Form 10-QSB for AMERICAN ACCESS TECHNOLOGIES, INC. filed on August 16, 1999
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[XX] Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934 For the quarterly period ended
June 30, 1999
OR
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from ______________ to ________________
* * * * * * * * * * * * * * * * * * * * * *
Commission File No. 000-24575
AMERICAN ACCESS TECHNOLOGIES INC.
A Florida corporation
(Exact name of registrant as specified in charter, and state incorporated)
* * * * * * * * * * * * * * * * * * * * * *
Employer Identification No. 59-3410234
Lake Mary Florida, 37 Skyline Drive Suite 1101
(Address of principal executive offices of registrant)
(407) 333-1446
(Registrant's telephone number, including area code)
* * * * * * * * * * * * * * * * * * * * * *
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X]. NO [ ].
The number of shares of AMERICAN ACCESS TECHNOLOGIES INC. Common Stock (Par
Value $0.001) outstanding at June 30, 1999 was 4,021,397
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AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Audited
Financial
ASSETS 30-Jun-99 Statements
------ UNAUDITED Dec. 31, 1998
--------- -------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 587,392 $ 637,776
Investments 3,450,738 2,825,177
Accounts receivable, net of allowance 1,254,887 806,960
Note receivable, related party 500,000 500,000
Inventories 339,243 297,440
Prepaid expenses and other current assets 124,922 60,466
Cost in excess of contract sales 229,679 -
----------------------------
Total current assets 6,486,861 5,127,819
Property, Plant and Equipment, net of accumulated depreciation 1,296,175 1,313,630
Building Under Construction 543,035
Patent Costs 34,448 34,962
Total assets $ 8,360,519 $ 6,476,411
============================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Line of credit $ 286,904 $ 296,002
Accounts payable and accrued expenses:
Compensation due to officers/directors/stockholders 0 111,235
Other 348,654 355,390
----------------------------
Total current liabilities 635,558 762,627
----------------------------
Deferred Income Taxes 69,000 69,000
Stockholders' Equity:
Series A 10% Senior Convertible Preferred stock,
$.001 par value; authorized 1,000,000 shares; issued and
outstanding 12,239 and 50,000 respectively shares at liquidation value 1,223,900 5,000,000
Common stock, $.001 par value; authorized 10,000,000
shares; issued and outstanding 4,021,397 and 3,265,470 respectively shares 4,021 3,265
Additional paid-in capital 7,462,821 1,512,625
Unrealized losses on securities held for investment (37,061)
Deficit (997,720) (871,106)
----------------------------
Total stockholders' equity 7,655,961 5,644,784
----------------------------
Total liabilities and stockholders' equity $ 8,360,519 $ 6,476,411
============================
See accompanying notes to financial statements
</TABLE>
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AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
<TABLE>
<CAPTION>
Six Months Six Months Three Months Three Months
Ended Ended Ended Ended
30-Jun-99 30-Jun-98 30-Jun-99 30-Jun-98
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales
Formed metal 2,210,820 1,943,184 $ 1,256,511 1,250,270
Zone cabling termination cabinet 714,747 317,051 378,894 187,252
------------------------------------------------------------------
Total Net Sales 2,925,567 2,260,235 1,635,405 1,437,522
------------------------------------------------------------------
Costs and Expenses:
Cost of sales 1,239,478 1,089,552 737,701 699,474
Selling, general and administrative 1,534,940 1,262,282 858,365 723,731
------------------------------------------------------------------
Total Cost and Expenses 2,774,418 2,351,834 1,596,066 1,423,205
------------------------------------------------------------------
Net Operating Income (Loss) 151,149 (91,599) 39,339 14,317
------------------------------------------------------------------
Other Income (Expense):
Interest income 152,457 6,268 72,214 1,464
Interest expense (13,374) (68,435) (7,764) (38,331)
Other income 36,835 228,605 19,436 22,034
------------------------------------------------------------------
Total Other Income (Expense) 175,918 166,438 83,886 (14,833)
------------------------------------------------------------------
Net Income Before Taxes 327,067 74,839 123,225 (516)
Income Taxes (Credit) (15,170) (15,170)
------------------------------------------------------------------
Net Income 342,237 74,839 138,395 (516)
==================================================================
Net Income Per Common Share (0.05) 0.02 $ 0.02 0.0
==================================================================
</TABLE>
See accompanying notes to financial statements
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AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Six Six
Months Months
Ended Ended
June 30, 1999 June 30, 1998
--------------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 342,237 $ 74,839
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 150,244 154,225
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (447,927) (384,260)
Inventories (41,803) 100,079
Prepaid expenses and other assets (64,456) 175,091
Costs in excess of contract sales (229,679)
Increase (decrease) in:
Compensation due to officers/directors/stockholders (111,235) 418,609
Accounts payable and accrued expenses (6,736) (357,787)
------------------------------
Net cash provided by operating activities (409,355) 180,796
------------------------------
Cash Flows from Investing Activities:
Proceeds from investment changes (625,560) -
Patent costs - (23,243)
Acquisition of property and equipment (net of sales and retirements) (132,275) 8,899
Costs for building under construction (543,035) -
------------------------------
Net cash provided by investing activities (1,300,870) (14,344)
------------------------------
Cash Flows from Financing Activities:
Proceeds from issuance of common Stock 1,668,939 160,001
Proceeds from line of credit (9,098) -
Payments on loans and capital lease obligations -
------------------------------
Net cash used in financing activities 1,659,841 160,001
------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (50,384) 326,453
Cash and Cash Equivalents, Beginning 637,776 638,134
------------------------------
Cash and Cash Equivalents, Ending $ 587,392 $ 964,587
==============================
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 13,374 $ 68,435
==============================
</TABLE>
See accompanying notes to financial statements
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AMERICAN ACCESS TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 Unaudited
1. Basis of Presentation
The accompanying unaudited consolidated condensed financial statements at June
30, 1999 have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-QSB and reflect all adjustments which, in the opinion of management, are
necessary for a fair presentation of financial position as of June 30, 1999 and
results of operations for the three and six months ended June 30, 1999 and 1998.
All adjustments are of a normal recurring nature. The results of operations for
interim periods are not necessarily indicative of the results to be expected for
a full year. The statements should be read in conjunction with the consolidated
financial statements and footnotes thereto for the year ended December 31, 1998
included in the company's Registrations Statement Form SB-2 filing and 10-KSB.
2. Nature of Business and Summary of Significant Accounting Policies.
BUSINESS
American Access Technologies, Inc. develops specialized products for the
telecommunications industry. The company manufactures and distributes several
models of Zone Cabling Termination Cabinets to the telecommunications industry.
The product helps manage and route wiring and cabling used in voice, computer
and data transmission systems throughout the world.
Omega Metals, Inc., a wholly-owned subsidiary of American Access, shears and
molds metal and manufactures metal-formed products for customers principally in
Florida and Georgia. Omega manufactures the company's product.
COMMON STOCK
The Registration Statement on April 6 became effective for the Series A
10% Senior Convertible Preferred Stock, of which there were 50,000 shares
outstanding at a gross of $5,000,000. Through August 11, 1999, 78.3% of the
preferred stock, $3,915,000 has been converted resulting in 288,456 common stock
shares being issued. A total of 286,511 shares were sold on the open market.
American Access Technologies began trading on the Nasdaq Stock Market, Inc., as
a Small Cap listing, on April 13, 1999.
The Registration Statement on April 7 became effective for the offering
of 720,000 shares of common stock upon the exercise of 720,000 $8 warrants.
During the quarter ending June 30, 1999, 483,250 warrants were exercised;
106,500 in May and 376,750 in June, leaving a balance of 86,750 unexercised
warrants.
NET LOSS PER COMMON SHARE
In 1997, the Company adopted Statements of Financial Accounting Standards (SFAS)
No. 128, "Earnings per Share" which requires the presentation of both basic and
diluted earnings (loss) per share.
Basic net loss per common share has been computed based upon the weighted
average number of shares of common stock outstanding during the periods. The
computation of earnings per share is reflected in the following schedule:
5
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<TABLE>
<CAPTION>
Computation of Net Loss Per Common Six Months Ended Three Months Ended Year Ended
Share June 30, 1999 June 30, 1999 Dec. 31, 1998
<S> <C> <C> <C>
Net Income (Loss ) $ 342,237 $ 138,395 $ (492,814)
Cumulative Preferred Stock Dividend (61,195) (61,195) (104,167)
Beneficial Conversion Preferred Stock Dividend (468,750) (781,250)
------------ ----------- ------------
$ (187,708) $ 77,200 $(1,378,231)
------------ ------------ ------------
Weighted Average Common Shares Outstanding 3,450,539 3,633,575 2,992,500
Common Shares Issued to Acquire Omega Metals, Inc. 226,470
------------
Total Weighted Average Number Common Shares and 3,450,539 3,633,575 3,218,970
------------ ------------ ------------
Equivalent
Net Loss per Common $ (.05) $ .02 $ (.43)
------------ ------------ ------------
Share
</TABLE>
3. Commitments and Contingencies
LEASE COMMITMENTS
The Company entered into a sublease for 10,472 square feet of office space on
May 28, 1999 with World Color Press, Inc., at 37 Skyline Drive, SunTech Commerce
Park, Lake Mary, Florida. The sublease runs through May 30, 2003 and calls for
an initial monthly payment of $9,599.33 from May 28, 1999 through May 31, 2000
with a 4% per annum increase.
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SIX MONTHS ENDED JUNE 30, 1999 COMPARED WITH THE SIX MONTHS ENDED JUNE 30, 1998
REVENUES
Revenues for the six months ended June 30, 1999 increased by $665,332
or 29.4% to $2,925,567 as compared to $2,260,235 for the six months ended June
30, 1998. The parent company, American Access Technologies, Inc., was still in
the development stage for the second quarter ended June 30, 1998, and revenues
were only $317,051 . In 1999 for the six months ended June 30, revenues
increased by $397,696 to $714,747. The company's subsidiary, Omega Metals Inc.,
also had an increase in revenues of $267,636.
COSTS AND EXPENSES
Direct costs represent the cost incurred by the Company to have its
products manufactured and assembled. These costs represented 42.4% of revenues
for the six months ended June 30, 1999, and 48.2% of revenues for the six months
ended June 30, 1998. The decrease is attributed to a change in the customer mix.
Revenues generated during the six month period ended June 30, 1999 required less
direct labor and material costs per sales dollar than for the previous year's
six months ended June 30, 1998.
Selling, General and Administrative expenses increased by $272,658 to
$1,534,940 for the six months ended June 30, 1999 compared to $1,262,282 for the
six months ended June 30, 1998. This increase was the result of costs associated
with the continued growth of the company including marketing and promotional
costs, management costs, and professional fees associated with the required SEC
filings. Startup costs related to the company's Building Industry Consulting
Service International (BICSI) licensed training agreements school have also been
expensed as incurred.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities utilized cash of $409,355 during the
six months ended June 30, 1999 as compared to providing $180,796 during the six
months ended June 30, 1998.
The Company's operating and capital requirements in connection with its
operations have been and will continue to be significant. Based on its current
plans, the Company anticipates that revenues earned from product sales will be
the primary source of funds for operating activities. The Company believes that
these revenues in addition to existing cash and cash equivalents remaining from
proceeds of it private offering, and cash received from the exercise of warrants
will be sufficient to meet its capital and liquidity needs for the next 12
months. The Company also believes that resources required to fulfill purchase
orders will be available through bank borrowings or factoring, if required. The
company's primary customers are established corporations with credit ratings
that will support such credit arrangements.
Management's plans include the following:
1. The Company has arranged for marketing in association with
manufacturers and distributors of telecommunications equipment,
which will enable the Company to obtain orders for its products
with a minimal expenditure of the Company's resources. The Company
has launched a manufacturer's rep program to assist in the
distribution of its products.
2. The Company has arranged for uninterrupted manufacture of its
products by purchasing the manufacturer in October, 1998, in order
to minimize the financial requirements necessary for production.
3. The company believes that it can acquire working capital through
sale of additional securities (including exercise of outstanding
warrants), or borrowings, including bank borrowing, in view of the
nature of its customer base. Nevertheless, the Company continues
to be subject to a number of risk factors, including the
uncertainty of market acceptance for its product line, the need
for additional funds, competition, and technological obsolescence.
4. American Access has obtained a general license from BICSI to teach
the BICSI cabling installation program and to suitcase the other
BICSI Institute courses. These programs as well as
company-developed courses will be taught at the Company's Lake
Mary location and will serve to increase awareness throughout the
industry of the Company's products.
7
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PART II. OTHER INFORMATION
ITEM 2:
CHANGES IN SECURITIES AND USE OF PROCEEDS
COMMON STOCK
The Registration Statement on April 6 became effective for the Series A
10% Senior Convertible Preferred Stock, of which there were 50,000 shares
outstanding at a gross of $5,000,000. Through August 11, 1999, 78.3% of the
preferred stock, $3,915,000 has been converted resulting in 288,456 common stock
shares being issued. A total of 286,511 shares were sold on the open market.
American Access Technologies began trading on the Nasdaq Stock Market, Inc., as
a Small Cap listing, on April 13, 1999.
The Registration Statement on April 7 became effective for the offering
of 720,000 shares of common stock upon the exercise of 720,000 $8 warrants.
During the quarter ending June 30, 1999, 483,250 warrants were exercised;
106,500 in May and 376,750 in June, leaving a balance of 86,750 unexercised
warrants.
ITEM 5:
OTHER INFORMATION
American Access held a Special Called meeting Saturday, April 10, 1999 at which
time three new members were appointed to the Board of Directors, Charles L.
Frampton, Elliot G. Steinberg and David S. Snyder, expanding the board from five
to seven members. Former Director and President Victor E. Murray retired from
American Access at age 74, effective April 15. John E. Presley replaced Victor
E. Murray as president, and continues his tenure as director. Charles L Frampton
replaced retiring CFO and Secretary/Treasurer Bobby E. Story, 57, effective May
12. Along with Presley, directors whose terms of office continued were: John W.
Cooney, Victor D. Phillips and Richard A. Murray.
Stock purchase warrants were authorized by the Board of Directors at the April
10 meeting in the following amounts: 20,000 $25 warrants were awarded to each of
the company's 1999 outside directors; a total of 750,000 $22 warrants were
authorized for management personnel, to be issued at the discretion of the
President; and 100,000 $23 warrants to the originals holders of Series A 10%
Convertible Preferred Stock. The 100,000 $25 warrants currently outstanding and
held by Merrill Webber & Co. were reissued at $23 for services provided with
respect to securing approval from Preferred shareholders regarding their warrant
issuance.
On May 19, Lucent Technologies confirmed in writing an ongoing working
relationship with the company.
On July 28, Vice President and Director Richard A. Murray resigned from his
position as an officer and from the board. He will serve as a consultant to the
company for 90 days. The Director position is currently vacant.
On August 3, 1999, American Access Technologies, Inc. and Herman Miller, Inc.
entered into a contract for an alliance to jointly promote the use of American
Access Technologies, Inc products in Herman Miller Ethospace and Systems Bridge
products.
8
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ITEM 6:
EXHIBITS AND REPORTS
(b) EXHIBITS
The following exhibits are being filed as part of this report:
Exhibit No. Description
----------- -----------
10.0 Material Contracts
27.0 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 16, 1999
AMERICAN ACCESS TECHNOLOGIES, INC.
(Registrant)
By: /s/ Charles L. Frampton
----------------------------
Charles L. Frampton
Secretary/Treasurer
Chief Financial Officer
By: /s/ John E. Presley
----------------------------
John E. Presley
President
9
EXHIBIT 10
American Access Technologies
Co-Marketing Alliance Agreement (revised 8/2/99)
This Co-Marketing Alliance Agreement ("Agreement") is entered into this ____ day
of _________ 1999, by and between Herman Miller, Inc. ("HMI"), 855 East Main
Ave., P.O. Box 302, Zeeland, Michigan 49464-0302, a Michigan corporation with
its principal headquarters located in Zeeland, Michigan, and American Access
Technologies (AATK), 37 Skyline Drive, Suite 1101, Lake Mary, Florida 32746, a
Florida corporation with its principal headquarters located in Lake Mary,
Florida.
Statement of Facts
HMI manufactures and markets a comprehensive line of office furniture and
seating. AATK manufactures and markets a line of telecommunication connectivity
products supporting zone distribution of data.
In order to provide a greater range of zone distribution telecommunication
connectivity solutions to customers of HMI and its subsidiaries, as well as to
increase market opportunities for AATK, HMI and AATK agree that it would be
mutually beneficial to jointly promote sale of AATK products.
AATK and HMI will jointly promote the use of AATK products in Ethospace and
Systems Bridge products using AATK's Ethocom and Comdeck products. AATK will
sell directly to clients utilizing their products in conjunction with HMI's
Ethospace and Systems Bridge products. AATK is responsible to sell, specify,
plan, install, invoice, and provide service for their products through its
manufacturer representative and value added resellers (Network). HMI will not
take title to AATK's products unless otherwise agreed to by HMI and AATK. At its
discretion, HMI may employ a technical selling consultant to assist with
integration, training, and promotion of AATK products. AATK will provide Ethocom
and Comdeck technical training for HMI and its distribution channel, as its
cost, to support the sale of its products.
HMI authorizes AATK's purchase of Systems Bridge frames for resale to the
Competitive Local Exchange Carrier (CLEC) market. AATK will factory-fit the
Systems Bridge frames with mounting racks and telecommunications devices as
specified by the CLEC, and then sell, install, and service the completed unit to
the CLEC at prices agreed to by AATK and the CLEC.
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Agreement
In consideration of the facts set forth above and the mutual promises and
undertakings set forth below, the parties agree as follows:
1. License
1.1 AATK assigns its rights in the Ethocom mark to HMI. During the
term of this agreement, HMI grants AATK a license to use the mark
"Ethocom" in connection with the sale and promotion of HMI's
Ethospace and Systems Bridge products manufactured and sold
within the United States, Canada, Europe and Latin America.
1.2 AATK may, for the duration of this Agreement, to use the name of
Ethocom, as earlier assigned to HMI in this Agreement, for
identification and promotion of those zone distribution products.
Any exceptions to this must be with prior written approval by
HMI.
1.3 HMI remains the sole and exclusive owner of all trademarks,
names, designs, or other items licensed under the mark of
Ethospace and Systems Bridge.
2. Distribution
2.1 AATK will maintain the network required to support the sale,
specification, installation, and service for its Ethocom and
Comdeck products in the United States, Canada, Europe, and Latin
America (Network). HMI reserves the right to periodically review
and approve the organizations selected as the Network.
2.2 AATK will ensure the Network will meet quality and service
standards established by AATK, the Telecommunications Industry
Association (TIA), Electronic Industry Association (EIA), the
National Electrical Code (NEC), and other appropriate US and
International standards and code authorities. Any proposed
changes or additions to the Network will be communicated to HMI
at least 30 days prior to the change.
2.3 AATK, and its Network, will sell Ethocom and Comdeck products
directly to Customers, except as otherwise stated in below and in
Section 4.2. Ethocom and Comdeck sales to the US Government will
be governed by the General Services Administration ("GSA")
multiple award schedule contracts held by HMI. The sale of
Ethocom and Comdeck products to federal government civilian
agencies, the Department of Defense, and select State and Local
Government direct accounts will be handled by HMI on an exclusive
basis.
2.4 HMI agrees to sell Systems Bridge Products to AATK for resale to
the Competitive Local Exchange Carrier (CLEC) market. The Product
list and discount for purchases of these products is listed in
Exhibit 1. AATK agrees to coordinate with HMI and its
distribution channel to provide any required finish tiles and /
or furniture components. AATK agrees not to promote or sell
Products purchased under this discount to customers who are not
CLEC's.
2.5 AATK agrees not to sell or make available the Ethocom and/or
Comdeck products, or equivalents, to its Network, competitive
dealers, agents, or contractors for installation in competitive
frame and tile or systems furniture products unless prior written
permission has been given by HMI's Vice President of Marketing.
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3. Manufacturing
3.1 AATK will manufacture Ethocom and/or Comdeck, or equivalent,
products according to printed standards with documented
production processes.
3.2 Ethocom and Comdeck products and product enhancements will meet
all applicable BIFMA, TIA, EIA, NEC, and international, national
and local construction codes and standards. AATK will be
exclusively responsible for ensuring the products meet applicable
codes and customer safety and performance expectations.
3.3 HMI will inform AATK of product and engineering changes to
Ethospace and Systems Bridge products 90 days in advance of
production.
3.4 AATK agrees to deliver the Ethocom and/or Comdeck products in a
sufficient quantity, dictated by customer-demand, to the
installation location in a coordinated manner with the furniture
products, in less than a four-week (4) lead time, including
staging time at the HMI dealer or Customer location.
4. Pricing
4.1 AATK retains the right to establish the prices for Ethocom and
Comdeck products sold directly to clients by AATK, except for
Customer pursuant to 4.2.
4.2 The price for those Ethocom and Comdeck products, sold directly
to HMI for resale to the US Government and select State and Local
Government Agencies, or a subsidiary for resale to third parties,
by AATK or the AATK Network during the term of this Agreement
will be equal to_______% off AATK's then current list price. (See
Exhibit 2 for AATK's current list prices) HMI intends to sell
Ethocom and Comdeck products directly to the US Government and
select State and Local Government accounts, utilizing the GSA
multiple award schedule contract discount schedule for Ethospace
and Systems Bridge. AATK will ensure its compliance to all
applicable GSA contract terms/conditions (i.e. price reduction
clause). The HMI Government Sales Team will provide the necessary
contract and technical support to ensure AATK is in full
compliance with the applicable GSA terms/conditions. AATK agrees
to provide HMI, in a timely manner, with periodic sales and /or
pricing reports as needed to ensure compliance to the GSA
contract terms and conditions.
4.3 All Ethocom and Comdeck products shipped by AATK will be sold
under terms and conditions as established by AATK, with exception
of those terms and conditions defined under 4.2.
5. Promotion
5.1 Promotional literature and programs developed by AATK and its
Network referencing Ethospace(TM), Systems Bridge(TM), or Herman
Miller(R) shall be submitted to HMI Marketing and are subject to
approval prior to publication and release.
5.2 HMI will provide promotional, specification, and pricing
literature, including electronic media, to support the
integration of the AATK products into Ethospace and Systems
Bridge as agreed by both parties.
5.3 AATK will publish and make available to HMI, at no charge,
reasonable quantities of appropriate AATK promotional,
specification, and pricing literature, including electronic
media, as agreed to by both parties. HMI will make the referenced
literature available to salespeople and Herman Miller dealers
through the normal Sales Source program and standard distribution
policies. Reasonable additional costs for the distribution of
such materials will be paid for by HMI.
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5.4 At its discretion, HMI will provide the opportunity for
presentation of Ethocom and Comdeck product training by AATK at
HMI training sessions.
5.5 AATK is allowed to purchase reasonable quantities of HMI
products, as mutually agreed by both parties, for use in showroom
displays and trade shows promoting the integration of HMI and
AATK products. Such products will be available to AATK at HMI's
prevailing dealer display discount and must be ordered by AATK
through HMI Marketing. Such products are to be used for display
only and are not to be resold to any third parties.
5.6 HMI is allowed to purchase reasonable quantities of AATK
products, as mutually agreed by both parties, for use in
showroom/facility displays and trade shows. Such products will be
available to HMI at AATK's prevailing display discount and must
be ordered by HMI through AATK. Such products are to be used for
display only and are not to be resold to any third parties.
6. Commission to HMI Salesperson
6.1 It is the intent of AATK and HMI that HMI compensation issues
will be administered by the HMI sales organization. AATK shall
not pay any additional commissions to HMI salespersons for
Ethocom and Comdeck product sales. A portion of the Alliance Fee
as described in 8.1 pays this commission.
6.2 Within thirty (30) days after the close of each month, AATK will
provide HMI and its subsidiaries appropriate documentation to
calculate the sales commissions due their respective salespeople.
6.3 Sales commission fees will not be paid by AATK to HMI for Ethocom
and Comdeck product sales as described in 4.2. It is the intent
of AATK and HMI to include the cost of sales commissions to HMI
salespeople in the inter-company transfer price established in
4.2. Commissions for sales of Ethocom and Comdeck product to the
US Government and select State and Local Government accounts will
be administered by the HMI sales organization.
7. Product Line Expansion
7.1 Neither HMI nor any HMI subsidiary will, during the term of this
Agreement, attempt to market other slip-fit telecommunication
frames as part of the Ethospace system or Systems Bridge products
unless otherwise agreed to in writing by AATK.
7.2 AATK, during the term of this Agreement, will not market office
furniture or office seating unless otherwise agreed to in writing
by HMI.
7.3 AATK agrees to limit AATK's marketing efforts to Ethospace and
Systems Bridge slip-fit telecommunications frame products and
associated sale, planning, specification, and installation
services. This marketing effort covers new product sales, as well
as specification of product for installation into the existing
installed base (Retrofit).
8. Alliance Fee
8.1 AATK agrees to pay to HMI an alliance fee as payment for access
to the distribution channel, product design, support, marketing
assistance, and sales compensation, for all qualifying sales. The
alliance fee on qualifying sales (at net sell price, excluding
Systems Bridge sales directly to AATK for the CLEC market, and
sales to US Government and select State and Local Government
contracts as described in 6.3) will be:
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<PAGE>
o 5% of net sell price by AATK
Qualifying sales include all sales of Ethocom and Comdeck
products except for direct sales to HMI and its subsidiaries as
described in 4.2 and 5.7 above.
8.2 AATK agrees to pay the alliance fee to HMI, within thirty (30)
days of the close of each month for all products sold, shipped,
and invoiced by the close of the month referenced. AATK shall
maintain records sufficient to verify net sales, percentages, and
fees paid. AATK further agrees that HMI, at its own expense and
with reasonable notice, has the right to audit all transactions
to verify the alliance fee payments. AATK agrees to pay any
shortfall in alliance fee payments uncovered by an audit within
thirty (30) days and audit costs if a shortfall were uncovered.
9. Contract Term
9.1 HMI and AATK agree to continue this Marketing Alliance Agreement
for a period beginning June 1, 1999, and continuing through June
1, 2001, unless terminated under the provisions set forth in
Section 10.
9.2 HMI and AATK agree that this Agreement does not create a
fiduciary relationship between them and that AATK shall be an
independent contractor. Nothing in this Agreement is intended to
constitute either party as agent, legal representative,
subsidiary, joint venture, or employee of the other for any
purpose whatsoever.
9.3 Each party agrees that nothing in this Agreement authorizes the
other party to make any contract, agreement, warranty, or
representation on behalf of the other party or to incur any debt
or other obligation in the name of the other party. Neither party
shall in any event assume liability for, or be deemed liable
hereunder as a result of, any such action, or by reason of any
act or omission of the other party and its conduct of its
business or any claim or judgment arising therefrom against the
other party. Each party shall indemnify and hold harmless the
other party against any and all claims from third parties arising
directly or indirectly from, as a result of, or in connection
with the other party's business operation or actions under this
Agreement, or any orders or contracts entered into or related
hereunder, as well as to the cost, including attorney's fees, of
defending against them.
9.4 AATK shall indemnify HMI and hold it harmless against all claims,
suits, or actions alleging that the manufacture, use, or sale of
such goods infringes any patent, trademark, copyright, or other
proprietary right with respect to Products supplied under this
Agreement which were designed or specified by AATK, as well as
the costs, including attorney's fees, of defending against them.
9.5 During the term of this Agreement, each party shall maintain in
effect insurance in coverage and amounts appropriate for its
business including worker's compensation, casualty, personal
injury, and property damage. Each part shall also maintain
product liability insurance in an amount not less than one
million dollars ($1,000,000) and shall furnish proof of all
insurance coverage to the other party upon request.
5
<PAGE>
10. Termination
10.1 This Agreement will automatically renew annually upon expiration
of the original term, unless either party notifies the other of
their desire to terminate 90 days prior to expiration.
10.2 This Agreement may be canceled given ninety (90) days written
notice in the event of a breach which is not cured within thirty
(30) days of the written notice given to the party in default
specifying the breach.
10.3 This Agreement may be terminated immediately if either HMI or
AATK a) becomes insolvent or b) files a petition for voluntary
bankruptcy or c) shall be adjudicated bankrupt or d) is subject
to receivership or e) materially breaches a provision of the
Agreement or f) if the agreement is terminated pursuant to 11.
10.4 HMI or AATK shall give the other written notice of termination
upon the occurrence of any such event described in 10.1 and /
or10.2 above, delivered by registered or certified mail, postage
prepaid, return receipt requested, specifying the reason for the
termination. Termination shall be effective upon notice except if
given pursuant to paragraph 10.3, in which event the defaulting
party shall have 30 days within which to cure the default. If the
default is not cured within the 30-day period, this Agreement
shall terminate forthwith, without further notice.
10.4 Upon termination for any reason, AATK and its Network will
immediately cease use of the Ethospace, Systems Bridge, Herman
Miller, and Ethocom marks, and will destroy all advertising
literature.
10.5 In the event of a termination, unless otherwise agreed upon by
the parties, any outstanding orders shall be completed by AATK
and all contractual obligations of each party shall be completed
as though this Agreement were in effect. HMI shall be obligated
to make payments to AATK for all deliveries made or for orders
canceled by HMI as though this Agreement were in full force and
effect.
10.6 In the event AATK or any subsequent majority owner(s) or group of
owner(s) decide to discontinue production of Ethocom, Comdeck,
and/or other products added subsequent to the date of this
Agreement, HMI retains the first rights to the manufacturing and
intellectual property for the affected products.
11. Change of Ownership
If during the period of this Agreement AATK proposed to enter into any
agreement or transaction which will result in a change in control of
AATK (as hereinafter defined), then in that event, AATK shall give HMI
the right to enter into such transaction on the same terms, but for a
consideration equal to or higher than the proposed transaction. AATK
shall allow HMI adequate time to conduct due diligence, in the event of
a proposed change of control. HMI shall be required to notify AATK of
its acceptance of any such proposal within five (5) business days of
completion of due diligence.
Change of Control shall mean: (a) a person or entity or group of
affiliated persons shall acquire more than fifty percent (50%) of the
outstanding voting power of AATK; or (b) AATK shall sell substantially
all of its assets or be merged or consolidated with another corporation
or entity under such terms as to result in the shareholders or
beneficial owners of such other corporation or entity have more than
fifty percent (50%) of the voting power of the resulting or continuing
corporation or other entity.
6
<PAGE>
12. Product Development
12.1 AATK will provide all design and development resources necessary
to support the product line.
12.2 AATK is free to create product enhancements for the Ethocom and
Comdeck product lines that satisfy TIA, EIA, NEC, and other
current code and standards requirements. Any product enhancements
must protect historic and current HMI customers from product
obsolescence and must guarantee retrofitability with the new
product(s).
12.3 Costs incurred to (1) gain approvals for new product lines or
additions to existing lines, (2) obtain or maintain current
approvals as the result of any product changes proposed by AATK
or changes in code requirements, or (3) periodic performance
verification testing required to maintain existing approvals
shall be paid by AATK. AATK will provide copies of results of
these tests to HMI c/o Compliance Program Manager within 30 days
of AATK's receipt of the report(s). Any administrative, testing
and/or engineering/consulting costs to attain new or re-approvals
as a result of the above conditions shall also be paid by AATK.
13. Exclusivity
13.1 During the term of this Agreement, HMI shall not purchase,
distribute, or enter into a marketing alliance arrangement with
any other supplier of slip-fit telecommunication frames for
Ethospace and/or Systems Bridge unless AATK fails to meet
then-current TIA, EIA, and/or other US or International codes,
standards, and/or performance requirements. HMI retains the
rights to sell, augment, develop, and/or form alliances to
advance their telecommunications product offering with new
technologies and products beyond the scope of this Agreement.
13.2 AATK, for the duration of this Agreement, and for one (1) year
thereafter if this Agreement is terminated or canceled by AATK or
if this Agreement is terminated by HMI for cause as described in
10.2 above, will not market or sell any competitive slip-fit zone
distribution telecommunication frame products competitive to HMI.
This includes telecommunication connectivity frame products for
frame and tile-type, Systems Bridge-like, and panel systems
furniture products.
13.3 If AATK, at some future date, should expand its product offerings
to include other building infrastructure and sub-architectural
products, it will provide to HMI a Right at First Refusal to add
those products to this Marketing Agreement with similar terms.
14. Product Warranty
14.1 AATK will warrant all Ethocom and Comdeck products sold by them
for twenty years (20) as specified in AATK terms and conditions
of warranty.
14.2 HMI will warrant all Ethospace and Systems Bridge frames as
specified in the terms and condition of current warranty where
AATK products are installed, if done so by an authorized AATK
Network provider.
15. Confidentiality
Unless disclosure is required to provide goods or perform services in
connection with the parties' relationship, or is required by law,
7
<PAGE>
neither party, its agents, employees, or subcontractors may, at any time
during or after this Agreement, without the other party's express
written consent, publish or disclose to any person or legal entity, or
use, directly or indirectly, any confidential or proprietary information
of the other that is obtained during the course of the relationship, for
its own benefit or the benefit of any other.
16. Year 2000 Warranty
AATK shall ensure that its systems are fully "Year 2000 Compliant";
shall operate and produce data on and after January 1, 2000, accurately
and without delay, interruption, or error; and shall accept, calculate,
process, maintain, and output accurately and without delay, interruption
or error, all times or dates, or both, whether before, on, or after
12:00am on January 1, 2000 including taking into account that such year
is a leap year.
17. Survival
The following sections and exhibits of this agreement shall survive any
termination of this Agreement: 9.4, 14. - Product Warranty, and 15. -
Confidentiality
18. Merger Modification Waiver
This Agreement contains the entire agreement of the parties with respect
to its object matter and supersedes all prior and written agreements. No
change or modification of this Agreement shall be valid unless it is in
writing and signed by both parties. The waiver by either party of any
breach or failure hereunder shall not be considered as a waiver of the
same breach or failure on any subsequent occasion or of the breach or
failure of any other term, covenant, or condition hereunder.
19. Assignability
Neither party shall have the right to assign its interest in this
Agreement without the written consent of the other party.
20. Invalid Provision
The invalidity or unenforceability of any particular provision of this
Agreement shall not affect the other provisions, and the Agreement shall
be construed in all respects as if such invalid or unenforceable
provision were omitted.
21. Applicable Laws
This Agreement shall be governed and construed in accordance with the
laws of the State of Michigan.
22. Captions
The captions of the several sections and subsections of this Agreement
are made for convenient reference and shall not modify or amend the
expressed terms of this Agreement.
8
<PAGE>
23. Execution and Counterpart
This Agreement may be executed in any number of counterparts, each of
which shall be taken to be an original.
24. Benefit
This Agreement shall be binding upon and inure to the benefit of the
parties' respective successors and assigns.
In witness of which, the parties have executed this Marketing Alliance
Agreement.
Herman Miller, Inc. American Access Technologies
By: s/ C. Kent Gawart By s/ John E. Presley
-------------------------------- ------------------
Title: Director of Product Marketing Title President
Date: 8/3/99 Date: 8/03/99
9
<PAGE>
EXHIBIT 1
Pricing to AATK for Systems Bridge Product
================================================================================
Pursuant to paragraph 2.4, Herman Miller establishes the following
discounts from current list prices, as established from time to time,
for AATK to purchase Products for resale to the Competitive Local
Exchange Carrier (CLEC) market.
Product Description Product Number Discount
------------------- -------------- --------
<PAGE>
EXHIBIT 2
AATK Price List
================================================================================
Pursuant to paragraph 4.2, AATK establishes the following list prices
for its products effective June 1, 1999:
----------------------------------------------------------------
ETHOCOM SIZE NET LIST
----------------------------------------------------------------
----------------------------------------------------------------
38x24 150 195
----------------------------------------------------------------
38x30 163 211
----------------------------------------------------------------
38x36 175 228
----------------------------------------------------------------
38x42 188 244
----------------------------------------------------------------
38x48 200 260
----------------------------------------------------------------
54x24 213 276
----------------------------------------------------------------
54x30 225 293
----------------------------------------------------------------
54x36 238 309
----------------------------------------------------------------
54x42 250 325
----------------------------------------------------------------
54x48 263 341
----------------------------------------------------------------
70x24 275 358
----------------------------------------------------------------
70x30 288 374
----------------------------------------------------------------
70x36 300 390
----------------------------------------------------------------
70x42 313 406
----------------------------------------------------------------
70x48 325 423
----------------------------------------------------------------
86x24 338 439
----------------------------------------------------------------
86x30 350 455
----------------------------------------------------------------
86x36 363 471
----------------------------------------------------------------
86x42 375 488
----------------------------------------------------------------
86x48 400 520
----------------------------------------------------------------
COMDECK 41x48 900 1,170
----------------------------------------------------------------
55x48 1,080 1,400
----------------------------------------------------------------
69x48 1,260 1,640
----------------------------------------------------------------
Prices are FOB AATK plant and must be stock design. Specials are
available but must be designed and quoted separately.
<PAGE>
Exhibit 10.0
Lucent Technologies
Bell Labs Innovations
Global Commercial Mkts, Engrg. Lucent Technologies, Inc.
6701 Roswell Road, N.E.
Atlanta, GA 30328
MAY 19, 1999
AMERICAN ACCESS
TECHNOLOGIES, INC. TM
238 N. Westmonte
Suite 210
Altamonte Springs, Fl. 32714
Attn: Richard Murray - Executive Vice President
Dear Richard,
This is to confirm our telephone conversation May 18, 1999 concerning our
working relationship.
PATHMAX will continue to comcode AAT material as developing projects dictate.
Material that has been comcoded is available for order through the same sales
channels as all PATHMAX Products. This means that Lucent's sales
representatives, Value Added Resellers, Distributors and any others who sell
SYSTIMAX products, will be able to order AAT products via PATHMAX Comcodes -
Merchandise Class.
PATHMAX will support zone solutions that include the use of AAT products in
conjunction, and in addition, to our standard cable delivery methods.
AAT's proposal to develop and produce a catalogue illustrating the AAT comcoded
products that will be available as PATHMAX solutions is acceptable. You will
provide us a rough draft of the catalogue for input. Printing and distribution
can be determined as our strategy is more clearly defined.
Thank you for all your efforts in making this happen.
s/ Gerald Darnell
Lucent Technologies
North American Emerging Markets
PATHMAX
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 587,392
<SECURITIES> 3,450,738
<RECEIVABLES> 1,282,887
<ALLOWANCES> 28,000
<INVENTORY> 339,243
<CURRENT-ASSETS> 6,486,861
<PP&E> 2,863,327
<DEPRECIATION> (1,567,152)
<TOTAL-ASSETS> 8,360,519
<CURRENT-LIABILITIES> 635,558
<BONDS> 0
0
5,000,000
<COMMON> 4,021
<OTHER-SE> 6,428,040
<TOTAL-LIABILITY-AND-EQUITY> 8,360,519
<SALES> 2,925,567
<TOTAL-REVENUES> 2,925,567
<CGS> 1,239,478
<TOTAL-COSTS> 2,774,418
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,374
<INCOME-PRETAX> 327,067
<INCOME-TAX> (15,170)
<INCOME-CONTINUING> 343,006
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 343,006
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.02
</TABLE>
