AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 11, 1999
FILE NO.333.68791
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
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)
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Florida 3661 59-3410234
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(State of Incorporation) (Primary Standard Industrial (IRS Employer I.D. Number)
Classification Number)
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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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Proposed
Amount of Maximum Proposed Maximum Amount of
Title of Each Class of Shares To be Offer Price Aggregate Offering Registration
Securities to be Registered Registered Per Unit(1) Price Fee
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Common Stock 588,235 $20.50 $12,058,817 $7,911.00
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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 December 3, 1998.
The Company 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.
AMERICAN ACCESS TECHNOLOGIES, INC.
588,235 SHARES OF COMMON STOCK
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. See "Risk Factors" beginning on
page 5 for a discussion of certain risk factors that should be considered by
prospective investors of the securities offered hereby.
The security holders named under "Plan of Distribution - Selling
Security Holders" have advised the Company that they may from time to time sell
or otherwise dispose of shares of the Common Stock to which this Prospectus
relates (of which 588,235 are issuable upon Conversion of outstanding
Convertible Preferred Stock) at prices then prevailing in the over-the-counter
market or otherwise at prices then obtainable.
The Company is not aware of any public market for the Warrants of the
Company.
The Company's Common Stock is quoted on the OTC Electronic Bulletin
Board under the symbol AATK. On December 3, 1998, the closing bid quotation for
the Common Stock on the OTC Electronic Bulletin Board was $20.50.
Costs and expenses in connection with the registration of the
securities offered hereby, estimated at $32,226, are to be borne by the Company.
Brokers' commissions, taxes and other selling expenses are to be borne by the
selling security holders and are not expected to exceed normal selling expenses
for sales in the over-the-counter market.
THE DATE OF THIS PROSPECTUS IS _________________, 1999.
THE COMPANY INTENDS TO FURNISH ITS SHAREHOLDERS WITH ANNUAL REPORTS CONTAINING
AUDITED FINANCIAL STATEMENTS CERTIFIED BY ITS INDEPENDENT PUBLIC ACCOUNTANTS AND
QUARTERLY REPORTS CONTAINING UNAUDITED FINANCIAL STATEMENTS FOR EACH OF THE
FIRST THREE QUARTERS OF EACH FISCAL YEAR.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
more detailed information and the financial statements, including the notes
thereto, appearing elsewhere in this Prospectus.
SECURITIES REGISTERED
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Shares of Common Stock which may be offered by the Selling Security
Holders...........................................................................588,235
Shares of Common Stock to be outstanding assuming all shares to which
this Prospectus relates are sold................................................3,844,705
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BUSINESS
The Company is a Florida corporation which was incorporated on October
21, 1996 to develop, design and manufacture products for the telecommunications
industry. The Company's first product, a zone cabling termination cabinet, to
facilitate the laying of cable for telecommunications systems, specifically
designed for the telecommunications cabling approach known as "Zone Cabling",
introduced in January 1997. The Company's independent certified public
accountants have included an explanatory paragraph in their report on the
Company's financial statements to express substantial doubt as to the Company's
ability to continue as a going concern.
The telecommunications industry in general is one that is continually
and rapidly expanding. Trends toward increased high speed data systems,
corporate networking and desktop personal computing, have created the need for
higher speed cabling, new ways to connect cabling and higher speed switching.
The Company's Zone Cabling Termination Cabinet ("ZCTC") was introduced
to the telecommunications industry in January 1997. This product acts as a
mini-telephone closet that fits into the ceiling the grid system and is
supported to the building structure by threaded rods, disguising its appearance
and providing a high degree of concealment, esthetic appearance as well as
security. The cabinet's design allows the mounting of telecommunications
apparatus on a removable equipment mounting plate located on the enclosure
access door. The product acts as a consolidation, distribution and termination
point for the system, as well as a multi-user outlet. Use of the ZCTC in
conjunction with "Zone Cabling" facilitates installation and moves, adds and
changes.
In November 1998 the Company acquired Omega Metals, Inc. ("Omega")
which firm has and will continue to provide product prototyping, production,
manufacturing, assembly and packaging operations to the Company. As a result of
acquisition, Company no longer considered to be in development stage.
The Company's goal is to become a leading supplier of structured
telecommunications cabling system components. The Company's offices are located
at 238 N. Westmonte Drive, Suite 210, Altamonte Springs, FL 32714. Its telephone
number is (407) 865-7696.
DIVIDENDS
The Company has not paid any cash dividends on its Common Stock and
does not expect to pay cash dividends on its Common Stock in the foreseeable
future.
RISK FACTORS
The Securities offered herein involve a high degree of risk.
Accordingly, before deciding to purchase, investors should carefully consider
the following risk factors along with the other matters discussed herein.
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NO ASSURANCE OF COMMERCIAL SUCCESS; UNCERTAINTY OF MARKET ACCEPTANCE.
The Company's products compete in the highly competitive market for
telecommunications products. The Company's prospects for success will therefore
depend on its ability to successfully market its products to distributors who
may be inhibited from doing business with the Company because of their
commitment to other products. As a result, demand and market acceptance for the
Company's produces is subject to a high level of uncertainty. The Company
currently has limited financial, personnel and other resources to undertake the
extensive activities that will be necessary to produce and market its products.
There is no assurance that the Company will be able to formalize expanded
marketing arrangements or that its marketing efforts will result in substantial
additional revenues. See "Business."
DEPENDENCE UPON KEY MANAGEMENT.
The Company is dependent upon the members of management set forth herein.
Accordingly, the Company will be adversely affected if the services of such
persons ceased to be available to the Company.
COMPETITION; PRODUCT OBSOLESCENCE.
The markets for the technology and products developed by the Company are
characterized by rapid changes and evolving industry standards often resulting
in product obsolescence or short product life cycles. As a result, certain
companies may be developing technologies or products of which the Company is
unaware which may be functionally similar, or superior, to some or all of those
being developed by the Company. These companies may have substantially greater
financial, technical, personnel and other resources than the Company and may
have established reputations for success in developing and sales of their
products. The ability of the Company to compete will depend on its ability to
continually enhance and improve such products and technology, to adapt its
products to be compatible with specific products manufactured by others, and to
successfully develop and market new products and technology. There is no
assurance that the Company will be able to compete successfully, that its
competitors or future competitors will not develop technologies or products that
render the Company's products and technology obsolete or less marketable or that
the Company will be able to successfully enhance its products or technology or
adapt them satisfactorily.
PROTECTION OF PROPRIETARY INFORMATION
The Company has applied for a several patents on its Zone Cabling products. On
April 26, 1998, the Company was informed by the Patent and Trademark office of
its approval of the patent for cabling termination cabinet. On June 5, 1998, the
Company was informed of its pending patent approval of the communications cable
interconnection apparatus and associated method for an open office architecture.
There is no assurance that any patents will afford the Company commercially
significant protection of its technologies or that the Company will have
adequate resources to enforce its patents. The Company also intends to seek
foreign patent protection. With respect to foreign patents, the laws of other
countries may differ significantly from those of the United States as to the
patentability of the Company's products or technology. Moreover, the degree of
protection afforded by foreign patents may be different from that in the United
States. Patent applications in the United States are maintained in secrecy until
patents issue, and since publication of discoveries in the scientific or patent
literature tends to lag behind actual discoveries by several months, the Company
cannot be certain that it will be the first creator of inventions covered by any
patent applications it makes or the first to file patent applications on such
inventions.
POTENTIAL LACK OF LIQUIDITY
The Company's common stock currently trades on the OTC Bulletin Board under the
symbol: AATK. Stocks trading on the OTC Bulletin Board generally attract a
smaller number of market makers and a less active public market and may be
subject to significant volatility. The company has made application to The
NASDAQ Stock Market for listing on Small Capital Market. No assurance that this
application will be approved. Sales of substantial amounts of shares of the
Company's common stock in the public market pursuant to exercise of the warrants
herein and additional capital financing transactions which may be undertaken by
the Company in the future could adversely affect the market price of the
Company's common stock and the Company's ability to raise equity capital in the
future and may make it more difficult for an investor to liquidate his
investment in the Company.
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NO CASH DIVIDENDS
The Company has not paid, nor does it presently contemplate the payment of, any
cash dividends on its Common Stock.
USE OF PROCEEDS
No assurance can be given that any or all of the Warrants will be
exercised. Accordingly, as far as can be determined as of the date of the
Prospectus, the proceeds received by the Company upon any exercise of Warrants
will be used for general corporate purposes and for working capital which may
include payment of salaries, rent, research and development, purchase of
inventory and marketing expenses. Such proceeds would aggregate $7,060,000 if
all the Warrants were exercised in full.
MARKET FOR SECURITIES
The Company's Common Stock is traded in the over-the-counter market and
is included in the NASD Electronic Bulletin Board under the symbol AATK. Trading
began on August 15, 1997.
The following is the range of high and low bid prices for the Company's
Common Stock for the periods indicated
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High Low
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August 15, 1997 through $7.625 $ 2.50
September 30, 1997
October 1, 1997 through $12.00 $ 7.20
December 31, 1997
January 1, 1998 through $12.25 $11.00
March 31, 1998
April 1, 1998 through $18.50 $12.25
June 30, 1998
July 1, 1998 through $21.50 $19.00
September 30, 1998
October 1, 1998 through $20.50 $17.75
December 3, 1998
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PASS
The above represents inter-dealer quotations which do not include
retail mark-ups, markdowns, or commissions, and do not necessarily represent
actual transactions.
The approximate number of record holders of the Company's Common Stock
as of December 3, 1998 was approximately 618.
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
$4,249,382.
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
The Company has not paid any dividends on its Common Stock, and it is
not anticipated that any dividends will be paid in the foreseeable future. The
Board of Directors intends to follow a policy of using 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.
5
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
AMERICAN ACCESS TECHNOLOGIES, INC.
OVERVIEW
The Company was formed in October 1996 to acquire the assets of Vic
Murray and Associates, Inc. (VMA). The purchase of VMA was for the primary
purpose of obtaining the pending patent for the Zone Cabling Termination
Cabinet, the product which the Company has since developed and marketed.
Shortly after the acquisition of VMA, the Company made a determination
to discontinue the operations and business activities of VMA, which was a
manufacturer's representative of various products. Accordingly, all of the
operations of VMA have been reflected as discontinued operation in the
accompanying statements of operations. The following discussion and analysis
reviews the operations by the Company in 1995, 1996 and 1997. The 1995 and 1996
periods reflect the historical operations of VMA as discontinued operations, as
described above. The operations of the Company with regard to the development
and sale of these Zone Cabling Termination Cabinet are reflected in the
historical operations for 1997. The following discussion and analysis should be
read in conjunction with a discussion about risk factors and the consolidated
financial statements of the Company, included elsewhere in this Prospectus.
RESULTS OF OPERATIONS
REVENUES
Revenues for the nine months ended September 30, 1998 increased by
$306,455 or 176.6% to $480,000 compared to $173,545 for the nine months ended
September 30, 1997. Revenues for the year ended December 31, 1997 were $231,622
as compared to zero for the year ended December 31, 1996. The initial
distribution of the Company's product did not occur until the second quarter of
1997, as the Company was primarily involved in training distributor's personnel
in the operation, functioning and marketing of the Company's product.
COSTS AND EXPENSES
Direct costs represent the cost incurred by the Company to have its
product manufactured and assembled by outside contractors. These costs
represented 40.0% of revenues for the nine months ended September 30, 1998 and
27.2% of revenues for the nine months ended September 30, 1997, 28.3% for the
year ended December 31, 1997.
Product development costs incurred in the nine months ended September
30, 1998 was $21,130 as compared to $3,996 for the same nine month period in
1997. For the year ended December 31, 1997 these costs were $11,072, which was
an increase of $4,471 over the costs of $6,601 for the year ended December 31,
1996.This increase in costs occurred in the Company's continuing efforts to
modify and update its design to vendor specifications.
Marketing and Promotion expenses of $52,596 for the nine months ended
September 30, 1998 was an increase of $19,453 over expenses for the same nine
months ended September 30, 1997, which only totaled $33,143. This was a result
of the Company's effort to continue to develop and market their product. The
expenses for the year ended December 31, 1997 totaled $38,821. For the year
ended December 31, 1996 the Company did not have any marketing and promotion
costs.
General and Administrative expenses for the nine months ended September
30, 1998 decreased by $35,514 to $383,161 as compared to total expenses to
$418,675 for the nine months ended September 30, 1997. Expenses for the year
ended December 31, 1997 increased by $485,817 to $544,272 as compared to total
expenses of $58,455 for the ended December 31, 1996. This increase was the
result of costs associated with the continued development growth of the Company.
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LIQUIDITY AND CAPITAL RESOURCES
The Company required cash for the operating activities of $379,547
during the nine months ended September 30, 1998 as compared to $333,366 during
the nine months ended September 30, 1997. The major source of cash for the nine
months ended September 30, 1998 was funded from financing activities through the
exercising of warrants to purchase common stock of $480,000. The use of cash is
due primarily to support expenditures for start up operations and manufacture,
promotion and distribution of products.
The Company's operating and capital requirements in connection with its
operations have been and will continue to be significant. Based on its current
plans, the Company anticipates that revenues earned from product sales will be
the primary source of funds for operating activities. The Company believes that
revenues in addition to existing cash and cash equivalents remaining from
proceeds of it private offering, will be sufficient to meet its capital and
liquidity needs for the next 12 months. The Company also believes that cash
required to fulfill purchase orders will be available through bank borrowings or
factoring, if required. The company's primary customers are substantial
corporations with credit ratings that will support such credit arrangements.
The Company is still in the process of emerging from the development
stage and, therefore, has generated little revenue to date. As reflected in the
accompanying financial statements, the Company incurred a net loss of $53,421
for the quarter ended September 30, 1998 compared to a net 1oss of $147,802 for
the same quarter in 1997. Management's plans include the following:
1. The Company has arranged for marketing in association with
manufacturers and distributors of telecommunications equipment,
which will enable the Company to obtain orders for its products
with a minimal expenditure of the Company's resources. The Company
is presently organizing a manufacture's rep program to assist in
the distribution of their equipment.
2. The Company has arranged for manufacture of its products by an
outside supplier in order to minimize the financial requirements
necessary for production. The Company is intending to purchase
this manufacturer. The status of this acquisition is discussed in
the Other Matters note included in this filing.
3. The company believes that it can acquire working capital through
sale of additional securities (including exercise of outstanding
warrants), or borrowings, including bank borrowing, in view of the
nature of its customer base. Nevertheless, the Company continues
to be subject to a number of risk factors, including the
uncertainty of market acceptance for its product line, the need
for additional funds, competition, technological obsolescence and
the difficulties faced by start up companies in general.
SUBSEQUENT EVENTS
Since October 1, 1998 and to December 10, 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 gross proceeds of $5,000,000.
The Company has an agreement to acquire six acres adjacent to the Omega
facility for $80,000. The Company plans a first quarter plant expansion of
30,000 sq. ft. to supplement their assembly capabilities. The capital cost to
complete this expansion will be funded from cash flows and working capital.
RISKS ASSOCIATED WITH YEAR 2000 PROBLEM
Computer systems and/or 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, the Company recognizes the need to ensure that its operations
will not be adversely impacted by software and/or system failures related to
such "Year 2000" problem. The Company has been reviewing its own internal
computer and related information and operational systems to assess the actions
required to assure Year 2000 compliance. Based on information currently
available, the Company 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 the Company's
business, financial condition and results of operations in any given year.
However, even if the internal systems of the Company are not materially affected
by the Year 2000 problem, the Company's business, financial condition and
results of operations could be materially adversely affected through disruption
in the operation of the enterprises with which the Company interacts.
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OMEGA METALS, INC.
REVENUES
Revenues for the nine months ended October 31, 1998 increased by
$772,334 to $3,873,425 from $3,151,091 for the nine months ended October 31,
1997. Revenues for the year ended January 31,1998 increased by $180,033 to
$4,194,889 from $4,014,856 for the year ended January 31,1997. The Company has
recently added sales representatives in North Carolina and Central Florida to
increase the revenue base.
COSTS AND EXPENSES
Direct costs represent the cost incurred to manufacture the Company's
products. These costs represented 45.3% of revenues for the nine months ended
October 31, 1998, 50.4% of revenues for the nine months ended October 31, 1997,
49.7% of revenues for the year ended January 31, 1998, 47.9% of revenues for the
year ended January 31, 1997. The percentage decrease in the nine months ended
October 31, 1998 was the result of more aluminum usage requiring less painting
in the finished products sold.
Selling, General and Administrative expenses increased by $124,700 to
$1,069,485 for the nine months ended October 31, 1998 from $944,785 for the nine
months ended October 31, 1997. For the year ended January 31, 1998 these costs
increased by $240,033 to $1,767,118 from $1,527,085 for the year ended January
31, 1997. From a revenue comparison these costs represented 27.6% of revenues
for the nine months ended October 31, 1998, 29.9% of revenues for the nine
months ended October 31, 1997, 42.1% of revenues for the year ended January 31,
1998, 38.0% of revenues for the year ended January 31, 1997. The major increase
in the Selling, General and Administrative expense percent to revenues in the
year end amounts was due to the awarding of management year end incentive
bonuses.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities provided cash of $1,018,969 for the
nine months ended October 31, 1998 as compared to $114,053 for the nine months
ended October 31, 1997. For the year ended January 31, 1998 the operating
activities provided cash of $57,692. This was a decrease of $483,627 from the
cash provided for the year ended January 31,1997 of $541,319. The Company
anticipates revenues from operations will be the primary source of funds and
will be sufficient to meet its capital and liquidity needs for the next year.
SUSEQUENT EVENTS
On November 11, 1998 the Company was purchased by American Access
Technologies, Inc.. The transaction included an exchange of 226,470 restricted
common stock shares being issued.
BUSINESS
COMPANY BACKGROUND
The Company's founder, Vic Murray, began working in the electrical,
cable and industrial supply business in 1945. As a Manufacturer's
Representative, he worked for such high profile companies as Graybar Electric
Company and Florida Electric Supply. Mr. Murray opened Vic Murray & Associates
as an independent manufacturer's representative in 1977 and such firm was
incorporated as Vic Murray & Associates, Inc. (VMA). VMA developed agency
relationships with electrical engineers, electrical contractors, municipalities,
power companies and distribution companies throughout the State of Florida. The
Company acquired VMA in exchange for Company common stock in 1996 and ceased its
manufacturer's representative business in order to engage exclusively in the
business described herein. In November 1998 the company acquired Omega Metals,
Inc. of Keystone Heights Florida.
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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 as well. The
telecommunications industry was forever changed and for the first time in this
industry, a myriad of new business opportunities emerged.
Richard Murray was directed to research and evaluate the industry to
determine in which categories of supply and support they would specialize. The
decision was made to focus on wire management for voice, data, fiber optic, CCTV
and CATV applications. With the birth of new and revolutionary high speed
telecommunications technology and equipment, wiring and wire management would
become a critical part of the telecommunications industry.
Along with other specialists throughout the United States, the Murray's
quickly realized that designers of new buildings and renovations did not
consider adequate spacing and design requirements in order to accommodate the
telecommunications wiring. Although wire and wire management is a critical
portion of telecommunications, in some cases, the design engineers actually had
forgotten to include it in the project design. These engineering and industry
oversights create significant and expensive changes in structure design
resulting in the loss of usable or otherwise rentable spaces. Additionally,
excessive future moves, adds and changes (MAC's), of personnel offices,
telephones, data terminals and other cable termination points were generally
given little consideration.
BACKGROUND FOR PRODUCT DEVELOPMENT
Until now, Wire Management Systems have not evolved as rapidly as the
Telecommunications Industry as a whole. Industry leaders began to realize that
with the advent of technologically advanced equipment, systems, new methods of
conveyance (e.g. Fiber Optics) and the demand for connection to the "Information
Super Highway", the established methods of wiring and wire management were
outdated.
Telecommunication wiring originates outside the building and is routed
into the building through either an underground, direct buried or aerial service
entrance facility. An internal room within the building is designated as the
Entrance Facility (EF) and is normally located either on the first or in a
basement floor level. This space can also be used as the Equipment Room (ER). If
this space serves as the ER and houses the EF, it may also contain the main hub
of backbone pathways and cables that feed the various Telecommunications Closets
(TC) throughout the building. This main hub location is known as the Main
Cross-connect (MC). As a minimum, each and every floor of the building has a
Telephone Closet (TC). The TC functions to connect backbone cables to horizontal
cables (Horizontal Cross-connect - HC) or backbone cables to backbone cables.
TCs that contain backbone cables and pathways from the MC and from another TC
are called an Intermediate Cross-connect (IC). From the MC, high pair count
backbone cables are fed to every floor's designated TC (IC or HC). Cabling is
distributed to each floor through vertical and horizontal backbone cables and
pathways located in the center of the building that are usually surrounded by
firewalls. Every station location, (phone, fax, data, computer etc., located at
each Work Area - WA) is required to have two horizontal cables that run from the
WA back to the TC which in turn is fed back to the IC or MC. ANSI/TIA/EIA 568-A
telecommunications standards require two drops per WA. This wiring from the TC
to the workstation is generally referred to a "star" topology. Therefor each
cable drop is a "direct run" from the Work Area to the Telecommunications Closet
and its associated Horizontal Cross-connect.
This method of wiring and wire management provides for very little
cabling system flexibility to accommodate future moves, adds or changes (MAC
service orders).
The MC services the whole building and is generally located in a common
area. The TC is also located in common areas within each floor. The HC could be
as far as 295 ft. (90 meters) away from each termination point in the Work Area.
For uncategorized voice wiring, the maximum backbone cable length is 800 meters.
This means that a massive amount of wire is required for telecommunication
applications. It is not unusual for a high rise building of 40 floors to have
200 - 300 Miles of wiring. The old method of zone cabling, requires very
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expensive modular furniture for cable distribution within the office environment
in order to meet the multitude of industry standards and regulations. In some
applications, even modular furniture may not meet industry guidelines. The
Company's products are specifically designed to provide cabling solutions.
Today the telecommunications industry methods of information conveyance
must be able to handle more traffic than ever before. Wire and wire management
must be able to provide voice, data, video and low-voltage communications
faster, cheaper, cleaner, longer runs, using less space, while at the same time
accommodating long term considerations for expensive moves, adds and changes
(MAC's). Utilizing old methods of zone cabling, each and every move, add and
change for each workstation drop requires that a new "home run" be installed
back to the TC-HC. The Zone Cabling Termination Cabinet eliminates that need by
placing the telecommunications equipment close to the workstation and in an
inconspicuous location. Zone cabling moves, add's and changes are not only
expensive but time consuming and inconvenient. Cabling, wire management and
telecommunications technology is rapidly evolving. The industry leaders began to
address the need for new cabling methods and equipment. These companies,
industry associations and individual experts have joined together to create new
and revolutionary standards. Companies such as Lucent Technologies, Ortronics,
AT&T, Krone, Belden, Siecor, Hubbell, Leviton Telcom, Superior Modular Products
and American Access Technologies, Inc., in conjunction with various standards
organizations and telecommunications standards committee's, are developing and
introducing innovations in wire/cabling design, connections, consolidation,
distribution and termination points, providing for telecommunication signals to
be transmitted cheaper, faster, longer and clearer utilizing less space. This
method of cabling is called "Open Office Architecture'"
"Open Office Architecture" or more commonly called "Zone Cabling", is a
design allowed by ANSI/TIA/EIA Telecommunications Systems Bulletin 75. The
purpose of this design is to horizontally extend the location of the
consolidation point closer to the individual Work Areas. These locations of
consolidation points are called Zones.
ZONE CABLING
Zone Cabling is officially defined as an "Interconnection in the
horizontal cabling which allows work station drops to be reconfigured frequently
without disturbing the horizontal cable run".
Zone Cabling is used in open office areas, hotels, convention centers,
entertainment and theme parks, hospitals, government buildings, schools,
industrial complexes, data centers, banks, and any other area where a flexible
cable layout is required to support collaborative work or provide service to an
area of high density and common use. Zone Cabling is used to support office
areas where reconfiguration of work areas is required due to a high rate of
rearrangements and/or reconfigurations (Moves, Adds and Changes are often
referred to as Churns).
PRODUCT AND PRODUCT DEVELOPMENT
The Company determined that it needed to expand in this market
place as rapidly as possible. The Company was reorganized and is now named
American Access Technologies, Inc. The purpose of the Company is to identify,
design, develop, and manufacture new products for any and all telecommunications
cabling applications with a specific focus on zone cabling. The Company
consulted with many of the leading telecommunications specialists and engineers
and all were in agreement. No one had developed a device that met all of the
industry standards and could effectively and efficiently be utilized as a zone
cabling consolidation/distribution/termination point. However, some sort of
device was absolutely required to complete the "Open Office Architecture"/Zone
Cabling design. American Access Technologies, Inc. performed the necessary
research and verified that no such Zone Cabling Termination Cabinet existed. In
fact, such research indicated that no one was even developing such a zone
device.
The Company has designed a consolidation/distribution/termination point
enclosure called Zone Cabling Termination Cabinet, (ZCTC) and currently holds a
Utility Patent Pending for such enclosure that may be installed in the ceiling,
above the ceiling, on or in the wall or on or in the floor structure. The
ceiling ZCTC is uniquely utilized as a consolidation/distribution/termination
enclosure that fits into the suspended ceiling the and system. The ZCTC provides
easy access to the horizontal cabling backbone, reduces material and
installation effort, and minimizes office disruption and down time of systems
while at the same time enhances telecommunication security and reduces the floor
and wall space requirements for termination apparatus. The floor ZCTC provides
the same application solution in a floor installation.
10
<PAGE>
The Company believes its ZCTC products are the only enclosures
manufactured that can function as a consolidation, distribution, termination
pointer multi-user outlet in a zone cabling system and still comply with all
industry and government guidelines, standards and regulations. The ZCTC products
provides an enclosure that can be utilized for any and all low voltage wiring
systems including but not limited to voice, data, video, HVAC, building
controls, security, and fire/life/safety wiring systems. The ZCTC was designed
to accommodates all manufacturers equipment including Category 3, 4 and 5 Jack
Panels, Patch Panels, and Punch Panels as well as fiber optic cables.
PRODUCT APPLICATION
The ZCTC will reduce the amount of wire needed for home runs from the
workstation to the TC-HC. These individual home runs will now run from the Work
Area to the ZCTC which is now located closer to the station termination (modular
jack). The ZCTC will be located within a controlled work environment which is
readily accessible located in the ceiling the grid system. The ZCTC is designed
to physically accommodate all of the newly developed "Open Office Architecture"
wiring equipment and distribution connections. This enclosure is mounted in a
standard 2ft. x 4 ft. ceiling the grid system but is physically attached to the
building structure to support the weight of the equipment installed within the
enclosure. The equipment access door opens from below the ceiling the for easy
maintenance, installations or MAC'S. Specially trained technicians will no
longer be required to effectuate MAC'S. The new wiring and distribution
equipment is of the modular plug-in type (not one time use) creating less down
time, loss of productivity and can be easily re-routed and reused. The initial
installation of the ZCTC is approximately the same as the old method of
Distribution Cabling. However, the Company believes the short term and long term
cost savings are very significant. It estimates that the ZCTC will reduce short
term and long term costs by:
Fire Stopping-reduced cable penetration resulting in reduced material
cost.
Cable reuse-Cable can be re-routed for re-use.
Labor-Zone Cabling Termination Cabinet allows shorter cable runs for
MAC's
The Zone Cable Termination Cabinet (ZCTC) provides better utilization
of the common area TC's. and provides the building owners more usable space. The
ZCTC provides for more efficient utilization of horizontal cables and it
significantly reduces the physical mass of cables to be run throughout the
building.
It also moves the point of connection closer to the Work Area making it
easier to effect changes and modifications without disturbing the work force.
Ceiling the is attached to the exposed "underside" of the enclosure disguising
its appearance thereby providing an degree of concealment and security for the
horizontal cable consolidation/distribution/termination point. It offers greater
security to the communication system since it is obscured, out of reach and can
easily be monitored by closed circuit TV. Breaking down communications into
zones is a sensible and cost effective alternative to the conventional methods
of cabling a building.
The benefits include: Reduced employee disruption, reduced system down
times, lower hourly rate for qualified technicians.
STANDARDS
The standards, regulations and various Industry association
guidelines are very specific. The Company believes its Zone Cabling Termination
Cabinet (ZCTC) is the only product that meets the standards/requirements of the
telecommunications industry Building Industrial Consulting Services
International (BICSI), National Electric Code regulations NEC 300-22 B & C,
American National Standards Institute/Telephone Industry association/Electrical
Industry Association publication 568 A, as well as the Zone Cabling guidelines
as specified in the newly released Telecommunications Systems Bulletin - TSB 75.
The Zone Cabling Termination Cabinet (ZCTC) is the only product known to the
Company that meets or exceeds these regulations and guidelines and has and
Underwriters Laboratories listing of UL 1863. This product is the only product
that has been tested by Underwriters Laboratories for this application.
Therefore, Underwriters Laboratories has assigned this product to a new category
listing. This listing is identified as UL 1863 (Telecommunications Cabinets)
under 31RF, and is further identified as a Type 12 rated enclosure for Plenum
type installations. The ZCTC is also listed as UL2043. The ZCTC is currently the
only enclosure manufactured to these standards.
11
<PAGE>
MARKETING
The primary focus of marketing efforts is to "PARTNER" with
major equipment manufacturers and telecommunications distributors since the
Company's products are designed to enhance the sales the manufacturer and
distributor. Since the Company's products enable the placement of
telecommunications equipment into ZONES and still comply with all of the
industry guidelines and building regulations, each of these companies can use
the Company's enclosure to sell more of their products. By partnering with the
Company each manufacturer and/or distributor has opportunity to gain a larger
share of their respective markets. The Company is providing various support
programs and materials that enhances its partners marketing plan.
The Company has developed several collateral marketing pieces.
These collateral material pieces range from one page to an eight page full color
product and application brochure. Our printed materials and World Wide Web Site
currently serves as our primary marketing tools. All of these marketing/media
materials provide Company information, product information, engineering
specifications, drawings, application for use, installation instruction,
features and benefits tailored to each individual market need. Additionally the
World Wide Web Site provides marketing support materials that can be downloaded
and printed at individual locations throughout the world. Questions and answers
can be transmitted via e-mail feedback capability, query analysis for tracking
of inquiries, lead generation for the distributors, distribution of marketing
materials to end users not normally addressed by the individual distributors.
The largest and most recognized telecommunications training
and certification organization (BICSI) is currently using the ZCTC line of
products as an integral part of their Zone Cabling Training and Certification
course.
The Company is participating with its partners in trade shows as a
component in their individual booths and hospitality suites. However, the
Company will individually participate in three or four trade shows per year. Two
of the shows are focused around standards, training and certifications. The
remaining two shows are industry product shows. The Company attended SUPERCOMM
97 that was held in New Orleans in June 1997. The Company believes that certain
of its partner relationships were as a result of its show presence.
The end users of the Company's products contract with
specialized, BICSI Certified Registered Communications Distribution Designers
(RCDD), qualified engineers and contracting firms. These specialist design,
specify, purchase and install cabling of all types, switches and all other
telecommunications equipment as required by the end user. All product purchases
are made through authorized distributors with the exception of certain companies
who can purchase extremely large quantities as a private label type product.
The market potential for the Zone Cabling Termination Cabinet is
believed to be large and can be generally classified within two categories- "New
Installation" and "Refurbishment of Existing Facilities".
DISTRIBUTION AND SALES
American Access Technologies has entered into a national distribution
contract with ANIXTER Internationals, Inc.
Anixter International Inc. (NYSE: AXE), 1996 revenues $2.5 billion.
Anixter International is a leading value-added provider of integrated
cabling and networking solutions that support business information and network
infrastructure requirements. Anixter teams with customers to implement these
solutions by combining a variety of customized pre- and post-sale services,
products from the world's leading manufacturers, and superior logistics
management through a global network of 37 countries with 205 domestic operating
locations. Anixter International also owns approximately 19 percent of ANTEC
(NASDAQ: ANTC).
American Access Technologies has negotiated distribution agreements
with the following Regional distributors:
CED-American Electric, Inc. (Data Voice)
12
<PAGE>
Founded over 100 years ago as a private Company and has grown to over
400 locations spread over 48 states and Canada. CED gross revenues in 1996
exceed $500 million and they employee over 3,500 people in their service area.
They stock over 25,000 separate inventory items with well in excess of 1 million
warehousing facilities.
State Electric Supply
State Electric was founded in 1954 in Dunbar, West Virginia,
as a private Company and has grown to over 22 locations spread over seven
states. State Electric Supply gross revenues in 1996 of over $125 million, and
employees over 500 people in their service area.
Core Data Comm, a Regional Distributor specializing in
telecommunications.
American Access Technologies, Inc., is currently negotiating with
several National Distributors. There can be no assurance of any additional
distribution agreements.
COMPETITION
The market for telecommunications products is highly competitive and
subject to rapid technological change, regulatory developments and emerging
industry standards. The Company believes that the principal competitive factors
in its markets are conformance to standards, reliability, safety, product
features, price, performance and quality of customer support. There can be no
assurance that the Company will compete successfully in the future with respect
to these or other factors.
MANUFACTURING
The Company has developed all of its products utilizing computer
assisted design drawings (CADD). Master copies of its products are safeguarded
at the home office and certain copies are available to outsource firms.
On November 12, 1998, the Company has acquired all the outstanding
common stock of Omega Metals, Inc.(Omega), in exchange for 226,470 shares of the
Company's Common Stock. Omega has been a contact manufacturer of 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, painting and silk screening.
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.
Omega's manufacturing capacity of approximately five (5,000) thousand
units per month and has additional property for expansion as the need arises.
Their manufacturing capability is not limited to only precision metal
fabrication as they also provide on site state of the art high-tech surface
coatings such as Iridizing, Powder Coating, Silk Screening and specialized
production painting.
By acquiring Omega with its 50 employees, the Company adds valuable
Long term management skills in the person of Erik Wiisanen and John Presley.
Omega will continue to operate as a wholly owned Subsidiary with their sales and
manufacturing intact. The Company has an agreement to acquire 6 acres adjacent
to their property and plans a first quarter plant expansion of 30,000 sq. ft to
supplement their assembly capabilities. The capital cost to complete this
expansion will be funded from cash flows and working capital.
13
<PAGE>
FUTURE PRODUCT DEVELOPMENT
As the Company identified the specific product needs of the
telecommunications industry they developed products to address these needs.
Products designed to date have been accepted by the major Standards and Code
Authorities throughout the United States. The products assist equipment
manufacturers in marketing their own products.
The Company's first design was a low-voltage Zone Cabling Termination
Cabinet which mounts within the ceiling the grid system. The Company developed
accessory equipment to permit cable penetrations and maintain fire rating.
The second phase was to develop a cabinet that serves as a termination,
distribution and/or consolidation point within a raised floor data center. This
unit has been developed with a prototype. It is estimated that this unit will be
in production within the next six months.
The third phase includes a high-voltage termination cabinet that
mounts into the ceiling the grid system to house active electronics, including
computer hubs, routers and switches. This unit will accommodate Fiber Optics as
well as conventional copper wiring. We anticipate that this unit will be U.L.
listed and into production within the next six months.
There can be no assurance that any new products will be successfully
developed or marketed.
INTELLECTUAL PROPERTY
The Company has filed with the United States Department of Commerce,
Patent and Trademark Office application for patent, pending No. 08785006, for
Zone Cabling Termination Cabinet and Communications Cable Interconnection
Apparatus and Associated Method for an Open Office Architecture. The patent
application contains approximately 67 various claims associated with zone
cabling techniques. On April 26, 1998, the company was informed by the Patent
and Trademark Office of its approval for patent of its Cabling Termination
cabinet. On June 5, 1998 the company was informed of its approval for patent of
a communication cable interconnection apparatus and associated method for an
open office architecture. Both programs are for utility patent.
The Company 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
Company's products or, if granted, that they will provide meaningful protection
against competing products which may be introduced. See "Litigation."
GOVERNMENT REGULATION - INDUSTRY STANDARDS
The markets for the Company's products are characterized by the need to
meet governmental and industry standards. In the U.S., the Company's products
must comply with various regulations established by the Federal Communications
Commission and Underwriters Laboratories, as well as standards established by
Bell Communications research and local building codes. The ZCTC has been
approved by Underwriters Laboratories for low voltage communications and meets
or exceeds the national electrical code requirements when used with appropriate
fire foam kits in association with cable access penetration models
The Company maintains membership in trade organizations such as the
Telecommunications Industry Association, International Association of Electrical
Inspectors and Building Industrial Consulting Services International.
EMPLOYEES
As of December 3, 1997 substantially all of the activities of the
Company are undertaken by its three officers, who are engaged pursuant to
Executive Management Agreements, and two commission sales representatives. See
"Executive Compensation - Executive Management Agreements". Omega employs
approximately 50 persons, including 5 in management,2 in marketing and sales,3
in engineering and approximately 40 in production and distribution.
14
<PAGE>
LITIGATION
The Company is defendant in a suit filed in January 1998 in the 18th
Judicial Circuit Court of Florida by Steve R. Jones who was the Company's
President from April 1997 to August 1997. Mr. Jones seeks rescission of a
consulting agreement he signed with the Company in August 1997, a declaration
that certain provisions of such agreement relating to non-competition, trade
secrets, non-disclosure and conflict of interest are no longer applicable to Mr.
Jones, damages for failure of the Company to make consulting payments of $7,500
per quarter to Mr. Jones and the present value of his stock options which he
agreed to surrender to the Company (200,000 options at $8.00 per share) and the
value of 200,000 shares of the Company's common stock which he surrendered
pursuant to the consulting agreement. The Company believes it was justified in
not paying Mr. Jones' consulting fees due to Mr. Jones' failure to perform the
consulting services assigned to him. Mr. Jones, is also seeking a judicial
determination that Mr. Jones is the inventor, or a co-inventor, of the Company's
Zone Cabling Termination Cabinet. The Company does not believe that Mr. Jones is
the inventor or a co-inventor of such product. If it were determined that Mr.
Jones was the inventor or co-inventor of the Company's product, such fact could
cause the invalidity of any patent issued to the Company on such product.
FACILITIES
The Company's executive offices in Altamonte Springs, Florida comprise
3,000 square feet and are leased on a 3 year lease expiring December 31, 1999 at
a rent of $3,133 per month.
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>
Victor E. Murray 73 President, Director
Richard A. Murray 43 Vice President, Director
Bobby E. Story 57 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, V. P Marketing, Omega Metals, Inc.
</TABLE>
VICTOR E. MURRAY, President and Director, has a 30 year track record of
success in the Electrical Engineering field with experience in distribution,
manufacturing and marketing. He has worked with companies such as Florida
Electrical Supply, Graybar Electric, James & Associates and Ralston, Lowe, Inc.
The clients he has served range from engineers and contractors to power
companies and municipalities. Employment history for the past five (5) years is:
October 1996 to February 1997 and August 1997 to Present: President -
American Access Technologies, Inc.
January 1, 1995 to October 1996: President - Vic Murray & Associates,
Inc.
April 1977 to December 31, 1994: Vic Murray & Associates, Inc.
Manufacturer's Representative
RICHARD A. MURRAY, Vice President-Sales and Director, has over 15 years
experience in the electrical field specializing in such area as Ozone
Generation, electrical switching and telecommunications. He has over 2 years
high level military training in sensitive electrical technologies. Mr. Murray
was Vice President of Sales for COOL WAY. Employment history for the past five
(5) years is:
October 1996 to Present: Vice President - American Access Technologies,
Inc.
15
<PAGE>
January 1, 1995 to October 1996: Vice President - Vic Murray &
Associates, Inc.
April 1977 to December 31, 1994: Vic Murray - associates - associate,
manufacturer's representative specializing in the telecommunications supplies,
wiring, and equipment.
BOBBY E. STORY, Secretary/Treasurer, CFO and Director, has been a
former practicing CPA and real estate developer during the past 30 years. He
worked for Arthur Young & Company CPA (now Ernst & Young, LLP), Treasurer for
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 (5) years is:
October 1996 to Present: Sec/Treasury, CFO - American Access
Technologies, Inc.
August 1996 to October 1996: Financial Advisor - Self employed.
March 1996 to August 1996: George S. May Co. Project Manager
April 1987 to March 1996: NACEX, Inc. Controller, Vice President
Finance
JOHN W. COONEY, Director, is a certified public accountant. He was
Senior Tax Partner at Coopers & Lybrand until he retired in 1986. He has
practiced as a tax and financial consultant since then. Employment history for
the past five (5) years is:
January 1987 to Present: Operates J. W. Cooney, CPA as a sole
proprietorship.
VICTOR D. PHILLIPS, Director, is a member of the Company's Active
Advisory and Consulting Board. He has been in the telecommunications industry
for over 30 years, certified as a Registered Communications Distribution
Designer, teaches as a certified BICSI instructor, past National President of
BICSI and is currently President of Information Transport Systems Designers
International which provides consulting, design, inspection and project
management services. Mr. Phillips is a member of the International Association
of Electrical Inspectors and is a communications inspector and member of the
Florence County Board of Appeals in Florence, South Carolina. Employment history
for the past five years is:
August 1991 to Present: President of Information Transport Systems
Designers.
JOHN PRESLEY, Director of the company since November 1998, 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.
ERIK WIISANEN,Vice-President-Marketing of 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 three completed fiscal years. No
executive officer of the Company received compensation of $100,000 or more
during any such year.
16
<PAGE>
<TABLE>
<CAPTION>
Name and Other Annual
Principal Position Year Total Income Bonus Compensation
- ------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Victor E. Murray, President 1995* $51,576 -0- -0-
1996* $25,501 -0- -0-
1997 $60,000 -0- -0-
1998 $60,000 -0- -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. have entered
into employment agreements with Omega Metals, Inc. The individuals and their
titles are as follows:
John Presley 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 are for two (2) years. It may be terminated
by action of the Board of Directors for cause on thirty days prior notice.
INDEMNIFICATION
FLORIDA BUSINESS CORPORATION ACT
Subsection (1) of Section 607.0850 of the Florida Business Corporation
Act ("BCA") empowers a corporation to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise (including an employee benefit plan), against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Subsection (2) of Section 607.0850 of the BCA empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
under similar standards, except that no indemnification may be made in respect
to any claim, issue or matter as to which such person shall have been adjudged
to be liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the court in which such action or
suit was brought, or any other court of competent jurisdiction, shall determine
that despite the adjudication of liability, but in view of all of the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
17
<PAGE>
BCA Section 607.0850 further provides that indemnification provided for
by Section 607.0850 shall not be deemed exclusive of any other rights to which
the indemnified party may be entitled and empowers the corporation to purchase
and maintain insurance on behalf of a director, officer, employee or agent of
the corporation against any liability asserted against him and incurred by him
in the capacities set forth above, or arising out of his status as such, whether
or not the corporation would have the power to indemnify him against such
liabilities under Section 607.0850.
ARTICLES OF INCORPORATION
Article 4 of the Company's Articles of Incorporation provides that the
Company shall indemnify those persons entitled to be indemnified, to the fullest
extent permitted by law.
SECURITIES AND EXCHANGE COMMISSION POLICY
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers or persons
controlling the Company, the Company has been informed that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is therefore unenforceable.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Victor E. Murray, President, is the father of Richard A. Murray, Vice
President of the Company. They co-invented the primary product of the Company,
the Zone Cabling Termination Cabinet and subsequently assigned all rights to the
patent to the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of December 3, 1998, the beneficial
ownership of the Company's Common Stock by (i) the only persons who own of
record or are known to own, beneficially, more than 5% of the Company's Common
Stock; (ii) each director and executive officer of the Company; and (iii) all
directors and officers as a group.
<TABLE>
<CAPTION>
Number of Percent of Outstanding
Name Shares Common Stock(1)
- ---- ------ ---------------
<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%
Cede & Co. 1,027,133 31.54%
Officers and Directors
as a group (6 persons) 1,357,735 41.69%
</TABLE>
(1) Based upon 3,256,470 shares outstanding
18
<PAGE>
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.
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 10,000,000 shares of Common Stock
with $.001 par value. The holders of the Common Stock are entitled to one vote
per each share held and have the sole right and power to vote on all matters on
which a vote of stockholders is taken. Voting rights are non-cumulative. The
holders of shares of Common Stock are entitled to receive dividends when, as and
if declared by the Board of Directors, out of funds legally available therefore
and to share pro-rata in any distribution to stockholders. The Company
anticipates that any earnings will be retained for use in its business for the
foreseeable future. Upon liquidation, dissolution, or winding up of the Company,
the holders of the Common Stock are entitled to receive the net assets held by
the Company after distributions to the creditors. The holders of Common Stock do
not have any preemptive right to subscribe for or purchase any shares of any
class of stock. The outstanding shares of Common Stock and the shares offered
hereby will not be subject to further call or redemption and will be fully paid
and non-assessable
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, the Company 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).
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 (i) issue other
series of preferred stock that are pari passu with, or junior to, to Preferred
Stock, (ii) amend the terms of the Preferred Stock, (iii) 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 (iv) 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
19
<PAGE>
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 (i) the
Company's failure to comply with the terms of the Preferred Stock, (ii) the
acceleration of any indebtedness of the Company or any of its subsidiaries or
(iii) the Company (A) becoming insolvent, (B) applying for, or consenting to,
the appointment of a receiver or trustee appointed, (C) has a trustee or
receiver appointed which is not discharged within 60 days or (D) 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.
See "Management's Discussion and Analysis of Results of Operations and
Financial Condition".
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, the Selling Security Holders may from
time to time offer such securities through underwriters, dealers or agents. The
distribution of securities by the Selling Security Holders may be effected in
one or more transactions that may take place on the over-the-counter market,
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more broker-dealers for resale of such securities as
principals, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Security Holders in connection with such sales of securities. The securities
offered by the selling Security Holders may be sold by one or more of the
following methods, without limitations: (a) a block trade in which a broker or
dealer so engaged will attempt to sell the securities as agent but may position
and resell a portion of the block as principal to facilitate the transaction;
(b) purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this Prospectus; (c) ordinary brokerage
transactions and transactions in which the broker solicits purchasers, and (d)
face-to-face transactions between sellers and purchasers without a
broker-dealer. In effecting sales, brokers or dealers engaged by the Selling
Security Holders may arrange for other brokers or dealers to participate. The
Selling Security Holders and intermediaries through whom such securities are
sold may be deemed "underwriters" within the meaning of the Act with respect to
the securities offered, and any profits realized or commissions received may be
deemed underwriting compensation.
At the time a particular offer of securities is made by or on behalf of
a Selling Security Holder, to the extent required, a Prospectus will be
distributed which will set forth the number of securities being offered and the
terms of the Offering, including the name or names of any underwriters, dealers
or agents, if any, the purchase price paid by any underwriter for shares
purchased from the Selling Security Holder and any discounts, commissions or
concessions allowed or reallowed or paid to dealers and the proposed selling
price to the public.
20
<PAGE>
The following Security Holders may offer shares of Common Stock issuable upon
Conversion of Preferred Stock:
<TABLE>
<CAPTION>
Common Shares Which Number of
may be offered Shares to be
pursuant to this Owned After
Name prospectus** the Offering*
- ---- ------------ -------------
<S> <C> <C>
EP Opportunity Fund, LLC 117,647 -0-
Tallisman Capital Opportunity Fund, Ltd 117,647 -0-
Cranshire Capital 105,882 -0-
Lionhart Aurora Fund, Ltd 82,353 -0-
Melvin Olshansky 11,765 -0-
G-Bar Limited Partnership 11,765 -0-
Orestes Lugo 2,941 -0-
Robert Weber IRA 2,941 -0-
Berkley Corp 11,765 -0-
Kopin Capital, Ltd 23,529 -0-
S. Robert Production, LLC 35,294 -0-
Robert Lehman 5,882 -0-
Scott J. Bakal 2,941 -0-
Leonard Leventhal, TST 5,882 -0-
Howard Todd Horberg 4,706 -0-
ICN Capital, Ltd 41,176 -0-
Kevin Shape 4,118 -0-
*Assuming all Shares are sold.
**Assuming conversion of preferred stock at the rate of $17.00 per share
</TABLE>
LEGAL MATTERS
The validity of the securities offered hereby is being passed upon for
the Company by Joel Bernstein Esq. P.A., Miami, Florida.
21
<PAGE>
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 reports thereon appearing
elsewhere herein and in the Registration Statement, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form SB-2 under the Securities Act with respect to the
securities offered hereby. This Prospectus, filed as a part of the Registration
Statement, does not contain certain information set forth in or annexed as
exhibits to the Registration Statement, and reference is made to such exhibits
to the Registration Statement for the complete text thereof. For further
information with respect to the Company and the securities offered hereby,
reference is made to the Registration Statement and to the exhibits filed as
part thereof, which may be inspected and copied at the public reference
facilities of the Commission in Washington, D.C., and at the Commission's
regional offices at 500 West Madison Street, Chicago, IL 60604; 7 World Trade
Center, New York, NY 10048; and 5757 Wilshire Boulevard, Los Angeles, CA 90034;
and copies of such material can be obtained from the Public Reference Section of
the Commission, 450 5th Street, N.W., Washington, DC 20549, at prescribed rates
and are available on the World Wide Web at: http://www.sec.gov.
22
<PAGE>
INDEX TO FINANCIAL STATEMENTS
-----------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
AMERICAN ACCESS TECHNOLOGIES, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS F-1 to F-5
NOTES TO CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS F-6
AMERICAN ACCESS TECHNOLOGIES, INC.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-7
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheet F-8
Statements of Operations F-9
Statements of Stockholders' Equity (Deficiency) F-10
Statements of Cash Flows F-11
Notes to Financial Statements F-12 to F-22
OMEGA METALS, INC.
REPORT OF INDEPENDENT CERTIFIED ACCOUNTANTS F-23
FINANCIAL STATEMENTS:
Balance Sheet F-24
Statements of Operations F-25
Statements of Retained Earnings F-26
Statements of Cash Flows F-27
Notes to Financial Statements F-28 to F-34
</TABLE>
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC.
(A Development Stage Enterprise)
PROFORMA CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
American Omega Adjustments
Access Metals and
9/30/98 10/31/98 Eliminations Pro Forma
------- -------- ------------ ---------
<S> <C> <C> <C> <C>
ASSETS
------
Current Assets:
Cash and cash equivalents $ 38,840 $ 873,218 $ - $ 912,058
Accounts receivable 139,538 866,587 (41,000) 965,125
Note receivable 500,000 - - 500,000
Inventories 84,506 257,476 - 341,982
Prepaid expenses and other current assets 11,880 4,224 - 16,104
----------- ----------- ----------- ----------
Total current assets 774,764 2,001,505 (41,000) 2,735,269
----------- ----------- ----------- ----------
Property and Equipment 31,088 1,359,777 - 1,390,865
----------- ----------- ----------- ----------
Other Assets:
Patent costs 26,217 - - 26,217
Other assets 3,797 5,960 - 9,757
----------- ----------- ----------- ----------
Total other assets 30,014 5,960 35,974
----------- ----------- ----------- ----------
Total assets $ 835,866 $3,367,242 $ (41,000) $4,162,108
=========== =========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current portion of obligations under capital leases $ - $ 843,218 $ - $ 843,218
Accounts payable and accrued expenses 71,996 236,832 (41,000) 267,828
Income taxes payable - 345,000 - 345,000
----------- ----------- ----------- ----------
Total current liabilities 71,996 1,425,050 (41,000) 1,456,046
----------- ----------- ----------- ----------
Obligations under Capital Leases, net of Current Portion - 205,104 - 205,104
----------- ----------- ----------- ----------
Deferred Income Taxes - 53,000 - 53,000
----------- ----------- ----------- ----------
Stockholders' Equity:
Preferred stock - - - -
Common stock 3,030 2,000 (2,000) 3,030
Additional paid-in capital 1,409,430 58,000 2,000 1,469,430
Retained Earnings (Deficit) (648,590) 1,624,088 - 975,498
----------- ----------- ----------- ----------
763,870 1,684,088 - 2,447,958
----------- ----------- ----------- ----------
Total liabilities and stockholders' equity $ 835,866 $3,367,242 $ (41,000) $4,162,108
=========== =========== =========== ==========
</TABLE>
See notes to proforma consolidated financial statements.
F-1
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC.
(A Development Stage Enterprise)
PROFORMA CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
American Omega Adjustments
Access Metals and
12/31/97 1/31/98 Eliminations Pro Forma
-------- ------- ------------ ---------
<S> <C> <C> <C> <C>
ASSETS
------
Current Assets:
Cash and cash equivalents $ 442,555 $ 195,578 $ - $ 638,133
Accounts receivable 11,436 566,900 (14,000) 564,336
Income tax receivable - 163,404 - 163,404
Inventories 21,586 373,821 - 395,407
Prepaid expenses and other current assets 3,547 9,587 - 13,134
----------- ----------- ----------- -----------
Total current assets 479,124 1,309,290 (14,000) 1,774,414
----------- ----------- ----------- -----------
Property and Equipment 35,277 1,455,384 - 1,490,661
----------- ----------- ----------- -----------
Other Assets:
Patent costs 22,583 - - 22,583
Other assets 3,598 - - 3,598
----------- ----------- ----------- -----------
Total other assets 26,181 - - 26,181
----------- ----------- ----------- -----------
Total assets $ 540,582 $2,764,674 $(14,000) $3,291,256
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current portion of obligations under capital leases $ - $ 265,825 $ - $ 265,825
Note payable - 4,026 - 4,026
Accounts payable and accrued expenses 100,825 343,362 (14,000) 430,187
Loans payable, stockholders - 100,000 - 100,000
Deferred income taxes - 52,000 - 52,000
----------- ----------- ----------- -----------
Total current liabilities 100,825 765,213 (14,000) 852,038
----------- ----------- ----------- -----------
Obligations under Capital Leases, net of Current Portion - 990,800 - 990,800
----------- ----------- ----------- -----------
Deferred Income Taxes - 53,000 - 53,000
----------- ----------- ----------- -----------
Stockholders' Equity:
Preferred stock $ - $ - $ - $ -
Common stock 2,970 2,000 (2,000) 2,970
Additional paid-in capital 929,490 58,000 2,000 989,490
Retained earnings (deficit) (492,703) 895,661 - 402,958
----------- ----------- ----------- -----------
439,757 955,661 - 1,395,418
----------- ----------- ----------- -----------
Total liabilities and stockholders' equity $ 540,582 $2,764,674 $(14,000) $3,291,256
=========== =========== =========== ===========
</TABLE>
See notes to proforma consolidated financial statements.
F-2
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC.
(A Development Stage Enterprise)
PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
American Omega Adjustments
Access Metals and
9/30/98 10/31/98 Elimination Pro Forma
------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Net Sales:
Sales - formed metal $ - $3,873,425 $ (200,000) $3,673,425
Sales - Zoned cable termination cabinet 480,000 - - 480,000
------------ ----------- ---------- -----------
480,000 3,873,425 (200,000) 4,153,425
------------ ----------- ---------- -----------
Cost of Sales
Formed metal - 1,755,978 - 1,755,978
Zoned cable termination cabinet 192,091 - (180,000) 12,091
------------ ----------- ---------- -----------
192,091 1,755,978 (180,000) 1,768,069
------------ ----------- ---------- -----------
Gross Margin 287,909 2,117,447 (20,000) 2,385,356
Selling, General, and Administrative Expenses 456,887 1,069,485 (20,000) 1,506,372
------------ ----------- ---------- -----------
Income (Loss) from Operations (168,978) 1,047,962 - 878,984
------------ ----------- ---------- -----------
Other Income ( Expense):
Interest Income 13,091 (122,042) - (108,951)
Other Income - 121,007 - 121,007
------------ ----------- ---------- -----------
13,091 (1,035) - 12,056
------------ ----------- ---------- -----------
Income (Loss) before Income Taxes (155,887) 1,046,927 - 891,040
Income Taxes - 318,500 - 318,500
------------ ----------- ---------- -----------
Net Income (Loss) $(155,887) $ 728,427 $ - $ 572,540
============ =========== ========== ===========
Earnings per Share: $ 0.18
</TABLE>
See notes to proforma consolidated financial statements.
F-3
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC.
(A Development Stage Enterprise)
PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
American Omega Adjustments
Access Metals and
12/31/97 1/31/98 Elimination Pro Forma
-------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Net Sales:
Sales - formed metal $ - $4,194,889 $(70,000) $4,124,889
Sales - Zoned cable termination cabinet 231,622 - - 231,622
------------ ------------- ---------- ------------
231,622 4,194,889 (70,000) 4,356,511
------------ ------------- ---------- ------------
Cost of Sales
Formed metal - 2,083,999 - 2,083,999
------------ ------------- ---------- ------------
Zoned cable termination cabinet 65,480 - (65,000) 480
------------ ------------- ---------- ------------
65,480 2,083,999 (65,000) 2,084,479
------------ ------------- ---------- ------------
Gross Margin 166,142 2,110,890 (5,000) 2,272,032
------------ ------------- ---------- ------------
Other Operating Expenses
Management and consulting fees,
office/directors/stockholders 285,384 - - 285,384
Selling, general, and administrative 308,781 1,767,118 (5,000) 2,070,899
------------ ------------- ---------- ------------
594,165 1,767,118 (5,000) 2,356,283
------------ ------------- ---------- ------------
Income (Loss) from Operations (428,023) 343,772 - (84,251)
------------ ------------- ---------- ------------
Other Income (Expense):
Interest Income
3,992 - - 3,992
Interest Expense (2,424) (101,350) - (103,774)
Other Income - 5,259 - 5,259
------------ ------------- ---------- ------------
1,568 (96,091) - (94,523)
------------ ------------- ---------- ------------
Income (Loss) before Income Taxes (426,455) 247,681 - (178,774)
Income Taxes - 78,000 - 78,000
------------ ------------- ---------- ------------
Net Income (Loss) $ (426,455) $ 169,681 $ - $ (256,774)
============ ============= ========== ============
Earnings (Loss) per Share: $ (0.08)
</TABLE>
See notes to proforma consolidated financial statements.
F-4
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC.
(A Development Stage Enterprise)
PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
American Omega Adjustments
Access Metals and
12/31/96 1/31/97 Elimination Pro Forma
-------- ------- ----------- ---------
<S> <C> <C> <C>
Net Sales:
Formed metal $ - $4,014,856 $ - $4,014,856
Zoned cable termination cabinet - - - -
------------- ----------- ------------ -----------
- 4,014,856 - 4,014,856
------------- ----------- ------------ -----------
Cost of Sales:
Formed metal - 1,922,382 - 1,922,382
Zoned cable termination cabinet - - - -
------------- ----------- ------------ -----------
- 1,922,382 - 1,922,382
------------- ----------- ------------ -----------
Gross Margin - 2,092,474 - 2,092,474
------------- ----------- ------------ -----------
Other Operating Expenses:
Management and consulting fees,
office/directors/stockholders 46,154 - - 46,154
Selling, general, and administrative 18,902 1,527,085 - 1,545,987
------------- ----------- ------------ -----------
65,056 1,527,085 - 1,592,141
------------- ----------- ------------ -----------
Income (Loss) from Operations (65,056) 565,389 - 500,333
------------- ----------- ------------ -----------
Other Income (Expense):
Interest Expense (1,192) (82,550) - (83,742)
Other Income - 21,138 - 21,138
------------- ----------- ------------ -----------
(1,192) (61,412) - (62,604)
------------- ----------- ------------ -----------
Income (Loss) before Income Taxes (66,248) 503,977 - 437,729
Income Taxes - 182,000 - 182,000
------------- ----------- ------------ -----------
Income (Loss) from Continuing Operations (66,248) 321,977 - 255,729
Income from Discontinued Operations 4,606 - - 4,606
------------- ----------- ------------ -----------
Net Income (Loss) $ (61,642) $ 321,977 $ - $ 260,335
============= =========== ============ ===========
Earnings per Share:
From Continuing Operations $ 0.08
Discontinued Operations -
-----------
Net Income $ 0.08
===========
</TABLE>
See notes to proforma consolidated financial statements.
F-5
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC.
(A Development Stage Enterprise)
NOTES TO PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated financial statements are based on the
historical financial statements of American Access Technologies, Inc. and Omega
Metals, Inc. as of and for the periods ended December 31, 1996, 1997 and
September 30, 1998. These pro forma financial statements reflect the acquisition
of 100% of the issued and outstanding common stock of Omega Metals, Inc. by
American Access Technologies, Inc. on November 11, 1998. This acquisition, which
is to be accounted for using the pooling of interests method has been given
retroactive effect in these pro forma financial statements.
Pro Forma Adjustments
Inter-company balances at September 30, 1998 and December 31, 1997, and
inter-company transactions for the nine months ended September 30, 1998
and the year ended December 31, 1997 have been eliminated. There were
no material inter-company transactions for the year ended December 31,
1996.
Earnings (Loss) Per Share
Basic earnings (loss) per common share has been computed based upon the
weighted average number of shares of common stock outstanding during
the periods. The number of shares of common stock issued in connection
with the acquisition of Omega Metals (226,470 shares) have been
included in the outstanding shares for all periods.
F-6
<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 (a development stage company) as of December
31, 1997, and the related consolidated statements of operations, stockholders'
equity (deficiency) and cash flows for each of the two years in the period then
ended and cumulative from inception. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of American Access
Technologies, Inc. and Subsidiary as of December 31, 1997, and the results of
their operations and their cash flows for each of the two years in the period
then ended and cumulative from inception in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As more fully discussed in
Note 2 to the consolidated financial statements, the Company is in the
development stage and has incurred net losses in 1997 and 1996 and reflects a
deficit accumulated during the development stage as of December 31, 1997. This
condition raises substantial doubt as to the ability of the Company to continue
as a going concern. Management's plans with regard to this matter are also
described in Note 2 to the consolidated financial statements. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
RACHLIN COHEN & HOLTZ
Miami, Florida
March 25, 1998
F-7
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1998
------------------
December 31, Historical Proforma
------------ ---------- --------
1997 (Unaudited) (Unaudited)
---- ----------- -----------
<S> <C> <C> <C>
ASSETS
------
Current Assets:
Cash and cash equivalents $442,555 $ 38,840 $4,495,137
Accounts receivable 11,436 139,538 139,538
Note receivable 500,000 500,000
Inventory 21,586 84,506 84,506
Prepaid expenses and other current assets 3,547 11,880 11,880
----------- ---------- -----------
Total current assets 479,124 774,764 5,231,061
----------- ---------- -----------
Property and Equipment 35,277 31,088 31,088
----------- ---------- -----------
Other Assets:
Patent costs 22,583 26,217 26,217
Other assets 3,598 3,797 3,797
----------- ---------- -----------
Total other assets 26,181 30,014 30,014
----------- ---------- -----------
Total assets $540,582 $835,866 $5,292,163
=========== ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable and accrued expenses:
Management and consulting fees, interest and
reimbursements due to officers/directors/stockholders $ 83,120 $ 28,883 $ 28,883
Other 17,705 43,113 43,113
----------- ---------- -----------
Total current liabilities 100,825 71,996 71,996
----------- ---------- -----------
Commitments, Contingencies and Other Matters - - -
Stockholders' Equity:
Preferred stock, $.001 par value; authorized
1,000,000 shares; liquidation preference $100 per share - - 4,965,000
Common stock, $.001 par value; authorized 10,000,000 shares; issued and
outstanding, 2,970,000 and 3,030,000 shares 2,970 3,030 3,030
Additional paid-in capital 929,490 1,409,430 900,727
Deficit accumulated during the development stage (492,703) (648,590) (648,590)
----------- ---------- -----------
Total stockholders' equity 439,757 763,870 5,220,167
----------- ---------- -----------
Total liabilities and stockholders' equity $ 540,582 $ 835,866 $5,292,163
=========== =========== ===========
</TABLE>
See notes to proforma consolidated financial statements.
F-8
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended Nine Months Ended Cumulative
December 31, September 30, from
1997 1996 1998 1997 Inception
---- ---- ---- ---- ---------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues $ 231,622 $ - $ 480,000 $ 173,545 $ 711,622
---------- ---------- ---------- --------- -----------
Costs and Expenses:
Direct costs 65,480 - 192,091 47,160 257,571
Management and consulting fees,
officers/directors/stockholders 285,384 46,154 65,080 220,185 396,618
Product development 11,072 6,601 21,130 3,996 38,803
Marketing and promotion 38,821 - 52,596 33,147 91,417
General and administrative 258,888 12,301 318,081 198,490 589,270
---------- ---------- ---------- --------- -----------
659,645 65,056 648,978 502,978 1,373,679
---------- ---------- ---------- --------- -----------
Loss before Other Income (Expense) (428,023) (65,056) (168,978) (329,433) (662,057)
---------- ---------- ---------- --------- -----------
Other Income (Expense):
Interest Income 3,992 - 13,091 - 17,083
Interest Expense (2,424) (1,192) - (2,414) (3,616)
---------- ---------- ---------- --------- -----------
1,568 (1,192) 13,091 (2,414) 13,467
---------- ---------- ---------- --------- -----------
Loss from Continuing Operations (426,455) (66,248) (155,887) (331,847) (648,590)
Income from Discontinued Operations - 4,606 - - 4,606
---------- ---------- ---------- --------- -----------
Net Loss $(426,455) $(61,642) $(155,887) $(331,847) $ (643,984)
========== ========== ========== ========= ===========
Net Loss Per Common Share $ (0.14) $ (0.02) $ (0.05) $ (0.11)
========== ========== ========== =========
</TABLE>
See notes to proforma consolidated financial statements.
F-9
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Stock Paid-In Development
Shares Amount Capital Stage Total
------ ------ ------- ----- -----
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1995:
Issuance of common stock for cash ($.001 per share) 2,800,000 $2,800 $ - $ - 2,800
Net income - - - 15,137 15,137
Stockholder distribution - - - (15,137) (15,137)
---------- -------- ---------- --------- --------
Balance, December 31, 1995 2,800,000 2,800 - - 2,800
Year Ended December 31, 1996:
Contributed capital - - 7,083 - 7,083
Net loss - - - (61,642) (61,642)
Stockholder distribution - - - (4,606) (4,606)
---------- -------- ---------- --------- --------
Balance, December 31, 1996 2,800,000 2,800 7,083 (66,248) (56,365)
Year Ended December 31, 1997:
Issuance of common stock to director for consulting services
($1.50 per share) 50,000 50 74,950 - 75,000
Sale of common stock in private placement ($1.50 per share), net of
related costs 400,000 400 487,577 - 487,977
Exercise of placement agent warrants ($3.00 per share) 120,000 120 359,880 - 360,000
Retirement of common stock issued to officers (400,000) (400) - - (400)
Net loss - - - (426,455) (426,455)
---------- -------- ---------- --------- --------
Balance, December 31, 1997 2,970,000 2,970 929,490 (492,703) 439,757
Nine Months Ended September 30, 1998 (Unaudited):
Exercise of warrants ($8.00 per share) 60,000 60 479,940 - 480,000
Net loss - - - (155,887) (155,887)
---------- -------- ---------- --------- --------
Balance, September 30, 1998 (Unaudited) 3,030,000 $3,030 $1,409,430 $(648,590) $763,870
========== ======== ========== ========= ========
</TABLE>
See notes to consolidated financial statements.
F-10
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended Nine Months Ended Cumulative
December 31, September 30, from
1997 1996 1998 1997 Inception
---- ---- ---- ---- ---------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (426,455) $(61,642) $(155,887) $(331,847) $ (643,984)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 6,626 - 8,358 4,427 14,984
Common stock issued for services
75,000 - - - 75,000
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (11,436) - (128,102) 900 (139,538)
Inventory (21,586) - (62,920) (23,396) (84,506)
Prepaid expenses (673) (2,874) (8,333) (5,687) (11,880)
Other assets 4,540 (8,138) (3,834) (1,076) (7,432)
Increase (decrease) in accounts payable
and accrued expenses 49,079 51,638 (28,829) 23,313 71,888
------------ ---------- ------------ ---------- -----------
Net cash used in operating activities (324,905) (21,016) (379,547) (333,366) (725,468)
------------ ---------- ------------ ---------- -----------
Cash Flows from Investing Activities:
(Increase) decrease in note receivable 5,000 (5,000) (500,000) - (500,000)
Expenditures for development of patent (14,500) - - - (14,500)
Acquisition of property and equipment (33,676) (8,227) (4,168) (27,772) (46,071)
------------ ---------- ------------ ---------- -----------
Net cash used in investing activities (43,176) (13,227) (504,168) (27,772) (560,571)
------------ ---------- ------------ ---------- -----------
Cash Flows from Financing Activities:
Proceeds from (repayment of) note payable (100,000) 100,000 - (101,000) -
Proceeds from sale of common stock and
exercise of warrants 847,977 - 480,000 669,177 1,327,977
Proceeds from issuance of common stock to
founding stockholders 2,300 500 - - 2,800
Repayment of loan payable, stockholder
(1,000) - - - (1,000)
Distribution to stockholder - (4,606) - - (4,606)
Other (400) - - - (400)
------------ ---------- ------------ ---------- -----------
Net cash provided by financing activities 748,877 95,894 480,000 568,177 1,324,771
------------ ---------- ------------ ---------- -----------
Net Increase in Cash and Cash Equivalents 380,796 61,651 (403,715) 207,039 38,732
Cash and Cash Equivalents, Beginning 61,759 108 442,555 61,761 108
------------ ---------- ------------ ---------- -----------
Cash and Cash Equivalents, Ending $ 442,555 $ 61,759 $ 38,840 $ 268,800 $ 38,840
============ ========== ============ ========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 1,082 $ 2,424 $ - $ 9,550
============ ========== ============ ==========
Non-cash investing and financing activities:
Investment in subsidiary by means of payable
to stockholder $ 1,000
==========
Issuance of common stock for receivable 900
==========
Patent contributed to Company by certain stockholders $ 7,083
==========
</TABLE>
See notes to consolidated financial statements.
F-11
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Capitalization
American Access Technologies, Inc. ("the Company") was incorporated
on October 21, 1996, under the laws of the State of Florida. The
Company's Certificate of Incorporation, as amended on November 25,
1996, authorizes the Company to issue and have outstanding at any
one time 10,000,000 shares of common stock, par value $.001 per
share and 1,000,000 shares of preferred stock, par value $.001 per
share. The Company was organized to acquire all of the voting
common stock of Vic Murray & Associates, Inc. ("VMA"). VMA was
incorporated on December 19, 1994, under the laws of the State of
Florida.
On October 21, 1996, the Company acquired all of the common stock
of VMA. Certain stockholders of the Company are related to the
stockholder of VMA. This transaction has been accounted for as a
reorganization of entities under common control, and, accordingly,
the acquisition has been accounted for in a manner similar to the
pooling of interests method. Retroactive effect has been given to
this acquisition in the accompanying consolidated financial
statements.
In October 1996 and December 1996, the Company issued an aggregate
of 1,400,000 shares of common stock to the founding stockholders of
the Company for the par value thereof. On February 11, 1997, the
Board of Directors declared a stock dividend in the amount of one
share for each share of common stock then outstanding, with each
stockholder to pay the Company the par value thereof. As a result
of this stock dividend, the previously issued and outstanding
1,400,000 shares of common stock became 2,800,000 shares of common
stock, with the total consideration of $2,800 (par value) having
been paid therefor. Retroactive effect has been given to this stock
split in the accompanying consolidated financial statements, and
all references to the number of shares of common stock gives effect
to the stock split effected on February 11, 1997.
Business
American Access Technologies, Inc. develops specialized products
for the telecommunications industry. The Company recently
introduced its first proprietary product, a Zone Cabling
Termination Cabinet (the "Product") which it plans to manufacture
and distribute to the telecommunications industry. The Product is a
device that is used in voice, computer and data transmission
systems throughout the world.
Principles of Consolidation
These accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary. All
intercompany accounts and transactions have been eliminated.
F-12
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Although these
estimates are based on management's knowledge of current events and
actions it may undertake in the future, they may ultimately differ
from actual results.
Revenue Recognition
The Company recognizes revenue from product sales at the time the
product is shipped to the customer. The Company does not generally
grant return privileges to customers.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash balances at
financial institutions that, from time to time, exceed federally
insured limits. The Company believes that such risks are minimized
as a result of the size and stature of the financial institution in
which the Company maintains its account.
Development Stage Enterprise
As noted above, the Company was incorporated on October 21, 1996.
To date, the Company has been principally engaged in organizational
activities, the promotion of its product and raising capital.
Planned operations, as described above, have commenced but revenue
generated to date is not considered significant in relation to the
Company's business plan. Accordingly, the Company is considered to
be in the development stage, and the accompanying consolidated
financial statements represent those of a development stage
enterprise.
Cash and Cash Equivalents
The Company considers all highly liquid investments, including
short-term securities, with an original maturity of three months or
less to be cash equivalents.
Short-term securities (generally commercial paper maturing in
approximately 30 days) are stated at cost plus accrued income,
which approximates market value.
Inventory
Inventory, which is primarily composed of parts, supplies and
certain product components, is stated at the lower of cost or
market, with cost determined using an average cost method. The
Company does not generally carry finished goods inventory.
F-13
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed
on the straight-line method at rates based on the estimated useful
lives of the assets. Expenditures for major betterments and
additions are charged to the asset accounts, while replacements,
maintenance and repairs which do not extend the life of the
respective assets are charged to expense currently.
Patent
The Company has capitalized certain incremental costs incurred
related to acquiring a patent on the Company's product. This patent
was pending at December 31, 1997; therefore, amortization of the
patent has not commenced.
Product Development Costs
Costs in connection with the development of the Company's product
are comprised of design, production, consulting and other related
professional fees. These costs have been charged to expense as
incurred.
Net Loss Per Common Share
In 1997, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings per Share" which requires the
presentation of both basic and diluted earnings (loss) per share.
Basic net loss per common share has been computed based upon the
weighted average number of shares of common stock outstanding
during the periods. The shares of common stock issued in connection
with the stock split effected in February 1997, have been
considered outstanding for all periods. In addition, the shares of
common stock issued to a director in February 1997, prior to an
initial registration of the Company's common stock and at a price
below the offering price at that time (see Note 7) have been
treated as outstanding during the entire period, pursuant to the
Securities and Exchange Commission Staff Accounting Bulletins. The
number of shares used in the computation were 3,083,000 and
2,850,000 for the years ended December 31, 1997 and 1996,
respectively, and 3,030,000 and 3,083,000 for the nine months ended
September 30, 1998 and 1997, respectively. Diluted net loss per
common share, assuming exercising of the warrants granted, is not
presented as the effect of conversion is anti-dilutive.
F-14
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Unaudited Financial Information
The accompanying financial statements as of September 30, 1998 and
for the nine months ended September 30, 1998 and 1997 are
unaudited. However, in the opinion of management, such financial
statements contain all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of
financial position, results of operations and cash flows for such
periods. Results for interim periods are not necessarily indicative
of results to be expected for an entire year.
NOTE 2. BASIS OF PRESENTATION
As described above, the Company was incorporated on October 21, 1996,
and since that time has been primarily involved in organizational
activities, developing a strategic plan for the marketing and
distribution of its product and raising capital. Planned operations
have commenced, but little revenue has been generated to date.
Accordingly, the Company is considered to be in the development stage
and the accompanying consolidated financial statements represent those
of a development stage enterprise.
The accompanying consolidated financial statements have been presented
in accordance with generally accepted accounting principles, which
assume the continuity of the Company as a going concern. However, as
discussed above, the Company is in the development stage and, therefore
has generated little revenue to date. As reflected in the accompanying
consolidated financial statements, the Company has incurred net losses
of $426,455 in 1997 and $61,642 in 1996 and $155,887 for the nine
months ended September 30, 1998 (unaudited), and reflects a deficit
accumulated during the development stage of $492,703 as of December 31,
1997 and $648,590 as of September 30, 1998 (unaudited). This condition
raises substantial doubt as to the ability of the Company to continue
as a going concern.
Management's plans with regard to this matter include the adoption of a
business plan intended to define the Company's strategy for growth and
raising additional capital in order to increase revenues sufficient to
cover costs and expenses and generate positive cash flows. The Company
will distribute its product in the industrial and commercial markets
through manufacturer's representatives and distributors. During the
next twelve months, the Company anticipates that it will have various
contracts in place with major telecommunications companies throughout
the majority of the United States (see Note 12).
The eventual outcome of the success of management's plans cannot be
ascertained with any degree of certainty. The accompanying consolidated
financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
F-15
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 3. CASH AND CASH EQUIVALENTS
December 31, September 30,
1997 1998
---- ----
(Unaudited)
Cash $ 42,555 $38,840
Short-term securities 400,000 -
--------- --------
$442,555 $38,840
========= ========
F-16
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
<TABLE>
<CAPTION>
NOTE 4. PROPERTY AND EQUIPMENT
Estimated Useful Lives December 31, September 30,
(Years) 1997 1998
------- ---- ----
(Unaudited)
<S> <C> <C> <C>
Office furniture and equipment 3-5 $41,903 $46,072
Less accumulated depreciation 6,626 14,984
------- --------
$35,277 $31,088
======= ========
</TABLE>
NOTE 5. INCOME TAXES
The Company accounts for income taxes under the provisions of Statement
of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes". SFAS No. 109 requires the recognition of deferred tax
liabilities and assets for temporary differences, operating loss
carryforwards, and tax credit carryforwards existing at December 31,
1997 and September 30, 1998. An effective tax rate of 34% was used to
calculate the deferred income taxes.
A temporary difference is a difference between the tax basis of an
asset or liability and its reported amount in the financial statements
that will result in taxable or deductible amounts in future years when
the asset is recovered or the liability is settled. Deferred taxes
represent the future tax return consequences of these differences.
As of December 31, 1997, and September 30, 1998, the Company had net
operating loss carryforwards for federal income tax reporting purposes
amounting to approximately $488,000 and $650,000, respectively, 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, September 30,
1997 1998
---- ----
(Unaudited)
<S> <C> <C>
Deferred tax asset $ 166,000 $ 221,000
Less valuation allowance (166,000) (221,000)
--------- ---------
Net deferred tax asset $ - $ -
========= =========
</TABLE>
In accordance with certain provisions of the Tax Reform Act of 1986, a
change in ownership of greater than 50% of a corporation within a three
year period will place an annual limitation on the corporation's
ability to utilize its existing tax benefit carryforwards. The
Company's utilization of its tax benefit carryforwards may be
restricted in the event of possible future changes in the ownership of
the Company from the exercise of warrants or other future issuances of
common stock.
F-17
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 6. PREFERRED STOCK
The Company is authorized to issue 1,000,000 shares of preferred stock,
par value $.001. The Board of Directors of the Company has the
authority, without further action by stockholders, to issue the
preferred stock in one or more series, and to fix for any series the
dividend rate, redemption price, liquidation or dissolution
preferences, conversion rights, voting rights and other preferences and
privileges. As of December 31, 1997, the Company has not designated any
series of preferred stock and no shares of preferred stock have been
issued or are outstanding.
See Note 14 regarding the subsequent issuance of Series A Senior
Convertible Preferred stock.
NOTE 7. COMMON STOCK
Private Placement of Securities
During the period from February to April 1997, the Company raised
additional capital through a private placement offering of its
securities. The private placement offering consisted of a maximum
of 100,000 units, each unit consisting of four shares of common
stock being offered by the Company on a "best efforts" basis at a
price of $6.00 per unit through a Placement Agent. Upon sale of the
units, the Company would receive gross proceeds of $600,000, before
payment of commissions and other offering costs. The Placement
Agent received a stipulated commission of 10% of funds received
from the offering and certain expense allowance and administrative
fee of 3% and 2% of the funds received from the offering,
respectively, and was issued warrants to purchase 120,000 shares of
common stock at $3 per share.
The sale of these units resulted in the issuance of 400,000 shares
of common stock for net proceeds totaling $487,977.
Additionally, in September and October 1997, the Company issued
120,000 shares of common stock resulting from the exercise of the
Placement Agent warrants at $3.00 per share.
Issuance of Common Stock to Director for Services
In February 1997, the Board of Directors authorized the issuance of
50,000 shares of common stock to a newly elected director, with
payment of par value thereof. These shares have been recorded in
the accompanying consolidated financial statements at their
estimated fair value of $1.50 per share, as measured by the
offering price of the Company's common stock in the 1997 private
placement of securities which took place at or about that time (see
above). Inasmuch as these shares were issued to the director, the
estimated fair value of these shares ($75,000) has been charged to
expense in 1997 and included in management and consulting fees,
officers/directors/stockholder.
Resignation of Officers and Retirement of Common Stock and Warrants
In August 1997, the consulting agreement between an officer and the
Company was modified (see Note 8). The modified agreement
stipulated that the officer return 200,000 shares of common stock
which was originally sold to the officer for $.001 per share. The
Company also 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 9).
F-18
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 7. COMMON STOCK (Continued)
Resignation of Officers and Retirement of Common Stock and Warrants
(Continued)
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 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 570,000 warrants to purchase
common stock at an exercise price of $8.00 per share as of
September 30, 1998.
NOTE 8. RELATED PARTY TRANSACTIONS
Note Payable - Bridge Bank, Ltd.
In December 1996, the Company arranged a $100,000 note payable to
Bridge Bank, Ltd., considered one of the founding stockholders of
the Company. The obligation was repaid in February 1997, from the
net proceeds of the 1997 private placement of securities (see Note
7). The note provided for interest at 15%; interest expense on the
note amounted to approximately $2,400 in 1997 and $1,200 in 1996.
Management Agreements
The Company entered into management agreements with four
stockholders dated October 21, 1996, on a month-to-month basis not
to exceed eighteen months. The agreements provide for compensation
of $60,000 per year per stockholder. On December 9, 1997, one of
the agreements was terminated through a management termination
agreement (see Note 7). In 1998 the remaining management agreements
were terminated, and the three stockholders became employees of the
Company.
F-19
<PAGE>
NOTE 8. RELATED PARTY TRANSACTIONS (Continued)
Consulting Agreement
The Company entered into a consulting agreement with one of its
stockholders dated October 21, 1996, on a month-to-month basis. The
agreement provides for compensation of $60,000 per year. This
agreement was modified on August 28, 1997, reducing the
compensation base to $30,000. In addition, the modified agreement
stipulated the return of 200,000 shares of common stock and
cancellation of 70,000 stock purchase warrants.
NOTE 9. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases its administrative facilities under an operating
lease, which expires in 1999. Future minimum rentals due under the
lease are approximately as follows for the years ending December
31:
1998 $37,600
1999 37,600
-------
$75,200
=======
Rent charged to operations amounted to approximately $35,000 in
1997 and $6,000 in 1996 for the years ended December 31, 1997 and
1996, respectively and $33,000 and $25,000 for the nine months
ended September 30, 1998 and 1997, respectively (unaudited).
Pending Litigation
The Company is involved in litigation with a former
officer/stockholder of the Company in connection with a modified
consulting agreement with the Company (see Note 7) whereby he
surrendered 200,000 shares of common stock and cancelled 70,000
stock warrants previously held. The former officer/stockholder
seeks rescission of the consulting agreement he signed with the
Company in August 1997, a declaration that certain provisions of
such agreement relating to non-competition, trade secrets,
non-disclosure and conflict of interest are no longer applicable,
damages for failure of the Company to make consulting payments of
$7,500 per quarter and the present value of his stock options which
he agreed to surrender to the Company (200,000 options at $8.00 per
share) and the value of 200,000 shares of the Company's common
stock which he surrendered pursuant to the consulting agreement.
The former officer/stockholder, through his attorney, has also
indicated that he is the inventor, or a co-inventor, of the
Company's Zone Calling Termination Cabinet. The Company does not
believe that he is the inventor or a co-inventor of such product
and such issue is not included in the litigation. If it were
determined that the former officer/stockholder was the inventor or
co-inventor of the Company's product, such fact could cause the
invalidity of any patent issued to the Company on such product.
The Company denies that it has any liability to the individual and
has filed a motion to dismiss the case. Management plans to
vigorously defend the case. Because the case is in its initial
stages, the amount of liability, if any, cannot be estimated by
management.
F-20
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 10. DISCONTINUED OPERATIONS
In October 1996, the Company acquired all the voting common stock of
Vic Murray & Associates, Inc. in order to acquire the patent developed
by the stockholder of Vic Murray & Associates, Inc. and his son. All
assets were transferred to the Company at their historical cost. No
further business was conducted in Vic Murray & Associates, Inc.
therefore Vic Murray & Associates, Inc. is accounted for on a
retroactive basis as a discontinued operation in the accompanying
consolidated financial statements.
Summarized information for the discontinued operations for the year
ended December 31, 1996 is as follows:
Revenues $106,145
Costs and expenses 101,539
----------
Net income $ 4,606
==========
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The respective carrying value of certain on-balance-sheet financial
instruments approximated their fair value. These instruments include
cash, accounts receivable and accounts payable. Fair values were
assumed to approximate carrying values for these financial instruments
since they are short-term in nature and their carrying amounts
approximate fair values or they are receivable or payable on demand.
NOTE 12. CONTRACTS WITH DISTRIBUTORS
As of December 31, 1997, the Company had entered into Stocking
Distributor Agreements with seven distributors. The agreements set
forth terms whereby the distributors may purchase products from the
Company for resale to their customers within the U.S. and Canada and
Mexico when the Company releases its products for sale in those
countries. The prices for the products covered by the agreements are
based upon the intention of the distributors to purchase a minimum
number of units during the next twelve months after execution of the
agreements (an aggregate of approximately 60,000 units as of December
31, 1997). Revenue from these future sales will be recorded at such
time as the units are shipped to the distributors. The agreements are
for a term of one year and are automatically renewed each year
thereafter unless either party gives written notice of its intent to
cancel the arrangement, and contain, among other things, a warranty
effective for one year after the date of sale.
In February 1998, the Company executed a value added reseller agreement
with another company, in order to actively market and sell the product.
The reseller will have exclusive rights in the state of Texas to market
the product through its direct sales. The agreement stipulates that the
reseller will purchase a minimum of 4,000 units in the next three
years. Revenue from these future sales will be recorded at such time as
the units are shipped to the customer.
F-21
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 13. OTHER MATTERS
Major Customer
During the year ended December 31, 1997, the Company had one
customer that accounted for approximately 74% of sales, and
accounted for approximately the same percentage of sales for the
nine months ended September 30, 1998 and 1997, respectively,
(unaudited).
Major Supplier
The Company outsources its entire product prototyping, production,
manufacturing, assembly and packaging operations to a single
supplier, Omega Metals, Inc. (See Note 14).
Other
In January 1998, Underwriter Laboratories, Inc. authorized the
Company to apply the UL mark to its product. Management believes
that the UL mark distinguishes the quality of the product due to
the requirements necessary to bear the UL mark and that recognition
of the UL mark should enhance sales.
NOTE 14. SUBSEQUENT EVENTS (Unaudited)
Acquisition of Omega Metals
On November 11, 1998 the Company completed purchase of all the
issued common stock of Omega Metals, Inc. The Company utilizes
Omega Metals, Inc. as the source of most of its manufactured
products. The transaction included the issuance of 226,470 shares
of common stock.
Private Placement of Convertible Preferred Stock
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 49,650 shares have been sold
for $4,965,000 resulting in the net proceeds, after offing costs of
$4,456,297. The Series A Preferred shall be valued at $100.00 per
share ("convertible value"), and, if converted, the Series A
Preferred shall be converted into common shares (the "Conversion
Stock") at the price per share equal to the then applicable
Conversion Price. The holders of Series A Preferred shall have the
right, at their option, to convert any or all of such shares into
conversion stock at any time on or after the earlier of (i) the
four month anniversary of the earliest Issuance Date of any shares
of Series A Preferred or (ii) the first date upon which the shelf
registration statement registering the conversion stock is declared
effective by the Securities and Exchange Commission.
The unaudited pro forma balance sheet as of September 30, 1998
reflects receipt of the net proceeds of $4,456,927 in cash through
mid-November 1998, with the Series A 10% senior convertible
preferred stock stated at its liquidation preference of $4,965,000
and a charge to additional paid-in-capital for the related offering
costs of $508,703.
F-22
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
To the Board of Directors and Stockholders
Omega Metals, Inc.
Keystone Heights, Florida
We have audited the accompanying balance sheet of Omega Metals, Inc. as of
January 31, 1998 and the related statements of operations, retained earnings and
cash flows for the years ended January 31, 1998 and 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Omega Metals, Inc. at January
31, 1998 and the results of its operations and its cash flows for the years
ended January 31, 1998 and 1997, in conformity with generally accepted
accounting principles.
RACHLIN COHEN & HOLTZ
Miami, Florida
November 3, 1998
F-23
<PAGE>
OMEGA METALS, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
January 31, October 31,
1998 1998
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
------
Current Assets:
Cash $ 195,578 $ 873,218
Accounts receivable, net of allowance for doubtful accounts of $41,000 566,900 866,587
Income tax refund receivable 163,404 -
Inventories 373,821 257,476
Other current assets 9,587 4,224
------------- --------------
Total current assets 1,309,290 2,001,505
Property, Plant and Equipment 1,455,384 1,359,777
Other Assets - 5,960
------------- --------------
Total assets $2,764,674 $3,367,242
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current portion of obligations under capital leases $ 265,825 $ 843,218
Note payable 4,026 -
Accounts payable and accrued liabilities 343,362 236,832
Loans payable, stockholders 100,000 -
Income taxes payable - 345,000
Deferred income taxes 52,000 -
------------- --------------
Total current liabilities 765,213 1,425,050
------------- --------------
Obligation under Capital Leases, Net of Current Portion 990,800 205,104
------------- --------------
Deferred Income Taxes 53,000 53,000
------------- --------------
Commitments, Subsequent Events and Other Matters - -
Stockholders' Equity:
Common stock; 7,500 shares of $1 par value
authorized; 2,000 shares issued and outstanding 2,000 2,000
Additional paid-in capital
58,000 58,000
Retained earnings 895,661 1,624,088
------------- --------------
955,661 1,684,088
------------- --------------
Total liabilities and stockholders' equity $2,764,674 $3,367,242
============= ==============
</TABLE>
See notes to proforma consolidated financial statements.
F-24
<PAGE>
OMEGA METALS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended October 31,
January 31, 1998 1997
1998 1997 (Unaudited) (Unaudited)
---- ----
<S> <C> <C> <C> <C>
Net Sales $4,194,889 $4,014,856 $3,873,425 $3,151,091
Cost of Sales 2,083,999 1,922,382 1,755,978 1,588,256
------------- ------------ ------------ -----------
Gross Profit 2,110,890 2,092,474 2,117,447 1,562,835
Selling, General and
Administrative Expenses 1,767,118 1,527,085 1,069,485 944,785
------------- ------------ ------------ -----------
Income from Operations 343,772 565,389 1,047,962 618,050
------------- ------------ ------------ -----------
Other Income (Expense):
Interest expense (101,350) (82,550) (122,042) (83,530)
Other income 5,259 21,138 121,007 3,840
------------- ------------ ------------ -----------
(96,091) (61,412) (1,035) (79,690)
------------- ------------ ------------ -----------
Income before Income Taxes 247,681 503,977 1,046,927 538,360
Income Taxes 78,000 182,000 318,500 199,550
------------- ------------ ------------ -----------
Net Income $ 169,681 $ 321,977 $ 728,427 $ 338,810
============= ============ ============ ===========
</TABLE>
See notes to proforma consolidated financial statements.
F-25
<PAGE>
OMEGA METALS, INC.
STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
Year Ended Nine MonthsEnded
January 31, October 31,
1998 1997 1998 1997
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Balance, Beginning $725,980 $404,003 $895,661 $ 725,980
Net Income 169,681 321,977 728,427 338,810
--------- --------- ------------ ------------
Balance, Ending $895,661 $725,980 $1,624,088 $1,064,790
========= ========= ============ ============
</TABLE>
See notes to proforma consolidated financial statements.
F-26
<PAGE>
OMEGA METALS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
January 31, October 31,
1998 1997 1998 1997
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 169,681 $ 321,977 $ 728,427 $338,810
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 221,463 166,153 124,615 166,970
Provision for doubtful accounts 41,124 - -
Deferred income taxes 74,000 15,000 (52,000) -
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (4,512) (105,700) (299,687) (149,290)
Other current assets (329) 1,350 5,363 -
Inventories (72,539) (114,929) 116,345 (66,751)
Income tax refund receivable (163,404) - 163,404 -
Other assets - - (5,960) -
Increase (decrease) in:
Accounts payable and accrued liabilities 19,040 30,636 (106,538) (224,257)
Income taxes payable (185,708) 185,708 345,000 48,571
------------ ------------ ------------ ------------
Net cash provided by operating activities 57,692 541,319 1,018,969 114,053
------------ ------------ ------------ ------------
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment (3,788) (58,392) (29,000) (210,303)
------------ ------------ ------------ ------------
Cash Flows from Financing Activities:
Payments on note payable (7,080) (7,080) (4,026) (4,026)
Payments on capital lease obligations (276,183) - (208,303) -
Proceeds (repayment) of loans from stockholders 100,000 - (100,000) -
------------ ------------ ------------ ------------
Net cash used in financing activities (183,263) (7,080) (312,329) (4,026)
------------ ------------ ------------ ------------
Net Increase (Decrease) in Cash (129,359) 475,847 677,640 (100,276)
Cash, Beginning 324,937 95,546 195,578 324,937
------------ ------------ ------------ ------------
Cash, Ending $ 195,578 $ 571,393 $ 873,218 $ 224,661
============ ============ ============ ============
Cash Flow Information Supplemental Disclosures:
Cash paid for:
Interest $ 101,350 $ 82,550 $ 12,204 $ 83,530
============ ============ ============ ============
Income taxes $ - $ 164,892 $ - $ 125,530
============ ============ ============ ============
Non-Cash Investing and
Financing Activities:
Property, plant and equipment
acquired by means of capital leases $ 770,983 $ 411,208 $ - $ 178,000
============ ============ ============ ============
</TABLE>
See notes to proforma consolidated financial statements.
F-27
<PAGE>
OMEGA METALS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
The Company shears and molds sheet metal and manufactures
metal-formed products for customers principally in Florida and Georgia.
Inventories
Inventories are stated at the lower of cost or market, with cost
determined on the 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.
Revenue Recognition
The Company ships all sales orders as completed and recognizes
revenues from sales at the time the product is shipped.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash and
accounts receivable.
Cash
The Company maintains deposit balances at financial institutions
that, from time to time, may exceed federally insured limits. At
January 31, 1998 and October 31, 1998 (unaudited), the Company
had cash balances on deposit with two different banks that
exceeded federally insured limit by a total of approximately
$95,000 and $125,000, respectively. 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.
F-28
<PAGE>
OMEGA METALS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect 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.
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.
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.
Unaudited Financial Information
The accompanying financial statements as of October 31, 1998 and
for the nine months ended October 31, 1998 and 1997 are unaudited.
However, in the opinion of management, such financial statements
contain all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of financial
position, results of operations and cash flows for such periods.
Results for interim periods are not necessarily indicative of
results to be expected for an entire year.
NOTE 2. INVENTORIES
January 31, October 31,
1998 1998
---- ----
(Unaudited)
Finished goods $ 61,920 $ 26,840
Work-in-process 186,277 135,436
Raw materials 125,624 95,200
--------- ---------
$373,821 $257,476
========= =========
F-29
<PAGE>
<TABLE>
<CAPTION>
NOTE 3. PROPERTY, PLANT AND EQUIPMENT
Estimated Useful January 31, October 31,
Lives (Years) 1998 1998
------------- ---- ----
(Unaudited)
<S> <C> <C>
Land - $ 23,809 $ 23,809
Building and improvements 30 337,054 337,054
Machinery and equipment 5-7 904,165 722,540
Property held under capital leases 5-7 1,612,827 1,612,827
Vehicles 5 31,414 31,414
Tools 5 15,323 15,323
------------ ------------
2,924,592 2,742,967
Less accumulated depreciation 1,469,208 1,383,190
------------ ------------
$1,455,384 $1,359,777
============ ============
</TABLE>
Depreciation expense for the years ended January 31, 1998 and 1997 was
$221,463 and $166,153, respectively, and for the nine months ended
October 31, 1998 and 1997 was $124,615 and $166,970, respectively
(unaudited).
<TABLE>
<CAPTION>
NOTE 4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
January 31, October 31,
1998 1998
---- ----
(Unaudited)
<S> <C> <C>
Accounts payable $319,561 $207,570
Accrued salaries 22,459 22,459
Accrued payroll taxes 1,342 6,803
--------- ---------
$343,362 $236,832
========= =========
</TABLE>
NOTE 5. NOTE PAYABLE AND OBLIGATIONS UNDER CAPITAL LEASES
Note Payable
The Company has a note payable to a bank which is collateralized by
a vehicle. The note has an interest rate of 7.75%. It is due in
monthly installments of $590 and matures in September 1998. The
amount due on the note as of January 31, 1998 was $4,026, and was
subsequently paid.
Obligations Under Capital Leases
The Company is the lessee of certain equipment under capital leases
expiring in various years through 2005. The assets and liabilities
under capital leases are recorded at the lower of the present value
of the minimum lease payments or the fair value of the asset. The
assets are depreciated over the lower of their related lease terms
or their estimated useful lives. Depreciation of assets under
capital leases is included in depreciation expense for the years
ended January 31, 1998.
F-30
<PAGE>
NOTE 5. NOTE PAYABLE AND OBLIGATIONS UNDER CAPITAL LEASES (Continued)
Obligations Under Capital Leases (Continued)
Minimum future lease payments under capital leases as of January 31,
1998 and in the aggregate are as follows for the years ending January
31:
1999 $ 393,842
2000 358,954
2001 310,868
2002 196,704
2003 159,972
Thereafter 421,425
-----------
Total minimum lease payments 1,841,765
Less amount representing interest 585,140
-----------
Present value of net minimum payments 1,256,625
Less current portion 265,825
-----------
Long-term portion $ 990,800
===========
NOTE 6. PROFIT SHARING PLAN
The Company has a 401(k) Profit Sharing Plan covering all 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 January 31, 1998 and 1997.
Employees are vested for purposes of the Company's 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
NOTE 7. LOANS PAYABLE, STOCKHOLDERS
As of January 31, 1998, two stockholders of the Company advanced
$50,000 each to the Company. The loans which bear interest at 10%, were
used specifically for operating purposes and were repaid in February
1998.
NOTE 8. LINE OF CREDIT
The Company has available a bank line of credit for $250,000, with
interest at 9.5%. The line is collateralized by accounts receivable and
inventory. As of January 31, 1998, the Company had not drawn on the
line of credit. In February 1998, the Company drew $150,000 on the
line. This amount was paid in full during April 1998.
F-31
<PAGE>
NOTE 9. INCOME TAXES
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended January 31, October 31,
1998 1997 1998 1997
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Current:
Federal $ 4,000 $150,000 $ 325,500 $181,500
State - 17,000 45,000 18,050
Deferred:
Federal 67,000 14,000 (50,000) -
State 7,000 1,000 (2,000) -
--------- --------- --------- -------------
$78,000 $182,000 $318,500 $199,550
========= ========= ========= =============
</TABLE>
The components of deferred income tax liabilities (assets) are as
follows:
<TABLE>
<CAPTION>
January 31, October 31,
1998 1998
---- ----
(Unaudited)
<S> <C> <C>
Deferred income tax liability, current:
Net operating loss $ (16,000) $ -
Allowance for doubtful accounts 42,000 -
Other 26,000 -
--------- -----------
52,000 -
Deferred income tax liability, long-term:
Depreciation 53,000 53,000
--------- -----------
$105,000 $53,000
========= ===========
</TABLE>
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.
NOTE 10. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The information set forth below provides disclosure of the estimated
fair value of the Company's financial instruments presented in
accordance with the requirements of Statement of Financial Accounting
Standards (SFAS) No. 107. Fair value estimates discussed herein are
based upon certain market assumptions and pertinent information
available to management as of January 31, 1998 and October 31, 1998.
Since the reported fair values of financial instruments are based upon
a variety of factors, they may not represent actual values that could
have been realized as of January 31, 1998 and October 31, 1998 or that
will be realized in the future.
The respective carrying value of certain on-balance sheet financial
instruments approximated their fair values. These financial instruments
include cash, accounts receivable, accounts payable, and debt and
capital lease obligations maturing within one year. Fair values were
assumed to approximate carrying values for these financial instruments
since they are short term in nature and their carrying amounts
approximate fair values or they are receivable or payable on demand.
F-32
<PAGE>
NOTE 10. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
The fair value of non-current debt instruments have been estimated
using discounted cash flow models incorporating discount rates based on
current market interest rates for similar types of instruments or
quoted market prices, when applicable. At January 31, 1998 and October
31, 1998, the differences between the estimated fair value and the
carrying value of non-current debt instruments were considered
immaterial in relation to the Company's financial position.
NOTE 11. COMMITMENTS, SUBSEQUENT EVENTS AND OTHER MATTERS
Major Customer
The Company has an agreement with one its customers to produce and
ship aluminum formed parts on a continuous basis for the period
beginning January 1, 1998 and ending December 31, 1998. The amount
of products provided by Omega Metals, Inc. will be based on
quarterly forecasts, and orders for the most current four week
period are fixed. These forecasts are updated weekly, and the
agreement specifies that shipments will be made weekly. The
purchasing company may cancel orders outside of the four week
period in which orders are firm with no penalty, and, at any time,
either party may terminate the agreement with at least sixty days
written notice.
This customer represented approximately 32% of sales for each of
the years ended January 31, 1998 and 1997, and 30% of sales for the
nine months ended October 31, 1998 and 1997 (unaudited).
Major Vendors
The Company purchases sheet metal from a vendor that represented
approximately 77% and 75% of purchases for the years ended January
31, 1998 and 1997, respectively, and approximately 70% of purchases
for the nine months ended October 31, 1998 and 1997.
Employment Contracts
Subsequent to January 31, 1998, the Company entered into employment
agreements with two members of management. 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 the Company, as defined, in excess of $1,200,000 annually.
Subsequent Event (Unaudited)
In November 1998, the Company became a wholly-owned subsidiary of
American Access Technologies, Inc.
F-33
<PAGE>
SUBSEQUENT EVENTS
On November 11, 1998 the company completed purchase of all the issued
common stock of Omega Metals, Inc. 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.
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 49,650 shares have been sold for $4,965,000. The series A Preferred shall
be valued at $100.00 per share ("convertible value"), and, if converted, the
series A Preferred shall be converted into common (the "Conversion Stock") at
the price per share equal to the then applicable Conversion Price. The holders
of Series A Preferred shall have the right, at their option, to convert any or
all of such shares into conversion stock at any time on or after the earlier of
(i) the four month anniversary of the earliest Issuance Date of any share of
Series A Preferred or (ii) first date upon which the shelf registration
statement registering the conversion stock is declared effective by the
Securities and Exchange Commission.
F-34
<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.
Registration Fee $ 7,911
Printing Expenses* 1,500
Legal Fees and Expenses* 10,000
Accounting Fees and Expenses* 8,000
Blue Sky Fees and Expenses* 3,000
Transfer Agent Fees and Expenses* 1,000
Misc.* 600
--------
Total $32,011
========
*Estimated
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.
II-1
<PAGE>
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 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).
II-2
<PAGE>
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).
3(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.*
8.2 Composite Exhibit of Stocking Distributor Agreements with Anixter,
Inc., State Electric Supply Company, and DataCom, 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.
II-3
<PAGE>
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.*
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.
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.
II-4
<PAGE>
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) 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.
(iii) 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 bona
fide 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-5
<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 December 11, 1998.
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>
Victor E. Murray President and Director December 11, 1998
(Principal Executive Officer)
Richard A. Murray Vice President and Director "
Bobby E. Story Treasurer, (Principal Accounting "
Officer), Director
Victor D. Phillips Director "
</TABLE>
II-6
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA
Warrant Number of
Certificate No. Warrants
American Access Technologies, Inc.
Stock Purchase Warrant
Void after 3:00 P.M., East Coast Time, on October 14, 2003
Registered Holder: ________________ Number of Warrants: __________________
This is to certify that, for value received, the Registered Holder, or assigns,
is entitled, subject to the terms and conditions hereinafter set forth, at or
before 3:00 P.M. on October 14, 2003, or such later time as may be determined by
the Corporation, to purchase shares of the common stock of American Access
Technologies, Inc. (the "Corporation") from the said corporation, for the
purchase price of $25.00 per share and to receive a certificate or certificates
for the common stock so purchased upon presentation and surrender to the
Corporation of this warrant with payment of the purchase price for each share
purchased. (a) The Corporation covenants and agrees that all shares which may be
delivered upon the exercise of this warrant will, upon delivery, be free from
all taxes, liens, and charges with respect to the purchase thereof, and shall be
fully paid and nonassessable. The Corporation covenants and agrees that it will
from time to time take all such action as may be requisite to assure that the
par value per share of its common stock is at all times equal to or less than
the current price per share pursuant to this warrant. (b) The number of shares
purchasable upon the exercise of this warrant and the purchase price per share
shall be subject to adjustment from time to time as set forth herein. (c) If the
outstanding shares of common stock of the Corporation are increased, decreased,
or changed into, or exchanged for a different number or kind of shares or
securities through reorganization, merger, re-capitalization, reclassification,
stock split, stock dividend, stock consolidation, or similar type of
reorganization transaction, an appropriate and proportionate adjustment shall be
made in the number and kind of shares as to which this warrant relates. Such
adjustment shall be made without change in the total price applicable to the
unexercised portion of this warrant, but with a corresponding adjustment in the
price of each share subject to the warrant. (d) If there shall be any adjustment
as provided above, the Corporation shall forthwith cause written notice to be
sent to the initial holder of this warrant at the address of such holder shown
on the books of the Corporation, which notice shall be accompanied by a
statement setting forth in reasonable detail the facts requiring any such
adjustment and the warrant price and number of shares purchasable after such
adjustment, as the case may be. (e) This warrant shall not entitle the holder
hereof to any voting rights or other rights as a shareholder of the Corporation
unless and until this warrant shall be exercised. (f) This warrant and the
shares the holder hereof may purchase have not and will not be registered under
the Securities Act of 1933 or any applicable state securities law. The
Corporation may condition the exercise of this warrant or its transfer upon the
availability of an exemption from registration under all applicable securities
laws.
IN WITNESS WHEREOF, the Corporation has caused this warrant to be executed by
the signatures of its duly authorized Officers and its corporate seal hereunto
affixed.
by:____________ Date_______ Corporate Seal President
Law Offices
JOEL BERNSTEIN, ESQ., P.A.
11900 Biscayne Blvd., Suite 604 Telephone: 305.892.1122
Miami, Florida 33181 Facsimile: 305.892.0822
December 10, 1998
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 1,308,235
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. The outstanding Common Stock and the Common Stock to be issued
upon exercise of Common Stock Purchase Warrants 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.
SERIES A 10% SENIOR CONVERTIBLE PREFERRED STOCK
REGISTRATION RIGHTS AGREEMENT
Dated as of October 2, 1998
1
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is entered into as
of October 2, 1998, among American Access Technologies, Inc., a Florida
corporation (the "Company"), and those persons and entities who purchase the
shares of the Series A 10% Senior Convertible Preferred Stock, par value $.001
per Share, (the "Shares") of the Company (collectively, the "Purchasers").
This Agreement is made pursuant to the Company's Confidential Private
Placement Memorandum, dated July 27, 1998, (the "Memorandum") pursuant to which
the Company, with the assistance of the Central International Securities Group
("Capital") and Merrill Weber & Co., Inc. ("MWC" and together with Capital, the
"Placement Agents") offered and sold the Shares (the "Offering") in a private
placement in accordance with Section 4(2) of the Securities Act of 1933, as
amended and Rule 506 thereunder to "Accredited Investors" within the meaning of
Regulation D under the Securities Act. In order to induce the Purchasers to
purchase the Shares, the Company has agreed to provide the registration rights
contained in this Agreement to the Purchasers and to their respective direct and
indirect transferrers. The execution of this Agreement is a condition to the
closing of the transactions contemplated by the Memorandum.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the following
meanings:
Advice: As defined in the last paragraph of Section 4(p) hereof.
Affiliate of any specified person shall mean any other person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control," when used with respect to any person, means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise and the terms
"affiliated," "controlling" and "controlled" have meanings correlative to the
foregoing.
Agreement: This Registration Right Agreement, as the same may be
amended, supplemented or modified from time to time in accordance with the terms
hereof.
Articles of Amendment: The Articles of Amendment of Amended and Restate
Articles of Incorporation of American Access Technologies, Inc.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which banking institutions in New York, New York are authorized
or obligated by law or executive order to close.
Closing Bid Price: With respect to a share of Common Stock, the last
closing bid price for such security on the Nasdaq National Market as reported by
Bloomberg Financial Markets ("Bloomberg"), or if the Nasdaq National Market is
not the principal trading market for such security, the last closing bid price
of such security on the principal national securities exchange or trading market
2
<PAGE>
where such security is listed or traded, as reported by Bloomberg, or if the
Common is not listed or traded on any national securities exchange or Nasdaq
National Market or SmallCap Market, then the last closing bid price of Common in
the over-the-counter market on the electronic bulletin board as reported by
Bloomberg, or, if no last closing trade price is reported for such security by
Bloomberg, the average of the bid prices of any market makers for Common as
reported in the "pink sheets" by the National Quotation Bureau, Inc.
Common Stock: Common Stock, par value $.001 per share, of the Company.
Company: American Access Technologies, Inc., a Florida corporation, and
any successor corporation thereto.
Company Registration Statement. As defined in Section 9 hereof.
Controlling person: As defined in Section 6(a) hereof.
Effectiveness Period: As defined in Section 2(a) hereof.
Effectiveness Target Date: The 120th day following the Closing Date.
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated by the SEC pursuant thereto.
Filing Date: The 60th day after the Closing Date.
Holder: Each registered holder of any Transfer Restricted Securities.
Indemnified Holder: As defined in Section 6(a) hereof.
Initial Issuance Date: The date of issuance by the Corporation of the
first share of Series A Preferred.
Liquidated Damages: As defined in Section 3(a) hereof.
NASD: National Association of Securities Dealers, Inc.
Person: An individual, partnership, corporation, limited liability
company, professional corporation, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
Placement Agents: Collectively, Capital International Securities Group
and Merrill Weber & Co., Inc.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated pursuant to the Securities
Act), as amended or supplemented by any prospectus supplement, with respect to
the terms of the offering of any portion of the Transfer Restricted Securities
covered by such Registration Statement, and all other amendments and supplements
to any such prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference, if any, in
such prospectus.
3
<PAGE>
Registration Default: As defined in Section 3(a) hereof.
Registration Statement: Any registration statement of the Company that
covers any of the Transfer Restricted Securities pursuant to the provisions of
this Agreement, including the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference, if any, in such registration statement.
Restricted Preferred Shares: As defined in Section 3(a) hereof.
Rule 144: Rule 144 promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 144A: Rule 144A promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 415: Rule 415 promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulations hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 424: Rule 424 promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulations hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 430A: Rule 430A promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulations thereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 462: Rule 462 promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulations hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Shares: The Shares of Series A 10% Senior Convertible Preferred Stock,
par value $.001 per share.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules
and regulations promulgated by the SEC thereunder.
Shelf Registration Statement: As defined in Section 2 hereof.
Special Counsel: Any special counsel to the holders of Transfer
Restricted Securities, for which holders of Transfer Restricted Securities will
be reimbursed pursuant to Section 5 hereof.
Transfer Restricted Securities; The shares of Common Stock into which
the Shares are convertible, upon original issuance thereof, and at all times
4
<PAGE>
subsequent thereto and any shares of Common Stock which would be issuable in
payment of accrued and unpaid dividends thereon or any shares of Common Stock
issuable as a Conversion Failure Payment (as such term is defined in the
Articles of Amendment) or issuable upon the failure of the Company to pay a
Redemption Amount in accordance with Section 8 of the Articles of Amendment,
until, in the case of any such share, the earliest of (i) the date on which it
has been registered effectively pursuant to the Securities Act and disposed of
in accordance with the Registration Statement relating to it, (ii) the date on
which the shares of Common Stock issued upon conversion of such Share is
distributed to the public pursuant to Rule 144 (or any similar provisions then
in effect) or are salable pursuant to Rule 144(k) promulgated by the SEC
pursuant to the Securities Act or (iii) the date on which it ceases to be
outstanding.
Underwritten Registration or Underwritten Offering: A registration in
connection with which securities of the Company are sold to an underwriter for
reoffering to the public pursuant to an effective Registration Statement.
2. Shelf Registration
(a) The Company agrees to file with the SEC as promptly as practicable
after the Initial Issuance Date (assuming at least 30,000 Shares are sold), but
in no event later than sixty (60) calendar days following the Initial Issuance
Date, a Registration Statement (the "Shelf Registration Statement") for an
offering to be made on a continuous basis pursuant to Rule 415 covering all of
the Transfer Restricted Securities; provided that the number of shares
registered pursuant to the Shelf Registration Date on the Effectiveness Date
shall not be less than the Minimum Amount (as defined below). The Shelf
Registration Statement shall be on Form SB-2 under the Securities Act or another
appropriate form permitting registration of the Transfer Restricted Securities
for resale by the Holders thereof in the manner or manners reasonably designated
by them (including, without limitation, one or more underwritten offerings). The
Company shall use its best efforts to cause the Shelf Registration Statement to
be declared effective pursuant to the Securities Act as promptly as practicable
following the filing thereof, but in no event later than one hundred twenty
(120) calendar days following the Initial Issuance Date (the "Effectiveness
Date"), and to keep the Shelf Registration Statement continuously effective
under the Securities Act for 24 months after the Initial Issuance Date (the
"Effectiveness Period"), or such shorter period ending when either (i) all the
Transfer Restricted Securities covered by the Shelf Registration Statement have
been sold in the manner set forth in the Shelf Registration Statement or (ii)
the date on which either the shares of Transfer Restricted Securities are
distributed to the public pursuant to Rule 144 or are saleable pursuant to Rule
144(k) (the period referred to in clauses (i) and (ii), collectively the
"Registration Period").
(b) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective by supplementing and amending the
Shelf Registration Statement to the extent necessary to ensure that it is
available for sales by the Holders entitled to the benefits of this Section
2(a), and to ensure that it conforms with the requirements of this Agreement,
the Securities Act and the rules, regulations or instructions applicable to the
registration form used for such Shelf Registration Statement. Without limiting
the foregoing, if on the 30th day after the Effectiveness Date (the "Initial
Measure Date") and on each 30th day thereafter during the Registration Period
(each a "Subsequent Measure Date" and together with the Initial Measure Date,
the "Measure Dates"), the number of Transfer Restricted Securities registered
pursuant to the Shelf Registration Statement is a number which is less than two
hundred percent (200%) of the number of shares of Common issuable upon
conversion of each Share then outstanding including any accrued and unpaid
dividends paid on such date by delivery of Transfer Restricted Securities and
any shares of Common Stock issuable as a Conversion Failure Payment (as such
term is defined in the Articles of Amendment) or issuable upon the failure of
5
<PAGE>
the Corporation to pay a Redemption Amount in accordance with Section 8 of the
Articles of Amendment and assuming each Share is converted on such Measure Date
(the "Minimum Amount"), the Company shall file an amendment to the Shelf
Registration Statement (or an additional Shelf Registration Statement) within
five (5) days of each Measure Date to the extent necessary to increase the
number of Transfer Restricted Securities registered pursuant to the Shelf
Registration Statement such that the number of Transfer Restricted Securities
shall be a number no less than the Minimum Amount and shall use its best efforts
to cause such amendment (or additional Shelf Registration Statement) to become
effective promptly thereafter.
3. Liquidated Damages
(a) The Company agrees that the holders of Transfer Restricted
Securities will suffer damages if the Company fails to fulfill its obligations
pursuant to Section 2(a) hereof and that it would not be possible to ascertain
the extent of such damages. Accordingly, in the event of such failure by the
Company to fulfill such obligations and to the extent the holders of Shares then
convertible into Transfer Restricted Securities ("Restricted Preferred Shares")
do not receive a special dividend as defined in the Articles of Amendment of the
Shares as a result of a Registration Default (as defined below), the Company
hereby agrees to pay liquidated damages ("Liquidated Damages") to each holder of
Restricted Preferred Shares who has complied with such holder's obligations
under this Agreement under the circumstances and to the extent set forth below
(clauses (i) through (iv) individually, a "Registration Default"):
(i) if the Shelf Registration Statement has not been filed
with the SEC or prior to the Filing Date; or
(ii) if the Shelf Registration Statement is not declared
effective by the SEC on or prior to the date which is 180 calendar days
following the Initial Issuance Date; or
(iii) if the number of Transfer Restricted Securities
registered pursuant to the Shelf Registration Statement is not the
Minimum Amount on the Effectiveness Date or on the fifth day following
each Measure Date in accordance with Section 2(b) hereof; or
(iv) if the Shelf Registration Statement has been declared
effective by the SEC and thereafter ceases to be effective or usable
(including as a result of a suspension of the use of the Shelf
Registration Statement as described in Section 2(b) hereof) provided
that any suspension of the use of the Shelf Registration Statement
which is a result of an acquisition or disposition of assets by the
Company, an acquisition of a business by the Company, a merger,
consolidation or reorganization of the Company or a tender offer by or
for the Company and which does not exceed a period of 75 calendar days
shall not be deemed a Registration Default.
then the Company shall pay Liquidated Damages to each holder of Restricted
Preferred Shares during the first 30-day period immediately following the
occurrence of such Registration Default in the form of a special payment on each
share of Restricted Preferred Shares as to which the underlying Transfer
Restricted Securities is not so registered in an amount equal to $1.00 per share
for the first 30-day period, and $2.00 per share every 30-days thereafter, in
cash, or at the Holder's option, in the number of shares of Common Stock equal
to the quotient of (x) the dollar amount of the Liquidated Damages on the
Payment Date (as defined below) by (y) the Conversion Price on the date of the
Registration Default, accruing daily, until all Registration Defaults have been
cured. The Liquidated Damages payable pursuant hereto shall be payable within
five (5) business days from the end of the calendar month commencing on the
first calendar month in which the Registration Default occurs (each, a "Payment
Date"). In the event the Holder elects to receive the Liquidated Damages amount
6
<PAGE>
in shares of Common Stock, such shares shall also be considered Transfer
Restricted Shares. A Registration Default under clause (i) above shall be deemed
cured on the date that the Shelf Registration Statement is filed with the SEC; a
Registration Default under clause (ii) above shall be cured on the date that the
Shelf Registration Statement is declared effective by the SEC; a Registration
Default under clause (iii) above shall be cured on the date on which the Shelf
Registration Statement covers the Minimum Amount and is declared effective; and
a Registration Default under clause (iv) above shall be deemed cured on the date
the Shelf Registration Statement is again declared effective or the Prospectus
contained therein again become usable, or the Effectiveness Period terminates.
Under no circumstances shall a holder of Transfer Restricted Securities be
entitled to Liquidated Damages to the extent such holder of Restricted Preferred
Shares receives a special dividend as defined in the Articles of Amendment of
the Shares upon such Registration Default.
4. Registration Procedures
In connection with the Company's registration obligations pursuant to
Section 2 above, the Company shall as expeditiously as possible:
(a) use reasonable efforts to keep such Shelf Registration Statement
continuously effective and provide all requisite financial statements required
by such Shelf Registration Statement for the period specified in Section 2 of
this Agreement. Upon the occurrence of any event that would cause any such Shelf
Registration Statement or the Prospectus contained therein (A) to contain a
material misstatement or omission or (B) not to be effective and usable for
resale of Transfer Restricted Securities during the Effectiveness Period, the
Company shall file promptly an appropriate amendment to such Shelf Registration
Statement, (1) in the case of clause (A), correcting any such misstatement or
omission, and (2) in the case of clauses (A) and (B), use its best efforts to
cause such amendment to be declared effective and such Shelf Registration
Statement and the related Prospectus to become usable for their intended
purpose(s) as soon as practicable thereafter;
(b) prepare and file with the SEC such amendments and post-effective
amendments to the Shelf Registration Statement as may be necessary to keep the
Shelf Registration Statement effective for the duration of the Effectiveness
Period; cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424, and to
comply fully with Rules 424, 430A and 462, as applicable, in a timely manner;
and otherwise comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such Shelf Registration Statement
during the applicable period in accordance with the intended method or methods
of distribution by the sellers thereof set forth in such Shelf Registration
Statement or supplement to the Prospectus;
(c) advise the underwriter(s), if any, and selling Holders promptly
and, if requested by such Persons, confirm such advice in writing, (i) when the
Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to any Shelf Registration Statement or any
post-effective amendment thereto, when the same has become effective, (ii) of
any request by the SEC for amendments to the Shelf Registration Statement or
amendments or supplements to the Prospectus or for additional information
relating thereto, (iii) of the issuance by the SEC of any stop order suspending
the effectiveness of the Shelf Registration Statement under the Securities Act
or of the suspension by any state securities commission of the qualification of
the Transfer Restricted Securities for offering or sale in any jurisdiction, or
the initiation of any proceeding for any of the preceding purposes, and (iv) of
the existence of any fact or the happening of any event that makes any statement
7
<PAGE>
of a material fact made in the Shelf Registration Statement, the Prospectus, any
amendment or supplement thereto or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes in
the Shelf Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes in the
Prospectus in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If at any time the SEC
shall issue any stop order suspending the effectiveness of the Shelf
Registration Statement, or any state securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption from
qualification of the Transfer Restricted Securities under state securities or
Blue Sky laws, the Company shall use its best efforts to obtain the withdrawal
or lifting of such order at the earliest possible time;
(d) furnish to each selling Holder named in any Shelf Registration
Statement or Prospectus and each of the underwriter(s) in connection with such
sale, if any, before filing with the SEC, copies of any Shelf Registration
Statement or any Prospectus included therein or any amendments or supplements to
any such Shelf Registration Statement or Prospectus (including all documents
incorporated by reference after the initial filing of such Shelf Registration
Statement), which documents will be subject to the review and comment of such
Holders and underwriter(s) in connection with such sale, if any, for a period of
at least five Business Days, and the Company will not file any such Shelf
Registration Statement or Prospectus or any amendment or supplement to any such
Shelf Registration Statement or Prospectus (including all such documents
incorporated by reference) to which the selling Holder covered by such Shelf
Registration Statement or the underwriter(s) in connection with such sale, if
any, shall reasonably object within five Business Days after the receipt
thereof. A selling Holder or underwriter, if any, may be objected to such filing
only if such Holder or underwriter, if any, reasonably believes that such Shelf
Registration Statement, amendment, Prospectus or supplement, as applicable, as
proposed to be filed, contains a material misstatement or omission or fails to
comply with the applicable requirements of the Securities Act;
(e) promptly following the filing of any document that is to be
incorporated by reference into a Shelf Registration Statement or Prospectus,
provide copies of such document to the selling Holders and to the underwriter(s)
in connection with such sale, if any, make the Company's representatives
available for discussion of such document and other customary due diligence
matters, and include such information in such document prior to the filing
thereof as such selling Holders or underwriter(s), if any, reasonably may
request.
(f) make available at reasonable times for inspection by the selling
Holders, any managing underwriter participating in any disposition pursuant to
such Shelf Registration Statement and any attorney or accountant retained by
such selling Holders or any of such underwriter(s), all relevant financial and
other records, pertinent corporate documents and properties of the Company and
cause the Company's officers, directors and employees to supply all relevant
information reasonably requested by any such Holder, underwriter, attorney or
accountant in connection with such Shelf Registration Statement or any
post-effective amendment thereto subsequent to the filing thereof and prior to
its effectiveness;
(g) if requested by any selling Holders or the underwriter(s) in
connection with such sale, if any, promptly include in any Shelf Registration
Statement or Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such selling Holders and underwriter(s), if any,
may reasonably request to have included therein, including, without limitation,
information relating to the "Plan of Distribution" of the Transfer Restricted
Securities, information with respect to the principal amount of Transfer
Restricted Securities being sold to such underwriter(s), the purchase price
being paid therefor and any other terms of the offering of the Transfer
Restricted Securities to be sold in such offering; and make all required filings
of such Prospectus supplement or post-effective amendment as soon as practicable
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<PAGE>
after the Company is notified of the matters to be included in such Prospectus
supplement or post-effective amendment;
(h) furnish to each selling Holder and each of the underwriter(s) in
connection with such sale, if any, without charge, at least one copy of the
Shelf Registration Statement, as first filed with the SEC, and of each amendment
thereto, including all documents incorporated by reference therein and all
exhibits (including exhibits incorporated therein by reference);
(i) deliver to each selling Holder and each of the underwriter(s), if
any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such Persons
reasonably may request; the Company hereby consents to the use (in accordance
with law) of the Prospectus and any amendment or supplement thereto by each of
the selling Holders and each of the underwriter(s), if any, in connection with
the offering and the sale of the Transfer Restricted Securities covered by the
Prospectus or any amendment or supplement thereto;
(j) enter into such agreements (including an underwriting agreement)
and make such representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition of the
Transfer Restricted Securities pursuant to any Shelf Registration Statement
contemplated by this Agreement as may be reasonably requested by any Holder or
underwriter in connection with any sale or resale pursuant to any Shelf
Registration Statement contemplated by this Agreement, and, at or prior to each
closing under the applicable underwriting agreement, the Company shall:
(A) furnish (or in the case of subparagraphs (2) and (3)
below, use its best efforts to furnish) to each selling Holder and each
underwriter, if any, upon the effectiveness of the Shelf Registration
Statement:
(1) a customary certificate, dated the date of
effectiveness of the Shelf Registration Statement, as the case
may be, signed on behalf of the Company by (x) the President
or any Vice President and (y) a principal financial or
accounting officer of the Company, confirming, as of the date
thereof, the matters similar to those covered in an Officers
Certificate to underwriters in connection with primary
underwritten offerings and such other similar matters as the
Holders or underwriter(s) may reasonably request;
(2) a customary opinion, dated the date of
effectiveness of the Shelf Registration Statement, as the case
may be, of counsel for the Company in customary form covering
matters similar to those customarily covered in opinion
letters of counsel to underwriters in connection with primary
underwritten offerings and such other matter as the Holders or
underwriters may reasonably request, and in any event
including a statement to the effect that such counsel has
participated in conferences with officers and other
representatives of the Company, representatives of the
independent public accountants for the Company and have
considered the matters required to be stated therein and the
statements contained therein, although such counsel has not
independently verified the accuracy, completeness or fairness
of such statements; and that such counsel advises that, on the
basis of the foregoing (relying as to materiality to a large
extent upon facts provided to such counsel by officers and
other representatives of the Company and without independent
check or verification), no facts came to such counsel's
attention that caused such counsel to believe that the
applicable Shelf Registration Statement, at the time such
Shelf Registration Statement or any post-effective amendment
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<PAGE>
thereto became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein
not misleading, or that the Prospectus contained in such Shelf
Registration Statement as of its date, contained an untrue
statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading. Without limiting the foregoing, such counsel may
state further that such counsel assumes no responsibility for,
and has not independently verified, the accuracy, completeness
or fairness of the financial statements, notes and schedules
and other financial data included in any Shelf Registration
Statement contemplated by this Agreement or the related
Prospectus; and
(3) customary comfort letters, dated as of the date
of effectiveness of the Shelf Registration Statement, from the
independent accountants of the Company in the customary form
and covering matters of the type customarily covered in
comfort letters to underwriters in connection with primary
underwritten offerings.
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, in connection with any sale or resale
pursuant to any Shelf Registration Statement the indemnification
provisions and procedures of Section 6 hereof with respect to all
parties to be indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by the selling Holders and the underwriter(s), if
any, to evidence compliance with clause (A) above and with any
customary conditions contained in the underwriting agreement or other
agreement entered into by the Company pursuant to this clause (j).
The above shall be done at each closing under such underwriting or
similar agreement, as and to the extent required thereunder, and if at any time
the representations and warranties of the Company contemplated in (A)(1) above
cease to be true and correct, the Company shall so advise the underwriter(s), if
any, and the selling Holders promptly and if requested by such Persons, shall
confirm such advice in writing;
(k) prior to any public offering of Transfer Restricted Securities,
cause the registration and qualification of the Transfer Restricted Securities
under the securities or Blue Sky laws as of such jurisdictions as the selling
Holders, if any, may request and do any and all other acts or things necessary
or advisable to enable the disposition in such jurisdictions of the Transfer
Restricted Securities covered by the applicable Shelf Registration Statement;
provided, however, that the Company shall not be required to register or qualify
as a foreign corporation where it is not now so qualified or to take any action
that would subject it to the service of process in suits or to taxation, other
than as to matters and transactions relating to the Shelf Registration
Statement, in any jurisdiction where it is not now so subject;
(l) in connection with any sale of Transfer Restricted Securities that
will result in such securities no longer being restricted securities as defined
in Rule 144, cooperate with the selling Holders and the underwriter(s), if any,
to facilitate the timely preparation and delivery of certificates representing
Transfer Restricted Securities to be sold and not bearing any restrictive
legends; and to register such Transfer Restricted Securities in such
denominations and such names as the Holders or the underwriter(s), if any, may
request at least two Business Days prior to such sale of Transfer Restricted
Securities;
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<PAGE>
(m) its best efforts to cause the disposition of the Transfer
Restricted Securities covered by the Shelf Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to enable the seller or sellers thereof or the
underwriter(s), if any, to consummate the disposition of such Transfer
Restricted Securities subject to the proviso contained in clause (k) above;
(n) provide a CUSIP number for all Transfer Restricted Securities not
later than the effective date of a Shelf Registration Statement covering such
Transfer Restricted Securities;
(o) cooperate and assist in any filings required to be made with the
NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is required
to be retained in accordance with the rules and regulations of the NASD; and
(p) Each Holder agrees by acquisition of Transfer Restricted Securities
that, upon receipt of any notice from the Company pursuant to Section 4(c)
hereof or of the happening of any event of the kind described in Section
4(c)(iv) hereof, such Holder will forthwith discontinue disposition of such
Transfer Restricted Securities covered by such Shelf Registration Statement or
Prospectus until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 4(d) hereof, or until it is advised
in writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus and, if so directed by the Company,
such Holder will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies, then in such Holder's possession of the
Prospectus covering such Transfer Restricted Securities at the time of receipt
of such notice.
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5. Registration Expenses
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by it whether or not any Shelf
Registration Statement is filed or becomes effective and whether or not any
securities are issued or sold pursuant to any Shelf Registration Statement. The
fees and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with the NASD,
(B) in compliance with securities or Blue Sky laws (including, without
limitation and in addition to that provided for in (b) below, reasonable fees
and disbursements of counsel for the underwriters or Special Counsel for the
Holders in connection with Blue Sky qualifications of the Transfer Restricted
Securities, and determination of the eligibility of the Transfer Restricted
Securities for investment under the laws of such jurisdictions as the managing
underwriters, if any, or Holders of a majority (on a fully converted basis) may
designate) and (C) the fees payable in connection with the printing of
Prospectuses if the printing of Prospectuses is requested by the managing
underwriters, if any), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company and Special Counsel for the
Holders (plus any local counsel, in accordance with the provisions of Section
5(b) hereof), (v) fees and disbursements of all independent certified special
audit and "cold comfort" letters required by or incident to such performance,
(vi) Securities Act liability insurance, if the Company so desires such
insurance, and (vii) fees and expenses of all other persons retained by the
Company. In addition, the Company shall pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, and the
fees and expenses incurred in connection with the listing of the securities to
be registered on any securities exchange.
(b) In connection with any registration hereunder, the Company shall
reimburse the Holders being registered in such registration for the reasonable
fees and disbursements of not more than one firm of attorneys representing the
selling Holders (in addition to any local counsel), which firm, if any, shall be
chosen by the majority of Holders (on a fully diluted basis).
6. Indemnification
(a) The Company agrees to indemnify and hold harmless (i) each Holder
and (ii) each person, if any, who controls (within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act) any Holder (any of the persons
referred to in this clause (ii) being hereinafter referred to as a "controlling
person") and (iii) the respective officers, directors, partners, employees,
representatives and agents of any Holder or any controlling person (any person
referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an
"Indemnified Holder"), to the fullest extent lawful, from and against any and
all losses, claims, damages, liabilities, judgments, actions and expenses
(including without limitation and as incurred, reimbursement of all reasonable
costs of investigating, preparing, pursuing or defending any claim or action, or
any investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of counsel to any
Indemnified Holder) directly or indirectly caused by (a) any untrue statement or
alleged untrue statement of a material fact contained in any Shelf Registration
Statement, preliminary prospectus or Prospectus (or any amendment or supplement
thereto), (b) any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading or (c) any other material violation of the Federal or state
securities laws, except insofar as such losses, claims, damages, liabilities or
expenses are caused by any such untrue statement or omission or alleged untrue
statement or omission that is made in reliance upon and in conformity with
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<PAGE>
information relating to any of the Holders furnished in writing to the Company
by any of the Holders expressly for use therein.
In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought against any Indemnified
Holder based upon the Shelf Registration Statement and with respect to which
indemnity may be sought against the Company, such Indemnified Holder (or the
Indemnified Holder controlled by such controlling person) shall promptly notify
the Company in writing (provided, that the failure to give such notice shall not
relieve the Company of their obligations pursuant to this Agreement). Such
Indemnified Holder shall have the right to employ its own counsel in any such
action and the fees and expenses of such counsel shall be at the expense of the
such Indemnified Holder, unless (i) the employment of such counsel shall have
been specifically authorized in writing by the Company, (ii) the Company shall
have failed to assume the defense and employ counsel or (iii) the named parties
to any such action (including any impleaded parties) include both the
Indemnified Holder and the Company, and such Indemnified Holder shall have been
advised by counsel that there may be one or more legal defense available to it
which are different from or additional to those available to the Company (in
which case the Company shall not have the right to assume the defense) it being
understood, however, that the Company shall not, in connection with any one such
action or proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) for such
Indemnified Holders, which firm shall be designated by the Holders. The Company
shall be liable for any settlement of any such action or proceeding effected
with the Company's prior written consent, which consent shall not be withheld
unreasonably, and the Company agrees to indemnify and hold harmless each
Indemnified Holder from and against any loss, claim, damage, liability or
expense by reason of any settlement of any action effected with the written
consent of the Company. In addition, the Company shall be liable for any
settlement of any such action or proceeding effected without the Company's prior
written consent if such settlement is entered into more than twenty business
days after the Company shall have received a request from the Indemnified
Holders for reimbursement for the fees and expenses of counsel (in any case
where such fees and expenses are at the expense of the Company) and, prior to
the date of such settlement, the Company shall have failed to comply with such
reimbursement request, and the Company agrees to indemnify and hold harmless
each such Indemnified Holder from and against any loss, claim, damage, liability
or expense by reason of such settlement. The Company shall not, without the
prior written consent of such Indemnified Holder, settle or compromise or
consent to the entry of judgment in or otherwise seek to terminate any pending
or threatened action, claim, litigation or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not any
Indemnified Holder is a party thereto), unless such settlement, compromise,
consent or termination includes an unconditional release of such Indemnified
Holder from all liability arising out of such action, claim, litigation or
proceeding.
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Company and its respective directors, officers, and any person
controlling (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) the Company, and its officers, directors, partners, employees,
representatives and agents of each such person, to the same extent as the
foregoing indemnity from the Company to each of the Indemnified Holders, but
only with respect to claims and actions based on information relating to such
Holder furnished in writing by such Holder expressly for use in any Shelf
Registration Statement. In case any action or proceeding shall be brought
against the Company or its directors or officers or any such controlling person
in respect of which indemnity may be sought against a Holder, such Holder shall
have the rights and duties given the Company (except that if the Company shall
have assumed the defense thereof, such Holder shall not be required to do so,
13
<PAGE>
but may employ separate counsel therein and participate in the defense thereof
but the fees and expenses of such counsel shall be at the expense of such
Indemnified Holder, its directors or officers or such controlling persons) and
the Company shall have the rights and duties given to each Holder by the
preceding paragraph. In no event shall any Holder be liable or responsible for
any amount in excess of the amount by which the total received by such Holder
with respect to its sale of Transfer Restricted Securities, pursuant to a Shelf
Registration Statement exceeds (i) the amount paid by such Holder for such
Transfer Restricted Securities, and (ii) the amount of any damages which such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission.
(c) If the indemnification provided for in this Section 6 is
unavailable to an indemnified party under Section 6(a) or Section 6(b) hereof
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages, liabilities or expenses referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the Company, on
the one hand, and of the Indemnified Holder, on the other hand, in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of the Company, on the one hand, and of the Indemnified
Holder, on the other hand, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Indemnified Holder and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in the second paragraph
of Section 6(a), any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action or claim.
The Company and each Holder agree that it would not be just and
equitable if contribution pursuant to this Section 6(c) were determined by pro
rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 6, no Holder shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the
total amount received by such Holder with respect to the sale of its Transfer
Restricted Securities pursuant to a Shelf Registration Statement exceeds the sum
of (A) the amount paid by such Holder for such Transfer Restricted Securities,
plus (B) the amount of any damages which such Holder has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The Holders'
obligations to contribute pursuant to this Section 6(c) are several in
proportion to the respective principal amount of Series A Shares held by each of
the Holders hereunder and not joint.
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7. Rules 144 and 144A
The Company shall file the reports required to be filed by it under the
Securities Act and the Exchange Act in a timely manner and, if at any time it is
not required to file such reports but in the past had been required to or did
file such reports, it will, upon the request of any holder of Transfer
Restricted Securities, make available other information as required by, and so
long as necessary to permit, sales of its Transfer Restricted Securities
pursuant to Rule 144 and Rule 144A.
8. Underwritten Registrations
(a) If any of the Transfer Restricted Securities covered by any Shelf
Registration Statement are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Company; provided that nothing
contained herein shall be construed as to require the Company to engage the
services of an underwriter in connection with such Shelf Registration Statement
or to grant the Holders the right to Demand an Underwritten Registration or
Underwritten Offering.
(b) No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person's Transfer
Restricted Securities on the basis reasonably provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, and other documents required under the terms of such underwriting
arrangements.
9. Piggy Back Rights of Holders.
If the Company at any time proposes or is required to register any of
its securities under the Securities Act or any applicable state securities or
blue sky laws on a form which permits inclusion of the Transfer Restricted
Securities (a "Company Registration Statement"), the Company shall notify the
Holders of the Company's intention to prepare a Company Registration Statement.
The Company shall thereafter use its best efforts to cause the Transfer
Restricted Securities, to which such Holders shall have requested be registered
within 20 days of such Notice from the Company, to be registered under the
Securities Act and any applicable state securities or blue sky laws all to the
extent requisite to permit the sale or other disposition by such Holders of the
Transfer Restricted Securities so registered. No registrations pursuant to this
Section 9 shall relieve the Company of its obligation to effect registrations
under Section 2 hereof. If, in the reasonable opinion of the underwriter of the
Company Registration, the size of the offering of the securities to be
registered pursuant to the Company Registration Statement has to be reduced,
then the Holders will participate in such registration, with priority to all
other Persons, including the Company, participating in such Company Shelf
Registration Statement and pari passu among the Holders pro rata in accordance
with the number of shares each such Holder requested be registered. The
provisions of Section 5 and Section 6 shall apply to a Company Registration
Statement as if such Company Registration Statement was the Shelf Registration
Statement. Notwithstanding anything to the contrary contained herein, the
Holders shall have no right to participate in a Company Registration Statement
at any time when a Shelf Registration Statement shall be effective.
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<PAGE>
10. Miscellaneous
(a) Remedies. Each holder of Transfer Restricted Securities or the
Company, in addition to being entitled to exercise all rights provided herein,
or granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company and each holder of
Transfer Restricted Securities agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by the Company
of the provisions of this Agreement and hereby agrees to waive the defense in
any action for specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company shall not enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the holders of Transfer Restricted Securities in this Agreement or
otherwise conflicts with the provisions hereof.
(c) No Piggyback on Registrations. The Company shall not include and
shall not grant to any of its security holders, including the Placement Agents,
(other than the Holders of Transfer Restricted Securities in such capacity) the
right to include any of its securities, including the warrant shares issued to
the Placement Agents, in any Shelf Registration Statement other than Transfer
Restricted Securities, except any such rights that exist as of the date hereof.
Notwithstanding the foregoing, nothing shall prevent the Company from filing a
registration statement simultaneously with the Shelf Registration Statement so
long as the holders of Transfer Restricted Securities have priority with respect
to the removal of any restrictive legend upon the resale by such holder of the
Transfer Restricted Securities.
(d) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, without the written consent of the Holders of a majority of the then
outstanding Transfer Restricted Securities (on a fully convened basis);
provided, however, that, for the purposes of this Agreement, Transfer Restricted
Securities that are owned, directly or indirectly, by either the Company shall
not be deemed outstanding.
(e) Notices. All notices and other communications provided for herein
shall be made in writing by hand-delivery, next-day air courier, certified
first-class mail, return receipt requested, or telecopy:
(i) if to the Company, to 238 N. Westmonte Drive, Suite 210,
Alamonte Springs, Florida 32714, Attn: Richard Murray, with a copy to Joel
Bernstein, Esq., 9701 Biscayne Blvd., Miami Shores, Florida 33138.
(ii) if to the Placement Agents, to Merrill Weber & Co., Inc.,
770 Frontage Road, Suite 134, Northfield, Illinois 60093, Attn: Merrill Weber,
and Capital International Securities Group 1 S.E. 3rd Avenue, Suite 2250, Miami,
Florida 33131, with a copy to Sonnenschein Nath & Rosenthal, 8000 Sears Tower,
Chicago, Illinois 60606, Attn: Mitchell L. Hollins, Esq., and
(iii) if to any other person who is then the registered Holder
of any Transfer Restricted Securities, to the address of such Holder as
it appears in the Transfer Restricted Securities or Common Stock
register of the Company.
Except as otherwise provided in this Agreement, all such communications
shall be deemed to have been duly given: when delivered by hand, if personally
delivered; one Business Day after being timely delivered to a next-day air
16
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courier; five Business Days after being deposited in the mail, postage prepaid,
if mailed; and when receipt is acknowledged by the recipient's telecopier
machine, if telecopied.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including subsequent Holders of Transfer Restricted Securities provided such
subsequent Holders acquire such Transfer Restricted Securities directly from
such Holder but without the need for an express assignment.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement.
(h) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida, as applied to contracts made
and performed within the State of Illinois without regard to principles of
conflicts of law. Any action or proceeding seeking to enforce any provision of,
or based on any right arising out of, this Agreement may be brought against any
of the parties only in the courts of the State of Florida, County of Orange.
(i) Severability. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(j) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof. All
references made in this Agreement to "Section" and "paragraph" refer to such
Section or paragraph of this Agreement, unless expressly stated otherwise.
(k) Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the prevailing party, as determined by the court, shall be
entitled to recover its reasonable attorneys' fees in addition to any other
available remedy.
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IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement
to be duly executed as of the date first written above.
AMERICAN ACCESS TECHNOLOGIES, INC.
By:/s/ Victor E. Murray
----------------------------------
Name: Victor E. Murray
Title: President
18
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and effective as of
November 11, 1998 between OMEGA METALS, INC., a Florida corporation (the
"Corporation"), and ERIK WIISANEN, an individual ("Executive").
WHEREAS, Executive has been in the employ of the Corporation as its
Vice President-Marketing; and
WHEREAS, the Corporation desires to assure the continuation of
Executive's services in connection with its business and that of its
subsidiaries and affiliates;
THEREFORE, in consideration of the premises and covenants herein set
forth, it is agreed as follows:
1. Employment. Corporation hereby employs Executive and Executive
accepts such employment on the terms and conditions set forth herein.
1.1 Executive covenants to perform in good faith his
employment duties as outlined herein, devoting his full productive time,
energies and abilities to the proper and efficient management of the business of
the Corporation and its subsidiaries and affiliates and for their exclusive
benefit.
1.2 Executive shall not, without the prior written consent of
the Corporation, directly or indirectly, during the term of this Agreement: (I)
render services of business, professional or commercial nature to any other
person or entity, whether for compensation or otherwise, similar or relating to
the business of the Corporation or its subsidiaries and affiliates, or (ii)
engage in any activity competitive with or adverse to the Corporation's business
or welfare, whether alone, as a partner or member, or as an officer, director,
Executive or 5% or greater shareholder of a corporation.
2. Term of Employment. Subject to the provisions set forth herein, the
term of Executive's employment hereunder shall continue for two (2) years.
3. Duties. Executive shall be employed and perform duties similar to
those that he is now performing on behalf of Corporation, or such other
activities within his area of expertise which the Corporation determines.
1
<PAGE>
4. Compensation. For all services he may render to the Corporation
during the term of this Agreement, including services as officer, director or
member of any committee of the Board of Directors of the Corporation and its
subsidiaries, Executive shall receive the following compensation:
4.1 Executive shall receive a base salary at the rate of
$125,000 per year.
4.2 (a) The Corporation agrees to pay to the Executive a
profit participation (his "Profit Participation") equal to ten percent (10%) of
the net profits of the Corporation in excess of $1,200,000 ("Net Profits") for
each fiscal year of the Corporation during the term of this Agreement.
The Profit Participation with respect to a fiscal year shall be paid to
the Executive within 120 days after the end of the fiscal year.
(b) The Net Profits of the Corporation and its
subsidiaries shall be determined by the independent public accountants regularly
retained by the Corporation, in accordance with generally accepted accounting
principles consistently applied, and their determination shall be final and
conclusive. Such Net Profits shall be determined after eliminating all capital
gains and losses and deducting all proper expenses and charges on income and the
profit participations payable pursuant to this Agreement with respect to such
fiscal year.
(c) As to the fiscal year in which this Agreement is
executed and the fiscal year in which this Agreement expires, if it expires
other than on the last day of the Corporation's fiscal year, the Profit
Participation is to be pro rated, and the sum to which the Executive will be
entitled as his Profit Participation for any such fiscal year will be the amount
obtained by multiplying what the profit participation would have been for the
full fiscal year by a fraction, the numerator of which will be the number of
full calendar months of the fiscal year during which the Executive rendered
services pursuant to this Agreement and the denominator of which will be 12.
5. Benefits. During the term of this Agreement, Executive shall be
entitled to the following executive benefits:
5.1 Executive shall be entitled to reasonable vacation time
without reduction in salary.
5.2 During the period of his employment, Executive shall be
reimbursed for reasonable traveling and other business expenses reasonably
incurred in connection with the performance of his duties hereunder, subject to
reasonable verification as required in order for the Corporation to comply with
applicable laws and regulations and accounting practices.
5.3 Executive shall be entitled to all other benefits of
employment generally available to members of management of the Corporation.
2
<PAGE>
6. Termination. The employment of Executive may be terminated at any
time by:
(i) Mutual agreement; or
(ii) Action of the Board of Directors, on thirty days' prior
written notice, in the event of illness or disability or Executive resulting in
failure to discharge his duties under this Agreement for ninety or more
consecutive days or for a total of one hundred eighty or more days in a period
of twelve consecutive months; or
(iii) Action of the Board of Directors, if it shall be
established that Executive is in material default in the performance of his
obligations, services or duties hereunder (other than for illness or incapacity)
or has materially breached any provision of this Agreement and such default or
breach has continued for twenty (20) days after written notice of such
non-performance or breach.
7. Insurance. Executive agrees that the Corporation may procure
insurance on his life, in such amounts as the Corporation may in its discretion
determine, and with the Company or any of its subsidiaries or affiliates named
as the beneficiary under such policy or policies. Executive agrees that upon
request from the Corporation he will submit to a physical examination and will
execute each such application or other documents as may be required for the
procurement of such insurance.
8 Trade Secrets. Executive agrees that he will not, during or after the
termination of his employment with the Corporation, furnish or make accessible
to any person, firm, corporation or any other entity any trade secrets,
technical data, customer list, sales representatives, or know-how acquired by
him during the term of his employment with the Corporation which relates to the
business, practices, methods, processes, programs, equipment or other
confidential or secret aspects of the business of the Company, or its
subsidiaries or affiliates or any portion thereof, without the prior written
consent of the Corporation, unless such information shall have become public
knowledge, other than being divulged or made accessible by Executive.
9 Non-disclosure. During the term of his employment and for two (2)
years after its termination, Executive will not, directly or indirectly,
disclose the names of the Corporation's customers, prospects or sales
representatives or those of its subsidiaries and affiliates or attempt to
influence such customers or representatives to cease doing business with the
Company or its subsidiaries or affiliates.
Executive shall communicate and make known to the Corporation all
knowledge possessed by him which he may legally impart relating to any methods,
developments, designs, processes, programs, services, and ideas which concern in
any way the business or prospects of the Corporation and its subsidiaries and
affiliates from the time of entering his employment until the termination
thereof.
3
<PAGE>
10 Conflict of Interest. Executive agrees that during the term of his
employment and any extensions thereof, he will comply with the policy of the
Corporation with respect to the Corporation entering into, directly or
indirectly, any transactions with any business organization or other entity in
which he or any member of his family has a direct or indirect interest.
11 Miscellaneous.
11.1 The failure of either party to enforce any provision of
this Agreement shall not be construed as a waiver of any such provision, nor
prevent such party thereafter from enforcing such provision or any other
provision of this Agreement. The rights granted both parties herein are
cumulative and the election of one shall not constitute a waiver of such party's
right to assert all other legal remedies available under the circumstances.
11.2 Any notice to be given to the Corporation under the terms
of this Agreement shall be addressed to the Corporation, at the address of its
principal place of business, and any notice to be given to Executive shall be
addressed to him at his home address last shown on the records of the
Corporation, or such other address as either party may hereafter designate in
writing to the other. Any notice shall be deemed duly given when mailed by
registered or certified mail, postage prepaid, as provided herein.
11.3 The provisions of the Agreement are severable, and if any
provision of this Agreement shall be held to be invalid or otherwise
unenforceable, in whole or in part, the remainder of the provisions, or
enforceable parts thereof, shall not be affected thereby.
11.4 The rights and obligations of the Corporation under this
Agreement shall inure to the benefit of and be binding upon the successors and
assignees of the Corporation.
11.5 This Agreement supersedes all prior agreements and
understandings between the parties hereto, oral or written, and may not be
modified or terminated orally. No modification, termination or attempted waiver
shall be valid unless in writing, signed by the party against whom such
modification, termination or waiver is sought to be enforced.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
OMEGA METALS, INC.
/s/ Victor E. Murray
By: ---------------------------
VICTOR E. MURRAY
/s/ Erik Wiisanen
---------------------------
ERIK WIISANEN
4
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and effective as of
November 11, 1998 between OMEGA METALS, INC., a Florida corporation (the
"Corporation"), and JOHN PRESLEY, an individual ("Executive").
WHEREAS, Executive has been in the employ of the Corporation as its
President; and WHEREAS, the Corporation desires to assure the continuation of
Executive's services in connection with its business and that of its
subsidiaries and affiliates;
THEREFORE, in consideration of the premises and covenants herein set
forth, it is agreed as follows:
1. Employment. Corporation hereby employs Executive and Executive
accepts such employment on the terms and conditions set forth herein.
1.1 Executive covenants to perform in good faith his
employment duties as outlined herein, devoting his full productive time,
energies and abilities to the proper and efficient management of the business of
the Corporation and its subsidiaries and affiliates and for their exclusive
benefit.
1.2 Executive shall not, without the prior written consent of
the Corporation, directly or indirectly, during the term of this Agreement: (I)
render services of business, professional or commercial nature to any other
person or entity, whether for compensation or otherwise, similar or relating to
the business of the Corporation or its subsidiaries and affiliates, or (ii)
engage in any activity competitive with or adverse to the Corporation's business
or welfare, whether alone, as a partner or member, or as an officer, director,
Executive or 5% or greater shareholder of a corporation.
2. Term of Employment. Subject to the provisions set forth herein, the
term of Executive's employment hereunder shall continue for two (2) years.
3. Duties. Executive shall be employed and perform duties similar to
those that he is now performing on behalf of Corporation, or such other
activities within his area of expertise which the Corporation determines.
4. Compensation. For all services he may render to the Corporation
during the term of this Agreement, including services as officer, director or
member of any committee of the Board of Directors of the Corporation and its
subsidiaries, Executive shall receive the following compensation:
4.1 Executive shall receive a base salary at the rate of
$125,000 per year.
4.2 (a) The Corporation agrees to pay to the Executive a
profit participation (his "Profit Participation") equal to ten percent (10%) of
the net profits of the Corporation in excess of $1,200,000 ("Net Profits") for
each fiscal year of the Corporation during the term of this Agreement.
5
<PAGE>
The Profit Participation with respect to a fiscal year shall be paid to
the Executive within 120 days after the end of the fiscal year.
(b) The Net Profits of the Corporation and its
subsidiaries shall be determined by the independent public accountants regularly
retained by the Corporation, in accordance with generally accepted accounting
principles consistently applied, and their determination shall be final and
conclusive. Such Net Profits shall be determined after eliminating all capital
gains and losses and deducting all proper expenses and charges on income and the
profit participations payable pursuant to this Agreement with respect to such
fiscal year.
(c) As to the fiscal year in which this Agreement is
executed and the fiscal year in which this Agreement expires, if it expires
other than on the last day of the Corporation's fiscal year, the Profit
Participation is to be pro rated, and the sum to which the Executive will be
entitled as his Profit Participation for any such fiscal year will be the amount
obtained by multiplying what the profit participation would have been for the
full fiscal year by a fraction, the numerator of which will be the number of
full calendar months of the fiscal year during which the Executive rendered
services pursuant to this Agreement and the denominator of which will be 12.
5. Benefits. During the term of this Agreement, Executive shall be
entitled to the following executive benefits:
5.1 Executive shall be entitled to reasonable vacation time
without reduction in salary.
5.2 During the period of his employment, Executive shall be
reimbursed for reasonable traveling and other business expenses reasonably
incurred in connection with the performance of his duties hereunder, subject to
reasonable verification as required in order for the Corporation to comply with
applicable laws and regulations and accounting practices.
5.3 Executive shall be entitled to all other benefits of
employment generally available to members of management of the Corporation.
6. Termination. The employment of Executive may be terminated at any
time by:
(i) Mutual agreement; or
(ii) Action of the Board of Directors, on thirty days' prior
written notice, in the event of illness or disability or Executive resulting in
failure to discharge his duties under this Agreement for ninety or more
consecutive days or for a total of one hundred eighty or more days in a period
of twelve consecutive months; or
(iii) Action of the Board of Directors, if it shall be
established that Executive is in material default in the performance of his
obligations, services or duties hereunder (other than for illness or incapacity)
or has materially breached any provision of this Agreement and such default or
breach has continued for twenty (20) days after written notice of such
non-performance or breach.
6
<PAGE>
7. Insurance. Executive agrees that the Corporation may procure
insurance on his life, in such amounts as the Corporation may in its discretion
determine, and with the Company or any of its subsidiaries or affiliates named
as the beneficiary under such policy or policies. Executive agrees that upon
request from the Corporation he will submit to a physical examination and will
execute each such application or other documents as may be required for the
procurement of such insurance.
8 Trade Secrets. Executive agrees that he will not, during or after the
termination of his employment with the Corporation, furnish or make accessible
to any person, firm, corporation or any other entity any trade secrets,
technical data, customer list, sales representatives, or know-how acquired by
him during the term of his employment with the Corporation which relates to the
business, practices, methods, processes, programs, equipment or other
confidential or secret aspects of the business of the Company, or its
subsidiaries or affiliates or any portion thereof, without the prior written
consent of the Corporation, unless such information shall have become public
knowledge, other than being divulged or made accessible by Executive.
9 Non-disclosure. During the term of his employment and for two (2)
years after its termination, Executive will not, directly or indirectly,
disclose the names of the Corporation's customers, prospects or sales
representatives or those of its subsidiaries and affiliates or attempt to
influence such customers or representatives to cease doing business with the
Company or its subsidiaries or affiliates.
Executive shall communicate and make known to the Corporation all
knowledge possessed by him which he may legally impart relating to any methods,
developments, designs, processes, programs, services, and ideas which concern in
any way the business or prospects of the Corporation and its subsidiaries and
affiliates from the time of entering his employment until the termination
thereof.
10 Conflict of Interest. Executive agrees that during the term of his
employment and any extensions thereof, he will comply with the policy of the
Corporation with respect to the Corporation entering into, directly or
indirectly, any transactions with any business organization or other entity in
which he or any member of his family has a direct or indirect interest.
11 Miscellaneous.
11.1 The failure of either party to enforce any provision of
this Agreement shall not be construed as a waiver of any such provision, nor
prevent such party thereafter from enforcing such provision or any other
provision of this Agreement. The rights granted both parties herein are
cumulative and the election of one shall not constitute a waiver of such party's
right to assert all other legal remedies available under the circumstances.
7
<PAGE>
11.2 Any notice to be given to the Corporation under the terms
of this Agreement shall be addressed to the Corporation, at the address of its
principal place of business, and any notice to be given to Executive shall be
addressed to him at his home address last shown on the records of the
Corporation, or such other address as either party may hereafter designate in
writing to the other. Any notice shall be deemed duly given when mailed by
registered or certified mail, postage prepaid, as provided herein.
11.3 The provisions of the Agreement are severable, and if any
provision of this Agreement shall be held to be invalid or otherwise
unenforceable, in whole or in part, the remainder of the provisions, or
enforceable parts thereof, shall not be affected thereby.
11.4 The rights and obligations of the Corporation under this
Agreement shall inure to the benefit of and be binding upon the successors and
assignees of the Corporation.
11.5 This Agreement supersedes all prior agreements and
understandings between the parties hereto, oral or written, and may not be
modified or terminated orally. No modification, termination or attempted waiver
shall be valid unless in writing, signed by the party against whom such
modification, termination or waiver is sought to be enforced.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
OMEGA METALS, INC.
/s/ Victor Murray
By: ---------------------------
VICTOR MURRAY
/s/ John Presley
---------------------------
JOHN PRESLEY
Omega/Emplyjp
8
MEMO OF UNDERSTANDING
This memo is made and entered into this 11th day of November, 1998 by and
between American Access Technologies, Inc. and Troy Fornshell and his wife Anna
Fonshell pertaining to the purchase by American Access of their approximately 6
acres of property, legal description is:
Part of SE 1/4 of Sec. 3, TWP 8S, Reg 23E., Clay County, Florida Warranty Deed
recorded in O.R. Book 1085, page 337 et seq.
Upon completion of the Rezoning actions, the Company agrees to buy the above
described property Troy and Anna agree to sell, their approximately 6 acre
homestead for the amount of 80,000.00 dollars. The price will be paid 40,000.00
dollars at closing, with proceeds to retire the existing mortgage and balance to
sellers.
Parties acknowledge that the property has been rezoned to industrial by Board of
County Commissioners, Clay County; however, the county master plan must be
changed by the State of Florida.
The remaining 40,000.00 dollars is to be paid within 60 days if the rezoning
action clears Tallahassee. The sellers will have 30 days to turn over the
property.
The closing must be on or before January 15, 1999.
/s/ Troy Fonshell /s/ Anna Fonshell
- -------------------- -------------------
Troy Fornshell Anna Fornshell
American Access Technologies, Inc.
by: /s/ B. E. Story
--------------------
Signature
AMERICAN ACCESS TECHNOLOGIES, INC.
(A Development Stage Enterprise)
STATEMENT RE: COMPUTATION OF NET LOSS PER COMMON SHARE
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 31, September 30,
1997 1996 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Loss $ (426,455) $ (61,642) $ 155,887 $(331,847)
=========== ============ =========== ==========
Weighted Average Common Shares Outstanding 3,033,000 2,800,000 3,030,000 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 50,000 - 50,000
----------- ------------ ----------- ----------
Total weighted average number of common
shares and equivalents 3,083,000 2,850,000 3,030,000 3,083,000
=========== ============ =========== ==========
Net Loss per Common Share $ (0.14) $ (0.02) $ (0.05) $ (0.11)
=========== ============ =========== ==========
</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 March 25, 1998 (which
contains an explanatory paragraph that describes a condition that raises
substantial doubt as to the ability of the Company to continue as a going
concern) relating to the financial statements of America Access Technologies,
Inc. appearing in such Prospectus. We also consent to the references to us under
the headings "Experts" in such Prospectus.
RACHLIN COHEN & HOLTZ
Miami, Florida
January 6, 1999
<PAGE>
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 November 3, 1998
relating to the financial statements of Omega Metals, Inc. appearing in such
Prospectus. We also consent to the references to us under the headings "Experts"
in such Prospectus.
RACHLIN COHEN & HOLTZ
Miami, Florida
January 6, 1999
