Bank, Ltd. 437,000 13.42%
- -------------------------------------- -------------------------------- ------------------------------------
Officers, Directors as group (6) 1,027,133 41.69%
- -------------------------------------- -------------------------------- ------------------------------------
</TABLE>
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.
- ---------------
*Footnote: American Access has been advised that the following are principals in
Bridge Bank, Ltd.: Hugo Soto, N7788 West Bay St., Nassau, Bahamas; and Andres
Mandel, N7788 West Bay St. Nassau, Bahamas.
DESCRIPTION OF SECURITIES
Common stock
American Access 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.
Preferred stock
The Board of Directors has the authority to cause the company to
issue without any further vote or action by the stockholders, up to 1,000,000
shares of preferred stock, in one or more series, and to designate the number of
shares constituting any series, and to fix the rights, preferences, privileges
and restrictions thereof, including dividend rights, voting rights, rights and
terms of redemption, redemption price or prices and liquidation preferences of
such series. The issuance of preferred stock may have the effect of delaying,
deferring or preventing a change in control of the company without further
action by the stockholders. The issuance of preferred stock with voting and
conversion rights may adversely affect the voting power of the holders of common
stock, including the loss of voting control.
In October and November 1998, American Access issued 50,000 shares
of Series A 10% Senior Convertible Preferred Stock as the convertible preferred
stock with the rights, privileges and designations of the convertible preferred
stock which includes:
Conversion. Preferred stock will be convertible into shares of
common stock at any time after the sixth month anniversary of the initial
issuance of preferred stock, at the option of the holder. Preferred stock will
be automatically converted into common stock upon delivery of written notice by
the company at any time after the fifth anniversary of the final issuance
(November 16, 1998). For the purposes of conversion, each share of preferred
stock will be valued at $100 and will be converted into common stock at a price
of the lower of (x) $17 per share (subject to adjustment under certain
circumstance) and (y) 80% of the average closing bid price for common stock in
the 15 trading days preceding conversion (or if converted in connection with a
firm underwritten public offering, 80% of the per share price applicable in such
offering).
19
<PAGE>
Liquidation Preference. $100 per preferred share, plus accumulated
dividends. A sale or change of control of the company will be considered a
liquidation for the purposes of entitling the holders of preferred stock to
receive their liquidation preference.
Dividends. Dividends will cumulate on each share at a rate of 10%
per annum, based upon a base value of $100 per share of preferred stock, and be
payable in cash or stock (at the option of the company) upon conversion of such
share. Preferred stock will also receive dividends on an as converted basis,
when and if dividends are declared on the common stock.
Voting Rights. The preferred stock will vote, on an as converted
basis, with the common stock. Without the consent of the holders of a majority
of the outstanding shares of preferred stock, the company may not :
o issue other series of preferred stock that are pari passu with, or junior
to, to preferred stock,
o amend the terms of the preferred stock,
o amend any of the terms of the company's amended and restated Articles of
Incorporation or by-laws if such amendment would have an adverse effect on
upon the rights of the holders of shares or
o issue any preferred stock other than in connection with the offering or the
transfer of any preferred stock issued in the offering.
Board Representation. The holders of preferred stock will have the
right, voting as a separate class, to elect two of seven members of the
company's Board of Directors and, following the occurrence of a Majority Voting
Event (see "Events of Non-Compliance" below) will have the right, voting as a
separate class, to elect six of eleven members of the company's Board.
Events of Non-Compliance. An Event of Non-Compliance will occur
upon:
o the company's failure to comply with the terms of the preferred stock,
o the acceleration of any indebtedness of the company or any of its
subsidiaries or
o the company becoming insolvent, applying for, or consenting to the
appointment of a receiver or trustee appointed, has a trustee or receiver
appointed which is not discharged within 60 days, or has a bankruptcy
proceeding commenced against it.
Upon the occurrence of an Event of Non-Compliance, the company is
obligated to notify the holders of preferred stock. Within forty five days of
such notice, each holder of preferred stock will have the right to tender
preferred stock to the company for redemption at a price per share equal to (x)
1.1 times (y) the sum of $110 plus all accrued an unpaid dividends accrued on
such preferred share through and including the date of redemption; provided that
if the Event of Non-Compliance ceases within such forty-five day period, the
tenders shall be null and void, and the tendered shares shall be returned to the
tendering holders. If a majority of the preferred stock outstanding before the
occurrence of the Event of Non-Compliance are so tendered, and the company fails
to redeem all of the preferred stock so tendered (unless the Event of
Non-Compliance ceased before the company was so required to redeem such shares),
then the holders of a majority of the outstanding preferred stock will have the
right to declare a Majority Voting Right Event, giving the holders of preferred
stock the right to elect a majority of the members of the company's Board of
Directors.
Exchange Privileges. If the company issues any securities
convertible into common stock other than pursuant to the offering (either alone
or as part of a unit) each holder of preferred stock shall have the right to
exchange such preferred stock, at any time within twenty days following notice
of the proposed issuance from the company, for such convertible securities (or
units) to be so issued, at the price payable in connection with such issuance,
with the preferred stock being valued at $100 per share plus all accrued and
unpaid dividends thereon.
The following table shows the number of shares of common stock that
could be issued upon conversion of the 50,000 shares of the convertible
preferred stock at the following assumed market price of the common stock:
<TABLE>
<CAPTION>
----------------------------------------- -------------------------------------
Market Price of Common Stock Number of Shares of Common Stock
Issued on Conversion
----------------------------------------- -------------------------------------
<S> <C> <C>
$21.25 or above 294.118
----------------------------------------- -------------------------------------
$20.00 312,500
----------------------------------------- -------------------------------------
$18.00 347,222
----------------------------------------- -------------------------------------
$16.00 390,625
----------------------------------------- -------------------------------------
$14.00 446,429
----------------------------------------- -------------------------------------
$10.00 625,000
----------------------------------------- -------------------------------------
$ 5.00 1,250,000
----------------------------------------- -------------------------------------
</TABLE>
20
<PAGE>
Based on the market price of our common stock on February 4, 1999,
the following table shows how many shares of our common stock would be
outstanding if all of the convertible preferred stock was converted into common
stock and all of the outstanding warrants were converted into common stock and
the percentage of the total shares of common stock which would be represented:
<TABLE>
<CAPTION>
----------------------------------------- ------------------------------------- -------------------------
Class of Holder No. of Shares of Common Stock Percentage of Total
----------------------------------------- ------------------------------------- -------------------------
<S> <C> <C>
Current Common Stock 3,256,470 77.16%
----------------------------------------- ------------------------------------- -------------------------
$8.00 Warrants 570,000 13.51%
----------------------------------------- ------------------------------------- -------------------------
$25.00 Warrants 100,000 2.37%
----------------------------------------- ------------------------------------- -------------------------
Convertible Preferred Stock 294,118 6.97%
----------------------------------------- ------------------------------------- -------------------------
TOTAL 4,220,588 100.0%
----------------------------------------- ------------------------------------- -------------------------
</TABLE>
The following table shows the percentage of total outstanding common stock that
would be owned by the convertible preferred stockholders if their stock was
converted as indicated:
<TABLE>
<CAPTION>
--------------------- -------------------------------
Market Price Percent of Total
--------------------- -------------------------------
<S> <C> <C>
$21.25 or above 6.97%
--------------------- -------------------------------
$20.00 7.37%
--------------------- -------------------------------
$18.00 8.12%
--------------------- -------------------------------
$16.00 9.05%
--------------------- -------------------------------
$14.00 10.21%
--------------------- -------------------------------
$10.00 13.73%
--------------------- -------------------------------
$ 5.00 24.15%
--------------------- -------------------------------
</TABLE>
Accordingly, the lower the market price of American Access common
stock at the time a preferred stockholder converts, the more common stock he
gets. Conversion and resale of such additional common stock may reduce the
prevailing market price of our common stock and, as a result, additional
conversions of preferred stock could result in even greater shares of common
stock being issued, the sale of which could further depress the market price of
our common stock.
PLAN OF DISTRIBUTION/SELLING SECURITY HOLDERS
Plan of distribution
The shares offered hereby may be sold from time to time directly by
the selling security holders. Alternatively, these 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:
o ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more broker-dealers for resale at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. 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:
o 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;
21
<PAGE>
o purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this prospectus;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers, and
o 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 shares
purchased from the selling security holder and any discounts, commissions or
concessions allowed or re-allowed or paid to dealers and the proposed selling
price to the public.
Costs and expenses in connection with the registration of the
securities offered, estimated at $32,226, are to be borne by American Access.
Brokers' commission, 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 following table lists the security holders that may offer shares
of common stock issuable upon conversion of preferred stock. The common shares
which may be offered pursuant to this prospectus are 588,235. The total
outstanding shares assuming these conversions, would be 4, 514, 705.
<TABLE>
<CAPTION>
Name Common Common Shares Percentage Number of
stock held Which may be of common Shares
by offered stock Owned
shareholder pursuant to this beneficially After the
prospectus owned Offering
<S> <C> <C> <C> <C>
EP Opportunity Fund, LLC -0- 117,647 2.61% -0-
Eisenberg Partners LLC, Jeffrey Eisenberg
Tallisman Capital Opportunity Fund, Ltd -0- 117,647 2.61% -0-
Brian Laddin, vice president
Cranshire Capital -0- 105,882 2.35% -0-
Mitchell P. Kopin, manager
Lionhart Aurora Fund, Ltd -0- 82,353 1.82% -0-
Terrance Daffy
Melvin Olshansky -0- 11,765 0.26% -0-
G-Bar Limited Partnership -0- 11,765 0.26% -0-
Chris Hershee, vice president
Orestes Lugo -0- 2,941 0.07% -0-
Robert Weber IRA -0- 2,941 0.07% -0-
Berkley Corp -0- 11,765 0.26% -0-
Mitchell Kopin, vice president
Kopin Capital, LLP -0- 23,529 0.52% -0-
Mitchell Kopin, manager
S. Robert Production, LLC -0- 35,294 0.78% -0-
Mitchell P. Kopin, manager
Robert Lehman -0- 5,882 0.13% -0-
Scott J. Bakal -0- 2,941 0.07% -0-
Leonard Leventhal, TST -0- 5,882 0.13% -0-
Leonard Leventhal
Howard Todd Horberg -0- 4,706 0.10% -0-
ICN Capital, Ltd -0- 41,176 0.91% -0-
Greg Murphy
Kevin Shape -0- 4,118 0.09% -0-
</TABLE>
22
<PAGE>
LEGAL MATTERS
The validity of the securities offered hereby is being passed upon
for the company by Joel Bernstein Esq. P.A., 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.
23
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
TABLE OF CONTENTS
-----------------
PAGE
----
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-1
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheet F-2
Statements of Operations F-3
Statements of Stockholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6--F-19
<PAGE>
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 as of December 31, 1998, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended December 31, 1998 and 1997. 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, 1998, and the results of
their operations and their cash flows for the years ended December 31, 1998 and
1997, in conformity with generally accepted accounting principles.
As more fully discussed in Notes 15 and 18 of notes to consolidated financial
statements, (a) the Company's major customer announced that it will cease
operations in February 1999 and, therefore, will not subsequently purchase
products from the Company; and (b) the Company's zone cabling product operations
have yet to generate a sufficient level of revenue in order to achieve
profitable operations.
RACHLIN COHEN & HOLTZ
Fort Lauderdale, Florida
January 29, 1999 except for the second paragraph of Note 15, as to which the
date is March 17, 1999
F-1
<PAGE>
<TABLE>
<CAPTION>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
<S> <C>
ASSETS
------
Current Assets:
Cash and cash equivalents $ 637,776
Investments 2,825,177
Accounts receivable, net of allowance 806,960
for doubtful accounts of $28,000
Note receivable, related party 500,000
Inventories 297,440
Prepaid expenses and other current assets 60,466
------------
Total current assets 5,127,819
Property, Plant and Equipment 1,313,630
Patent Costs 34,962
------------
Total assets $6,476,411
============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Line of credit 296,002
Accounts payable and accrued expenses:
Compensation due to officers/directors/stockholders 111,235
Other 355,390
------------
Total current liabilities 762,627
------------
Deferred Income Taxes 69,000
------------
Commitments, Contingencies and Other Matters -
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
Common stock, $.001 par value; authorized 10,000,000
shares; issued and outstanding 3,256,470 shares 3,256
Additional paid-in capital 1,512,634
Deficit (871,106)
------------
5,644,784
------------
Total liabilities and stockholders' equity $6,476,411
============
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
---- ----
<S> <C> <C>
Net Sales
Formed metal $4,344,118 $4,124,889
Zone cabling termination cabinet 592,086 231,622
----------- -----------
4,936,204 4,356,511
----------- -----------
Costs and Expenses:
Cost of sales 2,257,169 2,235,326
Compensation and related benefits 1,415,473 868,515
Selling, general and administrative 1,661,479 1,336,921
----------- -----------
5,334,121 4,440,762
----------- -----------
Loss before Other Income (Expense) (397,917) (84,251)
----------- -----------
Other Income (Expense):
Interest income 89,731 3,992
Interest expense (139,527) (103,774)
Other income 158,346 5,259
Lease termination costs (239,447) -
----------- -----------
(130,897) (94,523)
----------- -----------
Loss before Income Taxes (528,814) (178,774)
Income Taxes (Credit) (36,000) 78,000
----------- -----------
Net Loss $ (492,814) $(256,774)
=========== ===========
Net Loss Per Common Share $ (.43) $ (.08)
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Capital
Series A in
Preferred Stock Common Stock Excess
Shares Amount Shares Amount of Par
------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 as previously reported - $ - 2,800,000 $ 2,800 $ 7,083
Adjustment for pooling of interests - - 226,470 226 59,774
--------- ----------- ---------- ------- -----------
Balance, December 31, 1996 as restated - - 3,026,470 3,026 66,857
Year Ended December 31, 1997:
Issuance of common stock to director for consulting services - - 50,000 50 74,950
Sale of common stock in private placement, net of related costs - - 400,000 400 487,577
Exercise of placement agent warrants - - 120,000 120 359,880
Retirement of common stock issued to officers - - (400,000) (400) -
Net loss - - - - -
--------- ----------- ---------- ------- -----------
Balance, December 31, 1997 - - 3,196,470 3,196 989,264
Year Ended December 31, 1998:
Sale of preferred stock in private placement, net of related costs 50,000 5,000,000 - - (737,820)
Exercise of warrants - - 60,000 60 479,940
Dividend related to beneficial conversion feature of preferred stock - - - - 781,250
Net loss - - - - -
--------- ----------- ---------- ------- -----------
Balance, December 31, 1998 50,000 $ 5,000,000 3,256,470 $ 3,256 $ 1,512,634
========= =========== ========== ======= ===========
(RESTUBBED TABLE)
Deficit Total
------- -----
<C> <C>
Balance, December 31, 1996 as previously reported $ (66,248) $ (56,365)
Adjustment for pooling of interests 725,980 785,980
---------- -----------
Balance, December 31, 1996 as restated 659,732 729,615
Year Ended December 31, 1997:
Issuance of common stock to director for consulting services - 75,000
Sale of common stock in private placement, net of related costs - 487,977
Exercise of placement agent warrants - 360,000
Retirement of common stock issued to officers - (400)
Net loss (256,774) (256,774)
---------- -----------
Balance, December 31, 1997 402,958 1,395,418
Year Ended December 31, 1998:
Sale of preferred stock in private placement, net of related costs - 4,262,180
Exercise of warrants - 480,000
Dividend related to beneficial conversion feature of preferred stock (781,250) -
Net loss (492,814) (492,814)
---------- -----------
Balance, December 31, 1998 $(871,106) $ 5,644,784
========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $(492,814) $(256,774)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 256,159 228,089
Common stock issued for services - 75,000
Unrealized gain / loss on investments 29,058 -
Gain on sale of investment (22,505) -
Gain on sale of equipment (137,238) -
Provision for doubtful accounts 28,000 -
Deferred income taxes (36,000) 74,000
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (270,624) (1,948)
Income tax refund receivable 137,899 (163,404)
Inventories 97,967 (94,125)
Prepaid expenses and other assets (18,229) 3,536
Increase (decrease) in:
Income tax payable - (185,708)
Accounts payable and accrued expenses 36,438 54,120
------------ ----------
Net cash used in operating activities (391,889) (267,214)
------------ ----------
Cash Flows from Investing Activities:
Acquisition of investments (4,281,803) -
Proceeds from sale of investments 1,450,073 -
(Increase) decrease in notes receivable (500,000) 5,000
Patent costs (13,634) (14,500)
Acquisition of property and equipment (85,635) (37,464)
Proceeds from sale of equipment 145,000 -
------------ ----------
Net cash used in investing activities (3,285,999) (46,964)
------------ ----------
Cash Flows from Financing Activities:
Proceeds from sale of preferred stock 4,262,180 -
Proceeds from sale of common stock and exercise of warrants 480,000 847,977
Payments on capital lease obligations (1,256,625) (276,772)
Repayment of note payable (100,000) (1,000)
Proceeds from issuance of common stock to founding stockholders - 2,300
Proceeds from line of credit 296,002 -
Payments on loans (4,026) (6,491)
Retirement of common shares to officers - (400)
------------ ----------
Net cash provided by financing activities 3,677,531 565,614
------------ ----------
Net Increase (Decrease) in Cash and Cash Equivalents (357) 251,436
Cash and Cash Equivalents, Beginning 638,133 386,697
------------ ----------
Cash and Cash Equivalents, Ending $ 637,776 $638,133
============ ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for :
Interest $ 139,527 $102,432
------------ ----------
Income taxes $ 25,500 $ -
------------ ----------
Non-cash investing and financing activities:
Property, plant, and equipment acquired by means of capital leases $ - $770,981
============ ==========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
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").
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.
On October 2, 1998, the previously amended Articles of
Incorporation were further amended to provide for the issuance of
60,000 shares of Series A 10% Senior Convertible Preferred Stock.
The amendment further provides, among other things, that the
holders of the Series A Preferred shall be entitled to voting
rights equal to the votes that would be cast by the holders of the
number of shares of common into which the Series A Preferred could
be converted immediately prior to the taking of such votes,
including any shares which would be issuable in payment of accrued
and unpaid dividends. In addition, so long as the Series A
Preferred are outstanding, the holders of at least a majority of
the shares of then outstanding Series A Preferred shall be entitled
to elect two directors, and five directors shall be elected by the
holders of Common and Series A Preferred, voting together as a
single class.
F-6
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Organization and Capitalization (Continued)
The Series A Preferred has a liquidating preference equal to the
greater of $100.00 per share plus an amount equal to all accrued
and unpaid dividends or an amount equal to the property to be
distributed to the holders of Common Stock. The holders of the
Series A Preferred shall be entitled to receive cumulative
dividends at a rate of 10% payable in cash or common shares. If
dividends are declared on the common shares, the Series A Preferred
holders shall be entitled to receive the dividend as if the Series
A Preferred were converted into common shares immediately prior to
the record date.
The holders of the Series A Preferred shall have the right, at
their option, to convert any and all Series A Preferred shares into
common shares at the lower of $17.00 per share or eighty percent of
market value at any time on or after the earlier of the four month
anniversary of the earliest issuance date or the first date upon
which the shelf registration statement registering the underlying
common stock is declared effective by the Securities and Exchange
Commission.
Business
American Access Technologies, Inc. ("AAT") develops specialized
products for the telecommunications industry. The Company recently
introduced its first proprietary product, a Zone Cabling
Termination Cabinet (the "Product") which is manufactured and
distributed to the telecommunications industry. The Product is a
device that is 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
products for customers principally in Florida and Georgia.
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary. All
material inter-company accounts and transactions have been
eliminated.
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.
F-7
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 and cash
equivalents, and accounts receivable.
Cash
The Company maintains deposit balances at financial institutions
that, from time to time, may exceed federally insured limits. At
December 31, 1998, the Company had cash balances on deposit that
exceeded federally insured limit by a total of approximately
$327,000. The Company believes that such risks are minimized as
a result of the size and stature of the financial institutions
in which the Company maintains its accounts.
Accounts Receivable
The Company does business and extends credit based on an
evaluation of the customers' financial condition generally
without requiring collateral. Exposure to losses on receivables
is expected to vary by customer due to the financial condition
of each customer. The Company monitors exposure to credit losses
and maintains allowances for anticipated losses considered
necessary under the circumstances.
Termination of Development Stage
As noted above, 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 the acquisition of
Omega Metals, Inc., on November 11, 1998 (see Note 2).
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.
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.
F-8
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash and Cash Equivalents (Continued)
Short-term securities (generally commercial paper maturing in
approximately 30 days) are stated at cost plus accrued income,
which approximates market value.
Investments
The Company's securities investments that are bought and held
principally for the purpose of selling them in the near term are
classified as trading securities. Trading securities are recorded
at fair value in the accompanying consolidated balance sheet in
current assets, and the change in fair value during the period is
included in the results of operations.
Inventories
Inventories, which are primarily composed of raw materials, parts,
supplies and certain product components, are stated at the lower of
cost or market, with cost determined using an average cost method.
Inventory costs for finished goods and work-in-process include
material, labor, production overhead, and outside services.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost and depreciated,
using the straight-line method over the estimated useful lives of
the assets. Gain or loss on disposition of assets is recognized
currently. Repairs and maintenance are charged to expense as
incurred. Major replacements and betterments are capitalized and
depreciated over the remaining useful lives of the assets.
Patent
The Company has capitalized certain incremental costs incurred
related to acquiring two patents on the Company's products. In
1998, one of the patents was finalized and issued by the United
States Patent Department. The Company then began amortizing the
cost of the patent over the patent's life, 18 years. The other
patent was still pending at December 31, 1998 and, therefore,
amortization of this 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 are charged to expense as incurred.
Advertising
Advertising costs are charged to expense as incurred. Advertising
costs incurred for the years ended December 31, 1998 and 1997 were
not material.
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 the date of the financial statements. An
effective tax rate of 37% was used to calculate the deferred income
taxes.
F-9
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
Reclassifications
Certain amounts in prior year financial statements have been
reclassified for comparative purposes to conform with the
presentation in the current year financial statements.
NOTE 2. ACQUISITION OF SUBSIDIARY
On November 11, 1998, the Company acquired 100% of the outstanding
common stock of Omega Metals, Inc. ("Omega") in exchange for 226,470
shares of the Company's common stock. This acquisition, which has been
accounted for using the pooling of interests method, has been given
retroactive effect in these financial statements.
Separate pre-acquisition revenue and net income of American Access and
Omega, as if the acquisition was consummated on October 31, 1998, were
as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Revenue:
Pre-acquisition
American Access $3,873,425 $4,194,889
Omega 480,000 231,622
Acquisition adjustments (200,000) (70,000)
------------- -------------
4,153,425 4,356,511
Post-acquisition 782,779 -
------------- -------------
$4,936,204 $4,356,511
============= =============
Net income (loss):
Pre-acquisition
American Access $ (155,887) $(426,455)
Omega 728,427 169,681
------------- -------------
572,540 (256,774)
Post-acquisition (1,065,354) -
------------- -------------
$ (492,814) $(256,774)
============= =============
</TABLE>
Post-acquisition losses include expenses incurred related to the
Company's acquisition of Omega, including bonuses paid to Omega
officers of approximately $800,000 and lease termination costs of
approximately $239,000.
F-10
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 3. CASH AND CASH EQUIVALENTS
Cash $606,308
Short-term securities 31,468
----------
$637,776
==========
NOTE 4. INVESTMENTS
Corporate bonds $1,393,000
Stocks, rights, and warrants 836,490
Asset-backed securities 295,687
Certificate of deposit 300,000
----------
$2,825,177
==========
During 1997, the Company began purchasing securities classified as
trading securities. Net unrealized loss on the trading securities
portfolio amounted to $29,058 in 1998, and is included in other
income in the accompanying consolidated statement of operations.
Investments in securities are summarized as follows at December 31,
1998:
<TABLE>
<CAPTION>
---------------------------------- --------------------------- --------------------------- -----------------
Gross Unrealized Gain Gross Unrealized Loss Fair Value
---------------------------------- --------------------------- --------------------------- -----------------
<S> <C> <C> <C>
Corporate bonds $ -- $ 7,000 $ 1,393,000
---------------------------------- --------------------------- --------------------------- -----------------
Stocks, rights and warrants $ -- $ 28,953 $ 836,490
---------------------------------- --------------------------- --------------------------- -----------------
Asset-backed securities $7,737 $ 842 $ 295,687
---------------------------------- --------------------------- --------------------------- -----------------
Certificate of deposit $ -- $ -- $ 300,000
---------------------------------- --------------------------- --------------------------- -----------------
$7,737 $ 36,795 $ 2,825,177
---------------------------------- --------------------------- --------------------------- -----------------
</TABLE>
<TABLE>
<CAPTION>
NOTE 5. NOTE RECEIVABLE, RELATED PARTY
<S> <C>
Note receivable, interest at 15%; due March 3, 1999, as extended;
secured by a chattel mortgage on certain equipment owned by debtor
company and guaranteed by a stockholder of the debtor company who is
also a major stockholder of the Company $500,000
===========
NOTE 6. INVENTORIES
Finished goods $ 52,439
Work-in-process 115,555
Raw materials 129,446
-----------
$297,440
===========
NOTE 7. PROPERTY, PLANT AND EQUIPMENT
Estimated Useful
Lives (Years)
-------------
Land - $ 23,808
Building and improvements 30 351,997
Machinery and equipment 5-7 2,383,837
Vehicles 5 31,415
Tools 5 15,323
------------
2,806,380
Less accumulated depreciation 1,492,750
------------
$1,313,630
============
</TABLE>
F-11
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 7. PROPERTY, PLANT AND EQUIPMENT (Continued)
Depreciation expense for the years ended December 31, 1998 and 1997 was
$254,902 and $228,088, respectively.
NOTE 8. OBLIGATIONS UNDER CAPITAL LEASES
In December 1998, the Company satisfied in full the obligations under
various capital leases, which had original terms extending to various
years through 2005, and which provided for implicit interest rates
ranging from approximately 10.5% to 14.5%. The aggregate sum paid was
approximately $1,284,000, of which approximately $239,000 represented
prepayment penalties. Management is considering instituting discussions
with the leasing companies involved with a view towards mitigating the
amount of these lease termination costs. Such amounts, if any, that
management is able to negotiate as a refund of these costs will be
recognized at such time as the amounts are received.
NOTE 9. LINE OF CREDIT
The Company has available a bank line of credit for $300,000, with
interest at 7.75%. The line is collateralized by a $300,000 certificate
of deposit.
NOTE 10. PROFIT SHARING PLAN
The Company has a 401(k) Profit Sharing Plan covering all non-leased
employees who meet minimum length of service and age requirements.
Employer contributions are made at the discretion of management, and
were $75,000 for each of the years ended December 31, 1998 and 1997.
Employees are vested for purposes of the contribution as follows:
Years of Service Percentage
---------------- ----------
Less than 1 0%
1-2 20
2-3 40
3-4 60
4-5 80
5 or more 100
F-12
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 11. INCOME TAXES
The provision for income taxes was computed on a consolidated return
basis for the year ended December 31, 1998. For the year ended December
31, 1997, the Company was not eligible to file a consolidated return
with Omega. Therefore, the income tax provision for 1997 has been
computed on a separate return basis.
As of December 31, 1998, the Company had consolidated net operating
loss carryforwards for federal income tax reporting purposes amounting
to approximately $1,059,000, which expire in varying amounts to the
year 2013.
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>
<CAPTION>
December 31, December 31,
1998 1997
---- ----
<S> <C> <C>
Deferred tax asset $ 392,000 $ 166,000
Less valuation allowance (392,000) (166,000)
--------- ---------
Net deferred tax asset $ - $ -
========= =========
The components of deferred income tax liabilities at December 31, 1998
are as follows:
Deferred income tax liability, long-term:
Depreciation $69,000
=========
</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 issuance of
common stock.
The Company's federal and state income tax returns have not been
examined by responsible taxing authorities for the past several years.
The final determination of the amount and timing of currently payable
income taxes is therefore subject to possible examination of these
unexamined years by such responsible taxing authorities.
F-13
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 12. PREFERRED STOCK
In November, 1998, the Company completed a $5,000,000 private placement
of 50,000 shares of its Series A 10% Senior Convertible Preferred
Stock, par value of $.001 per share, at $100.00 per share. The costs
associated with the completion of the private placement, $737,820, have
been recorded as a reduction of additional paid-in capital.
Additionally, the placement agent received warrants to purchase 100,000
shares of common stock at $25.00 per share, which expire October 14,
2003. The Series A Preferred are valued at $100.00 per share
("liquidation value"), and, if converted, the Series A Preferred shall
be converted into common shares (See Note 1) at the price per share
equal to the then applicable Conversion Price. This conversion feature
results in a discount between the market value of the common shares
that would be issued if the conversion option were exercised, and the
liquidation value of the preferred shares surrendered upon that
conversion. The resulting dividend is being amortized over the period
up to the date that exercise of the conversion feature is first
possible. As a result, $781,250 of the total $1,250,000 dividend has
been recognized in the accompanying 1998 financial statements; the
balance will be recognized in the 1999 financial statements.
As of December 31, 1998, dividends in arrears on the Series A Preferred
Stock amounted to $104,167.
NOTE 13. 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 received 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.
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.
F-14
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 13. COMMON STOCK (Continued)
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. 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 cancelled
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 15).
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.
Warrants
On February 11, 1997, the Board of Directors authorized the
issuance of 700,000 warrants to purchase one share of common stock
per warrant at an exercise price of $8.00 per share expiring on
February 11, 2000. 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.
On June 30, 1998, warrants to purchase 20,000 shares were
exercised, at $8.00 per share. On August 16, 1998 additional
warrants to purchase 40,000 shares were exercised at $8.00 per
share. The Company has remaining outstanding 570,000 warrants to
purchase common stock at an exercise price of $8.00 per share as of
December 31, 1998, 280,000 of which warrants are outstanding to
officer/directors.
Subsequent Issuance of Common Stock for Services
Subsequent to December 31, 1998, the Company issued 9,000 shares of
Company common stock to certain employees as an incentive for
services to be rendered in 1999. This will result in a charge to
compensation expense of approximately $180,000 in the first quarter
of 1999.
F-15
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 14. RELATED PARTY TRANSACTIONS
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 13). In 1998 the remaining management
agreements were terminated, and the three stockholders became
employees of the Company.
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 (see Notes 13 and
15).
NOTE 15. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
Pending Litigation
As of December 1997, the Company was involved in litigation with a
former officer/stockholder of the Company in connection with a
modified consulting agreement with the Company (see Notes 13 and
14) whereby he surrendered 200,000 shares of common stock and
cancelled 70,000 stock warrants previously held. The former
officer/stockholder sought rescission of the consulting agreement
he signed with the Company in August 1997, declaratory judgment
regarding the consulting agreement, damages for breaching the
consulting agreement and damages for fraud. The plaintiff was
seeking damages of $150,000 plus costs.
On March 17, 1999, a formal settlement agreement was reached on the
above matter. Under this settlement, the consulting agreement dated
August 28, 1997 was amended to provide, among other things, that
the former officer/stockholder is not required to provide any
consulting services and the Company is not required to compensate
the former officer/stockholder. The consulting agreement, as
amended, provides for, among other things, a term of five years and
additional compensation in the form of an option to purchase 40,000
shares of common stock on the last day of each year of the
consulting term, exercisable for three years from date of issue, at
an exercise price of 125% of the closing price of the common stock,
on the date of issue. In addition, under the terms of the
settlement agreement, the former officer/stockholder was granted a
warrant to purchase 15,000 shares of common stock at an exercise
price of $22.875 per share, exercisable on or before March 11,
2004.
Major Customer and Subsequent Loss Thereof
The Company's subsidiary (Omega) has a customer which purchased
product that represented approximately 39% and 32% of sales of
formed metal products for the years ended December 31, 1998 and
1997, respectively. In January 1999, this customer announced that
it will cease operations as of February 1999 and, therefore, will
not purchase any products subsequent to that date.
F-16
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 15. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)
Employment Contracts
The Company entered into employment agreements with two members of
management of Omega. These agreements are for a term of two years
commencing in November 1998. The agreements provide, among other
things, for total annual compensation of $250,000 plus profit
participation equal to 10% of the net profits of Omega, as defined,
in excess of $1,200,000 annually.
Contracts With Distributors
In 1997, the Company 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 as specified in the agreements. For 1997 and 1998, revenue
from these sales was not significant. Revenue from 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.
Consulting Agreement
In December 1998, the Company entered into a consulting agreement
to acquire technical expertise in developing and marketing
products. The agreement is for a term of one year, commencing
January 1999, and is automatically renewed unless terminated by
either party. Annual fees are to be $80,000 in cash payable
semi-monthly, plus $40,000 in Company common stock, measured at
market. The common stock is to be distributed on or before December
31 of each year the contract is in force.
Land Purchase
The Company has entered into an agreement to purchase six acres of
land adjacent to the Omega manufacturing plant. The transaction,
which is to close during the first quarter of 1999, at a cost of
approximately $80,000, will allow the Company to build a
manufacturing facility of approximately 30,000 square feet to
supplement the assembly facilities.
F-17
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 15. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)
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 $40,000 for the year ending December 31,
1999.
Rent charged to operations amounted to approximately $45,000 in
1998 and $35,000 in 1997.
Major Vendors
The Company purchases sheet metal from a vendor that represented
approximately 77% of purchases for each of the years ended December
31, 1998 and 1997, respectively.
NOTE 16. 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 common shares issued in connection
with the acquisition of Omega (226,470) have been considered
outstanding shares for all periods. The number of shares used in the
computation were 3,218,970 and 3,309,470 for the years ended December
31, 1998 and 1997, respectively. Diluted net loss per common share,
assuming exercising of the warrants granted and convertible preferred
stock, is not presented as the effect of conversion is anti-dilutive.
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net Loss $ (492,814) $(256,774)
Cumulative Preferred Stock Dividend (104,167) -
Beneficial Conversion Preferred Stock Dividend (781,250) -
----------- -----------
Net Loss Allocated to Common Stockholders $(1,378,231) $(256,774)
=========== ===========
</TABLE>
F-18
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 17. 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, line of credit, 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.
NOTE 18. SEGMENT INFORMATION
The Company adopted SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, in 1998 which changes the way the
Company reports information about its operating segments. The
information for 1997 has been restated from the prior year's
presentation in order to conform to the 1998 presentation.
The Company has two reportable segments, zone cabling products and
formed metal products. As discussed in Note 1, American Access, the
parent company, markets zone cabling products which are manufactured by
Omega. Omega manufactures formed metal products of varying designs for
customers, including American Access.
<TABLE>
<CAPTION>
1998 1997
------------------------------------- ------------------------------------
Zone Formed Zone Formed
Cabling Metal Cabling Metal
Products Products Total Products Products Total
-------- -------- ----- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Revenue from external customers(a) $ 592,086 $4,344,118 $4,936,204 $231,622 $4,124,889 $4,356,511
Intersegment revenue - 234,496 234,496 - 70,000 70,000
Interest revenue 89,731 - 89,731 3,992 - 3,992
Interest expense 2,110 376,864 378,974 2,424 101,350 103,774
Depreciation and amortization 14,701 241,458 256,159 6,742 221,463 228,205
Income tax expense (credit) - (36,000) (36,000) - 78,000 78,000
Segment profit (loss) (350,533) (142,281) (492,814) (426,455) 169,681 (256,774)
Segment assets $3,858,092 $2,618,319 $6,476,411 $540,582 $2,750,674 $3,291,256
</TABLE>
(a) See Note 15 regarding major customer and subsequent loss thereof.
F-19
<PAGE>
- --------------------------------------------------------------------------------
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
Prospectus Summary .............................................................
Risk Factors ...................................................................
Use of Proceeds ................................................................
Market for Securities
Recent Financing
Dividend Policy
Management's Discussion and
Analysis of Results of Operation
and Financial Condition
Business .......................................................................
Management .....................................................................
Indemnification ................................................................
Certain Relationships and Related Transactions .................................
Security Ownership of Certain Beneficial
Owners and Management .........................................................
Description of Securities ......................................................
Plan of Distribution/Selling Security Holders ..................................
Legal Matters ..................................................................
Experts ........................................................................
Additional Information .........................................................
Index to Financial Statements ..................................................
UNTIL ____________, 1999 (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
- --------------------------------------------------------------------------------
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Reference is hereby made to the provisions of Section 607.0850 of the
Florida Business Corporation Act which provides for indemnification of directors
and officers under certain circumstances.
Reference is hereby made to Article IV of Registrant's Amended and
Restated Articles of Incorporation which is filed as Exhibit 3(a).Item 25.
Other expenses of issuance and distribution
The following table sets forth the expenses in connection with the
issuance and distribution of the securities offered hereby:
<TABLE>
<CAPTION>
------------------------------------------------------- ------------------
<S> <C>
Registration Fee $ 7,911
------------------------------------------------------- ------------------
Estimated Printing Expenses $ 1,500
------------------------------------------------------- ------------------
Estimated Legal Fees and Expenses $10,000
------------------------------------------------------- ------------------
Estimated Accounting Fees and Expenses $ 8,000
------------------------------------------------------- ------------------
Estimated Blue Sky Fees and Expenses $ 3,000
------------------------------------------------------- ------------------
Estimated Transfer Agent Fees and Expenses $ 1,000
------------------------------------------------------- ------------------
Estimated Misc. $ 600
------------------------------------------------------- ------------------
Total $32,011
------------------------------------------------------- ------------------
</TABLE>
Item 26. Recent sales of unregistered securities.
The following provides information of all sales of outstanding stock
which were not registered under the Securities Act of 1933.
On November 25, 1996,in connection with the Registrant's organizational
activities, 2,000,000 shares of common stock were issued to founders and
officers, Victor Murray, Richard Murray, Steven J. Robinson, Bobby E. Story and
Steve Jones for par value of $.001 per share. Messrs. Robinson and Jones
subsequently returned a total of 400,000 shares to the Company for cancellation.
The Company also issued each of the foregoing persons a stock purchase warrant
for 70,000 shares. Mr. Jones' warrant was subsequently cancelled. Exemption from
registration is claimed under Section 4(2) of the Securities Act of 1933, as
amended, Shareholders, as directors and/or officers are "accredited investors"
defined in Rule 501.
The Company issued 50,000 shares of common stock to John W. Cooney,
a director, for $.001 per share on February 11, 1997. Exemption form
registration is claimed under Section 4(2) of the Securities Act of 1933, as
amended. Shareholders, as directors and/or officers are "accredited investors"
defined in Rule 501.
On December 2, 1996 the company sold 400,000 shares and on February
1997 the company sold 400,000 shares of common stock to Bridge Bank, Ltd. at par
value of $.001 per share. Exemption from registration is claimed under Rule 504
of Regulation D, which does not require investors to be accredited or
sophisticated.
The company issued a stock purchase warrant to Capital International
Securities Group, Inc. for 350,000 shares exercisable for $8.00 per share on
February 11, 1997. Exemption is claimed under Section 4(2) of the Securities
Acts of 1933, as amended. Holder, a member of NASD, is sophisticated.
From February 12 to April 11, 1997 the company undertook a private offering
pursuant to Regulation D, Rule 504 and sold 400,000 shares of common stock for
$600,000. The Company issued 120,000 stock purchase warrants in connection with
II-1
<PAGE>
the private offering, exercisable at $3.00 and such shares were issued on
exercise of the warrants. Exemption from registration is claimed under Rule 504
of Regulation D, which does not require investors to be accredited or
sophisticated.
Since October 1, 1998 and to November 13, 1998, the company has
had a private placement of its Series A 10% Senior Convertible Preferred Stock
in process. There are 60,000 shares authorized at a par value $.001. During this
period 50,000 shares have been sold for $5,000,000. Merrill Weber & Co., Inc.
and Capital International Securities Group, Inc., members NASD, were placement
agents and received commissions of $575,000, expenses and administrative fees of
$80,981, and accounting fees of $10,000, and warrants to purchase 100,000 shares
of common stock for $25.00 per share which expire October 14, 2003. The shares
were issued to accredited investors, pursuant to the exemption from registration
under Rule 506 of Regulation D.
On November 11, 1998 the company completed purchase of all
the issued common stock of Omega Metals, Inc. from two persons. The company
utilizes Omega Metals, Inc. as its source of most of its manufactured products.
The transaction included an exchange of 226,470 restricted common stock shares
being issued, pursuant to the exemption from registration under Section 4(2) of
the Securities Act of 1933.
All of such securities were not solicited by advertising or any
general solicitation and, except such securities issued pursuant to Rule 504,
contain a restrictive legend.
Item 25. Exhibits.
Exhibit No. Description
- ---------- -----------
3(a) Amended and Restated Articles of Incorporation of the Registrant
(Incorporated by reference to Exhibit 3(a) to Amendment No. 1 to Registrant's
Registration Statement on Form SB-2 - File No. 333-43589).
3(b) Bylaws of the Registrant (Incorporated by reference to Exhibit 3(b) to
Amendment No. 1 to Registrant's Registration Statement on Form SB-2 - File No.
333-43589).
39(c) Form of $8.00 Stock Purchase Warrant expiring February 11, 2000
(Incorporated by reference to Exhibit 3(C) to Amendment No. 1 to Registrant's
Registration Statement on Form SB-2 - File No. 333-43589).
3(d) Form of $3.00 Stock Purchase Warrant expiring February 11, 2000
(Incorporated by reference to Exhibit 3(d) to Amendment No. 1 to Registrant's
Registration Statement on Form SB-2 - File No. 333-43589).
3(e) Articles of Amendment to Articles of Incorporation (Incorporated by
reference to Exhibit 4.1 to Registrant's Quarterly Report on Form 10Q-SB for
quarter ended September 30, 1998).
3(f) Form of Stock Purchase Warrant expiring October 14, 2003.*
5.1 Opinion of counsel (Incorporated by reference to Amendment 2 Form SB-2 File
No. 333-68791 filed March 11)
II-2
<PAGE>
8.2 Composite Exhibit of Stocking Distributor Agreements with Anixter, Inc.,
State Electric Supply Company, and Data Com, Inc. (Incorporated by reference to
Exhibit 8.2 to Amendment No. 1 to Registrant's Registration Statement on
Form SB-2 - File No. 333-43589).
8.3 Value Added Reseller Agreement with DataStar Computer Systems, Inc.
(Incorporated by reference to Exhibit 8.3 to Amendment No. 1 to Registrant's
Registration Statement on Form SB-2 - File No. 333-43589).
8.4 Engagement letter dated November 27, 1996 between Registrant and Capital
International Securities Group, Inc. (Incorporated by reference to Exhibit 8.4
to Amendment No. 1 to Registrant's Registration Statement on Form SB-2 - File
No. 333-43589).
8.5 Composite Exhibit of Management Agreements with Vic Murray and Sons, Steve
R. Jones, Steven K. Robinson and Nacex, Inc. (Incorporated by reference to
Exhibit 8.5 to Amendment No. 1 to Registrant's Registration Statement on Form
SB-2 - File No. 333-43589).
8.6 Consulting Agreement dated August 28, 1997 between Registrant and Steve R.
Jones. (Incorporated by reference to Exhibit 8.6 to Amendment No. 1 to
Registrant's Registration Statement on Form SB-2 - File No.
333-43589).
8.7 Management Termination Agreement dated December 9, 1997 between Steven K.
Robinson and Registrant. (Incorporated by reference to Exhibit 8.7 to Amendment
No. 1 to Registrant's Registration Statement on Form SB-2 File No. 333-43589).
8.8 Purchase Agreement dated October 21, 1996 between Registrant and Victor E.
Murray. (Incorporated by reference to Exhibit 8.8 to Amendment No. 1 to
Registrant's Registration Statement on Form SB-2 - File No. 333-43589).
8.9 Promissory Note dated December 2, 1996. (Incorporated by reference to
Exhibit 8.9 to Amendment No. 1 to Registrant's Registration Statement on Form
SB-2 - File No. 333-43589).
8.10 Agreement and Plan of Reorganization dated November 11, 1998 relating to
the acquisition of Omega Metals, Inc. (Incorporated by reference to Exhibit 2.1
to Registrant's Form 10Q-SB for the Quarter ended September
30, 1998.
8.11 Registration Rights Agreement relating to Registrant's Series A 10% Senior
Convertible Preferred Stock.*
8.12 Employment Agreements between Omega Metals, Inc. and John Presley and Erik
Wiisanen.*
8.13 Letter of Intent to Purchase additional land from Troy Fornshell and Anna
Fornshell.*
11.1 Statement Re: Computation of Net Loss per Common Share.
23 Consent of counsel is contained in Exhibit 5.1
23.1 Consent of Independent Certified Public Accountants.
II-3
<PAGE>
27.0 Financial Data Schedule.(Incorporated by reference to Exhibit 27.0 Form
SB-2,December 11, 1998, File No. 333-68791).
*Filed with Amendment No. 1
Item 26. Undertakings.
1.) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised 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. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel, the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the questions whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
o To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
o To include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
o To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement.
o To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
2.) That for the purpose of determining any liability under the Securities Act
of 1935, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bonafide offering thereof.
3.) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Altamonte Springs and State of Florida on March 9, 1999.
AMERICAN ACCESS TECHNOLOGIES, INC.
By /s/ Victor E. Murray
- --------------------------------------
President/ principal executive officer
In accordance with the requirements of the Securities Act of 1933,
this amendment to registration statement was signed by the following persons in
the capacities and on the dates stated.
<TABLE>
<CAPTION>
- ---------------------------------------- -------------------------------------- --------------------------------------
Signature Title Date
- ---------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
By /s/ Victor E. Murray President and Director, Principal March 9, 1999
Victor E. Murray Executive Officer
- ---------------------------------------- -------------------------------------- --------------------------------------
By /s/ Richard A. Murray Vice President and Director March 9, 1999
Richard A. Murray
- ---------------------------------------- -------------------------------------- --------------------------------------
By /s/ Bobby E. Story Treasurer, Principal Accounting March 9, 1999
Bobby E. Story Officer, Director
- ---------------------------------------- -------------------------------------- --------------------------------------
By /s/ Victor D. Phillips Director March 9, 1999
Victor D. Phillips
- ---------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
II-5
Law Offices
JOEL BERNSTEIN, ESQ., P.A.
11900 Biscayne Blvd., Suite 604
Miami, Florida 33181
Telephone: 305.892.1122 Facsimile: 305.892.0822
March 8, 1999
American Access Technologies, Inc.
238 N. Westmonte Drive
Altamonte Springs, FL 32714
Gentlemen:
I have acted as special counsel to American Access Technologies, Inc., a Florida
corporation (the "Corporation"), in connection with the offering of 588,235
shares of Common Stock. The offering of the shares is to be made pursuant to
Registration Statement on Form SB-2 to be filed with the Securities and Exchange
Commission (the "Registration Statement").
I have acted as special counsel to the Corporation in connection with the
shares.
Please be advised that I am of the opinion that the Corporation's Common Stock
to be offered pursuant to the Registration Statement has been duly authorized by
the Corporation. And upon conversion of outstanding Preferred Stock in
accordance with the terms thereof will be validly issued by the Corporation and
fully paid and non-assessable.
I consent to the use of my name in the Registration Statement in the section of
the Prospectus entitled "Legal Matters" and the filing of this letter as an
exhibit to the Registration Statement.
Yours very truly,
s/Joel Bernstein
JB:jk
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
STATEMENT RE: COMPUTATION OF NET LOSS PER COMMON SHARE
<TABLE>
<CAPTION>
Year Ended
December 31,
------------
1998 1997
---- ----
<S> <C> <C>
Net Loss $ (492,814) $(256,774)
Cumulative Preferred Stock Dividend (104,167) -
Beneficial Conversion Preferred Stock Dividend (781,250) -
------------- -----------
$ (1,378,231) $(256,774)
============= ===========
Weighted Average Common Shares Outstanding 2,992,500 3,033,000
Adjustments to Reflect Requirements of the Securities and Exchange Commission
SAB 83:
Common stock issued to director within the period - 50,000
Common Shares Issued to Acquire Omega Metals, Inc. 226,470 226,470
------------- -----------
Total Weighted Average Number of Common Shares and Equivalents 3,218,970 3,309,470
============= ===========
Net Loss per Common Share $ (.43) $ (.08)
============= ===========
</TABLE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting
part of this Registration Statement on Form SB-2 of our report dated January 29,
1999, except for the second paragraph of Note 15 as to which the date is March
17, 1999 (which contains an emphasis paragraph that describes certain
significant uncertainties relating to the financial statements of American
Access Technologies, Inc, appearing in such Prospectus. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
/s/Rachlin Cohen & Holtz
RACHLIN COHEN & HOLTZ LLP
Fort Lauderdale, Florida
March 30, 1999